Basic form CP 10 10 and broad form CP 10 20 are the two causes of loss forms used to create named perils coverage for insureds under the ISO commercial property program. Form CP 10 10 contains eleven “basic” causes of loss; form CP 10 20 includes three additional causes of loss, plus an additional coverage applicable to collapse.

Analysis

As with the standard fire policy, which is no longer used since the introduction of the ISO simplified language commercial property forms, forms CP 10 10 and CP 10 20 do not define or limit the term “fire” in any way. The courts have long interpreted the standard fire policy as covering only hostile fire.

Not included under explosion coverage of the commercial property program are two forms of “explosion” traditionally excluded from the scope of the explosion peril: operation of pressure relief devices and rupture due to expansion of the contents of any structure caused by water. Steam boiler explosion is also excluded, but this limitation is found as item 2.d of exclusion section B of form CP 10 10 (2.b. of form CP 10 20; 2.e. of form CP 10 30). Sonic boom and water hammer, specifically removed from the explosion peril of earlier commercial property forms, are not mentioned in the explosion language of form CP 10 10 or CP 10 20; ISO refers to this in their introductory material, indicating that coverage is intended for these causes of loss.

The windstorm basic cause of loss, like earlier versions of the windstorm or hail peril, does not apply to frost or cold weather, or to ice, snow, or sleet, even if driven by wind. Also retained from earlier coverage forms is the requirement of wind or hail damage to the exterior of a building or structure before coverage in connection with rain, snow, sand, or dust entering the building or structure is provided. Windstorm or hail is one of three causes of loss that may be removed from coverage of the commercial property program by endorsement. Its removal is made possible to avoid duplication of coverage for insureds who have windstorm insurance through a catastrophe pool or similar facility.

Smoke damage from agricultural smudging or industrial operations is not covered under this cause of loss.

In addition to physical contact with an aircraft or vehicle, including a spacecraft or self-propelled missile, the aircraft cause of loss applies specifically to objects falling from aircraft and to objects thrown up by a vehicle.

Damage by vehicles owned by the named insured or by vehicles operated in the course of the named insured's business is excluded. (Prior to the 1988 revisions to the basic causes of loss form, damage caused by any vehicle operated by the named insured was excluded.)

Acts of striking employees occupying the described premises are included under the riot or civil commotion cause of loss, as is looting at the time and place of a riot or civil commotion.

“Malicious mischief” has been dropped from the name of the vandalism coverage, although the definition remains the same as that of “vandalism or malicious mischief” found in earlier forms—willful and malicious damage to or destruction of the insured property. Building damage caused by the break-in or exit of burglars is covered, but other loss caused by or resulting from theft is excluded.

Under earlier forms of commercial property insurance, vandalism and malicious mischief coverage was optional. It may be excluded as a basic cause of loss under the simplified language program by endorsement, but otherwise it is automatically covered.

Vandalism is one of the causes of loss for which there is no coverage if the building where the loss occurs has been vacant for more than sixty consecutive days.

The sprinkler basic cause of loss addresses roughly the same exposure dealt with under earlier commercial property forms by attachment of an optional sprinkler leakage endorsement. It may be eliminated from form CP 10 10 or CP 10 20 at the insured's option. Coverage is for leakage or discharge from an automatic sprinkler system, including the collapse of the system's tank if there is one.

Automatic sprinkler system is a defined term within the context of the sprinkler leakage cause of loss. It refers to an “automatic fire protective or extinguishing system” and includes sprinklers, nozzles, ducts, pipes, valves, fittings, tanks, pumps, and private fire protection mains. It also includes nonautomatic systems, hydrants, standpipes, and outlets supplied from an automatic system.

This cause of loss, when it is part of a policy covering the building or structure containing the sprinkler system, also applies to repair or replacement of damaged parts of the system when the damage results in sprinkler leakage or is directly caused by freezing, and to the cost of tearing out and replacing part of the structure in order to repair the system. The sixty-day vacancy condition of the building and personal property coverage form applies to sprinkler leakage losses.

Coverage for the sinkhole collapse loss exposure was previously available only by endorsement and only in certain regions of the country where sinkholes occur with some frequency. As a basic cause of loss under the simplified language commercial property program, sinkhole collapse applies to the sudden sinking or collapse of land caused by the underground erosion of limestone or dolomite by water. The cost of filling the sinkhole itself is not covered.

The form clarifies that sinkhole collapse coverage does not include those instances where the ground sinks or collapses into manmade cavities in the earth. This exposure is more appropriately the subject of mine subsidence coverage.

Volcanic action coverage also was previously available only on an optional basis by endorsement. As a basic cause of loss under the ISO commercial property program, it covers damage from the above-ground effects of a volcanic eruption—airborne blast and shock waves, ash, dust, particulate matter, and lava flow. It does not include, as detailed in the earth movement exclusion, the removal cost of volcanic ash or dust that has not physically damaged insured property, nor the seismic effects of a volcanic eruption.

Coverage under this cause of loss applies to any volcanic eruptions occurring within a seven day period (168 hours). Under the original versions of the form (prior to the 1988 revisions), this period was three days.

In addition to the foregoing eleven basic causes of loss, broad form CP 10 20 includes under section A three other causes of loss—falling objects; weight of snow, ice, or sleet; and water damage.

Analysis

Personal property in the open is not covered for the falling objects cause of loss; neither is personal property within a structure or the interior of the structure itself unless the roof or an outside wall is first damaged by a falling object.

The weight of snow, ice, or sleet peril in earlier property forms includes a long list of property to which the peril does not apply. As a cause of loss under the simplified language commercial property program, weight of snow, ice, or sleet applies to all personal property that is outside of buildings or structures.

Coverage under the water damage cause of loss applies to accidental discharge or leakage of water or steam when a system or appliance containing water or steam breaks or cracks. Water damage coverage does not encompass leakage or discharge from an automatic sprinkler system, which is the subject of coverage under a separate cause of loss. Water damage also does not include discharge or leakage from a sump, related equipment, roof drains, gutters, downspouts, or similar fixtures or equipment.

Included as a covered part of water damage losses is the cost of tearing out and replacing part of the building or structure to repair damage to the system or appliance. Excluded from coverage is “the cost to repair any defect that caused the loss or damage.” This wording, which was newly introduced in the 1988 edition of CP 10 20, replaces the previous exclusion of the “cost of repairing or replacing the actual system or appliance itself.” This revision constitutes a broadening of coverage under this cause of loss as illustrated by the following situation. Suppose a beam settles on a pipe causing it to crack and leak water. Under the new language, the defect can be considered to be the misplaced beam. The cost to repair the defect, i.e., restore the beam to its proper location, is not covered, but the cost to repair or replace the damaged pipe would be covered.

Damage caused by continuous or repeated leakage (the form specifies that such leakage must occur over a period of at least fourteen days), and loss caused by freezing unless the insured has taken steps to maintain heat in the building or structure or has drained the equipment and shut off the water supply are also excluded from water damage coverage. (Earlier versions of commercial property forms imposed these last conditions on coverage for freezing losses only when the building was vacant or unoccupied. Broad form CP 10 20 makes no such distinction, imposing the conditions with respect to freezing losses regardless of the building's status.) Coverage under the water damage cause of loss is subject to the sixty-day vacancy condition of the building and personal property coverage form.

See Water Exclusion Clause, for a discussion of court cases relating to the accidental discharge peril and its apparent conflict with the water damage exclusion.

Analysis

A commercial property program insured's third option with respect to scope of insured perils is special causes of loss form CP 10 30, which provides coverage on an open perils basis—that is, it insures against “risks of direct physical loss” other than causes of loss specifically excluded or limited in the form itself. These exclusions and limitations are discussed below.

There are seven exclusions comprising subsection B.1. of each of the three causes of loss forms of the ISO commercial property program. These exclusions operate to eliminate coverage as specified, regardless of other concurrent causes that contribute to the loss.

This introductory language, which excludes coverage for the seven causes of loss described in section B “regardless of any other cause or event that contributes concurrently or in any sequence to the loss,” appears to extend the exclusions to many kinds of losses that historically have been considered as a part of the damage from a named peril such as fire, wind, explosion, vandalism, etc. And while there is coverage for damage from certain specified causes of loss (as noted in the description of these exclusions that follows) that occurs after the occurrence of the excluded cause of loss, no exceptions are provided for otherwise covered causes of loss that occur before an excluded cause of loss and give rise to the excluded cause of loss.

For example, suppose a fire damages a building adjacent to the insured's property. Fire fighters, in combating the blaze, pump enormous amounts of water into the house, much of which flows away and into the insured's basement. In the absence of the water exclusion, this damage is covered as a fire loss, on either a named causes of loss or a special causes of loss basis. Or suppose there is an explosion in a house on a hillside of sufficient force not only to damage the building but to cause displacement of the earth or rock of the hill so the house slides down the hill and is totally demolished. Again, the loss would be fully covered as an explosion loss in the absence of the earth movement exclusion.

Note that the legal situation surrounding the concurrent causes of loss language is not entirely settled. See Concurrent Causation for a legal analysis of the concurrent causation issue and relevant case law.