Question

Question 4-4: The Murphy Corporation has a commercial property policy with a Causes of Loss - Basic Form covering its building. Explain whether each of the following losses would be covered under Murphy’s policy. For those that would not be covered, identify a causes of loss form, if any, that would cover the loss.

1. A windstorm damaged Murphy’s roof.

2. During a major storm, the river that runs near Murphy’s property overflowed its banks. The rising water seeped into Murphy’s building, damaging the hardwood floors.

3. Vandals broke several windows in Murphy’s building.

4. Heavy earthquake shocks caused structural damage to Murphy’s building.

Question 5-6: Coverage for Jones’s building and business personal property is currently subject to a Causes of Loss - Broad Form. When Jones renews his property insurance, he will purchase coverage subject to a Causes of Loss - Special Form, rather than a Broad Form. Briefly explain how the coverage for Jones’s building and business personal property will be affected by this change in the causes of loss form.

Answer 1

4-4

a. A windstorm damaged Murphy's roof.
Covered because windstorm is a covered peril under the Basic Form.

b. During a major storm, the river that runs near Murphy's property overflowed its banks. The rising water seeped into Murphy's building, damaging the hardwood floors.
Damage from rising water would not be covered because of flood exclusion. Flood is not a covered peril under any of the causes of loss forms. (Murphy needs to purchase coverage through the National Flood Insurance Program or by endorsement to its commercial property policy.)

c. Vandals broke several windows in Murphy's building.
Broken windows would be covered because vandalism is a covered cause of loss. (Although the vandalism peril once excluded glass breakage, that exclusion was eliminated in the 2000 revision.)

d. Heavy earthquake shocks caused structural damage to Murphy's building.
The structural damage would not be covered because of the earthquake exclusion. Murphy needs one of the earthquake endorsements.

5-6

-With the Special Form, Jones's building and business personal property form will have coverage for accidental and unforeseen risks of direct physical loss subject to exclusions and limitations expressed in the form. With the Broad Form, Jones's building and business personal property form had coverage for the listed perils.