Question

Your business owns a five year old copy machine that breaks down. It's worked so well over the years, and new machines are so expense, that you decide to have it repaired. A local vendor takes the machine to their shop. A severe thunderstorm spawns a tornado that severely damages the vendor's shop, and your copy machine is destroyed. A new machine of its type would cost you $15,500 and your old machine was valued at $6,500. You file a claim under your commercial property policy where your deductible is $500. What can you expect?

(A)No coverage. The property was not damaged by a covered peril on your premises.

(B) In the absence of an RCV endorsement, you would receive $6,000 (the ACV of your machine less the $500 deductible) under Property Off-Premises coverage.

(C) You would receive the RCV of $15,500 under the Property Off-Premises coverage.

(D) You would be told that you must file a claim against the vendor's liability carrier.

Answer 1

The insured business can expect `In the absence of an RCV endorsement, you would receive $6,000 (the ACV of your machine less the $500 deductible) under Property Off-Premises coverage.`

The correct answer is (B)

Step-by-step explanation:

When filing a claim under your commercial property policy, the coverage will depend on the type of policy you have. In this case, your copy machine was damaged while it was off-premises at the vendor's shop due to a tornado. Since the property was not damaged by a covered peril on your premises, you would not be eligible for coverage under that particular provision.

However, you would still have coverage under Property Off-Premises, which would provide coverage for property away from your premises. The coverage is typically the Actual Cash Value (ACV) of the damaged property minus the deductible. In this scenario, the ACV of your machine was $6,500 and your deductible was $500, so you would receive $6,000 (ACV less deductible) as compensation.

The correct answer is (B)