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.
| 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. |