BASIC, BROAD, AND SPECIAL CAUSES OF LOSS FORMS ANALYSIS

(June 2019)

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INTRODUCTION

The Insurance Services Office (ISO) Commercial Property Program Causes of Loss Forms are designed to work with a coverage form. The separate causes of loss forms allow the insured to customize its coverage. After selecting the appropriate coverage, the insured then selects a causes of loss form for each insured property. This provides maximum flexibility in arranging insurance coverage.

The Causes of Loss Forms answer the question, "What must happen in order for coverage to apply?" The more causes of loss provided, the more expensive the policy. One of the following Causes of Loss forms must be attached to any Commercial Property Coverage form:

CP 10 10–Causes of Loss–Basic Form
CP 10 20–Causes of Loss–Broad Form
CP 10 30–Causes of Loss–Special Form

The form used most often is CP 10 30–Causes of Loss–Special Form. For this reason, this analysis builds on this form. The other two forms are analyzed at the end of this section, with emphasis on how they differ from CP 10 30.

Note: This analysis is based on the 09 17 edition of the CP 10 30. Changes from the previous edition are in bold print. The CP 10 20 and CP 10 10 remain 10 12 editions.

CP 10 30–CAUSES OF LOSS–SPECIAL FORM

A. COVERED CAUSES OF LOSS

The declarations must list a causes of loss form for each item of covered property. If it is CP 10 30–Causes of Loss–Special Form, coverage applies based on risks of direct physical loss or damage. The coverage this form provides is extremely broad because any physical event that causes loss or damage to covered property is covered unless it is modified elsewhere in this causes of loss form or by endorsement.

B. EXCLUSIONS

CP 10 30 has three categories of exclusions. Each has multiple subparts.

Editorial note: ISO does not give titles to the major categories of exclusions. To assist in the analysis, we have provided a title to help identify the exclusion’s main intent.

1. Broad Exclusions

The causes of loss in this exclusion do not apply to loss or damage caused directly, indirectly, or in any sequence in a chain of events that contribute to the loss. Exceptions to the chain of events condition are stated in the specific exclusion subpart. The lead wording emphasizes that coverage for any event analyzed in these exclusions does not apply even if the event is widespread.

a. Ordinance or Law

Local governments develop ordinances and laws that relate to construction, remodeling, and repair of buildings. Most are not retroactive. As a result, existing buildings are grandfathered out of the ordinance until they must undergo renovations or repairs. When a substantial loss occurs and rebuilding, remodeling, or repair is necessary, the grandfathered laws activate and come into play. This exclusion states that the coverage form does not apply to any costs that must be incurred because the laws and ordinances are being enforced or because the named insured is complying with the ordinances of laws.

This exclusion also states that coverage does not apply to the expense to remove undamaged portions of the building or to rebuild them. There is also no coverage for the additional cost to rebuild at a different location because ordinances or laws do not permit the building to be rebuilt at the existing location. Finally, it does not pay remodeling costs needed to bring the building up to current standards.

HogFarm_1

Example: Harvey’s Hogs started business operations in 1930. It was located on the family farm 15 miles from Little Town. Over the years, both Little Town and Harvey’s Hogs grew. As new subdivisions sprouted, the town limits expanded, and new city ordinances were enacted. One prohibited livestock and other farm animals inside the city limits.

Over Harvey’s objection, the land area where Harvey’s farm was located was incorporated into the city. Harvey’s continued to operate as it did in the past and tried to be a good neighbor, but hogs were an unpleasant intrusion on city life.

The farm sustained a significant covered loss that destroyed 60% of the building. Harvey was ready to start rebuilding but the city inspector informed him that he could not do so at the present location.

Because of this exclusion Harvey recovers only 60% of the loss. He must cover the cost to demolish the 40% undamaged portion of the building and also pay 40% of the cost to rebuild at the new location.

b. Earth Movement consists of five separate components:

(1) Earthquake includes any sinking, rising, or shifting of the earth directly related to the earthquake. The
10 12 edition adds tremors and aftershocks to this list.

(2) Landslide includes any sinking, rising, or shifting of the earth directly related to the landslide.

(3) Mine Subsidence applies to only man-made mines and applies whether the mine is operating or not. Mine subsidence coverage is an option that may be purchased separately. In some states, mine subsidence coverage is required to be offered in certain counties. If coverage applies to property located in Illinois, Indiana, Kentucky, Pennsylvania, or West Virginia, the laws in those states should be reviewed carefully to determine the way to properly handle this exposure.

(4) Sinkhole Collapse is covered but all other sinking, rising, shifting, eroding, contracting, or expanding of the earth is excluded. Loss or damage caused by or that result from water movement beneath the ground and poor soil conditions is also excluded.

However, if any of the events described in (1)-(4) above cause or result in a fire or explosion, the insurance company pays for the ensuing loss or damage the fire or explosion causes.

Example: An earthquake rocks Bardsville. While the buildings are virtually undamaged, the rigid gas lines break. A spark causes the escaping gas to explode and despite heroic efforts by the fire department, the explosion results in Sam’s Hardware building burning to the ground. This loss is covered because it resulted from a fire, even though the fire was a direct result of an earthquake.

(5) Volcanic eruption is not covered unless fire, breakage of building glass, or volcanic action ensues. Volcanic action is considered airborne blasts and shockwaves, dust, ash, and particulate material the volcano emits, as well as lava flow. The costs to remove dust, ash, and particulate matter is excluded unless there is also direct damage to the covered property.

Volcanic eruptions are unpredictable, cause widespread damage, and usually occur over a period of days. An eruption that takes place over a period of 168 consecutive hours is treated as one occurrence. This is very important to an insured that has a substantial deductible for this coverage. Instead of a number of deductibles applying to multiple events, only one deductible applies to each 168-hour period. On the other hand, this also means that only one limit is available for all losses that occur within that same time period.

Example: Prime Real Estate Management owns two commercial strip centers and insures the buildings for a blanket limit of $6,000,000 on an agreed value basis. A volcano erupts nearby, and lava flow destroys one center and a fire caused by flaming debris destroys the other. Each has a value of $6,000,000. Because both losses are caused by the same occurrence, Prime has only $6,000,000 available to cover its loss, not $12,000,000.

All aspects of this exclusion apply regardless of whether nature or any other force causes the event.

Example: An earthquake damages Rapid Lines’ building. Joe, the owner, is sure the earthquake is due to hydraulic fracking taking place in various places throughout the county where his building is located. He submits the earthquake claim as a fracking claim instead of as an earthquake claim. Coverage is denied.

c. Government Action

Coverage does not apply if the government seizes or destroys property. However, coverage does apply if the action it took was to prevent the spread of fire. This exception applies only if the policy covers the fire that the government is trying to stop.

Example: An anarchist group declares its secession from the United States and establishes a separate country within the state of Indiana known as "Free to Live." The group is armed and takes over a small community by force. Because one of its tactics is to set fires, the government has no choice but to burn other structures in order to establish a fire stop. There is no coverage in this case because the government action was taken to thwart fire set within a military action. Because the military action is not covered, the fire due to it is also not covered.

d. Nuclear Hazard

There is no coverage for loss or damage for anything related to nuclear hazards. Reactions, radiation, and contamination are not covered. However, if a fire ensues, the loss or damage that the fire causes is covered.

Note: CP 10 37–Radioactive Contamination provides either limited or broad coverage for radioactive contamination.

e. Utility Services

Loss or damage due to utility failure that begins away from the described premises is excluded. When the failure begins on the insured premises, there is still no coverage if the source of the failure is equipment that supplies off premises utility service to the described premises. Utility failure is loss of power, water, communications, and other utility services. It also includes lack of capacity and reduction in supply.

CP 10 30 does not cover Utility Services loss due to damage to equipment the utility owns that is on the named insured’s premises.

Communication services include Internet, cellular, satellite, and other access services. Power surge that occurs because of the power failure is excluded. If power failure or surge results in a covered cause of loss, coverage applies to the damage that covered cause of loss causes.

Examples:

Scenario 1: A fire occurs at the electric power plant and causes a blackout. Fred's Fine Foods loses refrigeration and the food spoils. When looters discover that Fred's alarm system is not working, they break in and steal food items. The spoiled food loss is not covered. The loss due to theft is covered.

Scenario 2: A windstorm rips the satellite dish and its connecting lines from the hotel's roof. A number of scheduled meetings are cancelled because teleconferencing is not available. There is no coverage for the loss of income that results from the cancelled meetings or extra expenses incurred.

Related Article: Utility Service Coverage

f. War and Military Action

This exclusion lists three specific warlike activities that are excluded.

War. This can be a declared, an undeclared, or a civil war.
Military force of a warlike nature. These activities must utilize military personnel or agents of a government or other type of authority. The actions taken to thwart any of these activities are also considered war.
Insurrection, rebellion, revolution, and attempts to usurp power. Any government action taken to respond to such actions is also considered war.

Note: The words "terrorism" or "terrorist" do not appear in this exclusion.

g. Water

Loss or damage caused by the action of water outside the building is excluded. To further clarify this exclusion, it is broken down into five separate components. Each defines exactly what water means within this exclusion. It is any of the following:

(1) Flood. Flood is flood. It is also surface water, tides, tidal water, and waves. Waves include tidal waves and tsunami. Overflow of any body of water is also excluded. A body of water is a natural or man-made river, creek, ocean, or lake. Spray from any of the above, wind-driven water, and storm surge are also excluded.

(2) Mudslide and mudflow which occurs when a sudden large volume of water mixes with unstable soil conditions and is excluded.

(3) The sewers, drains, and sumps part of this exclusion is broadened in two ways. The first is the how and the second is the what. In the 06 07 edition, water had to back up or overflow. In the 10 12 edition, the water can be discharged in other ways. A description of those other ways is not provided. Second, in the 06 07 edition, the water had to come from a sewer, drain, or sump. In the 10 12 edition, it may also come from a sump pump or related equipment. Related equipment is not defined.

(4) Underground water that presses against, flows into or seeps through foundations, walls, floors, paved surfaces, basements, doors, windows, and other building openings.

(5) Waterborne material. This section introduces the term "waterborne material." Damage caused by material carried by waters described in (1), (3), and (4) above is excluded. Damage due to material being moved or carried by mudslides or mudflow described in (2) above is also excluded.

Example: In an updated version of the Wizard of Oz, a storm surge (instead of a tornado) picks up Dorothy’s house and deposits it on top of the Wicked Witch’s castle. The Wicked Witch’s policy does not cover the property loss that Dorothy’s house causes because of this exclusion.

ISO adds a paragraph that explains when this entire exclusion applies. It applies whether any of the events are caused by an act of nature or otherwise. In order to clarify the term "otherwise," ISO provides an example that uses the terms “dam,” “seawall," "levee," "boundary" or "containment system" and states that any of them failing to contain the water is an "otherwise" type situation. However, it is important to note that using this example format does not limit the exclusion to failure of only those specific items. The goal is to define the term "otherwise" as broadly as possible.

Much like other exclusions, if fire or explosion occurs because of any action of water, coverage applies to the loss or damage the fire or explosion causes. In addition, if a sprinkler leakage loss occurs due to these actions of water, coverage applies to the loss or damage the sprinkler leakage causes. Sprinkler leakage coverage applies only if sprinkler leakage is a covered cause of loss on the coverage form or policy.

h. Fungus, Wet Rot, Dry Rot, and Bacteria

Loss or damage caused by or that results from the existence or any activity of fungus, mold, rot, bacteria, and other similar growing organisms is excluded. However, if the existence of one of them causes a specified cause of loss to occur, coverage applies to the loss or damage from that specified cause of loss.

This exclusion does not apply if the fungus, mold, rot, bacteria, or similar organisms result from a fire or lightning loss. It also does not apply to coverage that Additional Coverage–Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria provides.

Examples:

Scenario 1: Millicent has a fire at her store. She notices an odor three weeks later and discovers that mold behind ceiling tiles is destroying them. The tiles must be destroyed, and the area disinfected. Investigation reveals it was the result of the fire-fighting actions three weeks earlier. This loss is covered because the fire caused it.
Scenario 2: Millicent purchases a store but does not notice an unusual odor until about six months later. She hires a contractor who discovers that mold behind ceiling tiles is destroying them. The tiles must be destroyed, and the area disinfected. The claim is denied because the cause of the mold is unknown.

2. Limited Exclusions

There is no coverage for loss or damage caused by the following exclusions. Note that the lead-in language is not as strong or inclusive for these exclusions as the language in 1. Broad Exclusions.

Editorial note: ISO does not give titles to the following exclusions. To assist in the analysis, we have provided a title to help identify the exclusion’s main intent.

a. Artificially Generated Energy

Coverage does not apply if electrical, magnetic, or electromagnetic energy generated artificially causes damage, interferes with, disturbs, or disrupts any of the following:

Networks, devices, systems, wires, or appliances of an electrical or electronic nature
Cellular or satellite devices, appliances, systems, or networks

Examples of artificially generated energy include electrical current, charges a magnetic field produces, electromagnetic, and microwaves, among others, but this listing is not inclusive. However, coverage applies to loss or damage caused by a fire that result from them.

Note: Open-ended exclusions like this have been largely ineffective when courts interpret them. The courts maintain that it is the insurance company's responsibility to be precise in its language because it authors the form.

b. Delay, Loss of Use, or Loss of Market

Delay, loss of use, and loss of market are all consequential losses that may occur following a direct damage loss. All are excluded.

c. Agricultural Smudging and Industrial Operations

Agricultural smudging operations produce significant amounts of smoke in order to protect crops from freezing. Loss or damage it causes is excluded. Loss or damage from industrial produced smoke, vapor, or gas is also excluded.

Example: A freeze warning is in effect, so Lenny sets out his smudge pots to protect his orange grove. A strong wind blows the smoke into the restaurant Lenny operates for tourists. The damage the smoke causes is excluded.

d. Miscellaneous Losses

This exclusion has seven subparts. Most of the causes of loss listed should be viewed simply as costs associated with doing business and not as losses.

(1) Wear and tear is simply loss caused by aging and everyday use and is excluded.

Note: Wear and tear is damage, diminishment in value, or erosion due to long or hard use or exposure. It includes breakdown over time and eventually becoming unusable because of previous use. This also includes the tendency of property to pull apart or break down into pieces because of forces applied to it.

(2) There is no coverage for rust, fungus, and other hidden or latent defects. This includes any feature of the property that causes it to destroy itself.

(3) Damage caused by smog is excluded.

Note: Smog is fog that has become mixed with and polluted with smoke.

(4) All buildings and some personal property may shrink, expand, crack, or settle. This is normal and should be expected. Accommodations for them should be made in building construction and design and with respect to storage of personal property. Losses from these causes are excluded because these are costs of doing business.

(5) Insects, birds, rodents, and other animals may cause considerable damage to buildings and the sudden damage they cause is covered. However, their long-term presence, as evidenced by nesting, infestation, and waste products or secretions, is a building maintenance issue and is excluded.

Example: Perry notices an unusual shimmering substance on the side of the church. He touches the amber liquid and realizes it is honey. He notices the amount increases almost daily and notifies the trustees. They bring in a contractor who investigates and finds a beehive in one of the walls of the church. The contractor brings in a beekeeper to remove the bees. The beekeeper removes the bees. Then the contractor removes part of the interior wall to remove the hive, repair the damaged wood, and seal the entry. None of this is a covered loss because the damage was the result of an insect infestation.

(6) Machines regularly break down because of use. This is an anticipated cost of doing business that should be prevented with regular scheduled maintenance. As a result, mechanical breakdown is excluded. Rupture and bursting caused by centrifugal force is considered mechanical breakdown and is also excluded.

There is an exception. Coverage is provided for damage caused when a mechanical breakdown results in elevator collision. Elevator collision covers both the elevator and damage to the shaft and other property the elevator damages.

Equipment Breakdown Protection Coverage is available to cover this excluded cause of loss.

(7) Exclusions (1) through (6) above apply primarily to buildings. This exclusion applies specifically to Business Personal Property. Coverage does not apply to loss or damage caused by or that result from atmospheric dampness or dryness, temperature extremes, any changes in temperature, or from scratching or marring. These causes of loss are excluded because the insured should expect and anticipate these causes of property damage.

If any of the causes of loss in (1) through (7) above results in either a specified cause of loss or breakage of building glass, coverage applies to the loss or damage the specified cause of loss or glass breakage causes.

Example: Susie's Fancy Finery is a tenant on the first floor of a three-story building. The upper floors are sealed off and are not used. Unknown to the building’s owner or Susie, birds nest in the attic and also find their way into the chimney. The chimney's opening at the top leads directly into Susie's shop. One day nearly a dozen birds enter the shop, panic, and careen into objects and windows in their attempt to escape. The birds crack and break the windows before escaping. Coverage does not apply to the damage the infestation causes but does apply to the damage caused by the glass breaking.

ThreeStoryRetail

e. Explosion of Owned or Operated Steam Boilers

This exclusion applies to only explosions of steam boilers, pipes, engines, or turbines the named insured owns, leases, or operates. This means that most building tenants are not subject to this exclusion unless they have contractually agreed to operate the boilers.

There are two exceptions:

If the explosion causes a fire or combustion explosion, the resulting damage is covered.
If gases or fuel within the furnace, flues, or combustible gas passage explode, the resulting damage is covered.

Equipment Breakdown Protection Coverage is available to cover this excluded cause of loss.

f. Continuous Water Seepage

Loss or damage due to water that leaks or seeps over a period of 14 days or more is excluded. Any damage or damage caused by any humidity, moisture, or vapor that is present over a period of 14 days or more is also excluded. This means that loss or damage due to water that leaks internally is covered unless it is allowed to run unchecked and unnoticed for more than 14 days.

g. Freezing Liquids

There is no coverage for loss or damage caused by or that result from water that flows from plumbing, heating, or other equipment because of freezing. This exclusion also applies if other liquids, powder, or molten material flow for the same reason. However, this exclusion does not apply if any of the following apply:

The other equipment is a fire protective system.
The named insured maintains heat in the building or structure.
The named insured drains the equipment and shuts off the source of supply when heat is not maintained.

Note: This exclusion requires that the insured address maintenance issues that are not the responsibility of insurance. The insurance company has the right to expect the insured to act responsibly towards its property even if insurance coverage does apply.

h. Internal Dishonest Acts

Coverage does not apply to dishonest or criminal acts by the named insured, partners, members of a limited liability company (LLC), officers of a corporation, managers, employees, or authorized representatives. This exclusion applies whether these parties act alone, in collusion with each other, or in collusion with any other party.

Whenever the term employee is used in this exclusion it applies to permanent, leased, and temporary employees. The phrase “dishonest or criminal act” includes theft.

There is also no coverage for theft committed by anyone else entrusted with property. This exclusion applies whether a person is acting alone or is in collusion with others in committing the theft.

This exclusion applies 24 hours a day. This means that acts that occur during business hours are excluded as well as acts committed after hours.

There is one exception. There is coverage if employees or authorized representatives destroy property. This destruction exception does not extend to theft.

Example: Sheila and Fred are long time employees of Frankel Egg Farm but decide they've had enough of the company. They steal the payroll, burn down the plant to conceal their tracks, and are captured three days later. The fire loss is covered but the theft of payroll is not.

Note: The theft loss could be covered under employee dishonesty coverage.

i. Voluntary Parting

There is no coverage if the named insured or someone the named insured entrusts property to is tricked or deceived into giving property away.

GiftExchange

Example: Great Cameras, Inc. ordered a number of lenses from Linda’s company. Linda was preparing to ship the product when Joe appeared. He explained that Great Cameras needed the lenses immediately, so he had driven from company headquarters to personally pick them up. Five days later, Great Cameras inquired about the lenses and Linda learned that Joe was an imposter. Linda mailed the requested lenses and submitted a claim to her carrier for the lenses Joe had stolen. The claim was denied because Linda had voluntarily given the lenses to Joe.

j. Rain, Snow, Ice, or Sleet

Personal property in the open is not covered for any loss or damage due to rain, snow, ice, or sleet.

None of the items pictured outside of this store is covered for rain, snow, ice or sleet damage.

OpenCommecialProperty

k. Collapse

Collapse is an unusual exclusion. At one time it was covered but over the years because it was not defined, it was used as a cause of loss to cover flood, earthquake and other excluded loss scenarios. ISO changes it approach and now excluded Collapse and then adds it back as an Additional Coverage.

Collapse is excluded. This means the following property conditions are also excluded:

(1) Any type of sudden caving in or falling down

(2) When the structural integrity of the building is lost or compromised. The evidence of this could be parts of the property that separate from the rest of the building or the building appearing to be in danger of caving in or falling down.

(3) Cracking, sagging, expanding, settling, shrinking, bulging, or bending, but only as they relate to items (1) and (2) above

SaggingBuilding

A collapse can trigger another cause of loss. When that other cause of loss is a covered cause of loss covered that damages covered property, the portion of the loss that is due to the covered cause of loss is covered.

Example: The bookshelf suddenly collapses. A lit candle was sitting on top of the bookshelf when it collapsed. The lit candle ignited the books and papers that had fallen to the floor during the collapse. The collapse damage is not covered but the resulting fire damage is covered.

There are two exceptions to this exclusion.

The coverage provided in Section D., Additional Coverage–Collapse is not excluded. This exception prevents a conflict between that Additional Coverage and this exclusion.
When a collapse is caused by specified causes of loss, building glass breaking, weight of rain on a roof, or weight of people or personal property, loss or damage from that collapse is covered.

l. Pollutant Damage

There is no coverage for loss or damage when it is caused by or results from any release, discharge, seepage, migration, dispersal, or escape of pollutants.

There are three exceptions to this exclusion.

When a specified peril causes the event, this exclusion does not apply.
When a pollution event results in a specified peril and that specified peril causes loss or damage, the resulting loss or damage is covered but not the pollutant event.

Loss or damage to glass caused when chemicals are applied to glass.

Example: A strong windstorm rips the doors and windows from an outbuilding at Mayfield, Inc. It causes the adhesives and solvents to be scattered around the building compound. The adhesives cling to the buildings while the solvents caused indentations on the entire stucco exterior. Even though this is a pollution loss, there is coverage because wind (a specified peril) caused the damage to occur.

While waiting for the outbuilding to be rebuilt, Mayfield receives a new shipment of adhesives. The shipment is stored in the main building but is placed too close to a heat source. The vapor from the adhesives ignites and causes a fire. Coverage applies to the fire loss even though the pollutant was the trigger.

m. Neglect

There is no coverage if an insured does not use reasonable measures to save and preserve property from further damage during and after the time of loss.

Example: The Mayfield family is exhausted after the two losses described above and decides to just walk away and take a week’s vacation. Thieves notice the unlocked doors and unattended supplies. Coverage does not apply to the theft loss of the supplies because the Mayfields failed to preserve property.

3. Anti-Concurrent Causation Exclusions

The subparts of this exclusion are sometimes referred to as the anti-concurrent causation exclusions. These exclusions are unique in that, if a loss is covered as a covered cause of loss, with the exception of these exclusions, it is still covered. On the other hand, if the loss would have been excluded anyway, it is still excluded.

The three subparts of this exclusion are:

a. Weather Conditions

Loss or damage due to weather conditions is excluded but only when the loss is caused by a weather condition combined with a cause of loss excluded in exclusion 1-Broad Exclusions.

Examples:

Scenario 1: Heavy rains cause creeks to rise well above flood stage. The subsequent flooding damages businesses. While the proximate cause of loss is a weather condition, the weather exclusion applies, and the flooding damage is excluded because exclusion 1. excludes flood.

Scenario 2: Heavy rains and winds destroy the roof on the building. The loss is due to a weather condition, but it is not accompanied by an exclusion 1. cause of loss so the damage to the roof is covered.

b. Acts or Decisions

Governmental entities and related groups make decisions and take actions that not only affect others but may also result in loss or damage. Loss or damage that results from such acts or decisions is excluded.

Examples:

Scenario 1: The dams along the river are getting old but the U.S. Army Corps of Engineers decides it is too expensive to replace them. Heavy spring rain causes the dams to fail and many homes and businesses are flooded. Melanie’s Hosiery submits a claim for the damage and is rejected because of the flood exclusion. She then resubmits the claim on the basis that the Corps made a faulty decision to not replace the dams. This claim is also rejected.

Scenario 2: Smelling Good, a candle manufacturing plant, received a zoning variance from the city council even though Melanie’s Hosiery, its nearest neighbor, petitioned against it on the grounds that it would be a fire hazard. The city council gave Smelling Good its variance and five months after it opened a fire erupted that damaged Melanie’s Hosiery. Melanie’s loss is covered because even though the act or decision made by the city council may have contributed to the loss, fire is not part of exclusion 1.

c. Design Flaws

Loss or damage that is due to faulty, inadequate, or defective planning, design, materials, and maintenance is excluded. An important provision is that it applies both on and away from the designated premises.

Example: Mainline Construction Company prepares the land for an industrial park. Severe drought, followed by drenching rains, causes the newly constructed buildings to shift and slide down the slope. It is later determined that the ground preparation was inappropriate for the slope involved. This loss is not covered because landslide is not a covered cause of loss, although it could be argued that the design flaw was the proximate cause of loss.

4. Special Exclusions

These three exclusions apply only to Business Income, Leasehold Interest, and Legal Liability.

a. The following additional exclusions apply to the Business Income (And Extra Expense) Coverage Form, Business Income (Without Extra Expense) Coverage Form, and Extra Expense Coverage Form:

(1) Loss that is due to damage to finished stock or that is due to the amount of time needed to replace the finished stock is excluded.

Note: Because this incident is time-related, it does not apply to Extra Expense.

(2) There is no coverage for any loss that results from physical loss or damage to radio or television antennas or satellite dishes.

(3) Coverage does not apply to any increase of loss due to:

· Interference by strikers or others that delay rebuilding. This applies only when such actions are taken at the actual building site.

· Suspension, lapse, or cancellation of a license, lease, or contract. However, if the lapse or cancellation is a result of a loss, coverage applies during the period of restoration.

Example: Rudy's Bar has a fire and is being rebuilt. During the fire investigation, the police discover some irregularities that cast a shadow on Rudy’s reputation. The liquor board suspends Rudy’s liquor license until it completes its investigation and conducts a full hearing on the matter. The fire repairs are complete, but Rudy cannot reopen without the liquor license. The period of restoration ends when the building is complete, even though Rudy is still unable to re-open due to his suspended license.

(4) Extra Expense coverage does not extend beyond the period of restoration when a license, lease, or contract is suspended, lapses, or is cancelled.

(5) Any type of consequential loss that is not loss of income or extra expense is excluded.

b. Leasehold Interest Coverage Form

CP 10 30 changes in two ways when Leasehold Interest Coverage is provided.

(1) The Ordinance or Law exclusion B. 1. a. does not apply.

(2) There is no coverage for loss that results if the named insured cancels a lease, has a license suspended, lapsed, or cancelled, or any consequential loss.

c. Legal Liability Coverage Form

The Legal Liability coverage form is more of a liability coverage form than a property coverage form. As a result, the CP 10 30 must be altered to accommodate the form.

(1) Five exclusions are removed and do not apply. They are exclusions 1.a. Ordinance or Law, 1.c. Governmental Action, 1.d. Nuclear Hazard, 1.e. Utility Services, and 1.f. War and Military Action.

(2) Two liability-related exclusions are added:

Contractual Liability

There is no coverage for liability the named insured assumes under a contract. The only exception is a lease agreement where it assumes liability for building damage due to attempted break-in. This agreement must be made prior to any accident and the coverage form must insure the building in question.

Nuclear Hazard

There is no coverage for suits brought due to any damages or expenses that relate to nuclear reaction, radiation, or contamination.

5. Additional Exclusion

This exclusion applies only to merchandise, goods, or other products. It excludes loss or damage to such property because of an error or omission in production.

Loss or Damage to Products

There is no coverage for loss or damage to merchandise, goods, or other products caused by any party's error or omission. These errors or omissions are excluded beginning with planning or testing through repair and maintenance. This exclusion also applies to errors or omission made at locations where work is outsourced. It applies to any compromising of the product’s form, substance, or quality.

The one exception is if such an error or omission results in a covered cause of loss occurring. In that case, coverage applies to only the loss or damage the covered cause of loss causes.

Example: Maybell designs jewelry and contracts with an Asian manufacturer to produce jewelry based on its designs and manufacturing specifications. The first shipment that arrives is tested and the results indicate an unacceptable amount of lead. Maybell cannot sell the product in the United States and the Asian manufacturer does not return phone calls. Maybell presents a claim to the insurance company because the items are useless to them. The company denies this claim because of this exclusion (and others).

C. LIMITATIONS

Now that what is covered and what is excluded has been analyzed, four coverage limitations must be reviewed. Each of the four has multiple subparts.

Editorial note: ISO does not give titles to the major categories of limitations. To assist in the analysis, we have provided a title to help identify the limitation’s main intent.

1. Broad Limitation

Loss or damage to any property described and limited in this section is excluded. Losses that are a consequence of loss to such property are also excluded.

a. Steam Boilers, Steam Pipes, Steam Engines, or Steam Turbines

There is no coverage if a loss is caused by or results from a condition or an event that occurs inside covered steam boilers, steam pipes, steam engines, or steam turbines. However, coverage applies if gases or fuel inside the furnace or within a flue or other passage explode and cause loss or damage.

b. Water Heating Devices

Loss or damage caused by water-heating devices such as including hot water boilers caused by a condition or event within them is excluded. However, coverage applies if an explosion causes the loss.

c. Interior of Any Building and Personal Property

The interior of a building and the personal property inside it is not covered for damage that rain, snow, sleet, ice, sand, or dust causes. However, there are two exceptions. Coverage applies:

If the roof or walls of the building are first damaged by a covered cause of loss that allows the rain, snow, sleet, ice, sand, or dust to enter
If snow, sleet, or ice on the building thaws and then causes the loss

Note: Leaving doors and windows open limits a loss that may otherwise be covered.

OpenWindow

Example:

Scenario 1: Pamela awakens to drops of water on her nose. She looks up and notices water dripping from her ceiling. She contacts the apartment manager who discovers that ice under the snow on the roof has thawed and is flowing through the roof into Pamela’s bedroom. The apartment's policy covers the damage to the ceiling and floor coverings because of the exception to this limitation.

Scenario 2: Pamela rolls out of bed and steps onto to her very wet carpet. She awakens quickly when she realizes that she left her window slightly opened, that snow had entered through the window, and that it melted on the windowsill and floor. There is no coverage for any damage this situation caused.

d. Building Materials Awaiting Installation in a Building

Theft of building materials is not covered if the items are not yet attached to the building.

There are two exceptions:

Building materials that are being held for sale are covered. This exception is not applicable to CP 00 20–Builders Risk Coverage Form. CP 11 21–Builders Risk – Theft of Building Materials, Fixtures, Machinery, Equipment must be attached in order for this exception to apply to CP 00 20.
The exclusion does not apply to Business Income Coverage or Extra Expense Coverage

e. Inventory Shortage

Any missing property loss that can be proven only because an inventory revealed a shortage is excluded. This is because it really means there is no actual knowledge that something was taken. The loss could be due to a mathematical or computation error, employee theft, or a break-in. There is no coverage if there is nothing to physically suggest what actually happened.

f. Unauthorized Instructions

Coverage does not apply if a loss occurs because property was given to another person or sent to another place based solely on unauthorized instructions.

The crime insuring agreement CR 04 17–Fraudulent Impersonation should be considered to fill this coverage gap.

g. Vegetated Roofs

Lawns, trees, shrubs, and plants that are part of vegetated roofs are covered property because they are excepted from 2. Property Not Covered in the coverage form. This limitation is needed because they are alive and depend on certain conditions to thrive. They are also outdoors and are not protected from the elements. There is no coverage if these lawns, trees, shrubs, or plants are damaged due to:

The atmosphere or the soil being too damp or too dry
The temperature changes too often or is considered extreme
Disease
Hail, frost, rain, snow, ice, or sleet

2. Coverage Limited to Specified Causes of Loss

The insurance company does not pay for loss or damage to any of the following property unless a specified cause of loss or breakage of building glass causes the loss or damage:

a. Animals

This item has a limitation within a limitation. In addition to being covered only if specified perils or glass breakage causes the loss, coverage applies only if the animal dies or must be destroyed. This means that coverage does not apply to veterinarian bills or expenses incurred to save the animal.

b. This is breakage limitation that applies to only fragile objects. Statuary, marbles, chinaware, and porcelains are examples of such fragile items. Glass and items that contain property for sale are not subject to this limitation. However, if a specified cause of loss or breakage of building glass causes the fragile items to be broken, coverage does apply.

c. Builders’ machinery, tools, and equipment that the named insured owns or has entrusted to it that qualifies as covered property is subject to this limitation.

There are two exceptions:

Property that is located on or within 100 feet of the described premises is covered. This exception is not applicable to CP 00 20–Builders Risk Coverage Form.
The exclusion does not apply to Business Income Coverage or Extra Expense Coverage

3. Limited Theft Coverage for Specific Types of Property

The following categories have special limitations that apply to only theft losses. These are per occurrence sub-limits that do not increase the limit of insurance available to cover a loss. These sub-limits can be increased:

Furs, fur garments, and fur-trimmed garments are subject to a $2,500 limit.
Jewelry, watches, watch movements, jewels, pearls, gold, and similar items are subject to a $2,500 limit. This limitation does not apply to jewelry or watches that are valued at less than $100 each.

Patterns, dies, molds, and forms are subject to a $2,500 limit.

VariousDies

Printing Dies

Stamps, tickets, letters of credit, and lottery tickets held for sale are subject to a $250 limit.

These limitations do not apply to the business income or extra expense coverage forms.

Note: Coverage applies for all other causes of loss, subject to the standard exclusions and the limit of insurance on the declarations.

Example: Pitta Pat clothing store has a $75,000 business personal property limit. A break-in takes place and a number of items are stolen. However, the thieves destroyed many others as they vandalized the store. The loss was as follows:

$50,000 clothing stolen or destroyed
$25,000 fixtures destroyed
$5,000 fine jewelry stolen
$1,000 costume jewelry (under $100 per item) stolen
$10,000 fur-trimmed garments stolen

Pitta Pat submits a claim and requests $75,000 for the clothing and fixtures, $2,500 for the fine jewelry, and $2,500 for the fur-trimmed garments that were stolen.

Her loss settlement is for $75,000 because that is the policy's limit of insurance. The theft limitations are only sub-limits within the policy limit.

4. Defect in Systems or Appliances

ExposedWaterPipes

There is no coverage for the cost to repair a defect in a system or appliance from which water, other liquids, powder, or molten material escapes.

There are two exceptions.

The cost to repair fire-extinguishing systems is covered if either of the following apply:

o The damage to the system results in it discharging substances

o The damage is caused directly by freezing.

This limitation does not apply to the business income or extra expense coverage forms.

D. ADDITIONAL COVERAGE–COLLAPSE

This additional coverage is necessary because the coverage form specifically excludes collapse in Exclusion 2.k. Policies and coverage forms once provided collapse coverage. However, broad legal interpretations forced rewriting collapse coverage as a named cause of loss.

1. Collapse coverage applies to abrupt collapse. As used in this coverage, abrupt collapse means that the building or part of the building must abruptly fall down or cave in. As a result of such falling down or caving in, the building or part of the building cannot be occupied for its intended purpose.

2. Payment for such abrupt collapse as described in item 1. is for only direct physical damage to the collapsed building or the business personal property that is inside the building. Furthermore, payment is made only if any of the following cause the collapse:

a. Hidden decay. This applies only if the insured was not aware of the hidden decay prior to the collapse.

b. Hidden insect or vermin damage. This applies only if the insured was not aware of the hidden insect or vermin damage prior to the collapse.

c. Defective construction material or construction methods. This applies only if the collapse occurs while the building is being built, remodeled, or renovated.

d. Defective construction material or construction methods. This applies only if the collapse occurs after a building has been built, remodeled, or renovated and depends on one of the following contributing to the collapse:

· Items a. or b. of this paragraph

· Specified cause of loss

· Glass breakage

· Weight of people or personal property

· Weight of rain that collects on a roof

3. There is no coverage for any of the following:

A building or any part of a building that is in danger of falling down or caving in
A part of a building that remains standing even if it has separated from another part of the building
A building or part of a building that is standing but shows evidence that it may collapse due to bulging, sagging, cracking, bending, leaning, settling, shrinking, or expanding

Example: The Good Shepherd Church was built 90 years ago in a small rural area next to the main road. It is now in the suburbs of a town along a major highway. The church never moved but the town grew out to it. During choir practice one evening, a few tiles in the sanctuary ceiling loosened and fell. The next day, the building inspector who had been called to evaluate the situation, condemned the building. He opined that over the years, the building had shifted on its foundation and was now in imminent danger of collapse. Collapse coverage does not apply to this situation.

Related Court Case: Policy Is Ambiguous About Collapse

4. The following property is covered only if it is considered covered property, the loss or damage is due to collapse of a covered building, and items 2.a through 2d above cause the building to collapse:

Outdoor radio or television antennas
Awnings, gutters, and downspouts
Yard fixtures
Outdoor swimming pools
Fences
Pier, wharves, and docks
Beach or diving platforms or appurtenances
Retaining walls
Roadways, walks, and paved surfaces

5. There will be times when personal property abruptly falls down but the building in which it is situated does not. In such cases coverage applies only if all of the following apply:

The collapse was due to a cause of loss listed in 2.a through 2.d. above.
The personal property that collapsed is in a building.
The personal property is not one of the types listed in 4. above.

Coverage does not apply if the only damage to the personal property is marring or scratching.

Example: The chandelier in the main ballroom at the Luxury Plaza abruptly collapses and is destroyed when it hits the ground. Investigation revealed that the beams into which the chandelier was attached had decayed. Because the decay was hidden, the chandelier was in the building and it was not one of the excluded items, the loss is covered.

6. Any cracking, bulging, sagging, leaning, settling, expanding, or shrinking of personal property is not treated as collapse. Coverage applies only if the personal property either abruptly fell down or caved in.

Example: Instead of the collapse of the chandelier above occurring abruptly, employees notice that it is beginning to tilt. Management notices and hires a contractor to investigate the situation. The decay is discovered, and the chandelier immediately removed. The decaying beams are replaced, and the chandelier replaced. When Luxury files a claim for the costs it incurred, all are denied because there had not been a collapse.

7. This additional coverage does not increase the coverage part limits of insurance.

8. Whenever the term "covered cause of loss" is used throughout this coverage form, this Additional Coverage–Collapse is included, subject to the description and limitations this additional coverage provides.

E. ADDITIONAL COVERAGE–LIMITED COVERAGE FOR FUNGUS, WET ROT, DRY ROT, AND BACTERIA

Collapse was removed as a covered cause of loss and then added back in as an additional coverage many years ago. Similarly, and for the same reasons, fungus coverage was removed as a covered cause of loss and is added back as a separate cause of loss coverage. Although the method is similar, the coverage provided is very different.

1. Coverage applies when the fungus, wet rot, dry rot, or bacteria result from a specified cause of loss. If flood is a covered cause of loss, fungus, wet rot, dry rot or bacteria from that flood is also covered. Because fire and lightning losses are excepted from exclusion 1.h. Fungus, Wet Rot, Dry Rot, and Bacteria and therefore covered, this Additional Coverage excludes losses that result from them in order to prevent duplication of coverage.

An unusual feature of this coverage is that it applies only if all reasonable steps are taken to prevent further damage to property during or following a loss. The requirement of taking reasonable steps does not indicate who must take the steps.

Example: Smoke filled a small store and the employees took all of the personal property outside to avoid smoke damage to it. The employees left work at quitting time but did not put the personal property back in the store. The next morning, they picked up the property and placed it back in the store without inspecting it. Mold and mildew were found on most of the items a week later because they were exposed to moisture during the night. A claim was filed and subsequently denied because the employees did not take reasonable care to protect the property from further damage, even though the mold was the result of a smoke loss.

Lawns, trees, shrubs, or plants that are part of a vegetated roof are not eligible for this additional coverage.

2. Loss or damage includes more than the direct damage to the property by the fungus, wet rot, dry rot, or bacteria. It also includes removing them. The cost to tear out and replace walls and other parts of the building in order to get to the problem is covered. Any necessary testing to verify that the property is clean, and the situation mitigated is also covered.

3. The limit of insurance for this coverage is not per occurrence. It is $15,000 per policy year. This means that the limit for the policy year is $15,000, regardless of the number of locations and occurrences. There is no additional limit available once the limit is used up. If the condition continues over multiple policy years, the limit available in the policy year when the loss occurred that caused the fungus, wet rot, dry rot, or bacteria is the only limit that applies.

Note: CP 04 31–Changes–Fungus, Wet Rot, Dry Rot, and Bacteria endorsement is available to increase the limit and also provide coverage per location.

Example: Max’s Jewelers has 15 retail locations. A covered mold loss occurs at store number five and the total claim paid amounts to $13,000. A month later, a mildew loss occurs at store number ten. The total amount claimed is $9,000 but only $2,000 is paid because that is the amount of the aggregate amount for the policy period that remains.

4. The $15,000 limit is a sub-limit. It does not increase the limit of insurance.

Example: A windstorm caused $100,000 in direct damage to George’s Card Shop. George noticed mildew on some of his property a month after the loss and filed a separate claim. There are no limits available to pay for the mildew loss because paying the windstorm claim exhausted George’s $100,000 limit of insurance.

5. This Additional Coverage does not affect the coverage available under Additional Coverage Extension–Water Damage, Other Liquids, Powder, or Molten Material Damage or under Additional Coverage–Collapse.

6. If business income and/or extra expense coverage is provided, this extension provides coverage in two different situations.

Coverage applies for 30 days if the specified cause of loss direct damage loss does not result in a business income or extra expense loss, but the fungus, wet rot, dry rot, and bacteria loss does.
In addition, if the direct damage loss from the specified cause of loss results in a business income or extra expense loss, this extension provides 30 additional days of coverage for the delays or extension of the down time due to the fungus, wet rot, dry rot, and bacteria.

Example:

Scenario 1: Felicia’s Beauty Salon was vandalized but all parties believed they could keep working while repairs were being made. One week after the loss, one of the hairdressers became very ill. Mold and mildew had formed because some of the water pipes had been opened during the vandalism. This discovery, and the beautician’s illness, caused Felicia to close the shop until the mold situation could be remedied. This business income loss is covered for up to 30 days and is subject to the business income limit.

Scenario 2: Same scenario but Felicia decides to close following the vandalism. The mold is discovered while repairs are being made. This discovery causes a delay because of the necessary remediation. Felicia’s period of restoration is increased by not more than 30 days because of the mold loss.

F. ADDITIONAL COVERAGE EXTENSIONS

Three coverage extensions broaden the coverage CP 10 30–Causes of Loss–Special Form provides.

1. Property in Transit

This extension applies to only the named insured's covered personal property.

a. Covered personal property in transit in or on a motor vehicle the named insured owns, leases, or operates is covered. This extension applies only if the property is not in a salesperson's care, custody, or control, and is more than 100 feet away from the premises but still in the coverage territory.

b. The loss or damage must result from one of the following causes of loss:

Fire, lightning, explosion, windstorm, hail, riot, civil commotion, or vandalism
Upset, overturn, or collision of the transporting vehicle with an object or another vehicle. A vehicle that strikes the roadbed is not considered collision.
Theft of an entire bale, case, or product. However, visible signs or evidence of forced entry must be present and the vehicle's body or compartment where the property was kept must have been securely locked.

c. The additional limit of insurance under this Additional Coverage Extension is $5,000. It is not subject to coinsurance.

Note: This is property coverage that is extended for transit. The causes of loss are very limited. The causes of loss an inland marine transportation coverage form provides are much broader. For example, flood and earthquake are covered.

AAIS Transportation Coverage Forms

ISO Annual Transit Coverage Form

ISO Motor Truck Cargo Owners Coverage Form

ISO Trip Transit Coverage Form

2. Water Damage, Other Liquids, Powder, or Molten Material Damage

This extension is unusual because it pays to repair undamaged property that was damaged in order to stop a cause of loss. If water, other liquids, powder, or molten material escapes from its confines, this coverage pays the cost to tear out any part of the building or structure when needed to reach the system or appliance that allowed the escape. This coverage also pays to replace the part of the building or structure torn out. It does not pay to repair the system or appliance because that is the named insured's responsibility. It does not pay for the damage the escape caused because the standard causes of loss form should cover it.

Note: This does not increase the limit of insurance but is still important because coverage does not usually apply to undamaged property.

Example: Cecil at Cecil's Farm Supply notices water damage to his stock. He searches for the source of the leak and discovers a trickle of water coming from the bottom of a wall. He calls a plumber to come out, investigate the source of the leak, and repair it. The plumber finally finds the leaky pipe after having to remove quite a bit of dry wall to do so but he successfully repairs the pipe. Cecil pays the cost of the plumber's services, but the insurance company pays the expense to replace the dry wall and also the water damage to the stock.

3. Glass

Coverage applies to the cost to install temporary plates of glass or boards to cover window opening following a covered glass loss. Coverage also applies to the expense to remove obstructions that hinder the ability to repair or replace damaged covered glass. This coverage extension does not include the cost to remove or replace window displays.

Note: This is not an additional limit of insurance.

G. DEFINITIONS

1. Fungus

This is any form or type of fungus. It includes mold, mildew, mycotoxins, spores, scents, and by-products that fungus produces.

2. Specified Causes of Loss (9 17 change)

This means only the following causes of loss: Fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing equipment, volcanic action, and weight of snow, ice, or sleet. The following are also considered specified causes of loss:

a. Sinkhole collapse is the sudden sinking or collapse of land into spaces created by water acting on dolomite or limestone. The cost to fill sinkholes and the sinking or collapse into man-made underground spaces is not part of this cause of loss.

b. Damage caused by falling objects is covered. However, coverage does not apply to loss or damage to personal property that has been left in the open. It also does not apply to loss or damage to the interior of a building or to personal property inside the building unless the falling object first damages the roof or an outer wall.

Example: The chandelier hanging in the dining room falls and lands on top of the dining room table. There is no coverage for either the chandelier or the dining room table.

c. Water damage is accidental discharge or leakage of either of the following:

Water or steam but only when caused by the cracking or breaking apart of the plumbing or HVAC system or appliance on the described premises. The system must contain water or steam. However, this coverage does not apply to sump systems.
Water or waterborne material but only when caused by cracking or breaking apart of a water or sewer pipe that is located off premises. Coverage applies only if all of the following apply:

o The damaged water or sewer pipe is part of a potable water supply system or sanitary sewer system.

o The system is operating under authority of a governmental subdivision.

o The premises is located in that government subdivision.

o Wear and tear causes the pipe to crack or break.

Note: This item is the only update in the 09 17 edition of the CP 10 30. It eliminated the word municipal and expanded coverage to include breakage of pipes belonging to a variety of public/private types of water and sewer systems providers.

This definition is limited by conditions in the Water Exclusion. Any situation the Water Exclusion excludes is not considered water damage. CP 10 30 then provides two examples of when situations that may appear to be water damage are not water damage because they are not covered under the Water Exclusion.

ISO Example 1: Weather induced flooding causes a pipe to break apart, causing water damage. There is no coverage even if wear and tear contributed to the pipe breaking because flooding caused the pipe to break.

Example: The water on the White River crested at 10 feet above flood stage. Paul’s Pastries’ basement is flooded. The impact of the flood breaks 75-year-old pipes and results in water damage to the upper areas that the flood did not reach. There is no coverage because the flood caused the pipes to break.

ISO Example 2: A pipe breaks because of wear and tear. Damage that occurs following that break because of weather-induced flooding or that becomes worse because of it is excluded.

Example: The water on the White River crested at 10 feet above flood stage. Maggie had noticed a leak in her bathroom earlier in the day and had contacted a plumber. She had turned off water to the pipe in order to prevent damage. The flood entered her basement and the impact of the water sheared off the cut off valve. The water damage that occurred when the water restarted in the bathroom is excluded because the flood aggravated it.

COMPARE: CP 10 30 TO CP 10 10

A key to understanding the differences between these two forms is that CP 10 10–Causes of Loss–Basic Form covers losses based on designated or named causes of loss instead of the risks of direct physical damage causes of loss that CP 10 30–Causes of Loss–Special Form provides. With CP 10 10, the insured must find coverage in one of the listed causes of loss. With CP 10 30, the insurance company must review the exclusions to determine that a specific loss is excluded.

CP 10 10–CAUSES OF LOSS–BASIC FORM

CP 10 10–Causes of Loss–Basic Form covers only 11 causes of loss. CP 10 30 also covers these causes of loss but does not list them specifically.

A. COVERED CAUSES OF LOSS

1. Fire

2. Lightning

3. Explosion. Explosion does not include operation of a pressure device or it rupturing or bursting. It also does not include a building or structure rupturing or bursting because water caused contents inside it to expand.

4. Windstorm or hail. There following are not considered windstorm or hail and are therefore not covered:

Frost or cold weather
Ice that is not hail, snow, or sleet. These are not wind even when wind accompanies them.
Damage to the interior of a building and/or to personal property inside the building caused by snow, rain, sand, or dust is covered but only when the roof or walls of the building are first damaged by wind or hail that then allows the snow, rain, sand, or dust to enter.
Hail damage to lawns, trees, shrubs, or plants that are part of a vegetated roof

5. Smoke damage that is both sudden and accidental is covered. Smoke damage from agricultural smudging or industrial operations is specifically excluded.

6. Damage by vehicles or aircraft is covered only if the vehicle or aircraft actually physically contacts the damaged property. There is also coverage for property damaged that is inside a building when a vehicle or aircraft physically contacts the building. This means that the aircraft or vehicle or their parts must actually touch the property or the building where the property is located. As a result, sonic boom damage (also known as shock wave) is excluded because there is no physical damage.

There is no coverage for vehicle damage that the named insured’s owned vehicle (or any vehicle it uses in its operations) causes.

7. Riot or civil commotion. This cause of loss also includes acts of striking employees when they occupy a premises and looting by rioters that occurs at the same time as a civil commotion event.

8. Vandalism. Such damage must be willful and malicious. Loss that results from theft is not considered vandalism. However, damage that burglars cause while breaking into and exiting from a building is covered.

9. Sprinkler leakage damage. Sprinkler leakage occurs when any substance leaks or discharges from an automatic sprinkler system. This includes complete collapse of the system's tank. There is no requirement that the event be accidental. If the covered property is building, repairing or replacing damaged parts of the systems is covered when the damage causes leakage or is caused by freezing. The cost to tear out and repair parts of the building in order to access and repair a leaking sprinkler system is also covered.

Note: CP 10 10 defines what is considered an automatic sprinkler system. CP 10 30 does not define it.

10. Sinkhole collapse. This coverage does not apply to or include the costs to fill sinkholes. Coverage also does not apply to land that sinks or collapses into man-made mines and underground spaces.

11. Volcanic Action is covered similarly and as CP 10 30 defines it under the Earth Movement Exclusion.

B. EXCLUSIONS

This section in CP 10 10 is considerably shorter than in CP 10 30 because the causes of loss are defined. It has the broad, limited and special exclusions but not the anti-concurrent causations exclusions.

1. Broad Exclusions

These exclusions are identical to those in CP 10 30. Both forms exclude Ordinance or Law, Earth Movement, Governmental Action, Nuclear Hazard, Utility Services, War and Military Action, Water, and Fungus, Wet Rot, Dry Rot, and Bacteria.

2. Limited Exclusions

This exclusions section has only six subparts compared to 13 in CP 10 30. However, this does not mean that
CP 10 10 provides broader coverage. It simply means that fewer exclusions are needed because the coverage is much narrower to begin with. The CP 10 10 exclusions are:

a. Artificially Generated Energy

This exclusion is identical to exclusion 2. a. in CP 10 30.

b. Rupture or bursting of water pipes

This does not apply to sprinkler systems unless caused by a covered cause of loss.

Note: It is always to the insurance company’s advantage to have the sprinkler system operate properly.

c. Water or Steam Leakage or Discharge

There is no coverage unless a covered cause of loss damages the system or appliance. There is no coverage if such seepage or leakage continues for more than 14 days. The first part of this exclusion does not apply to automatic sprinkler systems. The second part of this exclusion is identical to exclusion 2. f. in CP 10 30.

d. Explosion of Owned or Operated Steam Boilers

This exclusion is identical to exclusion 2. e. in CP 10 30. However, the exclusion in CP 10 10 does not have the coverage exception for explosion of gases within the furnace.

e. Mechanical Breakdown

This exclusion is identical to the exclusion 2. d. (6) in CP 10 30. However, the exceptions are different. The exceptions in CP 10 30 are for elevator collision, glass breakage, and specified causes of loss. The exception in CP 10 10 is for mechanical breakdown that results in a covered cause of loss.

f. Neglect

This exclusion is identical to exclusion 2. m. in CP 10 30.

3. Special Exclusions

These exclusions are identical in both forms.

C. ADDITIONAL COVERAGE

CP 10 10 has only one Additional Coverage. Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria is identical to CP 10 30.

Note: CP 10 10 does not cover collapse.

D. LIMITATION

CP 10 30 has a number of limitations, but CP 10 10 has only one. It states that the insurance company pays for only loss of animals that are killed or must be destroyed. It does not pay veterinarian bills.

Note: This limitation is identical to the second part of limitation 2. a. in CP 10 30. The first part in CP 10 30 limits coverage to only specified cause of loss. This is not necessary in CP 10 10 because it covers only the basic causes of loss.

E. DEFINITIONS

Fungus is the only term defined and it is identical to the definition in CP 10 30.

COMPARE: CP 10 30 TO CP 10 20

A key to understanding the differences between these forms is that CP 10 20–Causes of Loss–Broad Form covers losses based on a designated or named causes of loss instead of risks of direct physical damage causes of loss that CP 10 30–Causes of Loss–Special Form provides. With CP 10 20, the insured must find coverage in one of the listed causes of loss. With CP 10 30, the insurance company must review the exclusions to determine that a specific loss is excluded. While CP 10 30 has more exclusions in order to explain what is not covered, the covered causes of loss sections of CP 10 20 is longer.

CP 10 20–CAUSES OF LOSS–BROAD FORM

CP 10 20–Causes of Loss–Broad Form covers 14 causes of loss. CP 10 30 also covers these causes of loss but does not list them specifically.

A. COVERED CAUSES OF LOSS

CP 10 20 provides broader coverage than CP 10 10 but not as broad as CP 10 30 because it also lists only the covered causes of loss. It includes 14 covered causes of loss compared to 11 in CP 10 10. The first 11 in CP 10 20 are identical to the first 11 in CP 10 10. The three additional covered causes of loss are:

12. Falling Objects

Coverage on personal property applies only to property in the building. It does not apply to property in the open. However, coverage does not apply until and unless the falling object first damages an outside wall of the building or its roof. This is identical to falling objects as described in the definition of specified causes of loss in CP 10 30.

Example: A falling object strikes a covered warehouse and the impact causes a lamp to fall off a table. The insured files a claim for the loss. The adjuster denies the loss after noticing that the object (an old tree limb) did not first cause any damage to the warehouse.

13. Weight of Snow, Ice, or Sleet

Any of these that cause damage is covered unless the personal property damaged is outside a covered building. There is also no coverage for such damage to lawns, trees, shrubs, or plants that are part of a vegetative roof.

14. Water Damage

This is accidental discharge of water or steam due to a plumbing, air conditioning, heating, or other systems or appliances cracking or breaking apart. The limitations on coverage are similar to those in CP 10 30 but all are brought together in CP 10 20.

B. EXCLUSIONS

This section in CP 10 20 is considerably shorter than in CP 10 30 because the causes of loss are defined.

It has the broad, limited and special exclusions but not the anti-concurrent causations exclusions.

1. Broad Exclusions

2. Limited Exclusions

This exclusions section has only four subparts compared to 13 in CP 10 30, but this does not mean that CP 10 20 provides broader coverage. It simply means that fewer exclusions are needed because the coverage is much narrower to begin with. The CP 10 20 exclusions are:

a. Artificially Generated Energy

This exclusion is identical to exclusion 2. a. in CP 10 30.

b. Explosion of Owned or Operated Steam Boilers

This exclusion is identical to exclusion 2. e. in CP 10 30. However, the exclusion in CP 10 20 does not have the coverage exception for explosion of gases inside furnaces.

c. Mechanical Breakdown

This exclusion is identical to exclusion 2. d. (6) in CP 10 30. However, the exceptions are different. The exceptions in CP 10 30 are for elevator collision, glass breakage, and specified causes of loss. The exception in CP 10 20 is for mechanical breakdown that results in a covered cause of loss.

d. Neglect

This exclusion is identical to exclusion 2. m. in CP 10 30.

C. ADDITIONAL COVERAGE–COLLAPSE

This coverage is similar to the coverage CP 10 30 provides. The only difference is that CP 10 30 states that specified causes of loss apply while CP 10 20 lists the covered causes of loss that apply.

D. ADDITIONAL COVERAGE–LIMITED COVERAGE FOR FUNGUS, WET ROT, DRY ROT, AND BACTERIA

This coverage is similar to the coverage CP 10 30 provides. The only difference is that CP 10 20 lists the causes of loss instead of referring to the specified causes of loss in CP 10 30.

E. LIMITATION

This section of CP 10 20 is identical to the same section in CP 10 10.

F. DEFINITIONS

Fungus is the only term defined and it is identical to the definition in both CP 10 10 and CP 10 30.

CONCLUSION

CP 10 30 is the broadest of the three causes of loss forms and should be viewed as the first choice for most insureds. However, an alternative must be used from time to time. A good understanding of each form allows the agent to provide sound advice to the insured to enable it to make an informed selection.