Question

DEX, Inc. has flucuating inventory levels. It has opted to provide its insurer with a monthly value reporting form to document its monthly inventory values for premium calculation purposes. Assume for its last report DEX purposely underreported its inventory values as $75,000 instead of the true $100,000 so that it would have a smaller premium payment at the end of the year. One week after submitting its report, DEX suffered a fire loss to its inventory valued at $20,000. This was within its overall policy insurance limit, but the insurance company was able to identify the underreported inventory values during the claims investigation. How much will DEX's property insurer pay for this loss? Assume there are no deductibles.

	a.	$15,000
	b.	$5,000
	c.	$10,000
	d.	$20,000

The "no benefit to a bailee" condition in a BPP policy is intended to

	a.	prevent a bailee from being able to sell the property of others for a profit.
	b.	prevent a bailee from being able to charge the owner of property a premium for coverage provided by the bailee.
	c.	prevent a bailee from being able to directly collect indemnity payments for a property loss covered under a property owner's insurance policy.
	d.	prevent a bailee from being able to escape liability for damage to the property of others under the bailee's control.

Answer 1

DEX's property Insurer will pay $15,000 for the Loss.

That is $75000/$10000*$25000

The No Benefit to the Bailee Condition in the BPP policy is to Intend to prevent a bailee from being able to directly collect indemnity payments for a property loss covered under a property owner's insurance policy.