Causes of loss—named perils

Covered causes of loss—basic and broad forms

Broad form causes of loss

Special form causes of loss

Exclusions applicable to all causes of loss forms

Additional exclusions—basic and broad forms

"Special" exclusions applicable to all causes of loss forms

Special form exclusions

Additional exclusion – special form

Additional coverages—broad and special forms

Additional coverage – fungus, etc.

Basic and broad form limitation

Special form limitations

Special form coverage extensions

Definitions

Causes of Loss—Named Perils

 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 additional coverages applicable to collapse and fungus, wet and dry rot, and bacteria.

 The term named perils is used to describe the basic and broad causes of loss forms because only damage caused by a peril listed on the respective form is covered. This is distinguished from the special causes of loss form, CP 10 30, which covers risk of direct physical loss but uses exclusions and limitations to define and refine the coverage. A peril is a potential cause of loss, such as fire, windstorm, hail, and flood.

 Even though the basic and broad causes of loss forms name the perils that are insured, exclusions and limitations still exist on the forms and must be reviewed for a complete understanding of how coverage flows.

 Covered Causes of Loss—Basic and Broad Forms

 A. Covered Causes of Loss

When Basic is shown in the Declarations, Covered Causes of Loss means the following:

1.Fire.

2.Lightning.

3.Explosion, including the explosion of gases or fuel within the furnace of any fired vessel or within the flues or passages through which the gases of combustion pass. This cause of loss does not include loss or damage by:

a.Rupture, bursting or operation of pressure relief devices; or

b.Rupture or bursting due to expansion or swelling of the contents of any building or structure, caused by or resulting from water.

4.Windstorm or Hail, but not including:

a.Frost or cold weather;

b.Ice (other than hail), snow or sleet, whether driven by wind or not; or

c.Loss or damage to the interior of any building or structure, or the property inside the building or structure, caused by rain, snow, sand or dust, whether driven by wind or not, unless the building or structure first sustains wind or hail damage to its roof or walls through which the rain, snow, sand or dust enters.

d. Loss or damage by hail to lawns, trees, shrubs or plants which are part of a vegetated roof.

5.Smoke causing sudden and accidental loss or damage. This cause of loss does not include smoke from agricultural smudging or industrial operations.

6.Aircraft or Vehicles, meaning only physical contact of an aircraft, a spacecraft, a self-propelled missile, a vehicle or an object thrown up by a vehicle with the described property or with the building or structure containing the described property. This cause of loss includes loss or damage by objects falling from aircraft.

     We will not pay for loss or damage caused by or resulting from vehicles you own or which are operated in the course of your business.

7.Riot or Civil Commotion, including:

a.Acts of striking employees while occupying the described premises; and

b.Looting occurring at the time and place of a riot or civil commotion.

8.Vandalism, meaning willful and malicious damage to, or destruction of, the described property.

     We will not pay for loss or damage caused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars.

9.Sprinkler Leakage, meaning leakage or discharge of any substance from an Automatic Sprinkler System, including collapse of a tank that is part of the system.

     If the building or structure containing the Automatic Sprinkler System is Covered Property, we will also pay the cost to:

a.Repair or replace damaged parts of the Automatic Sprinkler System if the damage:

(1)Results in sprinkler leakage; or

(2)Is directly caused by freezing.

b.Tear out and replace any part of the building or structure to repair damage to the Automatic Sprinkler System that has resulted in sprinkler leakage.

     Automatic Sprinkler System means:

(1)Any automatic fire protective or extinguishing system, including connected:

(a)Sprinklers and discharge nozzles;

(b)Ducts, pipes, valves and fittings;

(c)Tanks, their component parts and supports; and

(d)Pumps and private fire protection mains.

(2)When supplied from an automatic fire protective system:

(a)Non-automatic fire protective systems; and

(b)Hydrants, standpipes and outlets.

10.Sinkhole Collapse, meaning loss or damage caused by the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite. This cause of loss does not include:

a.The cost of filling sinkholes; or

b.Sinking or collapse of land into man-made underground cavities.

11.Volcanic Action, meaning direct loss or damage resulting from the eruption of a volcano when the loss or damage is caused by:

a.Airborne volcanic blast or airborne shock waves;

b.Ash, dust or particulate matter; or

c.Lava flow.

     With respect to coverage for Volcanic Action as set forth in 11.a., 11.b. and 11.c., all volcanic eruptions that occur within any 168-hour period will constitute a single occurrence.

     This cause of loss does not include the cost to remove ash, dust or particulate matter that does not cause direct physical loss or damage to the described property.

 Analysis

 These eleven perils are the named perils of the basic causes of loss form, CP 10 10. They also are featured on the broad causes of loss form, CP 10 20.

 As with the standard fire policy, which has not typically been 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, which is a fire that is out of bounds. For example, a fire within a furnace or stove fire box is considered friendly and loss arising from it has typically not been held to be covered. For example, personal property that is burned in a trash fire would not typically be considered covered for the fire damage to it. However, when the fire escapes its normal boundaries—such as when flames jump from a campfire to a forest or buildings—it is transformed into a hostile fire and resulting damage to covered property typically is covered.

 Although explosion also is not defined, the coverage for damage caused by explosion is narrowed through two exclusions: neither explosion arising from the operation of pressure relief devices nor rupture due to expansion of the contents of any structure or its contents caused by water are covered. 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 historical commercial property forms, are not mentioned in the explosion language of form CP 10 10 or CP 10 20 and therefore are considered to be covered.

 The windstorm basic cause of loss, like earlier versions of the windstorm or hail peril, does not encompass coverage for damage caused by frost or cold weather, or ice, snow, or sleet, even if driven by wind. Also retained in the CP 10 10 and CP 10 20 from previous coverage forms is the requirement that the exterior of a building or structure be damaged by wind or hail before coverage is provided for damage to the building interior or its interior property by rain, snow, sand, or dust that enters the building or structure. In other words, wind or hail has to have created a hole through which the rain, snow, sand, or dust entered before interior damage caused by such elements of the weather is covered. Windstorm or hail is one of three causes of loss that may be removed from coverage through the commercial property program by endorsement. Its removal is made possible to avoid duplication of coverage for insureds that have windstorm insurance through a catastrophe pool or similar facility. In the 2012 form, loss or damage by hail to shrubs, lawns, trees or plants that are part of a vegetated roof were specifically excluded from the windstorm or hail coverage.

 Smoke damage from agricultural smudging or industrial operations is not covered under this cause of loss, although sudden and accidental damage to covered property by smoke is covered. Additional information on the peril of smoke is provided at Smoke Damage Coverage.

 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.) Because of this exception, damage caused to an insured building when a customer backs into the loading dock would be covered. However, if an employee driving a company-owned delivery van had the same accident, neither the basic nor the broad causes of loss forms would pay for the damage to the building. Additional information on the aircraft or vehicles cause of loss is available at Aircraft or Vehicles as a Cause of Loss.

 Acts of striking employees occupying the described premises are covered under the riot or civil commotion cause of loss, as is looting at the time and place of a riot or civil commotion. Additional information on the riot or civil commotion cause of loss can be found at Riot or Civil Commotion Coverage.

 Malicious mischief was dropped from the name of the vandalism cause of loss some time ago, although the definition remains the same as that of the vandalism or malicious mischief title used in some much 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. A detailed discussion of how various jurisdictions have interpreted this exclusion is found at Vandalism as Cause of Loss.

 Under some 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 included. 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 leakage 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. One interesting note is that the ISO broad and special causes of loss forms (CP 10 20 and CP 10 30) both include an additional coverage for collapse under Sections C and D respectively. In York Ins. Co. v. Williams Seafood, 544 S.E.2d 156 (Ga. 2001) the insured's restaurant collapsed into a sinkhole caused by a flood. Flood is an excluded peril on the commercial property forms. However, because of the placement of coverage for collapse (section D) in the special causes of loss form, with its own set of exclusions, the court held that the exclusions that applied to section B were not applicable. Therefore, the sinkhole coverage was not limited by the exclusion for damage by flood. The basic cause of loss form does not include an additional coverage for collapse, so this reasoning could not be applied to coverage provisions on that form. As the Georgia court reasoned, sinkhole coverage as a direct physical loss and not as an additional coverage was subject to the exclusion for damage caused by flood.

 Volcanic action coverage was historically available only through an optional 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.

 All volcanic eruptions occurring within a seven day period (168 hours) is considered a single occurrence. Under the original versions of the form (prior to the 1988 revisions), this period was three days.

 Broad Form Causes of Loss

 In addition to the previously discussed 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.

 12.Falling Objects.