Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

Which of the following is NOT a reason for exclusions on commercial property policies?

1. Deliberate acts of violence

2. Catastrophic losses

3. General wear and tear

4. More specialized policy forms exist

The correct answer is: General wear and tear

Exclusions on commercial property policies are crafted to clarify the limits of coverage. Among various exclusions, general wear and tear is a common factor as insurance is designed to cover unforeseen and accidental damages rather than regular maintenance issues. Policies typically cover sudden and accidental damage but not gradual deterioration, which is expected from the normal use of property. In contrast, deliberate acts of violence, catastrophic losses, and the existence of more specialized policy forms represent scenarios or needs that require exclusion due to either moral hazard, the nature of risk, or the availability of tailored coverage options. For example, deliberate acts can lead to claims that raise concerns about the integrity of the coverage, while catastrophic losses may exceed what a standard policy is designed to accommodate. Specialized policies may exist to provide coverage for specific risks or perils that are not included in standard policies, thereby necessitating their exclusion in generic forms.