9.2 Building and Personal Property Coverage Form (BPP)

The BPP Coverage Form (CP 00 10)

The Building and Personal Property (BPP) Coverage Form, ISO form CP 00 10, is the most heavily tested commercial property form. It defines three coverage categories the insured selects on the declarations by entering a Limit of Insurance for each:

• Building — the structure, completed additions, fixtures, permanently installed machinery and equipment, and maintenance/service equipment.
• Your Business Personal Property (BPP) — furniture, stock, machinery not part of the building, and the insured's use interest in improvements/betterments.
• Personal Property of Others — others' property in the insured's care, custody, or control; loss is paid for the owner's account.

Where and What Is Covered

Covered property must be at the described premises. The form extends a short distance off-premises: property in the open or in a vehicle within 100 feet of the described premises is covered.

The form lists Property Not Covered, which the exam loves: money and securities (use Crime coverage), accounts/bills/records as documents (limited), land, water, growing crops, lawns, animals (unless stock for sale or boarding), vehicles licensed for road use, aircraft, and the cost of excavations or foundations below the lowest basement floor or ground level.

Additional Coverages and Extensions

Additional Coverages built into the form include Debris Removal (25% of the loss plus deductible, with an extra $25,000 if that cap is exhausted), Preservation of Property (covered for up to 30 days while moved to protect it), Fire Department Service Charge ($1,000), and Pollutant Cleanup and Removal ($10,000 aggregate per year).

Coverage Extensions (available when the insured carries at least 80% coinsurance) add limited amounts for Newly Acquired or Constructed Property, Personal Effects and Property of Others, Valuable Papers and Records, Property Off-Premises, and Outdoor Property (fences, signs, antennas, trees/shrubs/plants subject to a per-item sublimit).

Valuation and the Coinsurance Penalty

The default loss settlement is Actual Cash Value (ACV) = replacement cost minus depreciation. The Optional Coverages section (or a declarations election) can switch valuation to Replacement Cost (RC); to collect full RC the insured must actually repair/replace, otherwise recovery is capped at ACV.

The Coinsurance condition requires the insured to carry a limit equal to a stated percentage (commonly 80%, 90%, or 100%) of the property's value. If underinsured, the penalty formula is:

Recovery = (Limit Carried / Limit Required) x Loss − Deductible

Worked example: A building worth $1,000,000 has an 80% coinsurance clause, so the required limit is $800,000. The insured carries only $600,000. A $200,000 loss with a $1,000 deductible pays: ($600,000 / $800,000) x $200,000 = 0.75 x $200,000 = $150,000, minus $1,000 = $149,000. The insured absorbs the $50,000 coinsurance penalty plus the deductible. Had the loss been a total loss, recovery is still capped at the $600,000 limit.

ACV vs. Replacement Cost in Practice

The ACV measure leaves the insured short on aging property: a 15-year-old roof costing $40,000 to replace might have an ACV near $20,000 after depreciation, so an insured who never elected RC recovers only the depreciated figure. Replacement Cost removes the depreciation deduction but requires the loss be repaired or replaced as soon as reasonably possible with property of like kind and quality at the same premises. Until replacement occurs, the insurer may pay ACV and hold back the recoverable depreciation pending proof of completion.

A subtle exam point: even under Replacement Cost valuation, coinsurance still applies, and the required limit is measured against the property's replacement cost value, not its depreciated value. Insureds who set their limit to ACV while electing RC valuation create a guaranteed coinsurance penalty.

Deductibles, Improvements, and Tenants

The BPP carries a single per-occurrence deductible (default $1,000, adjustable) applied after coinsurance. A higher deductible lowers premium but shifts more first-dollar risk to the insured.

Tenants face a special concept: improvements and betterments are alterations a tenant makes to leased space (shelving, partitions, lighting) that legally become the landlord's building but were paid for by the tenant. The tenant has an insurable interest and insures them under Your Business Personal Property. If the lease lets the tenant remove them, they are valued like personal property; if not, the form pays a share of original cost based on the remaining lease term. A landlord and tenant each insuring the same wall is a classic distractor.

Vacancy Provision and Other Conditions

The BPP includes a Vacancy condition that punishes empty buildings. A building is vacant when it does not contain enough business personal property to conduct customary operations; for the owner, vacancy is judged on the whole building, and 70% or more must be rented or used to avoid vacant status. If the building is vacant beyond 60 consecutive days before a loss, the insurer will not pay at all for vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft, and reduces all other covered losses by 15%.

Other tested conditions include Mortgageholder protection (the lender is paid even if the insured's act voids coverage, provided the lender pays premium and files proof), Loss Payment options (pay value, repair, replace, or take the property at appraised value), and the Appraisal clause used to resolve disputes over loss amount.