October 2009
Standard Amendments of Coverage
Summary: Many of the standard endorsements used as part of the commercial property program of Insurance Services Office (ISO), in the order of their CP designations, along with a brief description of the coverages provided by each are included in this article. There are cross-references for endorsement forms that are the subject of separate discussion elsewhere in FC&S. The discussion that follows is based on the 06 07 revisions to the ISO commercial property program.
Unless otherwise indicated, endorsements modifying property forms may be used with the building and personal property form (CP 00 10 06 07); the condominium association coverage form (CP 00 17 06 07); the condominium commercial unit-owners coverage form (CP 00 18 06 07); and the standard property policy (CP 00 99 06 07). Endorsements changing causes of loss forms may be used with the basic (CP 10 10 06 07), broad (CP 10 20 06 07), and special ( CP 10 30 06 07) causes of loss forms unless differences are noted. References to Commercial Lines Manual (CLM) rules are to rules in division five, fire and allied lines.
Topics covered:
Cancellation Changes CP 02 99 06 07
Multiple Deductible Form (Fixed Dollar Deductibles) CP 03 20 10 92
Windstorm or Hail Deductible CP 03 21 06 07
Brands and Labels CP 04 01 10 00
Ordinance or Law CP 04 05 04 02
Pollutant Clean Up and Removal Additional Aggregate Limit of Insurance CP 04 07 10 91
Electrical Apparatus CP 04 10 06 07
Debris Removal Additional Limit of InsuranceCP 04 15 10 00
Utility Service—Direct Damage CP 04 17 06 07
Condominium Commercial Unit Owners Optional Coverages CP 04 18 06 07
Newly Acquired or Constructed Property—Increased Limit CP 04 25 07 88
Electronic Commerce (E-Commerce) CP 04 30 06 07
Changes – Fungus, Wet Rot, Dry Rot, and Bacteria CP 04 31 04 02
Business Personal Property Limited International Coverage CP 04 32 04 02
Property in Process of Manufacture by Others Limited International Coverage CP 04 33 04 02
Functional Building Valuation CP 04 38 06 07
Functional Personal Property Valuation (Other Than Stock)CP 04 39 10 90
Spoilage Coverage CP 04 40 06 07
Vacancy Permit CP 04 50 07 88
Vacancy Changes CP 04 60 10 00
Theft Exclusion CP 10 33 06 95
Watercraft Exclusion CP 10 35 06 95
Radioactive Contamination CP 10 37 10 00
Sprinkler Leakage—Earthquake ExtensionCP 10 39 07 88
Earthquake and Volcanic Eruption Form CP 10 40 08 99Earthquake Inception Extension CP 10 41 08 99
Grain Properties—Explosion Limitation CP 10 51 07 88
Broken or Cracked Glass Exclusion Form CP 10 52 06 07
Windstorm or Hail Exclusion — Direct Damage CP 10 53 06 07
Windstorm or Hail Exclusion CP 10 54 06 07
Vandalism Exclusion CP 10 55 06 07
Sprinkler Leakage CP 10 56 06 07
Molten Material CP 10 60 07 88
Flood Coverage CP 10 65 06 07
Pier and Wharf Additional Covered Causes of Loss CP 10 70 07 88
Builders Risk Endorsements CP 11 05 04 02-CP 11 20 06 01
Builders Risk Changes—Standard Property Policy CP 11 99 06 07
Burglary and Robbery Protective Safeguards CP 12 11 10 00
Loss Payable Provisions CP 12 18 06 95
Additional Insured – Building Owner CP 12 19 06 07
Peak Season Limit of Insurance CP 12 30 06 95
Limitation on Loss Settlement – Blanket Insurance (Margin Clause) CP 12 32 06 07
Value Reporting Form CP 13 10 04 02
Additional Locations—Special Coinsurance Provisions CP 13 20 07 88
Agricultural Products Storage CP 13 30 06 07
Report of Values and Supplemental Report of Values CP 13 60 10 00 and CP 13 61 11 85
Multiple Location/Premium and Dispersion Credit Application CP 13 70 11 85
Additional Covered Property CP 14 10 06 95
Additional Building Property CP 14 15 07 88
Additional Property Not Covered CP 14 20 11 91
Outdoor Trees, Shrubs, and Plants CP 14 30 10 00
Outdoor Signs CP 14 40 06 07
Radio or Television Antennas CP 14 50 10 00
Leased Property CP 14 60 07 88
Building Glass – Tenant's Policy CP 14 70 06 07
Time Element Endorsements CP 15 01—CP 15 50
Condominium Commercial Unit Owners Changes—Standard Property Policy CP 17 98 10 00
Condominium Association Coverage Endorsement CP 17 99 06 95
Your Business Personal Property—Separation of Coverage CP 19 10 06 95
Reported, Acquired, Incidental Locations Schedule CP 19 13 07 88
Legal Liability Coverage Schedule CP 19 40 11 85
Manufacturers Consequential Loss Assumption CP 99 02 07 88
Distilled Spirits and Wines Market Value CP 99 05 06 95
Alcoholic Beverage Tax Exclusion CP 99 10 07 88
Contributing Insurance CP 99 20 06 07
Manufacturer's Selling Price (Finished Stock Only) CP 99 30 06 95
Market Value Stock CP 99 31 07 88
Storage or Repairs Limited Liability CP 99 42 07 88
Household Personal Property Coverage CP 99 92 06 07
Tentative Rate CP 99 93 01 95
Protective Safeguards IL 04 15 04 98
Cancellation Changes, CP 02 99
This endorsement was created in response to the growing public concern over occurrences of arson. In those jurisdictions where it is available, it permits the insurance company to cancel the contract with five days notice (provided state statutes do not prohibit such cancellation) if conditions that increase the possibility of arson are found to exist. Among the conditions that may trigger the shorter notice of cancellation are sixty days consecutive vacancy or unoccupancy (with certain exceptions) or a declaration by a governmental authority that the building is unsafe. Addition of this endorsement modifies the cancellation provisions of the common policy conditions of the commercial property program.
This endorsement is used if the insured wishes to increase the deductible above the $500 standard deductible. Deductibles apply on a per location basis; different deductibles may be selected for different locations, but the deductible that applies at each location must be uniform for that location, even if property at one location is divided between blanket and specific limits. However, it is permissible to choose separate deductibles for windstorm/hail and theft by scheduling them on the endorsement; that deductible applies to all covered property damaged by that cause of loss at that location. If different deductibles apply to loss from the same occurrence (for example, windstorm) at more than one location, only the largest applicable deductible applies to the loss. The endorsement may be used with the builders risk coverage form (CP 00 20) and the tobacco sales warehouse coverage form (CP 00 80), as well as the forms listed in the introduction.
This endorsement allows the insured to choose a deductible for the perils of wind or hail, apart from the deductible that applies to all other perils. The available deductibles are 1 percent, 2 percent, or 5 percent of covered property. The deductible applies separately to each building that sustains loss or damage; personal property at each building at which there is loss or damage to personal property; personal property in the open; if there is damaged to a building and to personal property in that building, separate deductibles apply to each. The endorsement gives examples of how the deductible is calculated for both blanket and specific insurance situations. For the 2007 edition, language was added to make it explicit that this endorsement does not affect the impact of the policy's water exclusion or any other exclusion in the policy and does not affect the application of a flood deductible if the policy or another policy provides coverage for flood.
This endorsement provides the original manufacturer with two options concerning branded or labeled merchandise that has been damaged by an insured peril and that the insurance company acquires as salvage. The insured may stamp such merchandise as salvage material or it may relabel it as long as the new labels comply with the law. The insurer will pay the reasonable costs incurred by the insured to do this, but the applicable limit of insurance is not increased. The purpose is to save the insured from having the insurance company as a direct competitor as it disposes of the salvage.
The current building and personal property coverage form contains an additional coverage of the least of $10,000 per building, or 5 percent of the limit of liability applicable to that building, for increased cost of construction caused by enforcement of any law or ordinance governing repair or rebuilding. However, this additional coverage only responds if the insured has selected the replacement cost option.
In other instances, this endorsement may be attached. It responds if the enforcement of any building, zoning, or land use law results in added costs that are not covered as direct loss. The endorsement provides three distinct coverages: coverage A for loss to the undamaged portion of the building; coverage B, demolition and removal costs of undamaged parts of the structure; and coverage C, any increased cost of repairs or reconstruction. This endorsement cannot be used with the commercial unit-owners coverage form (CP 00 18) because that form covers only personal property.
Provision B details how coverage is triggered in the event that covered property is damaged by both a covered and an excluded peril. A description of proportionate loss payment is included. Provision H. contains examples of proportionate loss settlement.
Replacement cost applies to coverage A if the insured has chosen replacement cost for the direct portion of the loss. Since the standard property policy (CP 00 99) does not include an option for replacement cost coverage, only coverages A and B of the endorsement can be used with it.
Coverage A covers loss to the undamaged portion of the building caused by the enforcement of certain ordinances or laws. Such laws may require demolition or regulate construction, repair, zoning, or land use (such as laws that do not allow the same type of land use upon rebuilding as the insured had before the loss). In other words, the loss of value is covered. For coverage to apply, the ordinance or law must be in force at the time of loss. Coverage A is not an additional amount of insurance but merely an extension of the existing policy limit. Thus, recovery is limited to the lesser of actual cash value or the building coverage limit if replacement cost coverage does not apply. Replacement cost may not apply because an insured chooses not to repair or replace, or because the insured did not buy the coverage.
Coinsurance requirements apply only to coverage A. In the case of coverage A, the insured must purchase coverage for at least 80 percent of the property's replacement cost value if the insured has elected optional replacement cost, or, if not, 80 percent of actual cash value. Since coverage C requires that the underlying policy include the replacement cost option, the rules effectively require insurance equal to 80 percent of the property's replacement cost when coverage C is selected.
The CP 04 05 limits the amount of debris removal coverage to the lesser of the amount actually spent to demolish and clear the site or the coverage B limit.
If the building is actually repaired or replaced, either at the same or another location, coverage C pays the lesser of the increased cost of construction at the same premises or the coverage C limit. However, if the ordinance or law requires relocation to another location, coverage C pays the lesser of the increased cost of construction at the new premises, or the applicable limit. The form limits the time to rebuild to two years. However, that limit may be extended by another two years.
The current edition contains an exclusion of costs associated with any ordinance or law regarding pollutants. Although there is no coverage under the endorsement, some pollution loss coverage is provided in the commercial property program.
This endorsement allows an insured to schedule an additional annual aggregate limit for the clean up and removal of pollutants from land or water on the insured's premises. The limit applies as excess over the basic $10,000 aggregate limit for pollutant clean up found on the property coverage form to which the endorsement is attached. The manual rule concerning the deductible under the endorsement was modified by the 1990 program changes to reflect that deductibles are currently applied on a per location basis (see Building and Personal Property Coverage Form). A deductible is scheduled on the endorsement for each location; this deductible should not be less than the largest direct damage deductible that applies to the particular location. The minimum deductible under the endorsement is $1,000. The endorsement may be used with the builders risk coverage form (CP 00 20) and the tobacco sales warehouse coverage form (CP 00 80) as well as the forms listed above in the introduction.
The contaminant and pollutant clean up and removal additional aggregate limit of insurance does not respond until both the amount of the deductible scheduled on the endorsement and any amount remaining from the basic $10,000 annual aggregate limit are exceeded. For example, assume a cost of $40,000 to remove pollutants from the insured premises with an additional limit of $35,000 and a $5,000 deductible scheduled on endorsement CP 04 07. If $3,000 of the basic $10,000 aggregate limit is available from building and personal property form CP 00 10, then $8,000 (the $5,000 deductible plus the remaining $3,000 limit) would be subtracted from $40,000. Endorsement CP 04 07 would respond for $32,000.
The building and personal property form excludes damage caused by artificially generated electrical, magnetic, or electromagnetic energy. However, it makes an exception allowing coverage for any resulting fire damage.
Endorsement CP 04 10 extends this exception to include coverage for damage to electrical equipment or devices from resulting explosions also, and for damage by electricity after the fire or explosion. (Damage by electricity—or any other immediate occurrence triggered by fire or explosion—is normally covered by fire or explosion, e.g., smoke damage from a covered fire.) Use of the endorsement calls for extreme care that all policies covering the property have a similar amendatory endorsement. Loss settlement is handled by a proportional method that will leave the insured severely disappointed otherwise. Unless a higher amount is shown on the declarations, coverage under this endorsement is subject to a $1,000 deductible.
Debris Removal Additional Limit of Insurance, CP 04 15
The coverage forms of the commercial property program provide an additional $10,000 for debris removal expense if the applicable building and personal property limits are exhausted. Endorsement CP 04 15 may be added to increase this $10,000 limit. The manual rules specify that use of the endorsement requires that it be attached to all policies covering the same property. It may be added to the builders risk coverage form (CP 00 20 06 07) and the tobacco sales warehouse coverage form (CP 00 80) in addition to the forms listed in the introduction to this discussion.
This endorsement provides coverage for loss or damage to covered property that results from the interruption of (a) water, (b) communication, or (c) power supply services, if a covered cause of loss damages any of the properties furnishing these services. Damage to electronic data is excluded.
The insured may elect to cover one or all of the three exposures. The endorsement may be added to the builders risk coverage form (CP 00 20) and the tobacco sales warehouse coverage form (CP 00 80) in addition to the forms listed in the introduction.
The form defines the covered services as follows:
1. Water supply services are generated from pumping stations and water mains;
2. Communication supply services (telephone, radio, microwave or television) are provided through transmission lines, coaxial cables and microwave radio relays (not satellites); and
3. Power supply services are provided through utility generating plants, switching stations, substations, transformers and transmission lines and furnish electricity, steam or gas.
The current form allows the insured to extend coverage for losses resulting from damaged transmission lines listed under both communication and power supply services to lines that are overhead.
This endorsement is used in conjunction with Condominium Commercial Unit-Owners Changes – Standard Property Policy. The form pays the unit owner's share of an assessment charged to all unit owners by the condominium association made during the policy period and as a result of direct physical loss or damage to property in which each unit owner has an undivided interest, caused by a covered cause of loss. The 2007 edition enables identification of each condominium unit to which coverage applies.
Property coverage forms CP 00 10 (building and personal property), CP 00 17 (condominium association), and CP 00 99 (the standard property policy) provide an extension of $250,000 of building property coverage to newly acquired or constructed property. This extension of coverage is also contained in the legal liability coverage form (CP 00 40 04 02). See Legal Liability Coverage Form. The endorsement increases the $250,000 limit and must be written for the same causes of loss as the underlying insurance. It must be attached to all policies covering the same building property.
This optional endorsement addresses certain exposures faced by insureds who use the Internet in their business operations. It limits coverage to loss arising from e-commerce activity. The opening paragraph of the endorsement defines e-commerce as that “conducted via the Internet or other computer-based interactive communications network.”
With a single annual aggregate limit of liability, this endorsement provides direct damage coverage under section I and time element coverage under section II. Section III describes the perils insured against and section IV contains the conditions.
Section I covers damage to electronic data from a covered peril. It promises to “replace or restore” the lost or damaged data. The data may be owned by the insured or licensed or leased to the insured. The endorsement specifies that it does not cover data that the insured licenses, leases, or rents to others. It also specifically excludes the cost to duplicate research that led to the development of the electronic data.
Section II of the endorsement provides time element coverage. It covers the insured's lost income as well as extra expense when e-commerce activity is suspended. Business income and extra expense are defined similarly to the definitions in form CP 00 30 06 07. (See Business Income (and Extra Expense) Coverage Form.)
The suspension must be caused by a loss under Section I, or an interruption in computer network service. The form provides ninety days coverage for a section I loss and 2 weeks of income lost due to a computer network interruption. The endorsement provides business income coverage even if the policy to which it is attached does not.
Section III sets forth the covered perils, based on modifications to Special Form Coverage. The first paragraph in section III specifies that the provisions of this endorsement do not supersede the “exclusion of certain computer-related losses.” It deletes three exclusions from the CP 10 30 and adds eight new ones.
This endorsement allows the insured to increase the sublimit ($15,000) of coverage for damage from fungus, rot, and bacteria that the CP 00 10 provides. If the insured has chosen the separate premises option, then the new limit for this coverage applies separately to each premise. The limit of liability for this coverage is included in the limit of liability for the covered property. The insured may also choose to amend the number of days that business income is payable for a fungus, rot, or bacteria loss. The basic policy provides thirty days.
The CP 00 10 covers business personal property only on the described premises. For an additional premium, the insured may choose to cover such property in foreign countries or on its way to such countries. The endorsement asks the insured to specify the “foreign coverage territory,” other than the U.S., its territories and possessions, Puerto Rico, or Canada . The insured also specifies the length of time for the coverage and the applicable limit of liability.
In order for the coverage to apply, the property must be:
1. Used in the insured's business activity in the foreign country;
2. In the insured's care or the care of the insured's authorized representative, or located at a location the insured leases or owns; and
3. Temporarily in the foreign country, as indicated by the time period shown on the endorsement.
Note that the endorsement does not cover:
1. Property that the insured exports to a foreign country or that is held for sale in a foreign country; or
2. Property in the care of a carrier or bailee for hire.
This endorsement cannot be used to cover property being transported around the United States. For that the insured needs inland marine coverage.
Like the CP 04 32, this endorsement amends the coverage territory to those places the insured indicates. It covers the insured's raw materials and in-process goods while they are in the manufacturing process in a foreign country. The manufacturing must be done at a location that the insured does not own or operate.
Insureds may add this endorsement to building and personal property form (CP 00 10) or the condominium association coverage form (CP 00 17) to provide an alternate method of valuation for building property. It is used when a functionally equivalent building can replace the original at a lower cost than would be required by an identical replacement. Functional replacement cost valuation provides a lower valuation than replacement cost, resulting in a reduction of the amount of insurance coverage required and lower premiums.
The Commercial Lines Manual (CLM rule 38R) gives an example of how to develop the limit of insurance for this type of valuation under the current endorsement.
Buildings insured under the endorsement are not subject to the policy's coinsurance condition. In event of a total loss, if the insured chooses to repair or replace the building, the insurer pays the least of the following amounts: (1) the limit shown on the endorsement; or (2) the cost to replace the building on the same site with a less costly, but functionally equivalent building. In event of a partial loss, the insurer agrees to pay the smallest of: (1) the cost to repair or replace the damaged portion in the same architectural style with less costly material (if available); or (2) the necessary amount actually spent to repair or replace the building with less costly material (if available). The insured must contract for the repairs within 180 days of the loss, unless the insured and insurer agree otherwise.
If the insured does not select repair or replacement (or does not do so within the 180 day time period), coverage is limited to the smallest of (1) the endorsed limit; (2) the market value (defined as the price that the property might be sold for in a fair market exclusive of land value) at the time of loss; or (3) a modified form of actual cash value (the amount to repair or replace on the same site with less costly material and in the same architectural style, less depreciation).
An important feature of the current endorsement is automatic ordinance or law coverage. Coverage provisions are similar to those in endorsement CP 04 05, but the loss settlement provisions are modified to reflect the use of functional valuation.
Certain fixtures and personal property used to service the premises are not specifically excluded under this endorsement, so items such as awnings or floor coverings, appliances for refrigerating, ventilating, cooking, dishwashing or laundering, or outdoor equipment or furniture (treated as building property under the property coverage form) can be valued at functional replacement cost. Functional replacement cost coverage may be more favorable for such items than actual cash value.
If there is other insurance using the same type of valuation, coverage for the loss is pro rata. Coverage is excess when other insurance covering the loss is not subject to the same plan, terms, conditions (such as valuation), and provisions.
Provision G. gives examples of proportionate ordinance and law coverage if damage results from both a covered and an excluded peril.
Insureds may add this endorsement to the building and personal property coverage form (CP 00 10) and the condominium coverage forms (CP 00 17 and CP 00 18) to allow for an alternate method of valuation on scheduled items of personal property. It is used when an item of personal property cannot be replaced with the same type of property (as when the damaged property is technologically obsolete), or when actual cash value would be inappropriate because the item depreciates quickly in value.
Coverage examples illustrating appropriate coverage limits under functional replacement cost are found in CLM rule 38(S). These examples illustrate that the insured may insure for a higher or lower amount of coverage than identical replacement would require, depending on changes in technology.
The endorsement was introduced by ISO in October, 1990 to replace the provisions of endorsements CP 04 35 (functional replacement cost) and CP 04 37 (market value — property other than stock), which were simultaneously withdrawn. Both of these endorsements were available for use with real and personal property. Endorsement CP 04 35 was designed for those cases where functional replacement cost (FRC) exceeded actual cash value (ACV) and CP 04 37 applied when FRC was less than ACV.
The coinsurance requirements of the policy do not apply to property scheduled on the endorsement. If the insured contracts for repair or replacement within 180 days of the loss (a time period that may be altered by consent of the insurer and the insured), the insurer pays the least of the following amounts under functional replacement cost: (1) the endorsed limit; (2) the cost to replace, on the same site, with the most equivalent property available; or (3) the necessary amount actually spent to repair or replace the property. If the insured chooses not to repair or replace (or does not do so within the 180 day time period), the insurer pays the smallest of (1) the applicable limit; (2) the market value (the price that the property could be expected to sell for in a fair market) at the time of loss; or (3) the amount to repair or replace with material of like kind and quality, minus an allowance for physical deterioration and depreciation.
Covers perishable stock at the described premises owned by the insured or by others that is in the insured's care, custody, or control.
Insureds may purchase coverage during periods of vacancy that extend beyond the sixty days permitted in the property form by attaching a vacancy permit. The manual rules apply to contents as well as building property, if contents are to be covered. The language of the vacancy permit does not limit coverage to building property only.
Coverage for direct physical loss or damage applies only to the locations and for the permit periods scheduled on the form or on the declarations. (It is possible to specify vandalism or sprinkler leakage as excepted causes of loss for a reduction in premium.)
This endorsement modifies the vacancy condition that states that a building is not vacant when at least 31 percent of it is being rented or used. This endorsement recognizes that in some instances a lower level of occupancy is acceptable.
The endorsement may be used with the mortgageholders errors and omissions coverage form (CP 00 70 04 02) as well as the building and personal property form (CP 00 10), the condominium association coverage form (CP 00 17), the condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99).
This endorsement rules out coverage for loss or damage directly caused by theft.
This endorsement excludes damage to docks, retaining walls, bulkheads, piers, or wharves caused by watercraft.
This endorsement is used to insure property damage and time element losses from sudden and accidental radioactive contamination and resulting radiation that arise from eligible material (such as that used in research or medical care) stored on the described premises. Use of CP 10 37 entails scheduling the location and type of property covered as well as whether limited or broad radioactive coverage applies. Limited radioactive contamination coverage applies to such contamination that directly results from another covered cause of loss, whereas broad radioactive contamination coverage does not require causation by another covered cause of loss. Only the broad coverage option may be used with the special causes of loss form (CP 10 30). Coverage does not apply if there is a nuclear reactor or new or used nuclear fuel used in connection with the reactor on the premises.
This endorsement adds sprinkler leakage loss or damage caused by earthquake or volcanic eruption as covered causes of loss. It is not necessary to use the endorsement with earthquake and volcanic eruption form CP 10 40 since that form already includes sprinkler leakage coverage.
This endorsement has been renamed to eliminate confusion between it and the causes of loss forms (the previous name was earthquake cause of loss form). The form may be used to purchase coverage for loss from a sprinkler system caused by earthquake or volcanic eruption. If not subject to value reporting, the deductible is a percentage of the limit of liability; if subject to value reporting, the deductible is a percentage of the value of the property sustaining damage.
All earthquake shocks or volcanic eruptions that occur within any 168-hour period are considered to be one occurrence. Damage from tidal waves or tsunami that result from earthquake or volcanic eruption are not covered. The ordinance or law exclusion in this form applies, unless the insured has purchased ordinance or law coverage by endorsement. Masonry veneer is not covered, unless coverage is indicated in the declarations, or unless less than 10 percent of the total outside wall area is faced with masonry veneer. Stucco is not considered masonry veneer.
Briefly, this endorsement is used to avoid a coverage gap when an expiring policy and new policy both include earthquake coverage. The endorsement specifically covers damage that occurs on or after the inception of the new coverage if the damage is caused by earthquake shocks or volcanic eruptions that began within seventy-two hours before the new policy takes effect.
This endorsement restricts the peril of explosion found in the basic and broad causes of loss forms (CP 10 10 and CP 10 20) and the standard property policy (CP 00 99). It specifies that if a grain elevator or processing plant building or structure ruptures or bursts as a result of a change in temperature, the resulting damage is not covered as part of the explosion peril.
This endorsement is attached to the business and personal property coverage part at policy inception to identify any broken or cracked glass on the insured premises and to clarify that no coverage applies if damage caused by or resulting from the existing cracks or their extensions occurs. Identification of the breaks or cracks is made by diagram or by a written description of the damage.
An insurance company or an insured may desire to exclude certain property from coverage for these perils. This endorsement modifies the three causes of loss forms and standard property policy to eliminate payment for loss “caused directly or indirectly by Windstorm or Hail, regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage.” It also excludes damage done by rain, snow, or dust resulting from a windstorm. However, any resulting loss that is not excluded is covered.
The endorsement excludes wind or hail damage as a covered cause of collapse and as a specified cause of loss. It also removes wind and hail as a covered cause of loss for property in transit.
This endorsement extends the wind or hail exclusion to also apply to indirect losses covered under the business income coverage forms, extra expense coverage form, and leasehold interest. The 06 07 edition of the endorsement added a schedule and language emphasizing the applicability of underlying policy exclusions.
The insured or the insurer may wish to exclude vandalism as a covered peril for certain property. The vandalism exclusion endorsement may be used with the three causes of loss forms but does not need to be added to the standard property policy (CP 00 99) because the declarations to that form are used to show whether or not vandalism coverage has been purchased. Unlike endorsement CP 10 50, it specifically mentions the coverage provisions of the form that it affects. The endorsement does not exclude resulting loss or damage by a covered cause of loss. The 06 07 edition of the endorsement added a schedule.
An insurance company or an insured may desire to exclude certain property, identified in the declarations, from coverage for sprinkler leakage. Endorsement CP 10 56 may be used with the basic, broad, and special causes of loss forms. It does not need to be attached to the standard property policy (CP 00 99) because the declarations to that form are used to show whether or not sprinkler leakage coverage has been purchased. Unlike CP 10 50, it specifically mentions the coverage provisions of the form that it affects.
Two coverage changes made by the endorsement to the special causes of loss form (CP 10 30) should be noted. First, the endorsement does not provide coverage for loss or damage caused by the escape, due to freezing, of material from a fire protective system, unless the insured has done his best to maintain heat, or has drained the equipment and shut off the supply in an unheated building.
The other significant change is that coverage for repair or replacement of damaged parts of fire extinguishing equipment is restricted to cases where the damage is directly caused by freezing and the insured has taken the precautions mentioned above. Under the unendorsed special form additional coverage extensions, the cost to pay for damaged fire extinguishing equipment is covered if the damage results in discharge of any substances from the equipment or is directly caused by freezing (without requiring protective acts by the insured).
The 06 07 edition of the endorsement added a schedule.
When the molten material endorsement is attached to either the basic (CP 10 10) or broad (CP 10 20) causes of loss form or the standard property policy (CP 00 99), accidental discharge of molten material from equipment and heat from such discharged material is added as a covered cause of loss. Loss of or damage to the discharged material itself is not covered. Likewise, the cost to repair any defect that caused the discharge and the cost to remove or recover the discharged material are excluded.
This endorsement may be written as a layer of coverage above that provided by an underlying flood policy—one issued through the National Flood Insurance Plan (NFIP), or, subject to insurer agreement, it may provide first dollar flood coverage. Unlike the NFIP policy, the ISO endorsement provides for actual cash value, replacement cost, or functional replacement depending upon the coverage of the underlying policy.
The endorsement gives $250,000 coverage (limited to $100,000 per premises) for newly acquired or constructed property; however, this is included in the limit of liability and is not an additional amount of insurance. The cost to remove debris of covered property and other debris on the described premises is covered within the limit of liability. Back-up or overflow of a sewer that occurs within seventy-two hours after the flood recedes is covered if the back-up is the result of the flood.
Underground pipes, foundations, flues, and drains are added as covered property. Property in the open is covered if indicated in the schedule. Although coverage may be added by endorsement to the building and personal property forms for such property as bulkheads, pilings, piers, wharves, docks, and retaining walls, the flood endorsement will not provide coverage for these items. Destabilization of land caused by flooding of subsurface land areas is not covered. There is no coverage for ordinance or law unless added by separate endorsement.
Unless indicated differently on the flood schedule, any coinsurance condition applies. There is a single occurrence limit for flood, which is subject to an annual aggregate. Depending upon the insurer, the annual aggregate may be the same as the per occurrence limit, or a multiple thereof.
Pier and Wharf Additional Covered Causes of Loss, CP 10 70
This endorsement affords coverage for eligible piers and wharves for two additional causes of loss: floating ice and collision with any vessel or floating object. The endorsement may be attached to either the basic (CP 10 10) or broad (CP 10 20) causes of loss forms or the standard property policy (CP 00 99).
This series of endorsements is discussed elsewhere. See Builders Risk Endorsements.
The builders risk changes endorsement is attached when the standard property policy is used to insure buildings under construction. It incorporates the provisions from builders risk coverage form (CP 00 20) regarding covered property, coverage extensions, valuation, the need for adequate insurance, and the cessation of coverage.
The purpose of the endorsement is to identify protective safeguards that protect the insured's property from burglary and robbery, those that—according to rating procedures in the CLM—warrant credits during premium development. The insurer will not pay for loss or damage caused by or resulting from theft if the insured knows of any suspension or impairment in the system and fails to notify the insurer, or fails to maintain the system in working order.
This endorsement is used to make a claim settlement payable to a loss payee with an insurable interest, and to provide limited protection to the loss payee against invalidation of the policy because of certain acts of the insured. It may be used with the builders risk coverage form (CP 00 20) as well as the other forms listed above in the introduction.
Three loss payable options are available under the endorsement (loss payable, lender's loss payable, or contract of sale). The loss payable option stipulates that payment is to be made to the insured and loss payee as interests may appear. If the insurer denies a claim, the loss payee has no recourse under this clause.
The lender's loss payable clause is used for the protection of named creditors. If this option applies, the lender's rights are not affected by any breach by the insured and the lender is entitled to advance notice of cancellation. The lender's interest must be evidenced by written contracts such as warehouse receipts, a contract for deed, bills of lading, or financing statements.
The contract of sale option is used when there are duplicate interests in property being transferred by sale. Losses are adjusted as interests may appear. The other insurance condition is modified to take any other insurance of the loss payee into consideration during loss settlement.
This endorsement, added to the commercial property program in 2007, enables adding the building owner as an additional named insured under a tenant's building coverage.
Peak Season Limit of Insurance, CP 12 30
Businesses that experience seasonal cycles may adjust the amount of their insurance in line with fluctuating inventory values by using the peak season endorsement. The endorsement may be used with the building and personal property coverage form (CP 00 10), condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99). It provides for a specified increase in the limit of liability on personal property during a designated period of time. The form specifies that coverage both begins and ends at 12:01 A.M. standard time on the first and last day of the designated period.
This endorsement was introduced in 2007 for use with blanket policies. The form limits loss payment on an individual property on a blanket form to its stated value plus a percentage of that value, thus constraining the value of an individual property under blanket coverage.
Value Reporting Form, CP 13 10
This form is the subject of the discussion elsewhere in this section. Endorsements CP 13 60 and CP 13 61 are included in that discussion.
This endorsement may be used by insureds who make use of multiple location average rating but whose personal property values at each location do not fluctuate enough to warrant use of value reporting form CP 13 10. It may be attached to the building and personal property coverage form (CP 00 10), condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99).
As with the value reporting form, business personal property coverage is extended under the endorsement to include personal property at all reported, acquired, and incidental locations. Property that is at fairs or exhibitions is not covered.
The coinsurance percentage (at least 90 percent is required) is applied to an overall limit of insurance. The overall limit is the sum of the total values from each individual location (including any reported, acquired and incidental locations) and is shown in the declarations or on the reported—acquired—incidental locations schedule (CP 19 13). The average rate and premium are derived from the overall limit. It is not considered a blanket limit, however; each location possesses its own individual limit. A sample loss settlement is included on the endorsement to clarify the use of the overall limit.
Insureds, such as grain elevator operators who wish to cover grain and other agricultural products, may attach this endorsement to the building and personal property coverage form (CP 00 10) or the standard property policy (CP 00 99). It is used with the value reporting provisions of CP 13 10. Guidelines for use of the endorsement fall under CLM rule 36.
Addition of this endorsement amends the property not covered provision of the property coverage forms pertaining to grain, hay, straw or other crops outside of buildings. If such property is harvested and not in storage, it is covered under CP 13 30.
Agricultural products stored at fairs or exhibitions or in transit are not covered through this form; neither are storage or elevator charges or unpaid customs duties on agricultural products.
In case of loss to covered property in terminal grain elevator plants, payment is made jointly to any parties with established interests in the property (evidenced by ownership, having a pledge for property, or holding or having a pledge for warehouse receipts). For losses to property stored at other locations, it is stipulated that all liens, storage tickets and warehouse receipts must be satisfied and released before payment occurs.
Valuation of damaged or destroyed agricultural products is based on the market value of the covered property, less any unincurred expenses such as commissions, loading and unloading charges and freight. Loss to other commodities (those commodities for which market value is inappropriate) is figured at actual cash value of the property as of the time and place of the loss.
These endorsements are used for submitting reports of property values according to the provisions of CP 13 10, the value reporting form, and are discussed elsewhere.
Insureds may use this endorsement for calculating a provisional premium for use with a reporting form (see CLM rule 36) or for determining a multiple location average rate.
Coverage may be purchased for certain excluded items of property. Coverage applies only to those items scheduled on the endorsement and only at the premises designated. The endorsement is used primarily to add coverage for certain building items, generally at the building rate unless special class rates apply. The cost of excavations, grading, backfilling, or filling; certain foundations; underground pipes, flues, or drains; pilings, piers, wharves, or docks; fences; freestanding retaining walls; or bridges, roadways, walks, patios, or other paved surfaces may be added to building coverage.
The endorsement may also be used to add coverage for business vehicles or self-propelled machines (including aircraft and watercraft) and animals that the property form excludes—but only while on or within 100 feet of the described premises. Coverage for this type of business personal property is for physical damage only and is not as broad as coverage under the comprehensive coverage of a commercial auto policy or an open perils inland marine policy.
Business personal property items that are owned but not permanently installed may be designated as building items on this endorsement. See Building and Personal Property Coverage Form.
Items of building or business personal property may be excluded from coverage by scheduling them on this endorsement.
The limited coverage for outdoor trees, shrubs, and plants in the property forms (including the standard property policy CP 00 99 and builders risk form CP 00 20) may be increased by adding this endorsement. The property forms provide $1,000 of coverage but not more than $250 for any one tree, shrub, or plant, and coverage applies only in the case of damage by fire, lightning, explosion, riot, or aircraft. The endorsement permits an insured to schedule locations and increase both the individual and overall limits for the specified locations. The property form's causes of loss apply to items covered by the endorsement, and vehicle damage to outdoor trees, shrubs, and plants is also covered unless the vehicle exclusion option is indicated on the endorsement. Unless open perils coverage applies, there may be no coverage for perils that commonly cause loss to plant life, such as disease. Certain causes of loss that commonly harm plants such as insects or animals and snow and ice, are excluded even when open perils coverage applies. The endorsement does not apply to items grown for commercial purposes or for standing timber.
The 2007 revision broadened coverage limits under this endorsement, as well as changed its name from Outside Signs. Coverage for detached outdoor signs on the underlying coverage forms includes all causes of loss otherwise covered under the applicable causes of loss form. This endorsement is used solely to increase the limit for outdoor signs.
With this endorsement, an insured may schedule limits beyond the $1,000 coverage extension of named peril coverage available for radio and television antennas (including satellite dishes) and their lead-in wiring, masts, or towers. The endorsement may be added to the builders risk form (CP 00 20) as well as to the other forms listed in the introduction. The schedule indicates the premises, limit of insurance, applicable causes of loss form, coinsurance percentage, and additional premium. When the endorsement is attached, radio and television antennas and satellite dishes are treated as covered property under the policy—changing the limit from additional coverage to coverage within the limits.
Personal property of others the insured leases may be separately scheduled and considered as part of the insured's business personal property by way of this endorsement. An agreed value may be designated for each item. However, unlike the optional agreed value coverage available in the property forms, coinsurance provisions still apply. This endorsement allows the insured to select a valuation other than actual cash value (such as replacement cost) on an item-by-item basis for leased property.
Introduced with the 2007 program changes, this endorsement enables coverage of building glass under a tenant's policy that does not otherwise cover the building. When the glass coverage form was withdrawn in 2000, it was difficult to insure this exposure via a declarations entry limiting building coverage to building glass, so this form was developed.
Time Element Endorsements, CP 15 01 Through CP 15 50
The series of endorsements relating to the business income and extra expense coverage forms are discussed in the Business Income section of FC&S.
Both of these endorsements are used with standard property policy CP 00 99 to adapt that policy to the special needs of condominium associations and unit owners.
See Building and Personal Property Coverage Form, for a discussion of this endorsement that is used to schedule separate limits for the various categories of business personal property.
Both the value reporting form (CP 13 10) and the additional locations special coinsurance provision endorsement (CP 13 20) extend coverage to reported, acquired, or incidental locations if limits are designated on either the declarations or on this endorsement, CP 19 13. Limits may be assigned to business personal property, stock, or personal property of others. Additionally, the overall limit of insurance required by the additional locations special coinsurance provisions endorsement (CP 13 20) can be indicated on the CP 19 13 schedule.
The use of this endorsement in connection with the legal liability coverage form (CP 00 40) is described elsewhere. SeeLegal Liability Coverage Form.
This endorsement may be used to modify coverage under the building and personal property coverage form (CP 00 10), condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99). It covers the reduction in value of physically undamaged stock in the process of being manufactured when other unfinished stock is physically damaged at the insured location by a covered cause of loss. For coinsurance purposes, the value of stock in process at the insured location includes the additional value that it represents in stock at other locations.
This endorsement may be used with building and personal property coverage form (CP 00 10), condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99) to change the valuation of stock or personal property of others from actual cash value to market value. Insured locations to which the endorsement applies are scheduled on the endorsement.
Distilled spirits are divided into three categories: irreplaceable bulk, older bulk, and younger bulk, which are defined in the form. Valuation for distilled spirits is essentially market price at the time and place of loss less any discounts and expenses the insured otherwise would have had.
Wines are divided into two categories defined on the form: bottled winery products and bulk wine. Bottled winery products are valued at the price they would have been sold as case goods; bulk wine is valued at the lesser of the price it could have been sold for or the market price of replaceable bulk wine of like kind and quality. Values exclude federal taxes and discounts and expenses the insured otherwise would have had, but include state, county, and local taxes.
Certain insureds covered by the special causes of loss form (CP 10 30) may want to add endorsement CP 99 10 when this endorsement is used. For insureds with other types of stock subject to market value, another endorsement (CP 99 31) is available.
Endorsement CP 99 10 may be used with building and personal property coverage form (CP 00 10), the condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99). The endorsement is used for two purposes. First, since public law 94-423 allows the refund of taxes and custom duties paid on alcoholic beverages if they are damaged by causes of loss other than theft, it excludes the value of taxes and duties (including any refundable state and local taxes) on distilled spirits, wines, rectified products, and beer, and thus reduces premiums. When theft is a covered peril (as it is only under special causes of loss form CP 10 30), endorsement CP 99 10 includes the value of taxes and custom duties in the loss valuation. The insured cannot receive government reimbursement for such costs in the case of theft and therefore needs insurance protection. A special theft limit may be scheduled at each covered location under business personal property, stock only, or personal property of others.
The distilled spirits and wines market value endorsement (CP 99 05) also excludes the value of taxes and duties, so endorsement CP 99 10 does not need to be added for that purpose when endorsement CP 99 05 applies. However, if the insured has theft coverage under the special causes of loss form, endorsement CP 99 10 may be used in conjunction with CP 99 05. The addition of both endorsements allows for valuation at market value with different limits for theft versus causes of loss other than theft.
This endorsement is used to clarify the coverage amount that the insurer is liable for when coverage is provided by more than one company. The endorsement indicates the company's percentage of any loss, subject to the limit shown in the declarations. The endorsement also shows the property and coverages to which it applies and the total limits for all contributing insurance.
This endorsement may be used with the building and personal property coverage form (CP 00 10), the condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99). It provides for valuation based on selling price, less any applicable discounts and expenses, for all completed stock (not just finished stock that is sold but not delivered, as in the building and personal property coverage form).
This endorsement provides that stock (other than wines and distilled spirits; see CP 99 05) that is bought and sold at an established market exchange where the market prices are posted and quoted, may be valued based on its market price at the time and place of damage less any applicable discounts and expenses. It is used with the building and personal property coverage form (CP 00 10), the condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99).
This endorsement amends the valuation provision as respects nonowned personal property the insured holds in storage or for repair. It stipulates that in case of loss or damage, such property will be valued according to its actual cash value or, if less, its value as recorded on any receipt the insured issued to the owner of the property before the loss occurred. It may be attached to the building and personal property coverage form (CP 00 10), the condominium commercial unit-owners coverage form (CP 00 18), and the standard property policy (CP 00 99).
This endorsement extends the definition of covered property to include household personal property belonging to the insured, to the insured's domestic worker, to a member of the insured's family, or for which the insured is legally liable. This includes property purchased through installment plans. Further, as an additional coverage, 10 percent of the applicable limit is available while the property is away from the described premises. It may be attached to the building and personal property coverage form (CP 00 10) and the condominium commercial unit-owners coverage form (CP 00 18).
Used when property is not eligible for class rates, this endorsement states that the premium rates for the commercial property coverage part are tentative and that the insurer will adjust the premium once the rates are determined. If the policy is a renewal, the previous specific rate may need to be changed due to materially changed conditions. The endorsement provides that premium adjustment is effective from the renewal date once the rates are promulgated.
This endorsement replaces endorsement CP 12 10. The interline endorsement can be used with the commercial property or farm coverage parts.
This endorsement identifies what fire protection safeguards exist on the insured's property and clarifies the insured's duties with respect to the maintenance of such systems; i.e., keep the systems in operation and notify the insurance company if they are not working properly. If this notification process is not followed, coverage is suspended. Insureds with automatic sprinklers have 48 hours to restore a nonfunctioning systems before they must notify the insurer.
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