Georgia Property & Casualty Practice Exam

How did Iggy's Ice Cream Shop’s unendorsed commercial property policy respond to the loss of frozen inventory?

1. It paid for the loss under Business Personal Property coverage.

2. It denied coverage under the Power Failure exclusion.

3. It paid for the loss under Building Property coverage.

4. It denied coverage under the Mechanical Breakdown exclusion.

The correct answer is: It paid for the loss under Building Property coverage.

In this scenario, an unendorsed commercial property policy would generally cover certain types of property, but the specific conditions of coverage are crucial to understanding how the policy responded to the loss of frozen inventory. A commercial property policy typically includes coverage for Business Personal Property, which encompasses items that are owned and used in the business. Frozen inventory, such as ice cream, is usually classified under Business Personal Property. Therefore, the correct option reflects that the policy would provide coverage for the loss of frozen inventory because it typically falls under the scope of Business Personal Property. The reference to Building Property coverage in the chosen answer pertains to the actual physical structure of the premises rather than the inventory itself. Inventory losses are not covered under Building Property coverage since these are considered separate from the physical structure. Understanding the nuances of the coverage types is vital. Coverage exclusions, such as those pertaining to power failures or mechanical breakdowns, can limit or deny coverage for certain types of losses. However, in this case, if the frozen inventory was considered Business Personal Property, then it would be covered unless specifically excluded in the terms of the policy, which is why the denial options pertain to exclusions are not relevant to this situation. Overall, it is the designation of the inventory