(June 2019)
CP 00 90–Commercial Property Conditions contain nine conditions that apply to the Commercial Property Program. These are in addition to IL 00 17–Common Policy Conditions and the Loss Conditions and Additional Conditions in the specific Commercial Property Coverage Form.
Related Article: IL 00 17–Common Policy Conditions Analysis
The conditions are:
This policy is void if the named insured is involved in policy-related fraud. It is also void if ANY insured intentionally conceals, or misrepresents a material fact with respect to any of the following:
This section of the form deserves careful attention. Each state has its own philosophy with respect to the actions it considers concealment, misrepresentation, or fraud. Similarly, each state has laws or precedents that establish when an insurance company may or may not void, cancel, or suspend a coverage form or policy. As a result, a coverage review is not complete without analyzing the state specific endorsements attached to the policy.
Related Court Cases:
Insurer Can Rescind Policy Based On Insured's Material Misrepresentations On Application
Misrepresentations Voids Entire Policy
Insured's Material Misrepresentation in Application Warranted Denial of Coverage
Insured Blames Agent for Its Misrepresentations
Only the named insured's negligence or its negligent acts affects the coverage provided. Coverage is not affected by negligent acts or neglect of other parties that are outside the named insured's direction and control.
This condition emphasizes the fact that the insurance company cannot deny coverage for the negligent acts of parties other than the named insured or deny coverage because of situations beyond the named insured's control. The company must always be fair and have a legitimate basis to deny a claim.
If an act, neglect or breach occurs at one location, only that location is affected. A named insured that is negligent at one location may not be negligent at its other locations.
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Example: Paul Flybynight has a commercial property policy that covers three furniture outlets. Two of them are on opposite sides of a mega-mall that has significant customer traffic. A severe storm strikes the part of town where the mall is located. Both of Paul’s stores are seriously damaged by windborne debris, the display windows at each are blown out, and each store's interior sustains damage. Paul instructs his employees to secure location one. This includes boarding up windows and bringing in large fans to help dry things out. For reasons unknown, Paul does absolutely nothing at the other store. His staff at that location goes home and does not do anything except lower and lock the store's security gates. Meanwhile, the wind and rain cause tremendous damage to the store. Paul’s insurance company makes a complete settlement for the damage at the one store but successfully denies the claim at the other store because Paul was negligent in attending to the damage. |
Two or more coverages within a coverage form may apply to the same loss or damage. However, the insurance company is not liable for more than the actual amount of the loss or damage. This condition is important because it points out that insurance is a contract of indemnity that is intended to protect the insured's assets. It is not a license to profit from an accidental or intentional loss.
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Example: Patty's commercial property policy covers her building and business personal property. A fire damages a refrigeration unit. Patty reads her policy and decides to file a claim under both coverages because she realizes that the refrigeration unit could qualify as either building or personal property. The insurance company pays the full value of the refrigeration unit and nothing more. |
Any legal action against the insurance company must be brought within two years after the date of loss or damage. Purchasing insurance coverage does not relieve the insured of its obligations and responsibilities. It must act responsibly and protect undamaged property after a loss, as well as cooperate fully with the company to establish a legitimate amount of loss.
This condition states that the no one can take legal action against the insurance company unless all reasonable duties and responsibilities required have been performed. One condition would be handling disputes over loss amounts using the appraisal condition instead of taking legal action against the company.
This condition is designed to preserve the right to a legal remedy in court while ensuring that doing so is a last resort.
Related Court Cases:
Suit Against Insurer Is Filed Too Late
Reinvestigation Doesn't Affect Suit's Time Limit
Timely Payment Bars Bad Faith Suit
Suit Limitation Rule Was That of State in Which Property Was Located
The insurance company may adopt a revision to the coverage forms on this policy that broaden coverage without charging an additional premium within 45 days prior to or during the policy period. If it does, the broadened coverage automatically applies to the coverage forms.
This condition is meant to provide the insured with the full benefit of coverage upgrades the insurance company makes to the coverage form. One reason it is important is that many carriers begin to review and process renewal policies well in advance of the expiration date. This is to reduce expenses, increase efficiency, and comply with state non-renewal laws. As a result, the insured may not receive the most current policy upgrade, even if it becomes effective for that renewal. This condition permits the broader coverage to apply automatically as long as a premium charge does not accompany it and eliminates the company's expenses to subsequently endorse the renewal policy.
However, the opposite is not true. Changes in the new or upgraded version that reduce coverage do not automatically apply. In addition, enhancements or upgrades that would have been offered with an additional premium charge are not automatically included.
The insured is the only party that benefits from this insurance, even if another party has custody of covered property. Loss payments made to the insured are for only its financial interest in the covered property. There is no coverage for the time, labor, loss of use, or other potential loss that any other party that has custody of the property experiences.
There are two primary reasons for this provision:
· It places the responsibility for protecting property squarely on the entity that has control of it.
· Commercial property coverage pricing is based on covering property only in the circumstances defined within the policy.
This condition preserves the pricing integrity of the product.
This condition explains how to determine coverage or handle losses when other insurance coverage is available.
1. If the insured has other insurance subject to the same plan, terms, conditions, and provisions as this coverage form, the loss is shared on a proportionate basis. The insurance company's share is based on the proportion of its limit to the total limits of all insurance that covers the property on the same basis.
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Example: A coin laundry that burns to the ground is insured by two commercial property policies issued by two different insurance companies. Both policies are written on the same basis and have identical limits. In this case, each carrier is responsible for half of the loss. |
2. If any other insurance that applies to a covered loss is other than as described in 1. above, this insurance applies on only an excess basis. This coverage form pays the amount that exceeds any other such insurance, whether it can be collected or not. If the other carrier denies coverage, this coverage form acts as though the other carrier paid and offers only the amount above what the other insurance should have paid. However, this coverage form does not pay more than the limit of insurance on the declarations even when it is used as excess.
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Example: Gayle has a package policy that includes property, inland marine, and general liability coverages. The property coverage form includes a $2,500 limit on valuable papers and records as additional coverage. One of the inland marine coverages Gayle purchases is valuable papers and records with a $25,000 limit. A covered valuable papers and records loss occurs. The inland marine coverage responds first for its $25,000 limit and the property additional coverage for valuable papers and records then responds with an additional $2,500 amount of insurance if it is needed. |
This condition explains the policy period and coverage territory. Both apply to all losses.
1. In order for coverage to apply, loss or damage must first occur:
· In the coverage territory
· During the policy period on the declarations
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Example: Karen’s policy period is 01/01/19 to 01/01/20. A small spark starts a fire in her business at 11:50 p.m. on 12/31/19. The fire smolders and nobody notices it until 2:00 a.m. on 01/01/20. Coverage applies because the fire started prior to the policy expiration date and time. |
2. Coverage Territory consists of and is limited to the United States of America, its territories and possessions, Puerto Rico, and Canada.
This condition provides the details of how the insured's rights of recovery against another party (including another insurance company), transfer to the insurance company once it pays the insured for loss or damage. This is sometimes referred to as subrogation.
If the insured or any other covered party has rights of recovery against another entity, those rights transfer to the company at the time it pays the insured or the covered party. The rights transferred apply only to the extent of the payment the company made.
The party that receives payment must do everything necessary to secure and protect the company's rights. This includes making sure that those rights are not impaired after a loss. If the insured waives its rights of recovery against another party, the insurance company can refuse to pay its claim for loss or damage. This is not an absolute because the insured can waive its rights most of the time. However, such waivers must be in writing and be executed prior to any loss. The only really restricted time to waive rights is following a loss. However, they may still be waived if the party is any of the following:
Related Court Cases:
Mutual Subrogation Waiver Clause Barred Recovery by Property Owner's Insure
Subrogation Held Barred by Insurance Agreement between Landlord and Tenant