CP 10 65–FLOOD COVERAGE ENDORSEMENT

(June 2019)

BACKGROUND

CP 10 65–Flood Coverage Endorsement is an optional causes of loss form. It is important to note that this endorsement does not eliminate the water exclusion in any of the causes of loss forms. It provides very specific coverage. When that coverage conflicts with the exclusion, only that specific part of the exclusion is eliminated.

This endorsement is not a stand-alone causes of loss form. One of the other causes of loss forms, CP 10 10,
CP 10 20, or CP 10 30, must also be included.

Related Article: Basic, Broad and Special Causes Of Loss Forms Analysis

Covered Causes of Loss

When flood coverage is listed on the declarations as a covered cause of loss, this endorsement covers only flood. It does not cover any other type of water that the causes of loss forms describe. This endorsement defines flood instead of allowing the word to stand-alone as it does in the Water exclusion.

Flood exists only if normally dry land areas are inundated. The condition must be general and temporary and may be either partial or complete. This inundation must be due to one or more of the following:

• Tidal or inland waters that overflow
• Surface water that accumulates rapidly or runs off. This can be from any source.
• Mudslides or mudflows caused by surface water that accumulates rapidly or runs off, as described above. A mudslide or mudflow is further defined as flowing mud that travels over areas that are usually dry land.

All of the above that occur in a continuous event are a single flood, even if the event is lengthy.

It is important to compare this very limited coverage to the exclusionary language in the Water Exclusion. Note specifically that mudslide and mudflow coverage in this endorsement is an extension of flood, while in the Water exclusion mudslide and mudflow is a stand-alone event.

Example: The Farling Building slid down the hill.

Scenario 1: The dam broke and the water created a river of mud that destabilized the ground under the Farling Building and carried it down the hill. This endorsement covers this scenario.

Scenario 2: Underground water destabilized the Farling Building over a period of years. The destabilized land eventually gave way and caused a mudslide that took the Farling Building down the hill. This endorsement does not cover this scenario.

Exclusions, Limitations, and Related Provisions

1. The exclusions and limitation within any of the causes of loss forms apply to CP 10 65–Flood Coverage Endorsement, except as amended in items 2 and 3 below.

2. The water exclusion does not apply if it conflicts with the coverage that CP 10 65 provides. In other words,
CP 10 65 overrides the water exclusion but only for flood.

3. The tsunami portion of the earth movement exclusion does not apply to a tidal water loss that would be covered under this endorsement.

4. The ordinance or law exclusion in the causes of loss forms still applies. The only exception is when CP 04 05–Ordinance or Law Coverage is attached.

5. New exclusions and limits are added:

a. There is no coverage for loss or damage from a flood that begins 72 or fewer hours prior to the policy inception date. In addition, any increase in limits made in that 72-hour time frame does not apply to any loss or damage from that specific flood. That 72-hour time frame begins when water initially overflows its banks. There is an important exception to this exclusion. If the policy is a renewal policy and there was no break in coverage between the prior policy and this renewal, this 72-hour exclusion does not apply. In addition, the 72-hour increase exclusion does not apply if the limit increase was part of the renewal.

Example: Cavalier Customs sustains damage when the Big River overflows its banks on 04/16/19.

Scenario 1: Cavalier requested a flood endorsement on 04/14/19. There is no coverage for the flood damage.

Scenario 2: Cavalier’s policy had a flood endorsement attached. That policy renewed on 04/14/19. There is coverage for the flood damage.

Scenario 3: Cavalier’s agent encouraged him to switch from Company A to Company B and to increase the limit on the flood endorsement from $50,000 to $100,000. The change in carrier was effective on 04/14/19. Because both policies have the flood endorsement attached and there was no break in coverage, the damage from the flood is covered for $100,000.

b. Coverage does not apply to loss or damage due to land that becomes destabilized by water that acts on subsurface land.

c. This is really a reminder to the insured. Property coverage forms do not consider land to be covered property. The costs to excavate, grade, backfill, or fill are also considered Property Not Covered. This means that the cost to restore land after a loss occurs is the insured's responsibility. This can be a major cost factor to the insured because construction cannot begin until and unless the ground is first prepared. There is an exception. If land along a shoreline erodes or is undermined because of flood and subsequently collapses or sinks, there is coverage for the loss or damage to building and personal property that were on that land.

d. Damage to personal property in the open is excluded unless specifically covered based on entries on the flood coverage schedule or on the declarations.

e. This endorsement considers the following items to be Property Not Covered:

• Any building or property that is not eligible for flood insurance because of the Coastal Barriers Resources Act or the Coast Barrier Improvement Act
• Boathouses and open structures on or over a body of water. Property in or on these structures is also not covered.
• Bulkheads, pilings, piers, wharves, docks, and retaining walls, even if they are scheduled on CP 14 10–Additional Property
• Foundations below the lowest basement floor or the ground's sub-surface, underground pipes, flues, and drains, even if they are scheduled on CP 14 10–Additional Property

f. Damage due to water or waterborne material discharged from a sewer, drain, or sump is excluded. There is an exception. Sewer backup is covered if it results from flood. The discharge/backup must take place within 72 hours of the flood receding in order for coverage to apply.

Additional Coverages and Coverage Extensions

1. The following replaces Additional Coverage–Debris Removal:

a. The cost of removing debris created by a flood is covered. However, this coverage applies only to the debris of covered property and other debris on the premises. There is no coverage for the expense to remove mud or earth from the premises' grounds.

b. Floods often move covered property away from the premises that must subsequently be removed from the location where it lands. The expenses to remove that property are also covered.

c. The debris removal expense described in a. and b. above is part of the limit of insurance. There is no additional limit available to pay for it. This means that the most paid for debris removal plus the property damage is the scheduled flood limit of insurance.

Example: Jenkin's Tavern is located on a small lake. There is a large deck for outdoor seating and a gazebo that overlooks the lake. Unusual rains cause the lake to overflow and wash the gazebo away. It comes to rest on the other side of the lake. In addition, part of the deck is pulled away. It costs $5,000 to retrieve the gazebo and the deck. It costs $50,000 to repair the deck and replace the gazebo. The cost to repair the rest of the damaged property is $35,000. As a result, the total amount of loss is $90,000.

2. The Newly Acquired or Constructed Property extension is modified so that the coverage this endorsement provides does not apply to any such building or structure that is not fully enclosed. Flood coverage applies to any building or structure that is enclosed but is limited to not more than 10% of the total limits of insurance for all flood coverage. This is not additional insurance.

Example: Perry’s flood insurance limit is $150,000 for building #1, $100,000 for building #2, and $125,000 for building # 3. He purchases building # 4 but a flood loss occurs before he can report it to his insurance company. The flood insurance available for building # 4 is limited to the total limits for the other buildings of $375,000 X .10 = $37,500. However, this is a sub-limit because the maximum flood coverage available for all four buildings is $375,000.

3. None of this endorsement's additional coverages or extensions of coverage increase its limits of insurance.

Coinsurance

The policy's coinsurance requirements continue to apply unless the no-coinsurance option is selected on the flood coverage schedule or the declarations. In that case, it applies to all coverage provided and a coinsurance penalty is not assessed.

Limit of Insurance

1. General Information

The limit of insurance for flood coverage can be the same as the limit of insurance for all other coverages or it can be less. The policy limits apply if a limit is not entered on the flood schedule.

2. Application of Limit and Aggregate

The flood limit of insurance is the most paid in a single flood event. The Aggregate flood limit is the most paid for all floods in a 12-month policy period. The aggregate flood limit can be the same limit as the flood limit of insurance. The aggregate is depleted by each flood loss paid during the policy term.

If a flood begins in one policy year and ends in another, the aggregate limit from the initial policy term is the limit that applies. If that aggregate is exhausted, the limit for new policy term does not apply.

3. Ensuing Loss

When a flood loss occurs along with an ensuing loss that the coverage form insures, the most paid is the limit of insurance available for that property. The limit is not the total of the flood limit of insurance and the coverage form limit of insurance.

Example: Floodwaters flow into Jason’s Castle. The water extinguishes the water heater pilot light and causes an explosion. The fire damage is $150,000 and the flood damage is $25,000. Jason’s limit on building coverage is $125,000 and his flood limit is $25,000. He expects to be paid $125,000 plus $25,000. He is very surprised and disappointed when he receives only $125,000.

Deductible

The deductible on the flood schedule applies. This coverage does not pay for any part of the National Flood Insurance Program (NFIP) deductible. Any loss from both flood and another cause of loss is subject to only the highest deductible.

Other Insurance

This Other Insurance clause replaces the one in the coverage form.

1. The first part explains that, if an NFIP policy could cover the property, this flood endorsement is excess over it. This applies whether or not such a policy actually covers the property.

The NFIP underlying requirement can be waived if NFIP did not cover the property because it was not eligible at the time the flood endorsement was written. In addition, the Flood Coverage Schedule can specifically state that the NFIP requirement is waived. The waiver may apply to all locations or may apply to only a particular location if stated on the Flood Coverage Schedule.

2. If item 1. does not apply, a proportionate sharing takes place with other available coverages.