CP 00 80–TOBACCO SALES WAREHOUSES COVERAGE FORM OVERVIEW

(June 2019)

INTRODUCTION

At one time, tobacco was king, and the tobacco sales warehouse was where the price of tobacco was established. Tobacco is no longer kind and due to termination of the tobacco subsidies in 2005 and the labor-intensive nature of the crop, the number of farmers raising tobacco has dropped significantly. As an example, according to the USDA Ag Census in 1992, there were 124,270 tobacco farms in the U.S. but as of 2012 only 10,014 remained. In 1992, 831,231 acres were planted in tobacco but in 2012 only 342,932 were.

Many of the remaining farmers prefer the stability of contract farming to the unpredictability of the warehouse auctions. This change has resulted in the closure of many warehouses.

CP 00 80–Tobacco Sales Warehouses Coverage Form is available only for those auction warehouses where the warehouse owners are responsible for the tobacco while it is in their care, custody, and control.

It covers the warehouse owner or operator's storage and handling risk. It is an annual reporting form that covers direct physical loss of or damage to sales-ready tobacco while it is in the warehouse. However, coverage applies only during the tobacco-selling season.

HIGHLIGHTS

CP 00 80 has some unique features that affect coverage.

Coverage 1. Covered Property defines tobacco and clearly states that the only property covered is tobacco inside a building or structure listed on the declarations. Tobacco that is outside a listed building or structure or even inside an unlisted building is not covered.
Coverage 1.b. states the times that coverage applies. Coverage begins 15 days before the start of the auction season and ends 15 days after it ends. Any tobacco that arrives on the premises before the time the auction season begins or that remains on the premises after it ends is not covered.
E. Loss Conditions 6. Valuation explains that the value of the tobacco is based on a five-day average calculation. Prices at the nearest undamaged warehouse to the named insured’s warehouse are used to determine that average.
F. Additional Conditions 1. Need for Full Reports explains the reporting requirements because this is a reporting form. There is no option to write coverage on a non-reporting basis. This section also clearly states that coverage is on a specific basis, not a blanket basis, and reports must be submitted by location.

ELIGIBILITY

The only eligible risks are tobacco sales warehouses that charge tobacco farmers a fee to store their harvested, dried, and cured tobacco crops that are ready for sale.

POLICY MAKE-UP

The ISO Tobacco Sales Warehouses Policy consists of seven basic parts or forms:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions

This contains the conditions common to all commercial lines of insurance. It is a mandatory form for all simplified monoline or multi-line policies.

Commercial Property Declarations

CP 00 90–Commercial Property Conditions

CP 00 80–Tobacco Sales Warehouses Coverage Form

One or more of the Causes of Loss Forms

These forms describe the types of losses insured and the exclusions that apply.

Policy Cover or Policy Jacket developed by individual insurance companies

These forms may also include an index or a table of contents to meet requirements that some states impose.

CAUSES OF LOSS FORMS

The Causes of Loss Forms describe the types of losses insured, exclusions, and relevant limitations that apply. The policy is not complete unless at least one of the following causes of loss forms is included.

CP 10 10–Causes of Loss–Basic Form

This form provides coverage against fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicles, riot or civil commotion, sprinkler leakage, vandalism, sinkhole collapse, and volcanic action.

CP 10 20–Causes of Loss–Broad Form

This is an intermediate-level causes of loss form. It includes the basic causes of loss plus breakage of glass, falling objects, the weight of snow, ice, or sleet, and water damage.

CP 10 30–Causes of Loss–Special Form

This form covers direct physical loss or damage by all types and causes of loss not specifically excluded or limited.

AVAILABLE ENDORSEMENTS

There are no tobacco warehouse specific endorsements; instead, the same endorsements that are available to modify the CP 00 10–Building and Business Personal Property Coverage Form can be used to tailor the ISO Tobacco Sales Warehouse Coverage Form. Endorsements broaden, restrict, delete, modify, or add coverage.

UNDERWRITING

Underwriting tobacco sales warehouses always starts with Construction, Occupancy, Protection and Exposure (C.O.P.E.). After evaluating these tangible features, the important intangibles of moral and morale risk that may cause as many losses must also be evaluated.

RATING

The ISO Commercial Lines Manual Division Five (Fire and Allied Lines) Rule 68 describes how to rate tobacco in sales warehouses.