Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Commercial LinesHard
A Florida-based software development company hosts its primary application servers in a third-party data center. They have a Commercial Package Policy (CPP) and a separate Cyber Liability policy. A sudden, unexpected power surge at the data center, not caused by a cyberattack, fries their dedicated servers, leading to a week of downtime. Which policy, if any, would most likely respond to cover the physical damage to the servers and the resulting business interruption?
- ANeither policy, as a third-party data center is not covered.
- BBoth policies would respond, splitting the costs based on their respective coverages.
- CThe Commercial Package Policy (CPP) property section, if it includes coverage for off-premises property or property in the care of others.
- DOnly the Cyber Liability policy, as it involves technology infrastructure.
Show answer & explanationAnswer & explanation
Correct answer: C. The Commercial Package Policy (CPP) property section, if it includes coverage for off-premises property or property in the care of others.
Physical damage to servers from a power surge is a property loss, not a cyber event. While the servers are off-site, a CPP can be endorsed to cover 'property off-premises' or 'property in the care, custody, or control of others.' Business interruption would then follow from the covered property damage.
Why the other options are wrong
- A. A well-structured CPP can indeed extend coverage to property at third-party locations, especially if scheduled or endorsed.
- B. The Cyber policy would not cover physical damage from a power surge. The CPP would be the primary responder for the physical damage and subsequent business interruption if endorsed correctly.
- D. Cyber Liability covers cyberattacks, data breaches, and related intangible losses, not physical damage from a power surge.
CPP Off-Premises Property
Commercial Package Policies can be extended via endorsements to cover business personal property, such as servers, located at third-party premises like data centers.
- Standard CPP property coverage is typically for on-premises.
- Endorsements are necessary for off-premises property coverage.
- Crucial for businesses using cloud services or external storage.
Memory trick: CPP Endorsement: Extending Your Walls.