During the first two quarters of 2001, new Insurance Services Office, Inc. (ISO), commercial property forms and endorsements bearing an October 2000 edition date became available for use in a majority of jurisdictions. The 2000 revisions to the ISO commercial property portfolio affect 11 coverage forms, all three causes of loss forms, 24 coverage endorsements, and a number of schedule endorsements.
This article reviews the changes made in the 2000 editions of the causes of loss forms: the basic causes of loss form, CP 10 10; the broad causes of loss form, CP 10 20; and the special causes of loss form, CP 10 30. A summary of the changes to these forms appears at the end of the discussion.
Glass Coverage Changes
The 2000 editions of all three causes of loss forms contain changes that reflect a new approach to providing coverage on building glass. Under this new approach, damage to glass is covered in the same manner and to the same extent as damage to other types of covered property.
The exclusion of building glass breakage by vandals in the basic causes of loss form and the limitation on building glass breakage by vandals in the broad causes of loss have been eliminated. Therefore, the 2000 editions of both the basic and broad causes of loss forms provide full coverage for building glass breakage due to vandalism. Prior editions of the basic causes of loss form provided no coverage for building glass breakage due to vandalism, and prior editions of the broad causes of loss provided only $500 of coverage for such losses.
The breakage of glass additional coverage in the broad causes of loss form has been eliminated in the 2000 edition. With this change, the 2000 edition of the broad causes of loss form (like the basic causes of loss form) provides no coverage at all for glass breakage, unless it is the result of one of the form's named perils. Prior editions of the broad causes of loss form provided coverage for breakage of building glass, regardless of cause, subject to a maximum of $500 per occurrence and $100 per pane, plate, or panel.
The building glass breakage limitation in the special causes of loss form (which restricted loss recovery for building glass breakage to a maximum of $500 per occurrence) has been eliminated, and a new extension of coverage for expenses associated with repair or replacement of damaged glass has been added. The new coverage extension grants coverage for the expense of putting up temporary plates or boarding up openings and the expense of removing or replacing obstructions in order to repair or replace damaged glass that is part of a building, subject to the applicable limit of insurance.
Also, the provision limiting coverage on fragile articles to loss from specified causes has been revised to specify that this limitation does not apply to glass. Finally, the pollution exclusion has been revised to specify that damage to glass caused by the application of chemicals is not considered pollution damage.
Collapse Coverage
The collapse additional coverage has been extensively revised in the 2000 editions of the broad and special causes of loss forms. The most important change is new language establishing the meaning of "collapse" with respect to both buildings and personal property.
With respect to buildings, "collapse" means "the abrupt falling down or caving in of a building or a part of a building" such that it cannot be occupied for its intended purpose. The provision specifies that a building or part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse, and that a building or part of a building that is still standing is not considered to be in a state of collapse even if it has separated from another part of the building or shows evidence of cracking, bulging, settling, etc.
Under the special causes of loss form, this new definition applies only to collapse from hidden decay, insect, or vermin damage of which the insured had no knowledge prior to the collapse and collapse from faulty materials or workmanship during construction or renovation. Under the broad causes of loss form, the new collapse definition also applies to collapse from weight of people or personal property or weight of rain on a roof. Therefore, under either form, if fire or windstorm damage to a covered building leaves the building standing but in danger of falling down or caving in, the entire loss to that building—including its near-collapse—is covered under the fire or windstorm peril; the collapse definition is inapplicable to such losses.
With respect to personal property, the 2000 editions specify that personal property must fall down or cave in for coverage to apply. Cracking, sagging, bending, leaning, settling, etc., of personal property does not qualify as collapse of personal property. Also, no coverage applies to marring or scratching of personal property if that is the only damage caused by the collapse, and no coverage applies to loss from collapse of certain structures (outdoor radio or television antennas; awnings, gutters, and downspouts; yard fixtures; outdoor swimming pools; fences; piers, wharves, and docks; beach or diving platforms or appurtenances; retaining walls; and walks, roadways, and other paved surfaces).
Another change in the 2000 editions is new language establishing that collapse from hidden decay and hidden insect or vermin damage is covered only if the insured had no knowledge of the decay or damage prior to the collapse.
Finally, new language has been added to the collapse additional coverage to make it clear that coverage applies not only with respect to collapse of a covered building, but also with respect to the collapse of a building that contains covered personal property.
Water Damage
In the 2000 edition of the broad causes of loss form, two changes have been made to the language of the water damage peril.
The language describing the system or appliance discharging the water or steam has been expanded to make specific mention of plumbing, heating, and air-conditioning systems as examples, and, more importantly, to stipulate that the system or appliance must be located on the described premises for coverage to apply.
New language has been added to specify that the water damage peril does not apply to discharge of water from roof drains, gutters, or downspouts.
Similarly, in the special causes of loss form, the portion of the definition of the term "specified causes of loss" that addresses the meaning of "water damage" (as used in the form's water damage additional coverage extension) has been revised to clearly require that the system or appliance be located on the covered premises for coverage to apply, and to make it clear that no coverage applies to discharge of water from roof drains, gutters, or downspouts. Also, a statement has been added to the water damage additional coverage extension specifying that this coverage extension does not increase the limit of insurance.
Earth Movement Exclusion
In the 2000 editions of all three causes of loss forms, this exclusion has been reformatted as five subparts (rather than two subparts as in prior editions) and the language excluding earth sinking, rising, or shifting has been expanded. The new language specifies that earth sinking, rising, or shifting includes "soil conditions which cause settling, cracking, or other disarrangement of foundations or other parts of realty." It further specifies that, "soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface."
Whether this additional language actually changes the coverage provided by the form is debatable. However, it certainly adds clarity. Under pre-2000 editions of the forms, there might have been some room for debate as to whether damage caused by soil erosion, freezing, and thawing of the soil, etc., qualified as damage caused by earth sinking, rising, or shifting and is therefore excluded from coverage. Under the 2000 editions, however, there can be no doubt of the intent to exclude such damage from coverage.
New Conclusion to Group 1 Exclusions
The 2000 editions of all three causes of loss forms include a new provision establishing that the seven Group 1 exclusions—ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war and military action, and water—apply regardless of whether the damage from these causes of loss is widespread or localized.
New Neglect Exclusion
All three causes of loss forms include a new exclusion of loss resulting from neglect of the insured to protect property from further damage. Since the "duties in the event of loss" provision found in every edition of the building and personal property coverage form (CP 00 10) requires the insured to take reasonable steps to protect property damaged by a covered cause from further damage, it is doubtful that this new Group 2 exclusion reduces coverage.
Loss of Contract Special Exclusion
All three causes of loss forms contain a special exclusion that limits coverage for business income loss resulting from the suspension, lapse, or cancellation of a license, lease, or contract to the portion of the loss suffered during the period of restoration (basically, the time between the loss date and the date when the damaged property is repaired or replaced). In the 2000 editions of the causes of loss forms, new language has been added to make it clear that coverage applies to such business income losses incurred not only during the period of restoration, but also during any extension of the period of restoration granted in the policy and its endorsements.
For example, the extended business income additional coverage in the two business income coverage forms grants coverage for business income loss suffered in the first 30 days after damaged property has been repaired or replaced. This 30-day period can be increased by means of an extended period of indemnity coverage option included in both forms. The new language added to the exception specifies that business income loss incurred during these time periods is covered.
ISO has characterized this change as a broadening of coverage. However, it might be convincingly argued that the new language merely clarifies the intent to limit coverage to loss incurred during the policy's indemnity period, as established in various policy provisions and any applicable endorsements.
Gutters and Downspouts
In the 2000 editions of the broad and special causes of loss forms, the exclusion of loss to gutters and downspouts caused by weight of snow, ice, or sleet has been eliminated.
Valuable Papers and Records Limitation
In the 2000 edition of the special causes of loss form, the provision limiting coverage on valuable papers and records to loss from the specified causes of loss has been revised to make it clear that this limitation does not apply to pre-packaged software.
Property in Transit Additional Coverage
In the 2000 edition of the special causes of loss form, the limit applicable to the property in transit additional coverage has been increased from $1,000 to $5,000.
Summary of 2000 Revisions to Causes of Loss Forms
Glass coverage changes. The 2000 editions of all three causes of loss forms contain a number of changes that implement a new approach to providing coverage on glass. Under the 2000 editions of these forms, damage to glass is covered in the same manner and to the same extent as damage to other types of covered property.
Collapse additional coverage. The collapse additional coverage has been extensively revised in the 2000 editions of the broad and special causes of loss forms. New language addresses the meaning of "collapse" with respect to both buildings and personal property. The new definitions, which do not apply to collapse from the specified causes of loss, specify that the property must fall down or cave in. Also, collapse from hidden decay and hidden insect or vermin damage is covered only if the insured had no knowledge of the decay or damage prior to the collapse.
Water damage. In the 2000 edition of the broad and special causes of loss forms, the provisions addressing coverage for loss from the discharge of water from an appliance or system have been revised to stipulate that the system or appliance must be located on the described premises for coverage to apply, and to specify that no coverage applies to discharge of water from roof drains, gutters, or downspouts.
Earth movement exclusion. The earth movement exclusion in the 2000 editions of all three causes of loss forms includes new language that explicitly excludes loss resulting from soil conditions that cause settling, cracking, or other damage to foundations.
Property in transit. In the 2000 edition of the special causes of loss form, the limit applicable to the property in transit additional coverage has been increased from $1,000 to $5,000.
Gutters and downspouts. In the 2000 editions of the broad and special causes of loss forms, the exclusion of damage to gutters and downspouts caused by weight of snow, ice, or sleet has been eliminated.
Conclusion to group 1 exclusions. A new provision in the 2000 editions of all three causes of loss forms stipulates that the exclusions of loss from ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war and military action, and water apply regardless of whether the damage from these causes of loss is widespread or localized.
Neglect exclusion. An exclusion of loss resulting from neglect of the insured to protect property from further damage has been added to the 2000 editions of all three causes of loss forms.
Loss of contract special exclusion. All three causes of loss forms contain an exclusion of loss from the suspension, lapse, or cancellation of a license, lease, or contract that limits coverage for such losses to the portion of loss suffered during the policy's period of restoration. New language in the 2000 editions makes it clear that the portion of such losses incurred during any extension of the period of restoration granted in the policy and its endorsements is also covered.
Valuable papers and records. In the 2000 edition of the special causes of loss form, the provision limiting coverage on valuable papers and records to loss from the specified causes of loss has been revised to make it clear that this limitation does not apply to pre-packaged software.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
During the first two quarters of 2001, new Insurance Services Office, Inc. (ISO), commercial property forms and endorsements bearing an October 2000 edition date became available for use in a majority of jurisdictions. The 2000 revisions to the ISO commercial property portfolio affect 11 coverage forms, all three causes of loss forms, 24 coverage endorsements, and a number of schedule endorsements.
This article reviews the changes made in the 2000 editions of the causes of loss forms: the basic causes of loss form, CP 10 10; the broad causes of loss form, CP 10 20; and the special causes of loss form, CP 10 30. A summary of the changes to these forms appears at the end of the discussion.
Glass Coverage Changes
The 2000 editions of all three causes of loss forms contain changes that reflect a new approach to providing coverage on building glass. Under this new approach, damage to glass is covered in the same manner and to the same extent as damage to other types of covered property.
The exclusion of building glass breakage by vandals in the basic causes of loss form and the limitation on building glass breakage by vandals in the broad causes of loss have been eliminated. Therefore, the 2000 editions of both the basic and broad causes of loss forms provide full coverage for building glass breakage due to vandalism. Prior editions of the basic causes of loss form provided no coverage for building glass breakage due to vandalism, and prior editions of the broad causes of loss provided only $500 of coverage for such losses.
The breakage of glass additional coverage in the broad causes of loss form has been eliminated in the 2000 edition. With this change, the 2000 edition of the broad causes of loss form (like the basic causes of loss form) provides no coverage at all for glass breakage, unless it is the result of one of the form's named perils. Prior editions of the broad causes of loss form provided coverage for breakage of building glass, regardless of cause, subject to a maximum of $500 per occurrence and $100 per pane, plate, or panel.
The building glass breakage limitation in the special causes of loss form (which restricted loss recovery for building glass breakage to a maximum of $500 per occurrence) has been eliminated, and a new extension of coverage for expenses associated with repair or replacement of damaged glass has been added. The new coverage extension grants coverage for the expense of putting up temporary plates or boarding up openings and the expense of removing or replacing obstructions in order to repair or replace damaged glass that is part of a building, subject to the applicable limit of insurance.
Also, the provision limiting coverage on fragile articles to loss from specified causes has been revised to specify that this limitation does not apply to glass. Finally, the pollution exclusion has been revised to specify that damage to glass caused by the application of chemicals is not considered pollution damage.
Collapse Coverage
The collapse additional coverage has been extensively revised in the 2000 editions of the broad and special causes of loss forms. The most important change is new language establishing the meaning of "collapse" with respect to both buildings and personal property.
With respect to buildings, "collapse" means "the abrupt falling down or caving in of a building or a part of a building" such that it cannot be occupied for its intended purpose. The provision specifies that a building or part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse, and that a building or part of a building that is still standing is not considered to be in a state of collapse even if it has separated from another part of the building or shows evidence of cracking, bulging, settling, etc.
Under the special causes of loss form, this new definition applies only to collapse from hidden decay, insect, or vermin damage of which the insured had no knowledge prior to the collapse and collapse from faulty materials or workmanship during construction or renovation. Under the broad causes of loss form, the new collapse definition also applies to collapse from weight of people or personal property or weight of rain on a roof. Therefore, under either form, if fire or windstorm damage to a covered building leaves the building standing but in danger of falling down or caving in, the entire loss to that building—including its near-collapse—is covered under the fire or windstorm peril; the collapse definition is inapplicable to such losses.
With respect to personal property, the 2000 editions specify that personal property must fall down or cave in for coverage to apply. Cracking, sagging, bending, leaning, settling, etc., of personal property does not qualify as collapse of personal property. Also, no coverage applies to marring or scratching of personal property if that is the only damage caused by the collapse, and no coverage applies to loss from collapse of certain structures (outdoor radio or television antennas; awnings, gutters, and downspouts; yard fixtures; outdoor swimming pools; fences; piers, wharves, and docks; beach or diving platforms or appurtenances; retaining walls; and walks, roadways, and other paved surfaces).
Another change in the 2000 editions is new language establishing that collapse from hidden decay and hidden insect or vermin damage is covered only if the insured had no knowledge of the decay or damage prior to the collapse.
Finally, new language has been added to the collapse additional coverage to make it clear that coverage applies not only with respect to collapse of a covered building, but also with respect to the collapse of a building that contains covered personal property.
Water Damage
In the 2000 edition of the broad causes of loss form, two changes have been made to the language of the water damage peril.
Similarly, in the special causes of loss form, the portion of the definition of the term "specified causes of loss" that addresses the meaning of "water damage" (as used in the form's water damage additional coverage extension) has been revised to clearly require that the system or appliance be located on the covered premises for coverage to apply, and to make it clear that no coverage applies to discharge of water from roof drains, gutters, or downspouts. Also, a statement has been added to the water damage additional coverage extension specifying that this coverage extension does not increase the limit of insurance.
Earth Movement Exclusion
In the 2000 editions of all three causes of loss forms, this exclusion has been reformatted as five subparts (rather than two subparts as in prior editions) and the language excluding earth sinking, rising, or shifting has been expanded. The new language specifies that earth sinking, rising, or shifting includes "soil conditions which cause settling, cracking, or other disarrangement of foundations or other parts of realty." It further specifies that, "soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface."
Whether this additional language actually changes the coverage provided by the form is debatable. However, it certainly adds clarity. Under pre-2000 editions of the forms, there might have been some room for debate as to whether damage caused by soil erosion, freezing, and thawing of the soil, etc., qualified as damage caused by earth sinking, rising, or shifting and is therefore excluded from coverage. Under the 2000 editions, however, there can be no doubt of the intent to exclude such damage from coverage.
New Conclusion to Group 1 Exclusions
The 2000 editions of all three causes of loss forms include a new provision establishing that the seven Group 1 exclusions—ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war and military action, and water—apply regardless of whether the damage from these causes of loss is widespread or localized.
New Neglect Exclusion
All three causes of loss forms include a new exclusion of loss resulting from neglect of the insured to protect property from further damage. Since the "duties in the event of loss" provision found in every edition of the building and personal property coverage form (CP 00 10) requires the insured to take reasonable steps to protect property damaged by a covered cause from further damage, it is doubtful that this new Group 2 exclusion reduces coverage.
Loss of Contract Special Exclusion
All three causes of loss forms contain a special exclusion that limits coverage for business income loss resulting from the suspension, lapse, or cancellation of a license, lease, or contract to the portion of the loss suffered during the period of restoration (basically, the time between the loss date and the date when the damaged property is repaired or replaced). In the 2000 editions of the causes of loss forms, new language has been added to make it clear that coverage applies to such business income losses incurred not only during the period of restoration, but also during any extension of the period of restoration granted in the policy and its endorsements.
For example, the extended business income additional coverage in the two business income coverage forms grants coverage for business income loss suffered in the first 30 days after damaged property has been repaired or replaced. This 30-day period can be increased by means of an extended period of indemnity coverage option included in both forms. The new language added to the exception specifies that business income loss incurred during these time periods is covered.
ISO has characterized this change as a broadening of coverage. However, it might be convincingly argued that the new language merely clarifies the intent to limit coverage to loss incurred during the policy's indemnity period, as established in various policy provisions and any applicable endorsements.
Gutters and Downspouts
In the 2000 editions of the broad and special causes of loss forms, the exclusion of loss to gutters and downspouts caused by weight of snow, ice, or sleet has been eliminated.
Valuable Papers and Records Limitation
In the 2000 edition of the special causes of loss form, the provision limiting coverage on valuable papers and records to loss from the specified causes of loss has been revised to make it clear that this limitation does not apply to pre-packaged software.
Property in Transit Additional Coverage
In the 2000 edition of the special causes of loss form, the limit applicable to the property in transit additional coverage has been increased from $1,000 to $5,000.
Summary of 2000 Revisions to Causes of Loss Forms
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.