BASIC FACT PATTERN. CR Electrical Contractors, Inc. "CREC") is an Iowa corporation with its principal place of business in Cedar Rapids, lowa. It is owned by John Jones, who employs a total of six 6) individuals including him. His spouse, Mary Jones, is the Office Manager and performs all of the accounting functions and provides assistance with bids. The other four (4) employees, like John, are journeyman electricians who are capable of all residential and commercial electrical work including service activities. The business has an average of S1,500,000 of revenue annually. The following supplemental information represents the insurance coverages issued to the business by Dependable Insurance Company. Bill Best is the insurance agent for CREC, Inc. and the policies are issued to CREC through Bill's independent insurance agency, Best Insurance Agency, Ltd., also located in Cedar Rapids. II CREC maintains workers compensation insurance in accordance with lowa statutes and procures employer liability coverage of S500,000 for each bodily injury accident $500,000 for bodily injury by disease for each employee with 1,000,000 total limits for disease. CREC insures its commercial property exposures under a business owners policy coverage form (BOP). CREC Inc. owns a 1-story frame building with protection class 7 which has a lmit of insurance at $100,000, a covered causes of loss special form and a replacement cost inflation guard of 4%. CREC insures its business personal property with a limit of $25,000, covered causes of loss special form and a no dollar limit on business income and extra expenses but it is subject to a twelve (12) month maximum. The business personal property is valued at actual cash value CREC borrowed $50,000 from Strong Bank to acquire the building and has a line of credit with Strong Bank of $25,000 to replenish business personal property. Accordingly, CREC granted Strong Bank a mortgage and a security interest in the real and personal property respectively and the policy is endorsed accordingly. CREC also has a separate equipment floater covering all of its contractors' equipment with a catastrophe limit of $50,000. The floater has a $500 deductible per occurrence and carries a 100% co-insurance requirement. Answer the following questions: A. CREC's BOP contains the following provision: "In the event of loss or damage covered by this Coverage Form, at our option, we will either: (i) pay the value of lost or damaged property; (ii) pay the cost of repairing or replacing the lost or damaged propertyiii) take all or any part of the property at an agreed or appraised value; or iv) repair, rebuild, or replace property with other property of like kind and quality." What special legal characteristic of insurance contracts applies to this provision? Identify the provision and explain fully how it enforces the legal characteristic. (5 POINTS B. CREC's building suffers a total loss as a result of an unexplained fire that occurred after hours, CREC locates its business to a new location and leases it from a landlord for $1,500 per month until the new building is ready for occupancy. CREC continues to pay its journeyman electricians because of a skilled labor shortage which totals S10,000 per month. The new building is completed in six (6) months time. Answer the following questions: (10 POINTS 1. What is the purpose of coinsurance and why is important to CREC's rating structure as to the BOP? 2. Strong Book demands that its mortgage be paid before construction commences. The remaining loss balance is $50,000. What allows Strong Book to take this position? 3. CREC's business income loss totals $65,000, which is more than the value of the building. Will their loss be paid? Is the extra expense loss of $1,500 per month contained in the business income loss? Will the payroll expense be paid? Why or why not? 4. The replacement cost of the building is $175,000, however, its actual cash value is S125,000. How much with the carrier pay and why will it pay that amount? C. A CREC employee asks an employee of ABC Masonry Company to assist him while installing an overhead electrical outlet since both individuals were working at a construction site. The masonry employee is killed when CREC's employee fails to turn off the electricity. The masonry employee's widow sues CREC for loss of consortium and ABC's Masonry Company workers compensation carrier seeks payment for benefits paid to the deceased employee. Identify and explain the availability of coverage to CREC for these exposures. (5 POINTS BASIC FACT PATTERN. CR Electrical Contractors, Inc. "CREC") is an Iowa corporation with its principal place of business in Cedar Rapids, lowa. It is owned by John Jones, who employs a total of six 6) individuals including him. His spouse, Mary Jones, is the Office Manager and performs all of the accounting functions and provides assistance with bids. The other four (4) employees, like John, are journeyman electricians who are capable of all residential and commercial electrical work including service activities. The business has an average of S1,500,000 of revenue annually. The following supplemental information represents the insurance coverages issued to the business by Dependable Insurance Company. Bill Best is the insurance agent for CREC, Inc. and the policies are issued to CREC through Bill's independent insurance agency, Best Insurance Agency, Ltd., also located in Cedar Rapids. II CREC maintains workers compensation insurance in accordance with lowa statutes and procures employer liability coverage of S500,000 for each bodily injury accident $500,000 for bodily injury by disease for each employee with 1,000,000 total limits for disease. CREC insures its commercial property exposures under a business owners policy coverage form (BOP). CREC Inc. owns a 1-story frame building with protection class 7 which has a lmit of insurance at $100,000, a covered causes of loss special form and a replacement cost inflation guard of 4%. CREC insures its business personal property with a limit of $25,000, covered causes of loss special form and a no dollar limit on business income and extra expenses but it is subject to a twelve (12) month maximum. The business personal property is valued at actual cash value CREC borrowed $50,000 from Strong Bank to acquire the building and has a line of credit with Strong Bank of $25,000 to replenish business personal property. Accordingly, CREC granted Strong Bank a mortgage and a security interest in the real and personal property respectively and the policy is endorsed accordingly. CREC also has a separate equipment floater covering all of its contractors' equipment with a catastrophe limit of $50,000. The floater has a $500 deductible per occurrence and carries a 100% co-insurance requirement. Answer the following questions: A. CREC's BOP contains the following provision: "In the event of loss or damage covered by this Coverage Form, at our option, we will either: (i) pay the value of lost or damaged property; (ii) pay the cost of repairing or replacing the lost or damaged propertyiii) take all or any part of the property at an agreed or appraised value; or iv) repair, rebuild, or replace property with other property of like kind and quality." What special legal characteristic of insurance contracts applies to this provision? Identify the provision and explain fully how it enforces the legal characteristic. (5 POINTS B. CREC's building suffers a total loss as a result of an unexplained fire that occurred after hours, CREC locates its business to a new location and leases it from a landlord for $1,500 per month until the new building is ready for occupancy. CREC continues to pay its journeyman electricians because of a skilled labor shortage which totals S10,000 per month. The new building is completed in six (6) months time. Answer the following questions: (10 POINTS 1. What is the purpose of coinsurance and why is important to CREC's rating structure as to the BOP? 2. Strong Book demands that its mortgage be paid before construction commences. The remaining loss balance is $50,000. What allows Strong Book to take this position? 3. CREC's business income loss totals $65,000, which is more than the value of the building. Will their loss be paid? Is the extra expense loss of $1,500 per month contained in the business income loss? Will the payroll expense be paid? Why or why not? 4. The replacement cost of the building is $175,000, however, its actual cash value is S125,000. How much with the carrier pay and why will it pay that amount? C. A CREC employee asks an employee of ABC Masonry Company to assist him while installing an overhead electrical outlet since both individuals were working at a construction site. The masonry employee is killed when CREC's employee fails to turn off the electricity. The masonry employee's widow sues CREC for loss of consortium and ABC's Masonry Company workers compensation carrier seeks payment for benefits paid to the deceased employee. Identify and explain the availability of coverage to CREC for these exposures. (5 POINTS