ISO CAPITAL ASSETS PROGRAM COVERAGE FORM (OUTPUT POLICY) OVERVIEW

(December 2019)

INTRODUCTION

The Insurance Services Office (ISO) OP 00 01–Capital Assets Program Coverage Form (Output Policy) is its broadest and most comprehensive property coverage form. It is designed for manufacturing, industrial, commercial, wholesale, retail, service, contracting, institutional, and habitational risks. The scope of coverage provided is similar to that of Manufacturers Output Policies. However, the basic approach is different because coverage is more from a property approach than from an inland marine approach. In addition, it may not have the broad and universal appeal of many other standard ISO coverage forms because its structure is more rigid and less flexible. Most ISO property forms can be mixed and matched with one another. OP 00 01 is a complete coverage form that does not require many or any endorsements to enhance coverage. Compared to most other coverage forms, endorsement modifications reduce the coverage and protection provided.

This program insures buildings and business personal property on a blanket basis without any coinsurance requirements or penalties. It automatically includes blanket business income and extra expense coverage when a limit of insurance is entered on the declarations. Covered property includes everything that makes up buildings, even portions that are unlikely to be damaged by any kind of loss. All covered property must be insured to its full 100% value. As a result, building limits must also be substantially higher than in other coverage forms. This requirement forces most named insureds to ask themselves if they really want to insure underground pipes, flues, drains, foundations, and similar property. Business personal property coverage is also quite broad. Personal property must be inside a building at a covered location listed on the declarations or outside within 1,000 feet of it. The coverage form also provides limited coverage for property located off-premises and in transit.

There are important additional coverages that fall into four categories.

Group One

This group does not provide additional limits because they are part of the limits on the declarations. As a result, it is important to adjust those limits to reflect the amount of protection an insured needs from these coverages. A large claim could be underinsured if the named insured does not take this into consideration.

Group Two

This group provides a $100,000 limit for each coverage. One concern is that an insured may better meet its actual coverage needs through inland marine coverage forms and/or policies. This group of automatic coverages may make it difficult to convince an insured that a separate coverage form or policy that offers broader coverage and higher limits may be more appropriate for its needs. There is also the danger that an agent or company could become complacent and overlook an insured’s need for more inland marine coverage.

Group Three

This group provides a $50,000 limit for each coverage. Like Group Two, the concern is that the actual exposures are evaluated correctly, and that the coverage and the limits provided are adequate.

Group Four

This group provides crime coverages with $25,000 limits, except the limit for Money Orders and Counterfeit Money is $5,000. These limits can be increased. Particular attention should be provided to the employee dishonesty limits because the types of business using this form would have considerably more exposure than $25,000 would cover.

POLICY CONSTRUCTION

These forms are mandatory:

OP DS 01–Capital Assets Program (Output Policy) Declarations

OP 00 01–Capital Assets Program Coverage Form (Output Policy)

IL 00 17–Common Policy Conditions

Mandatory state endorsements, based on individual state requirements

OP IN 01–Capital Assets Program Coverage Form (Output Policy) Index is not a mandatory form. However, it helps the reader find the page number for a particular item.

OP DS 02–Supplemental Declarations is not a mandatory form. It is used when higher limits of insurance for certain coverages apply in place of those that OP 00 01 provides.

Note: OP 00 01 may be issued as a stand-alone, monoline policy or as part of a commercial package policy.

AVAILABLE ENDORSEMENTS

The coverage form is extremely broad and comprehensive. For this reason, it has only a limited number of endorsements available to use with it.

UNDERWRITING

The broad coverage provided requires both inland marine and commercial property underwriting expertise. The higher limits and broader coverage must be considered carefully.

RATING PLAN

The rating plan begins with very minimal category rates that are then increased. The increases are developed through a deficiency point rating plan system that considers the starting risk as perfect. As the risk is evaluated, deficiency points are determined based on how the risk actually compares to a perfect risk. These points are converted into rates that are added to category rates. This results in a unique rate for the specific risk. There is an experience-rating plan that increases the rate if the deductible is less than $5,000. This final rate is applied to the total property values to determine the final premium. All rating is risk specific, not location specific.