Attached to every commercial property insurance policy is a cause of loss form that determines which perils are covered and which are not. There are 3 forms in common use: basic form (CP1010), broad form (CP1020), and special form (CP1030). It is critical that a policyholder understands the property insurance cause of loss form attached to their policy and what coverage is provided.
Basic Form Cause of Loss
As the name indicates, the CP1010 basic form cause of loss is the simplest of the 3 forms and provides coverage for a limited number of named perils. Absent any specific underwriting restrictions, basic form cause of loss covers the following perils: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action. Some policies may include limited coverage for fungus, wet rot, dry rot, and bacteria.
It is important to understand that the basic form triggers coverage only when the loss is caused by a named peril. If the peril is not listed, there is no coverage provided.
Broad Form Cause of Loss
The CP1020 broad form provides coverage for the perils included in the basic form and adds 4 additional: falling objects, weight of snow, ice, or sleet, water damage, and additional coverage collapse.
As with basic form, the broad form cause of loss is named peril coverage. If the peril is not listed, there is no coverage provided.
Special Form Cause of Loss
The CP1030 special form is considered an “open peril” or “all-risk” cause of loss form. Instead of listing what perils are covered this form covers all “direct physical loss unless the loss is excluded or limited in this policy.”
Because special form provides coverage for all direct physical loss it is important to understand the exclusions. The standard exclusions found in nearly every special form cause of loss include: ordinance or law, earth movement (including earthquake, landslide, mine subsidence, earth sinking), governmental action (such as seizure or destruction of property), nuclear hazard, utility services, war and military action, water (meaning mudslide, water backup, flood or surface water), fungus or bacteria (unless the policy has additional coverage fungus or bacteria added).
Cause of Loss Form Comparison
For a better understanding of the 3 cause of loss forms, review the comparison chart below.
For additional information about property insurance cause of loss form, please contact Safeguard Insurance today.