A client operates a manufacturing plant and their Commercial Property Policy includes a 'Peak Season' endorsement. Their normal inventory value is $1,000,000, but during the holiday season (October 1st to December 31st), their inventory rises to $1,800,000. A fire occurs on November 15th, destroying $1,500,000 worth of inventory. The policy's stated limit for Personal Property is $1,000,000. How much will the policy pay for the inventory loss, assuming no deductible?
- A$1,000,000
- B$1,500,000
- C$1,800,000
- D$800,000
Show answer & explanationAnswer & explanation
Correct answer: B. $1,500,000
The Peak Season endorsement provides for an increased limit of insurance during specific periods when inventory values are higher. In this scenario, the endorsement would automatically increase the $1,000,000 limit to cover the higher inventory during the holiday season. Since the inventory reached $1,800,000, and the loss was $1,500,000 during this period, the policy would pay the full loss of $1,500,000, up to the maximum peak season value.
Why the other options are wrong
- A. This ignores the effect of the Peak Season endorsement.
- C. This is the maximum inventory value, not the amount of the loss.
- D. This represents the 'extra' inventory above the normal limit, not the total payout for the loss.
Peak Season Endorsement
A Commercial Property endorsement that provides for an increased limit of insurance for Business Personal Property during specified periods of the year when inventory values are typically higher, such as during holiday seasons.
- Increases limits automatically for specific periods.
- Useful for businesses with seasonal inventory fluctuations.
- Averages or specific dates can be used for the increased limit.
Memory trick: Peak Season: When your inventory 'Peaks', your coverage 'Jumps'.