The primary goal of any commercial insurance program is to protect the insured’s real and business personal property. Tangible property usually represents a significant portion of its total assets, regardless of the size of the business. The Commercial Property Building and Personal Property Coverage Form is an insurance industry standard that provides this needed coverage. As a result, it should always be reviewed and used as a benchmark for comparison when evaluating any commercial property coverage form.
The policies, forms, and endorsements developed for the Commercial Property Program may be used to provide coverage under either a monoline Commercial Property Policy or the Commercial Package Policy (CPP). The Commercial Property Policy does not have any limitations or exclusions with respect to eligibility.
A Commercial Property Policy consists of seven basic parts or forms:
- IL DS 00-Common Policy Declarations
- IL 00 17-Common Policy Conditions. This contains the conditions common to all commercial lines of insurance. It is a mandatory form for all simplified monoline or multi-line policies.
- Commercial Property Declarations
- CP 00 90-Commercial Property Conditions
- One of the Commercial Property Coverage Forms listed below.
- One or more of the Causes of Loss Forms. These forms describe the types of losses insured and the exclusions that apply.
- Policy Cover or Policy Jacket developed by individual insurance companies. These forms may also include an index or a table of contents to meet requirements that some states impose.
COMMERCIAL PROPERTY COVERAGE FORMS
All Commercial Property Coverage Forms identify the subject of insurance, describe basic, extended, and any optional coverages, provide conditions, and describe excluded property. Commercial Property Coverage Forms consist of Direct Damage Coverage Forms and Time Element Coverage Forms. The Direct Damage Coverage Forms are:
- CP 00 10-Building and Personal Property Coverage Form
- CP 00 17-Condominium Association Coverage Form
- CP 00 18-Condominium Commercial Unit-Owners’ Coverage Form
- CP 00 20-Builders Risk Coverage Form
- CP 00 40-Legal Liability Coverage Form
- CP 00 70-Mortgageholders Errors and Omissions Coverage Form
- CP 00 80-Tobacco Sales Warehouses Coverage Form
- CP 00 99-Standard Property Policy
The Time Element Coverage Forms are:
- CP 00 30-Business Income (and Extra Expense) Coverage Form
- CP 00 32-Business Income (without Extra Expense) Coverage Form
- CP 00 50-Extra Expense Coverage Form
- CP 00 60-Leasehold Interest Coverage Form
CAUSES OF LOSS FORMS
The Causes of Loss Forms describe the types of losses insured, exclusions, and relevant limitations that apply. The policy is not complete unless it includes at least one of the following causes of loss forms.
- CP 10 10-Causes of Loss-Basic Form provides coverage against fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicles, riot or civil commotion, sprinkler leakage, vandalism, sinkhole collapse, and volcanic action.
- CP 10 20-Causes of Loss-Broad Form is an intermediate-level causes of loss form. It includes the basic causes of loss plus breakage of glass, falling objects, weight of snow, ice, or sleet, and water damage.
- CP 10 30-Causes of Loss-Special Form covers direct physical loss or damage caused by all types and causes of loss not specifically excluded or limited.
There are many endorsements available to tailor the ISO Commercial Property Coverage Forms. Some are mandatory for all policies while others are mandatory for specific classifications and types of business. Others are optional and permit a standard form to be customized to meet a specific risk’s coverage needs. Endorsements broaden, restrict, delete, modify, or add coverage.
Underwriting commercial property coverage always starts with Construction, Occupancy, Protection and Exposure (COPE). After evaluating the tangible issues, the important intangibles of moral and morale risk must be evaluated. These intangible issues may cause as many or even more losses than the tangibles.
The ISO Property Manual provides detailed instructions as to how to rate commercial property coverage. While the manual is very specific, some of the details can be extremely confusing. Our Rating Considerations article provides general details on how to rate and also presents some in-depth analyses, examples, and recommendations for specific exposures.