ISO Commercial Property Program

 Summary: All policies issued under the ISO commercial property program must include the Commercial Property Conditions Form CP 00 90 07 88. (The one exception is when the Mortgage Holders Errors and Omissions Form—CP 00 70 06 07—is the only coverage form under the commercial property coverage part. Form CP 00 70 itself includes the pertinent conditions.) Form CP 00 90 becomes part of a complete policy when added to a Declarations page, a Common Policy Conditions Form, (IL 00 17 11 98), a coverage form (such as the Building and Personal Property Form CP 00 10 06 07), and a causes of loss form (such as the CP 10 30 06 07). Following is a discussion of the conditions found in this form.

Topics covered:

Introduction

Concealment, misrepresentation or fraud

Control of property

More than one coverage applying to loss

Legal action against us

Liberalization

No benefit to bailee

Other insurance

Policy period and coverage territory

Subrogation

Introduction

The commercial property conditions form CP 00 90 contains nine conditions. Although there are differences, most are either substantially identical to or are revised versions of conditions contained in the standard fire policy or in earlier editions of commercial property forms.

Concealment, Misrepresentation or Fraud

A.Concealment, Misrepresentation or Fraud

This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:

1.This Coverage Part;

2.The Covered Property;

3.Your interest in the Covered Property; or

4.A claim under this Coverage Part.

Analysis

This condition is similar to the concealment or fraud condition of the standard fire policy but with slightly different language that, when read alone, could prove to be more limiting of coverage. It voids coverage should the named insured commit a fraudulent act or if the named insured or any other insured intentionally conceals or misrepresents a material fact about the coverage, the covered property, a claim, or the named insured’s interest in the property.

Reference to “any other insured” appeared for the first time in the 1988 edition of the form. The language does not state that the act of “any other insured” voids the policy only as to that individual. Conceivably, therefore, the act of any insured could void the policy as to all other insureds, including the named insured. A number of courts have interpreted the language “the insured” under the concealment, fraud, or  neglect provisions of the standard fire policy as applying only to the individual insured guilty of the fraud, giving coverage to other innocent insureds.

Illinois appellate courts have found the “any insured” language ambiguous and have ruled in favor of the innocent insureds on this point. In State Farm Fire & Casualty Insurance Co. v. Micelli, 518 N.E.2d 357 (1987), the court found the policy ambiguous because it did not state that the policy would be void as to all insureds or only as to the guilty insured. The insurer argued that the named insureds could not recover when it appeared that their son, who lived with them, was involved in the theft and vandalism from which their claim arose. The court found that it was reasonable for the parents to assume that their rights and obligations were not dependent upon those of their children. The Micelli court quoted from another case involving almost identical language, West Bend Mutual Insurance Co. v. Salemi, 511 N.E.2d 785 (1987). The West Bend case involved a property seller who was named as “also insured” under the buyer’s insurance in the sales contract. The insurer denied coverage to the seller due to the buyer’s alleged arson, but the appellate court, using the reasoning later followed in Micelli, held that the innocent seller was not barred from recovery. See Arson—Recovery By Innocent Coinsureds for a discussion of recovery by innocent insureds in arson situations. See the Control of Property section in this article for further discussion of problems with interpretation.

Other federal court decisions have interpreted language similar to the ISO “any other insured” phrase in certain fire policies as “unambiguously” precluding coverage to innocent, as well as guilty, insureds. A Missouri case is illustrative, Employers Mutual Casualty Company v. Tavernaro, 4 F. Supp. 2d 868 (1998).

The Tavernaros owned a restaurant and were both named insureds on the businessowners policy (BOP) issued by Employers Mutual. The restaurant suffered a fire and Steve Tavernaro subsequently confessed to setting that fire. Tiffany attempted to collect the proceeds of the policy as an innocent coinsured because the issue had never been clearly decided either in court or in the legislature. However, the court cited previous decisions that the language “any other insured” was clear and unambiguous, thus barring her recovery.

It is important to note that the concealment, misrepresentation, or fraud condition works to void coverage whether the fraud, concealment, or misrepresentation occurs before or after a loss. The concept of “any time” was introduced in the 1988 edition of the form.

Control of Property