9.2 Building and Personal Property Coverage Form (BPP)

The Three Coverages of the BPP

The Building and Personal Property Coverage Form, ISO CP 00 10, is the core commercial property form. It offers three coverages, each requiring a separate limit on the declarations:

• Building — the structure, completed additions, permanently installed fixtures/machinery/equipment, and outdoor fixtures. Also covers materials within 100 feet used to maintain the building.
• Your Business Personal Property (BPP) — contents the insured owns and uses in business: furniture, stock, machinery not part of the building, and tenant's improvements and betterments.
• Personal Property of Others — property of others in the insured's care, custody, or control; loss is paid to the owner.

If only one coverage is needed, the insured can buy just that limit — but property and contents are usually scheduled together.

Valuation: ACV vs. Replacement Cost

By default the BPP settles losses at Actual Cash Value (ACV) = replacement cost minus depreciation. Replacement Cost is available only when activated under the Optional Coverages section and shown on the declarations.

Worked ACV example

A 10-year-old roof costs $30,000 to replace and has a 25-year useful life.

• Depreciation = 10 ÷ 25 = 40%
• ACV = $30,000 × (1 − 0.40) = $18,000

Under replacement cost, the insured could recover the full $30,000 — but RC settlement is paid only after repairs are made; until then the insurer pays ACV and releases the holdback (recoverable depreciation) once the insured rebuilds.

The Coinsurance Condition (the #1 BPP math trap)

The BPP carries an 80% coinsurance clause by default (90% or 100% can be selected). The insured must carry a limit equal to at least the coinsurance percentage times the property's value at the time of loss. If they under-insure, the loss payment is reduced by the same proportion they fell short:

Payment = (Did carry ÷ Should carry) × Loss − Deductible

The purpose of coinsurance is rate equity — most losses are partial, so without a coinsurance clause an insured could buy a small limit, pay a small premium, and still collect most partial losses in full. The clause forces insureds to carry a limit proportional to value or accept a penalty at claim time.

Worked coinsurance example

• Building value at loss: $1,000,000, coinsurance 80% → should carry $800,000
• Limit actually carried: $600,000
• Loss: $200,000, deductible $1,000

Payment = ($600,000 ÷ $800,000) × $200,000 − $1,000 = 0.75 × $200,000 − $1,000 = $149,000

The penalty factor (0.75) reflects 25% underinsurance. The recovery is also capped at the policy limit, and a total loss is paid up to the limit without applying the penalty.

Coverage extensions and excluded property

Coverage Extensions (apply when 80%+ coinsurance is met):

• Newly Acquired or Constructed Property — up to $250,000 per new building and $100,000 per new location for business personal property, for 30 days (or until reported).
• Personal Effects and Property of Others — up to $2,500 per location.
• Valuable Papers and Records — up to $2,500.
• Outdoor Property (trees, shrubs, plants, fences) — up to $1,000, max $250 per tree/shrub/plant.

Property Not Covered includes: money and securities (use Crime coverage), autos held for sale or licensed for road use, land/water/growing crops, and animals unless held for sale or boarding.

Tenants' improvements and betterments

A frequently tested wrinkle: a tenant who installs fixtures, carpeting, or partitions in a leased space owns those improvements and betterments as business personal property even though they are attached to the landlord's building. If a covered loss destroys them and the tenant rebuilds, the BPP pays on a replacement-cost or ACV basis. If the tenant does not replace them, settlement is made on a proportionate basis tied to the remaining term of the lease — the unused portion of the original cost. This prevents a tenant from profiting on improvements they were about to vacate.

How the deductible interacts

The BPP deductible (commonly $1,000 or $2,500) is subtracted after any coinsurance penalty is applied, not before. Sequence matters on the exam: first compute the coinsurance factor, multiply it by the loss, then subtract the deductible, and finally cap the result at the policy limit. Mixing up that order is a classic distractor on numeric questions.

Covered Property Categories and the Tested Exclusions

The BPP organizes property into Building, Your Business Personal Property (BPP), and Personal Property of Others in the insured's care. Frequently tested property not covered includes land, water, growing crops, money and securities (insure under Crime), vehicles licensed for road use, and the cost to research/restore lost data beyond a small sublimit.

Coverage Extensions and Additional Coverages

The BPP grants automatic extensions: Newly Acquired or Constructed Property (e.g., up to $250,000 building / $100,000 BPP for 30 days), Personal Property Off-Premises, Outdoor Property, and Valuable Papers/Records cost of research. Additional coverages include Debris Removal (25% of the loss plus deductible, with an extra amount if it exhausts), Preservation of Property, Fire Department Service Charge, and Pollutant Cleanup (often capped at $10,000/year).

Loss-Settlement Order Recap

These five steps are the same engine used across property lines, applied to commercial limits and the BPP's optional replacement-cost election.