Summary: Standard business income and extra expense endorsements available for general use as part of the simplified language commercial property program of Insurance Services Office are listed in this article along with a brief description of the coverages provided by each. The endorsements are listed in numerical order.
Business Income and/or Extra Expense – Coverage for Year 2000 Computer-related and Other Electronic Problems, CP 15 57
This endorsement, CP 15 03 06 07, provides a schedule on which the landlord may be added as an additional insured for rental value purposes. The named insured on the policy is the tenant. If the policy includes business income coverage for the named insured, the amount paid to the additional insured will reduce the named insured's business income recovery for normal operating expense.
|Discretionary Payroll Expense, CP 15 04
Endorsement CP 15 04 06 07 provides a schedule that may be used to include payroll expenses for the job titles listed as continuing normal operating expenses. Discretionary payroll may be listed as job classifications or specific employees. The payroll may be included for just a specified number of days or for the entire period of restoration.
|Food Contamination (Business Income and Extra Expense), CP 15 05
Endorsement CP 15 05 10 12 was introduced in the 2012 revisions. The endorsement adds an additional coverage for food contamination. If the insured business is ordered closed by the Board of Health or any other governmental authority as the result of the discovery or suspicion of food contamination, the expense to clean equipment, the cost to replace contaminated or suspected contaminated food, the expense to provide medical tests or vaccinations to employees potentially infected by the food contamination, and the loss of business income due to the necessary suspension of operations as a result of food contamination are covered.
|Off-Premises Interruption of Business – Vehicles and Mobile Equipment, CP 15 06
ISO introduced endorsement CP 15 06 02 14 in 2014 as a means for businesses with operations in fixed locations but also with operations in which vehicles or items of mobile equipment are used away from the premises, to insure off-premises business interruption exposures. In its explanatory materials describing the form, ISO lists several examples of types of business needing this coverage: retail stores and manufacturers that provide delivery, installation or repair services, and office risks that operate off-premises services such as document shredding or pet grooming.
Business income coverage is provided for necessary suspension of operations if caused by direct physical loss or damage to scheduled property while the property is away from the described premises but is located within the coverage territory. Extra expense coverage is provided as well.
Loss or damage to scheduled property caused by collision or overturn is excluded unless collision is listed as a covered cause of loss in the schedule. Even if collision is listed as a covered cause of loss, certain limitations apply.
|Expanded Limits on Loss Payment, CP 15 07
The system of recovery prescribed by extra expense coverage form CP 00 50 10 12 limits the insured's recovery to various percentages of the limit of insurance in thirty-day intervals (40 percent for thirty days or less; 80 percent for sixty days or less; 100 percent for sixty days or more is a typical choice) with provision in the form and declaration page for three such intervals. When four or more thirty-day intervals are chosen instead, endorsement CP 15 07 11 85 is used. For a discussion of the limits on loss payment provision of the extra expense form and the issues relating to the selection of percentages of payment, see Extra Expense Insurance.
|Business Income from Dependent Properties – Broad Form, CP 15 08
|Business Income from Dependent Properties – Limited Form, CP 15 09
These endorsements are used to provide coverage for loss of business income due to the necessary suspension of the insured's operations as a result of loss by a covered cause of loss to dependent property. Dependent property is that property not owned, operated, or controlled by the insured on which the insured is dependent in any way for continuation of the insured's normal business operation. Coverage does not apply if the only loss to dependent property is loss or damage to electronic data.
Dependent properties are locations that the insured relies on to (1) deliver materials or services to the insured or to others for the insured's account (a contributing location); (2) accept the insured's products or services (a recipient location); (3) manufacture products for delivery to customers of the insured under contract of sale (a manufacturing location); or (4) attract customers to the insured's business (a leader location).
Each location that is to be covered as a dependent property must be scheduled on the endorsement or on the declarations. The definition of dependent property clearly states that services provided by a contributing location do not include utility services such as water, communications, or power supply. Communications services include services providing Internet or electronic network access.
The 2012 revision added coverage for secondary dependencies. For secondary contributing locations, coverage is available for loss of business income due to a suspension of operations as a result of direct physical loss or damage at a secondary contributing location. The damage to the secondary contributing location must cause a partial or complete interruption of the materials or services provided by the dependent property and result in a suspension of operations. A secondary contributing location is not identified in the schedule, not owned or operated by the contributing location identified in the schedule, and delivers materials or services to the contributing location.
For secondary recipient locations, coverage is available for loss of business income due to a suspension of operations as a result of direct physical loss or damage at a secondary recipient location. The damage to the secondary recipient location must result in partial or complete interruption of the acceptance of the insured's material or services by the dependent property.
Coverage under these endorsements is provided during the period of restoration, which is the time it should take the dependent property to effect repairs or restoration with reasonable speed and similar quality and resume normal operation. The period of restoration does not refer to any additional time it takes the insured to resume normal operations after the dependent location has resumed its normal operations.
The current form includes a time deductible in that the period of restoration begins seventy-two hours after the time of direct physical loss or damage caused by or resulting from any covered cause of loss at the premises of the dependent property. The period of restoration does not include any increased period required due to the enforcement of any ordinance or law governing repair, reconstruction, or pollution testing or cleanup. The expiration of the policy does not cut short the period of restoration.
CP 15 08 10 12 and CP 15 09 10 12 are used under different circumstances. The broad form version (CP 15 08) is used to provide coverage subject to the same limit of insurance, coinsurance percentage, and coverage options as is found on the business income (and extra expense) coverage form, CP 00 30 10 12, or the business income (without extra expense) coverage form, CP 00 32 10 12. The limited form version of business income coverage from dependent properties (CP 15 09) is used when direct business income coverage under CP 00 30 or CP 00 32 at the insured's own premises is not provided or when the limits of insurance selected by the insured for the dependent properties differ from the direct business income limit of insurance or differ among the various dependent properties themselves.
Both endorsements are subject in other details to the provisions of business income coverage form CP 00 30 or CP 00 32. Both endorsements also provide a small amount of coverage for business income loss stemming from covered damage to miscellaneous locations—up to .03 percent (three-one-hundredths of one percent) of the limit of insurance (on the limited form, .03 percent of the sum of all the limits) that applies for each day's suspension of operations due to loss arising from any one location. These miscellaneous locations do not include roads, bridges, tunnels, waterways, airfields, pipelines, or any other similar areas or structures. This additional coverage does not apply to secondary contributing or secondary recipient locations.
Neither of these endorsements may be used with the agreed value option of form CP 00 30 or CP 00 32.
|Payroll Limitation or Exclusion, CP 15 10
The 2012 revision changed the name of this endorsement from Ordinary Payroll Limitation or Exclusion since the endorsement is no longer limited to non-managerial employees. The term ordinary payroll expense has also been removed from the form, as well as its definition. The endorsement applies to all categories of employees and job classifications.
Under business income coverage forms CP 00 30 and CP 00 32, payroll expenditures are covered as part of an insured's normal continuing expenses. As such, they must be included when calculating the business income limit needed to meet the coinsurance requirements of the form. For firms with substantial payroll that would not be continued or would be continued for only a limited period following a shutdown of operations (such as hourly workers in unskilled or semiskilled positions who could readily be replaced), this expense may be limited to a certain number of days or excluded entirely using endorsement CP 15 10 10 12. This endorsement reduces the amount of business income coverage that is needed to meet the coinsurance requirements of the business income coverage form.
Coverage is provided for up to the number of days shown in the schedule. The number of days do not need to be consecutive but must fall within the period of restoration or the extension of the period of restoration. If no number of days is shown in the schedule, there is no coverage for payroll.
|Power, Heat, and Refrigeration Deduction CP 15 11
Many manufacturing and mining risks expend a great deal of money on power, heat, or refrigeration expenses in the course of their operations. While operations are suspended, these expenses are discontinued or greatly reduced, in the same way that the cost of raw materials and supplies that are normally used in production does not continue.
Endorsement CP 15 11 07 88 may be added to business income coverage forms CP 00 30 or CP 00 32. It excludes coverage for power, heat, or refrigeration costs consumed in production operations but only those that do not continue under contract. It also clarifies that these costs are not considered operating costs for coinsurance purposes.
Business income coverage must be written with at least a 50 percent coinsurance percentage when this endorsement is used.
|Seasonal Leases – Monthly Limits on Loss Payments, CP 15 13
Attaching this endorsement, CP 15 13 07 88, to the business income coverage forms CP 00 30 or CP 00 32 modifies the definition of business income to include portions of the described premises that are rented to others, or leased to the insured, under written seasonal leases. The months for which coverage is desired and the limits that will apply monthly must be shown on the endorsement.
Business income coverage must be written with a 100 percent coinsurance provision when this endorsement is used.
|Business Income Report/Worksheet, CP 15 15
The Business Income Report/Worksheet, CP 15 15 10 12 is used for developing business income insurable values and becomes a part of the business income policy provisions. When the agreed value option or the premium adjustment form (CP 15 20 06 95) applies, statements certifying that the business income report/worksheet contains a true and correct report of values must be signed by the insured or an official representative of the insured. For a discussion of the method for completing the work sheet, see The Business Income Work Sheet Step-by-Step.
|Business Income Premium Adjustment, CP 15 20
Endorsement CP 15 20 06 95, for use with form CP 00 30 or CP 00 32, is an alternative to the agreed value coverage option see Business Income Optional Coverages as a device used to avoid a coinsurance penalty in at the time of loss. The endorsement converts business income insurance to a reporting form contract, permitting the insured to carry more insurance than is needed while paying only for the amount used.
When used properly, the endorsement provides the insured with enough coverage to fulfill the coinsurance requirements even though business income increases during the year. The limit of insurance is set at a higher figure than the insured's immediate need based on the current level of business income. The provisional premium is based on the limit of insurance selected. If business income increases, the insured is protected against the coinsurance penalty up to the higher limit of insurance chosen. After the next report is submitted, the premium is adjusted on the basis of the actual business income developed for the twelve-month period, with any excess provisional premium returned to the insured or applied against the following year's premium. The process is repeated for the next year.
|Mining Properties – Business Income, CP 15 24
This endorsement, CP 15 24 10 00, is added to business income coverage forms CP 00 30 or CP 00 32 when either form is used to insure mining risks that involve operations underground. The following three options are provided: (1) no coverage for loss of business income due to direct physical damage to mining machinery or equipment located underground; (2) limited underground coverage that pays for business income loss due to direct physical damage to mining machinery or equipment located underground but does not pay for loss of business income during the time needed to gain access to the damaged underground equipment; (3) broad underground coverage, similar to limited coverage except that it includes coverage for the time needed to get to the equipment.
When option one, no underground coverage, is chosen and indicated on the declarations, any loss of business income from direct damage to property above ground that resulted from damage to underground mining property is still covered. For example, if damage to underground electrical equipment causes a power surge and damages other electrical equipment above ground, the interruption of operations caused by the damage to the above ground equipment is covered under option one. The coverage will apply only until the above ground equipment can be restored to service and operations that are not dependent on the damaged underground equipment are resumed.
|Business Income Changes – Educational Institutions, CP 15 25
Endorsement CP 15 25 10 12 modifies the description of business income on form CP 00 30 or CP 00 32 for the use of schools, colleges, camps, and similar operations that rely on tuition or fees for a large portion of their income. Either limited or broad form coverage may be indicated on the endorsement. Limited coverage includes tuition and fees, including fees from room, board, laboratories and similar sources. Broad form coverage includes, in addition to the previous fees, income from bookstores, athletic events, activity related to research grants, and business activities other than those that generate tuition and related fees from students. A minimum of 50 percent coinsurance percentage is required on business income coverage when this endorsement is used.
The endorsement contains a time deductible of seventy-two hours following direct physical damage caused by a covered cause of loss before the period of restoration begins. This deductible applies to business income coverage; the period of restoration for extra expense coverage begins immediately after the time of direct physical loss or damage caused by a covered cause of loss. This period of restoration ends on the earlier of (1) the day before the opening of the next school term following the date when the property should, with all reasonable speed and quality, be repaired or rebuilt, or (2) the date when the school term resumes at a new permanent location.
If the actual date repairs are completed is sixty days or less before the start of the scheduled opening of the school term, the tuition and fees endorsement provides extended business income coverage to insure against any actual loss of business income sustained during the school term following the date of repair. Since the school year of some colleges consists of terms of three months each and other educational institutions refer to each of their semesters as terms, this could result in a significant reduction in the coverage normally available from this extension, limiting payment for loss of tuition and fees to the first term or semester of the school year following the date repairs are completed rather than to the beginning of the next school year.
The endorsement also offers the option to extend the recovery period. The insured chooses the number of months he wishes to extend the period and that number is entered on the endorsement. This option is an alternative to the coverage already provided for extended business income. Extended business income coverage provides coverage only if the repairs are completed sixty days or less before the next school term is supposed to begin.
This option extends coverage through several school terms by selecting the appropriate number of months. The coverage does not depend on how close the completion of the work and the beginning of the next term are.
|Electronic Media and Records, CP 15 29
This endorsement, CP 15 29 07 88, may be added to extend or eliminate the sixty-day limitation regarding replacement of electronic media and records found in business income coverage forms CP 00 30 or CP 00 32 prior to the 2002 editions.
|Ordinance or Law – Increased Period of Restoration, CP 15 31
This endorsement, CP 15 31 10 12, may be added to either business income coverage forms CP 00 30 or CP 00 32, or to extra expense coverage form CP 00 50 10 12. It extends the period of restoration under the form to include any increased time necessary to comply with existing building laws regulating construction, repair, or tearing down of property. Additional business income or extra expense insurance may be required to fully cover the potentially longer restoration time due to compliance with such laws. Sometimes choosing a higher coinsurance percentage (and a lower premium rate) to go with the longer restoration period and the increased amount of insurance will be appropriate.
The endorsement includes the seventy-two-hour time deductible in that the period of restoration begins seventy-two hours after the time of direct physical loss or damage for business income, or immediately after the time of direct physical loss or damage for extra expense coverage. Loss or damage must result from a covered cause of loss.
Coverage is not extended to losses caused by or resulting from the enforcement of law that requires demolition, repair, replacement, reconstruction, remodeling, or remediation of property due to contamination by pollutants, or the presence, growth, proliferation, spread, or any activity of fungus, wet or dry rot, or bacteria. Coverage also excludes any ordinance of law requiring the testing, monitoring, cleanup, removal, containment, treatment, detoxification, neutralization, or any type of response to pollutants, fungus, wet or dry rot, or bacteria. Fungus includes mold, mildew, mycotoxins, spores, scents, or any byproducts produced or released by fungus.
|Civil Authority Changes, CP 15 32
Endorsement CP 15 32 06 07 replaces the four-week civil authority coverage period provided by the civil authority additional coverage of the underlying policy with the number of days indicated on the schedule. The one-mile radius covered by the additional coverage can also be changed on this endorsement's schedule.
|Extra Expense from Dependent Properties, CP 15 34
This endorsement, CP 15 34 10 12, is the extra expense equivalent of the business income from dependent properties—limited form described previously. There is no extra expense equivalent to the broad form endorsement. When it is added to extra expense coverage form CP 00 50, the extra expense from dependent properties endorsement provides coverage for necessary extra expense the insured incurs due to a covered loss to dependent business property.
The 2012 revision added coverage for secondary dependencies. For secondary contributing locations, coverage is available for necessary expenses the insured would not have incurred but for the direct physical loss or damage to property at a secondary contributing location. The damage to the secondary contributing location must cause a partial or complete interruption of the materials or services provided by the dependent property and result in the extra expense. A secondary contributing location is not identified in the schedule, not owned or operated by the contributing location identified in the schedule, and delivers materials or services to the contributing location.
For secondary recipient locations, coverage is available for necessary expenses the insured would not have incurred but for the direct physical loss or damage to property at a secondary recipient location. The damage to the secondary recipient location must result in partial or complete interruption of the acceptance of the insured's material or services by the dependent property and result in the extra expense.
Similar to the business income from dependent properties endorsements, the extra expense from dependent properties form contains extra expense coverage for covered loss at miscellaneous locations. Coverage is limited to .03 percent of the sum of all limits of insurance shown in the schedule for each day's suspension of operations. These miscellaneous locations do not include roads, bridges, tunnels, waterways, airfields, pipelines, or any other similar areas or structures. This additional coverage does not apply to secondary contributing or secondary recipient locations.
The endorsement modifies the definition of extra expense on form CP 00 50 to mean necessary expense incurred during the period of restoration that would not have been incurred except for the damage to property at a described dependent location "to avoid or minimize the suspension of business and to continue operations, or to minimize the suspension of business if the named insured cannot continue operations."
|Utility Services – Time Element, CP 15 45
Previously called Off-Premises Services – Time Element, this endorsement, CP 15 45 10 12, provides coverage for business income and extra expense losses caused by the interruption of services supplying water, communication, or power. One or all of these utilities may be scheduled. The interruption must result from damage caused by a covered cause of loss.
Water supply properties include pumping stations or water mains that supply water to the described premises. The 2012 revision added wastewater removal property to the list. Wastewater removal property is a utility system for removing wastewater and sewage from the described premises other than a system designed primarily for draining storm water. Coverage is not provided for interruption of service caused by or resulting from discharge of water or sewage due to heavy rainfall or flooding. Communications supply services means property supplying communication services, such as telephone, radio, microwave, or television services.
|Radio or Television Antennas – Business Income or Extra Expense, CP 15 50
Each of the causes of loss forms of the commercial property program contains a special exclusion that removes coverage for any business income or extra expense loss caused by or resulting from direct physical loss to radio or television antennas. Attachment of endorsement CP 15 50 10 12 deletes the exclusion, giving back coverage for these losses.
|Business Income Changes – Beginning of the Period of Restoration, CP 15 56
Both the Business Income (and Extra Expense) and the Business Income (Without Extra Expense) coverage forms provide for a seventy-two-hour waiting period for coverage to begin after a civil authority prohibits access to the described premises. This endorsement, CP 15 56 06 07, deletes the seventy-two-hour waiting period; coverage is triggered immediately. Or, the insured can choose to replace the seventy-two-hour period on the policy with a twenty-four-hour waiting period.
|Business Income and/or Extra Expense Coverage for Year 2000 Computer-Related and Other Electronic Problems, CP 15 57
The provisions of form IL 09 35 07 02, Exclusion of Certain Computer-Related Losses, are voided by this endorsement. Endorsement CP 15 57 08 98 includes such exposures in the definition of computer failure and provides coverage for the actual loss of business income sustained as a result of computer failure. Extra expense coverage also is provided if the insured has purchased the business income (and extra expense) or the extra expense coverage forms. Failures of power or utility service to the described premises, even if caused by computer failure, are not covered. Coverage ends thirty days after the computer failure is corrected or when there is no further loss or expense caused by that computer failure, whichever comes first. The maximum coverage is $25,000, regardless of the number of computer failures that occur.
While the Year 2000 peril has passed, this endorsement is still active.
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
Reviewed September 19, 2019
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