Case Application

Kimberly owns and operates a tennis shop in a resort area. The
business is seasonal. A large part of the annual revenues are due
to sales in June, July, and August. Kimberly keeps the shop open
during the remaining months of the year, but the inventory carried
during those months is reduced. During the summer months, the
amount of inventory on hand is substantially increased. Kimberly
has the business insured under the special form business owners
policy (BOP) with no endorsements attached.

a. Assume you are a risk management consultant. Identify the
major loss exposures that Kimberly faces.

b. Assume that a covered loss occurs in July, which damages part
of the inventory. Does the BOP provide any protection for the
increase in inventory during the summer months? Explain your
answer.

c. Kimberly plans to hire an additional employee during the
summer months when sales are increasing. She is concerned about
possible employee theft and dishonesty. Explain to Kimberly how
this loss exposure can be handled under the BOP.

d. A fire damaged the building. As a result, Kimberly incurred a
business income loss because the business was closed for 3 months.
Is this loss covered by the BOP? Explain your answer.

e. Vandalsbrokeanexteriorglasswindowofthebusi- ness, which
caused substantial damage to the building. Is this loss covered by
the BOP? Explain your answer.