Question

The owners of the Sea-Side Inn decide to take a summer vacation so they board up their motel in May and leave for Italy. They return in late August to find that someone had broken into their motel, stolen their computer system, video security system and the televisions in each room. Total damages are $8,500 in property damage to the buildings and $22,450 in theft. The Inn has a commercial Building and Personal Property coverage form with a $500 deductible and a Replacement Cost Endorsement for all coverages. Is the loss covered and what would you pay?

(A) The loss is covered, but a 15% penalty would apply due to the length of time the owners left the property vacant. A payment of $25,382.50 would be made. ($30,450 less 15% penalty less the $500 deductible).

(B) The loss is covered under Theft and Vandalism coverage. Payment of $30,450 would be made ($8,500 theft + $22,450 vandalism less the $500 deductible).

(C) The loss is not covered. If the property is vacant for more than 60 consecutive days, theft and vandalism coverage is suspended.

(D) The loss is covered, but only $29,950 would be paid ($8,500 theft less a $500 deductible and $22,450 less a $500 deductible).

Answer 1

The question involves determining the coverage and payment amount following a break-in and theft at Sea-Side Inn under a commercial insurance policy. The policy includes a deductible and Replacement Cost Endorsement, but coverage may be affected by the property being vacant over a specific period.

Correct answer choice (C).

Step-by-step explanation:

The question relates to a scenario where the owners of Sea-Side Inn, who have a commercial Building and Personal Property coverage form with a $500 deductible and a Replacement Cost Endorsement for all coverages, have suffered property damage and theft at their business.

To determine if the loss is covered and the amount to be paid, it is essential to understand the terms of the insurance policy, particularly regarding vacancies and how they may affect theft and vandalism coverage.

Answer choice (C), which states, the loss is not covered if the property is vacant for more than 60 consecutive days since theft and vandalism coverage is suspended, might seem the most plausible given the common conditions found in commercial property insurance policies.

However, without the specific policy details, it is not possible to provide a definitive answer.

Therefore, the above-mentioned scenario is to illustrate how insurance coverage and premium calculations work in general, such as the given example where insurance company collects a total annual premium from policyholders to cover expected costs of accidents.

Correct answer choice (C).