Summary: There are three alternatives insureds may select from when arranging the scope of coverage desired under ISO's commercial property program. A named perils or open perils policy written under the simplified language commercial property program of Insurance Services Office must incorporate one of three alternative causes of loss forms—basic form CP 10 10 04 02, broad form CP 10 20 04 02, or special form CP 10 30 04 02—which are differentiated by the scope of covered perils (referred to in the forms as “causes of loss” rather than “perils”) each provides. A fourth cause of loss form, CP 10 40 08 99, provides earthquake coverage for insureds who choose to add it to their policies. A number of additional, optional causes of loss endorsements are available to modify the terms of whichever of the primary forms the policy contains.
The basic form includes eleven basic causes of loss which are insured under the policy. The broad form includes the same 11, plus three additional causes of loss and an additional coverage applicable to collapse. The special form is the open perils version.
This discussion reviews the causes of loss forms. The most recent edition of these forms is dated April, 2002.
Topics covered:
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 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 an additional coverage applicable to collapse.
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.
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.
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
As with the standard fire policy, which is no longer 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.
Not included under explosion coverage of the commercial property program are two forms of “explosion” traditionally excluded from the scope of the explosion peril: operation of pressure relief devices and rupture due to expansion of the contents of any structure caused by water. 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 earlier commercial property forms, are not mentioned in the explosion language of form CP 10 10 or CP 10 20; ISO refers to this in their introductory material, indicating that coverage is intended for these causes of loss.
The windstorm basic cause of loss, like earlier versions of the windstorm or hail peril, does not apply to frost or cold weather, or to ice, snow, or sleet, even if driven by wind. Also retained from earlier coverage forms is the requirement of wind or hail damage to the exterior of a building or structure before coverage in connection with rain, snow, sand, or dust entering the building or structure is provided. Windstorm or hail is one of three causes of loss that may be removed from coverage of the commercial property program by endorsement. Its removal is made possible to avoid duplication of coverage for insureds who have windstorm insurance through a catastrophe pool or similar facility.
Smoke damage from agricultural smudging or industrial operations is not covered under this cause of loss.
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.)
Acts of striking employees occupying the described premises are included under the riot or civil commotion cause of loss, as is looting at the time and place of a riot or civil commotion.
“Malicious mischief” has been dropped from the name of the vandalism coverage, although the definition remains the same as that of “vandalism or malicious mischief” found in 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.
Under 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 covered.
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 basic 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.
Volcanic action coverage also was previously available only on an optional basis by 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.
Coverage under this cause of loss applies to any volcanic eruptions occurring within a seven day period (168 hours). 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 foregoing 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.
But we will not pay for loss or damage to:
a. Personal property in the open; or
b. The interior of a building or structure, or property inside a building or structure, unless the roof or an outside wall of the building or structure is first damaged by a falling object.
13. Weight of Snow, Ice or Sleet.
But we will not pay for loss or damage to personal property outside of buildings or structures.
14. Water Damage
a. Water Damage, meaning accidental discharge or leakage of water or steam as the direct result of the breaking or apart or cracking of a plumbing, heating, air conditioning or other system or appliance, that is located on the described premises and contains water or steam.
However, Water Damage does not include:
(1) Discharge or leakage from:
(a) An Automatic Sprinkler System;
(b) A sump or related equipment and parts, including overflow due to sump pump failure or excessive volume of water; or
(c) Roof drains, gutters, downspouts or similar fixtures or equipment.
(2) The cost to repair any defect that caused the loss or damage;
(3) Loss or damage caused by or resulting from continuous or repeated seepage or leakage that occurs over a period of fourteen days or more; or
(4) For loss or damage caused by or resulting from freezing, unless:
(a) You do your best to maintain heat in the building or structure; or
(b) You drain the equipment and shut off the water supply if the heat is not maintained.
b. If coverage applies subject to a. above, and the building or structure containing the system or appliance is Covered Property, we will also pay the cost to tear out and replace any part of the building or structure to repair damage to the system or appliance from which the water or steam escapes. But we will not pay the cost to repair any defect that caused the loss or damage.
Analysis
Personal property in the open is not covered for the falling objects cause of loss; neither is personal property within a structure or the interior of the structure itself unless the roof or an outside wall is first damaged by a falling object.
The weight of snow, ice, or sleet peril in earlier property forms includes a long list of property to which the peril does not apply. As a cause of loss under the simplified language commercial property program, weight of snow, ice, or sleet applies to all personal property that is outside of buildings or structures.
Coverage under the water damage cause of loss applies to accidental discharge or leakage of water or steam when a system or appliance containing water or steam breaks or cracks. Water damage coverage does not encompass leakage or discharge from an automatic sprinkler system, which is the subject of coverage under a separate cause of loss. Water damage also does not include discharge or leakage from a sump, related equipment, roof drains, gutters, downspouts, or similar fixtures or equipment.
Included as a covered part of water damage losses is the cost of tearing out and replacing part of the building or structure to repair damage to the system or appliance. Excluded from coverage is “the cost to repair any defect that caused the loss or damage.” This wording, which was newly introduced in the 1988 edition of CP 10 20, replaces the previous exclusion of the “cost of repairing or replacing the actual system or appliance itself.” This revision constitutes a broadening of coverage under this cause of loss as illustrated by the following situation. Suppose a beam settles on a pipe causing it to crack and leak water. Under the new language, the defect can be considered to be the misplaced beam. The cost to repair the defect, i.e., restore the beam to its proper location, is not covered, but the cost to repair or replace the damaged pipe would be covered.
Damage caused by continuous or repeated leakage (the form specifies that such leakage must occur over a period of at least fourteen days), and loss caused by freezing unless the insured has taken steps to maintain heat in the building or structure or has drained the equipment and shut off the water supply are also excluded from water damage coverage. (Earlier versions of commercial property forms imposed these last conditions on coverage for freezing losses only when the building was vacant or unoccupied. Broad form CP 10 20 makes no such distinction, imposing the conditions with respect to freezing losses regardless of the building's status.) Coverage under the water damage cause of loss is subject to the sixty-day vacancy condition of the building and personal property coverage form.
See Water Exclusion Clause, for a discussion of court cases relating to the accidental discharge peril and its apparent conflict with the water damage exclusion.
Special Form Causes of Loss
A. Covered Causes of Loss
When Special is shown in the Declarations, Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C., Limitations;
Analysis
A commercial property program insured's third option with respect to scope of insured perils is special causes of loss form CP 10 30, which provides coverage on an open perils basis—that is, it insures against “risks of direct physical loss” other than causes of loss specifically excluded or limited in the form itself. These exclusions and limitations are discussed below.
Exclusions Applicable to All Causes of Loss Forms
There are seven exclusions comprising subsection B.1. of each of the three causes of loss forms of the ISO commercial property program. These exclusions operate to eliminate coverage as specified, regardless of other concurrent causes that contribute to the loss.
This introductory language, which excludes coverage for the seven causes of loss described in section B “regardless of any other cause or event that contributes concurrently or in any sequence to the loss,” appears to extend the exclusions to many kinds of losses that historically have been considered as a part of the damage from a named peril such as fire, wind, explosion, vandalism, etc. And while there is coverage for damage from certain specified causes of loss (as noted in the description of these exclusions that follows) that occurs after the occurrence of the excluded cause of loss, no exceptions are provided for otherwise covered causes of loss that occur before an excluded cause of loss and give rise to the excluded cause of loss.
For example, suppose a fire damages a building adjacent to the insured's property. Fire fighters, in combating the blaze, pump enormous amounts of water into the house, much of which flows away and into the insured's basement. In the absence of the water exclusion, this damage is covered as a fire loss, on either a named causes of loss or a special causes of loss basis. Or suppose there is an explosion in a house on a hillside of sufficient force not only to damage the building but to cause displacement of the earth or rock of the hill so the house slides down the hill and is totally demolished. Again, the loss would be fully covered as an explosion loss in the absence of the earth movement exclusion.
Note that the legal situation surrounding the concurrent causes of loss language is not entirely settled. See Concurrent Causation for a legal analysis of the concurrent causation issue and relevant case law.
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
a. Ordinance or Law
The enforcement of any ordinance or law:
(1) Regulating the construction, use or repair of any property; or
(2) Requiring the tearing down of any property, including the cost of removing its debris.
This exclusion, Ordinance or Law, applies whether the loss results from:
(1) An ordinance or law that is enforced even if the property has not been damaged; or
(2) The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation, remodeling or demolition of property, or removal of its debris, following a physical loss to that property.
b. Earth Movement
(1) Earthquake, including any earth sinking, rising or shifting related to such event;
(2) Landslide, including any earth sinking, rising or shifting related to such event;
(3) Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity has ceased;
(4) Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking, or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.
But if Earth Movement, as described in b.(1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.
(5) Volcanic eruption, explosion or effusion. But if volcanic eruption, explosion or effusion results in fire or Volcanic Action, we will pay for the loss or damage caused by that fire or Volcanic Action.
c. Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread, if the fire would be covered under this Coverage Part.
d. Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused.
But if nuclear reaction or radiation, or radioactive contamination, results in fire, we will pay for the loss or damage caused by that fire.
e. Utility Services
The failure of power or other utility service supplied to the described premises, however caused, if the failure occurs away from the described premises.
But if the failure of power or other utility service results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
This exclusion does not apply to the Business Income coverage or to Extra Expense coverage. Instead, the Special Exclusion in paragraph B.4.a.(1) applies to these coverages.
f. War and Military Action
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
(2) Mudslide or mudflow;
(3) Water that backs up or overflows from a sewer, drain or sump;
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) basements, whether paved or not; or
(c) Doors, windows or other openings.
But if Water, as described in g.(1) through (4) above, results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage.
Exclusions B.1.a. through B.1.g. apply whether or not the loss event results in widespread damage or affects a substantial area.
Analysis
Losses arising out of the enforcement of building laws or ordinances, including those that may require the demolition of damaged structures, are not covered by standard commercial property policies. Under the simplified language commercial property program, coverage for this exposure is available by attaching endorsement CP 04 05 04 02 (see Commercial Property Endorsements).
All forms of earth movement (earthquake, landslide, mine subsidence, etc.) other than sinkhole collapse, which is specifically covered as a basic or broad cause of loss, are excluded from coverage. Ensuing fire or explosion damage is covered.
Also ruled out by the earth movement exclusion is loss caused by volcanic eruption, explosion, or effusion. Exempt from this part of the exclusion (and therefore covered) is ensuing fire damage and loss attributable to volcanic action—the above-ground effects of volcanic eruption—an insured cause of loss under the basic and broad forms. The volcanic eruption exclusion of broad form CP 10 20 specifically exempts—and therefore covers—building glass breakage resulting from volcanic eruption. In special form CP 10 30, the earth movement exclusion spells out coverage for “volcanic action” losses equivalent to that provided in the basic and broad forms. For a general discussion of court decisions interpreting the earth movement exclusion, see Earth Movement Exclusion.
Seizure or destruction of covered property as an act of governmental authority is not covered, except for destruction of property ordered to prevent the more general spread of fire when the fire itself would be a covered cause of loss. This rewording of the standard fire policy's “order of civil authority” exclusion is more precise in its application than the older version, since it confines itself specifically to seizure or destruction rather than the more general “order of any civil authority.”
The nuclear hazard exclusion of the simplified language commercial property program eliminates coverage of loss by nuclear reaction, radiation, or radioactive contamination regardless of the cause. Ensuing fire loss is covered.
Earlier editions of property coverage forms contain a lengthier but equivalent nuclear clause precluding coverage for nuclear losses as a species of fire loss, but likewise specifying coverage for direct loss by fire that results from a nuclear reaction. A separate nuclear clause, applicable only in New York under earlier editions and emphasizing that nuclear reactions are not covered even if they result from a covered peril, is also eliminated from the simplified language forms. Radioactive contamination coverage is not covered, but may be added to a commercial property policy by endorsement.
The off-premises exclusion applies to failure of power or other utility service to the described premises that occurs away from those premises. The exclusion operates regardless of the cause of the failure, that is, even if the failure is brought about by a covered cause of loss. If damage to insured property on the premises from a covered cause of loss results from failure of power or other utility service, the resulting damage is covered. For example, if heat interruption causes pipes to freeze and rupture and either the broad or special causes of loss forms (IDL:CP 00 20 04 02.pdf^CP 00 20 04 02^CP 00 20 04 02] or CP 00 30 04 02, respectively) applies, there is coverage.
If, on the other hand, a lightning strike away from the insured premises knocks out the electrical power at the premises, consequential property damage on the premises—spoilage of refrigerated products or of property in process depending on continuous heat or cooling are common examples—is not covered. Though lightning is a covered cause of loss, the underlying agreement is to pay for direct physical loss caused by a covered cause of loss. Lightning that strikes off premises and runs in on a line to cause lightning damage on premises is covered under these provisions.
The war exclusion applies to three related causes of loss: war (including undeclared or civil war); warlike action by any governmental military force; and acts of insurrection, rebellion, revolution, or usurped power.
Deleted from the ISO commercial property program's war exclusion is the specific reference found in earlier property coverage forms to the discharge, explosion, or use of any nuclear weapon. The earlier forms stated a presumption that any such loss caused by a nuclear weapon would be an excluded warlike action. The absence of this provision in the simplified language forms leaves the way open for coverage at least of ensuing fire damage (exempt—as noted above for exclusion d.—from the nuclear exclusion) should a nuclear weapon be discharged by accident or by an individual not involved as part of any military force. See The War Exclusion Clause, for a discussion of court cases interpreting this exclusion.
Additional Exclusions—Basic and Broad Forms
Subsection B.2. of each of the causes of loss forms contains several more exclusions but, unlike the subsection B.1. exclusions, these do not apply “regardless of any other cause or event . . .” to defeat coverage by a covered cause of loss that happens to involve damage by the excluded cause of loss (concurrent causation).
2. We will not pay for loss or damage caused by or resulting from:
a. Artificially generated electrical current, including electric arcing, that disturbs electrical devices, appliances or wires.
But if artificially generated electrical current result in fire, we will pay for the loss or damage caused by that fire.
b. Rupture or bursting of water pipes (other than Automatic Sprinkler Systems) unless caused by a Covered Cause of Loss.
c. Leakage or discharge of water or steam from any part of a system or appliance containing water or steam (other than an Automatic Sprinkler System), unless the leakage or discharge occurs because the system or appliance was damaged by a Covered Cause of Loss.
d. Explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control.
But if explosions of steam boilers, steam pipes, steam engines or steam turbines results in fire combustion explosion, we will pay for the loss or damage caused by that fire or combustion explosion.
e. Mechanical breakdown, including rupture or busting caused by centrifugal force.
But if mechanical breakdown results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
f. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
Analysis
For broad form CP 10 20, three of these five exclusions, a., d., and e. are shown as exclusions a., b., and c. respectively. The broad form covers the two causes of loss listed as basic form exclusions b. and c. The neglect of an insured exclusion is listed on both the basic and broad causes of loss forms.
“Special” Exclusions Applicable to
All Causes of Loss Forms
3. Special Exclusions
The following provisions apply only to the specified Coverage Forms.
a. Business Income (And Extra Expense) Coverage Form, Business Income (Without Extra Expense) Coverage Form, or Extra Expense Coverage Form.
We will not pay for:
(1) Any loss caused directly or indirectly by the failure of power or other utility service supplied to the described premises, however caused, if the failure occurs outside of a covered building.
But if the failure of power or other utility service results in a Covered Cause of Loss, we will pay for the loss caused by that Covered Cause of Loss.
(2) Any loss caused by or resulting from:
(a) Damage or destruction of “finished stock”; or
(b) The time required to reproduce “finished stock.”
This exclusion does not apply to Extra Expense.
(3) Any loss caused by or resulting from direct physical loss or damage to radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers.
(4) Any increase of loss caused by or resulting from:
(a) Delay in rebuilding, repairing or replacing the property or resuming “operations,” due to interference at the location of the rebuilding, repair or replacement by strikers or other persons; or
(b) Suspension, lapse or cancellation of any license, lease or contract. But if the suspension, lapse or cancellation is directly caused by the suspension of “operations,” we will cover such loss that affects your Business Income during the “period of restoration” and any extension of the “period of restoration” in accordance with the terms of the Extended Business Income Additional Coverage and the Extended Period of Indemnity Optional Coverage or any variation of these.
(5) Any Extra Expense caused by or resulting from suspension, lapse or cancellation of any license, lease or contract beyond the “period of restoration.”
(6) Any other consequential loss.
b. Leasehold Interest Coverage Form
(1) Paragraph B.1.a., Ordinance or Law; does not apply to insurance under this Coverage Form.
(2) We will not pay for any loss caused by:
(a) Your canceling the lease;
(b) The suspension, lapse or cancellation of any license; or
(c) Any other consequential loss.
c. Legal Liability Coverage Form
(1) The following Exclusions do not apply to insurance under this Coverage Form:
(a) Paragraph B.1.a., Ordinance or Law;
(b) Paragraph B.1.c., Governmental Action;
(c) Paragraph B.1.d., Nuclear Hazard;
(d) Paragraph B.1.e., Utility Services; and
(e) Paragraph B.1.f., War and Military Action.
(2) The following additional exclusions apply to insurance under this Coverage Form:
(a) Contractual Liability
We will not defend any claim or “suit,” or pay damages that you are legally liable to pay, solely by reason of your assumption of liability in a contract or agreement.
But this exclusion does not apply to a written lease agreement in which you have assumed liability for building damage resulting from an actual or attempted burglary or robbery, provided that:
(i) Your assumption of liability was executed prior to the accident; and
(ii) The building is Covered Property under this Coverage Form.
(b) Nuclear Hazard
We will not defend any claim or “suit,” or pay any damages, loss, expense or obligation, resulting from nuclear reaction or radiation, or radioactive contamination, however caused.
Analysis
Three “special exclusions” contained in each of the causes of loss forms—CP 10 10, CP 10 20, and CP 10 30—have applicability only to particular optional coverages that may or may not be included in an individual policy. The special exclusions apply, respectively, to business income or extra expense coverage, to leasehold interest coverage, and to legal liability coverage. Since each of these coverages is the subject of a separate discussion elsewhere in this tab, or in the Business Income tab, exclusions applicable to each coverage are treated specifically as part of these individual discussions.
Special Form Exclusions
2. We will not pay for loss or damage caused by or resulting from any of the following:
a. Artificially generated electrical current, including electric arcing, that disturbs electrical devices, appliances or wires.
But if artificially generated electrical current results in fire, we will pay for the loss or damage caused by that fire.
b. Delay, loss of use or loss of market.
c. Smoke, vapor or gas from agricultural smudging or industrial operations.
d. (1) Wear and tear;
(2) Rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself;
(3) Smog;
(4) Settling, cracking, shrinking or expansion;
(5) Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents or other animals;
(6) Mechanical breakdown, including rupture or bursting caused by centrifugal force. But if mechanical breakdown results in elevator collision, we will pay for the loss or damage caused by that elevator collision.
(7) The following causes of loss to personal property:
(a) Dampness or dryness of atmosphere;
(b) Changes in or extremes of temperature; or
(c) Marring or scratching.
But if an excluded cause of loss that is listed in 2.d.(1) through (7) results in a “specified causes of loss” or building glass breakage, we will pay for the loss or damage caused by that “specified causes of loss” or building glass breakage.
e. Explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control.
But if explosion of steam boilers, steam pipes, steam engines or steam turbines results in a fire or combustion explosion, we will pay for the loss or damage caused by that fire or combustion explosion. We will also pay for loss or damage caused by or resulting from 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.
f. Continuous or repeated seepage or leakage of water that occurs over a period of fourteen days or more.
g. Water, other liquids, powder or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment (except fire protective systems) caused by or resulting from freezing, unless:
(1) You do your best to maintain heat in the building or structure; or
(2) You drain the equipment and shut off the supply if the heat is not maintained.
h. Dishonest or criminal act by you, any of your partners, members, officers, managers, employees (including leased employees), directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose:
(1) Acting alone or in collusion with others; or
(2) Whether or not occurring during the hours of employment.
This exclusion does not apply to acts of destruction by your employees (including leased employees); but theft by employees (including leased employees) is not covered.
i. Voluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
j. Rain, snow, ice or sleet to personal property in the open.
k. Collapse, except as provided below in the Additional Coverage for Collapse. But if collapse results in a Covered Cause of Loss at the described premises, we will pay for the loss or damage caused by that Covered Cause of Loss.
l. Discharge, dispersal, seepage, migration, release or escape of “pollutants” unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the “specified causes of loss.” But if discharge, dispersal, seepage, migration, release or escape of “pollutants” results in a “specified causes of loss,” we will pay for the loss or damage caused by that “specified causes of loss.”
This exclusion, l., does not apply to damage to glass caused by chemicals applied to the glass.
m. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
3. We will not pay for loss or damage caused by or resulting from any of the following, 3.a. through 3.c. But if an excluded cause of loss that is listed in 3.a. through 3.c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss or damage.
b. Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.
c. Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or
(4) Maintenance;
of part or all of any property on or off the described premises.
Analysis
Subsection B.2. of the special form consists of several exclusions, some with several subparts. In addition the special form has a third set of exclusions, subsection B.3., with three exclusions—the exclusions adopted to avoid coverage for concurrent causation losses. The exclusions of this form are comparable to those incorporated into other property forms providing open perils or all risks coverage. The three subsection B.2. exclusions of the broad form are included in the special form as well, but in different sequence.
Like the other causes of loss forms, the special form has a mechanical breakdown exclusion. However, the 1990 edition of the special causes of loss form added a provision to this exclusion, carrying over to the current version, clarifying that it does not apply to any resulting loss or damage caused by elevator collision.
Special form CP 10 30 excludes loss or damage caused by delay, loss of use, or loss of market; wear and tear, rust, corrosion, fungus, decay, deterioration, hidden or latent defect, “any quality in property that causes it to damage or destroy itself” (the “inherent vice” of earlier property form language); settling, cracking, shrinking, or expansion; animals; and, with respect to personal property, marring or scratching, dampness or dryness of atmosphere, and changes in or extremes of temperature. If any of these causes resulting loss or damage from building glass breakage or one of the “specified causes of loss” listed in definitions section F of the form, that resulting loss is covered.
The exclusion for release, discharge, or dispersal of contaminants or pollutants, originally part of the group of “wear and tear” exclusions listed above, was removed as part of the 1986 modifications made to the commercial property program. It was replaced by an exclusion removing coverage for loss or damage caused by or resulting from: the release, discharge or dispersal of “pollutants” unless the release, discharge or dispersal is itself caused by any of the “specified causes of loss.” But if loss or damage by the “specified causes of loss” results, we will pay for the resulting damage caused by the “specified causes of loss.”
The 1990 form revision modified this language to exclude coverage for loss or damage caused by or resulting from “seepage,” “migration,” and “escape” of pollutants as well, thus giving stronger emphasis to the exclusion of non-sudden pollution losses. This change is in accord with changes made in the 1990 building and personal property coverage form (CP 00 10 10 90). This is the exclusion as it appears in the current version of the form.
The effect of this exclusion is to limit the pollutant clean up and removal coverage of the forms in the commercial property program providing building and personal property coverage to those “sudden and accidental” occurrences brought on by the “specified causes of loss,” i.e., the broad form perils.
There is an exclusion of dishonest or criminal acts committed by the named insured, partners, employees, directors, trustees, or authorized representatives of the named insured, or anyone to whom the named insured entrusts covered property. This exclusion applies whether the person committing the act does so alone or in collusion with others and regardless of whether the act occurs during working hours. While it obviously excludes employee theft (a subject for the fidelity coverage), it was not originally intended to exclude loss from acts of destruction committed by such individuals. However, the exception to the exclusion, which states that “This exclusion does not apply to acts of destruction by your employees (emphasis added); but theft by employees is not covered,” implies that the exclusion does apply to acts of destruction by other persons listed in the exclusion who are not employees. At least one court has applied the exclusion to arson by a 50 percent shareholder and corporate officer. The case is Minnesota Bond Ltd. v. St. Paul Mercury Ins. Co., 706 P.2d 942 (1985). The court reached its decision without any discussion of the coinsured's position. To penalize innocent named insureds (the corporation or business, in many cases) conflicts with the “control of property” provision of the commercial property conditions form (CP 00 90 07 88), which states that “Any act or neglect of any person other than you beyond your direction or control will not affect this insurance.” However, although the case lacks any express discussion of the issue, the court apparently followed a long line of cases holding that the corporation will not be allowed to recover when the benefit of insurance will actually go to the wrongdoer. These cases, as was implied here, involve individuals who have such control over the corporation that their acts essentially constitute the acts of the corporation. For a discussion of these cases, see 37 A.L.R.3d 1385.
A related exclusion rules out coverage for so-called “trick or device” losses. It applies to loss of property with which the named insured has been induced to part voluntarily by any fraudulent scheme, trick, device, or false pretense.
A number of exclusions in special form CP 10 30 function to limit the scope of individual covered causes of loss under the special form to that of their counterparts in basic and broad forms CP 10 10 and CP 10 20. There is an exclusion of smoke, vapor, or gas from agricultural smudging or industrial operations, paralleling an equivalent restriction on coverage for the named peril of smoke. An exclusion of damage from continuous or repeated seepage or leakage of water over a period of fourteen days or more modifies coverage for plumbing discharge under special form coverage just as it does the named cause of loss of water damage in broad form CP 10 20. Similarly, there is an exclusion applicable to freezing of plumbing, etc., when the insured has not taken steps to maintain heat in the building or shut off the water supply and drain the pipes.
Damage to personal property in the open caused by rain, snow, ice, or sleet is excluded.
There is no collapse coverage under the special form other than that provided by the additional coverage feature applicable to collapse under certain specified conditions. Special causes of loss form CP 10 30 also incorporates the other so-called “concurrent causation” exclusions that have been made part of almost all standard open perils and all risks property coverages—weather conditions; acts or decisions of persons or groups; faulty planning, design, materials, maintenance, etc.
Additional Coverages—Broad and Special Forms
C. Additional Coverages—Collapse
The term Covered Cause of Loss includes the Collapse Additional Coverage as described and limited in 1. through 5. below.
1. With respect to buildings:
a. Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose;
b. A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse;
c. A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;
d. A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
2. We will pay for direct physical loss or damage to Covered Property, caused by collapse of a building or any part of a building that is insured under this Coverage Form or that contains Covered Property insured under this Coverage Form, if the collapse is caused by one or more of the following:
a. Fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling objects; weight of snow, ice or sleet; water damage, meaning accidental discharge of water or steam as the direct result of the breaking apart or cracking of a system or appliance containing water or steam; all only as insured against in this Coverage Part;
b. Decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;
c. Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to collapse;
d. Weight of people or personal property;
e. Weight of rain that collects on a roof;
f. Use of defective material or methods in construction, remodeling, or renovation if the collapse occurs during the course of the construction, remodeling or renovation. However, if the collapse occurs after construction, remodeling, or renovation is complete and is caused in part by a cause of loss listed in C.2.a. through C.2.e., we will pay for the loss or damage even if use of defective material or methods, in construction remodeling, or renovation, contributes to the collapse.
The criteria set forth in 1.a. through 1.d. do not limit the coverage otherwise provided under this Causes of Loss Form for the causes of loss listed in 2.a.
3. With respect to the following property:
a. Outdoor radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers;
b. Awnings, gutters and downspouts;
c. Yard fixtures;
d. Outdoor swimming pools;
e. Fences;
f. Piers, wharves and docks;
g. Beach or diving platforms or appurtenances;
h. Retaining walls; and
i. Walks, roadways and other paved surfaces;
if the collapse is caused by a cause of loss listed in C.2.b. through C.2.f., we will pay for loss or damage to that property only if:
a. Such loss or damage is a direct result of the collapse of a building insured under this Coverage Form; and
b. The property is Covered Property under this Coverage Form.
4. If personal property abruptly falls down or caves in and such collapse is not the result of collapse of a building, we will pay for loss or damage to Covered Property caused by such collapse of personal property only if:
a. The collapse was caused by a Cause of Loss listed in 2.a. through 2.f. above;
b. The personal property which collapses is inside a building; and
c. The property which collapses is not of a kind listed in 3. above, regardless of whether that kind of property is considered to be personal property or real property.
The coverage stated in this Paragraph 4. does not apply to personal property if marring and/or scratching is the only damage to that personal property caused by the collapse.
Collapse of personal property does not mean cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
5. This Additional Coverage, Collapse, will not increase the Limits of Insurance provided in this Coverage Part.
Analysis
Collapse is covered under broad form CP 10 20 not as a cause of loss but as an “additional coverage,” parallel to that provided in other commercial and personal property forms that have been revised to eliminate concurrent causation losses from coverage.
Courts are split on the meaning of collapse. Some jurisdictions follow a conservative interpretation of the word and limit collapse coverage to cases involving a falling down or reduction to rubble. Other courts have adopted a more liberal view, allowing coverage when there is detectable serious impairment of structural integrity, with collapse probable unless repairs are made. Court cases interpreting this issue are discussed elsewhere; see Meaning of Collapse. The current causes of loss forms attempt to preempt judicial interpretation of the meaning of collapse by explicitly listing what collapse is and what it is not.
In the current commercial property program, collapse is no longer covered under an open perils basis unless the collapse is caused by one or more of certain perils described in the form.
1. the specified causes of loss, defined as: fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; and water damage.
2. hidden decay
3. hidden insect or vermin damage;
4. weight of people or personal property
5. weight of rain that collects on a roof;
6. use of defective materials or methods in construction or remodeling, or renovation if the collapse occurs during the course of the construction, remodeling or renovation.
The sixth item allows recovery for collapse losses caused by defective materials or construction methods only if the collapse occurs during the course of construction. Once a building is completed, collapse is covered only if caused by one of the other specified causes. A question may be raised in some cases as to whether loss is due to defective materials or construction methods or “hidden decay.” A standard dictionary defines “decay” as “to decline, to fall into ruin, to lose strength gradually.” The distinction is between the collapse that was caused by loss of strength over time and collapse of a structure that had insufficient strength from the outset.
The collapse provision goes on to limit collapse coverage for certain types of property, unless the loss is a direct result of the collapse of a building, caused by the perils listed. These properties are: outdoor radio or television antennas (and satellite dishes), including lead-in wiring, masts, or towers; awning; gutters and downspouts; yard fixtures; outdoor swimming pools; fences; piers; wharves and docks; beach or diving platforms or appurtenances; retaining walls; walks, roadways, and other paved surfaces.
The provision states that collapse does not include settling, cracking, shrinkage, bulging, or expansion. And, collapse coverage does not increase the limits of insurance provided by the coverage form.
Additional Coverage—Fungus, etc.
C. Additional Coverage – Limited Coverage For “Fungus”, Wet Rot, Dry Rot And Bacteria
1. The coverage described in C.2. and C.6. only applies when the “fungus”, wet or dry rot or bacteria is the result of one or more of the following causes that occurs during the policy period and only if all reasonable means were used to save and preserve the property from further damage at the time of and after that occurrence.
a. A Covered Cause Of Loss other than fire or lightning; or
b. Flood, if the Flood Coverage Endorsement applies to the affected premises.
2. We will pay for loss or damage by “fungus”, wet or dry rot or bacteria. As used in this Limited Coverage, the term loss or damage means:
a. Property caused by “fungus”, wet or dry rot or bacteria, including the cost of removal of the “fungus”, wet or dry rot or bacteria;
b. The cost to tear out and replace any part of the building or other property as needed to gain access to the “fungus”, wet or dry rot or bacteria; and
c. The cost of testing performed after removal, repair, replacement or restoration of the damaged property is completed, provided there is a reason to believe that “fungus”, wet or dry rot or bacteria are present.
3. The coverage described under C.2. of this Limited Coverage is limited to $15,000. Regardless of the number of claims, this limit is the most we will pay for the total of all loss or damage arising out of all occurrences of Covered Causes Of Loss (other than fire or lightning) and Flood which take place in a 12-month period (starting with the beginning of the present annual policy period). With respect to a particular occurrence of loss which results in “fungus”, wet or dry rot or bacteria, we will not pay more than a total of $15,000 even if the “fungus”, wet or dry rot or bacteria continues to be present or active, or recurs, in a later policy period.
4. The coverage provided under this Limited Coverage does not increase the applicable Limit of Insurance on any Covered Property. If a particular occurrence results in loss or damage by “fungus”, wet or dry rot or bacteria, and other loss or damage, we will not pay more, for the total of all loss or damage, than the applicable Limit of Insurance on the affected Covered Property.
If there is covered loss or damage to Covered Property, not caused by “fungus”, wet or dry rot or bacteria, loss payment will not be limited by the terms of this Limited Coverage, except to the extent that “fungus”, wet or dry rot or bacteria causes an increase in the loss. Any such increase in the loss will be subject to the terms of this Limited Coverage.
5. The terms of this Limited Coverage do not increase or reduce the coverage provided under paragraph b. of Covered Causes Of Loss 9., Sprinkler Leakage.
6. The following, 6.a. or 6.b., applies only if Business Income and/or Extra Expense coverage applies to the described premises and only if the “suspension” of “operations” satisfies all terms and conditions of the applicable Business Income and/or Extra Expense coverage form.
a. If the loss which resulted in “fungus”, wet or dry rot or bacteria does not in itself necessitate a “suspension” of “operations”, but such “suspension” is necessary due to loss or damage to property caused by “fungus”, wet or dry rot or bacteria, then our payment under Business Income and/or Extra Expense is limited to the amount of loss and/or expense sustained in a period of not more than 30 days. The days need not be consecutive.
b. If a covered “suspension” of “operations” was caused by loss or damage other than “fungus”, wet or dry rot or bacteria but re mediation of “fungus”, wet or dry rot or bacteria prolongs the “period of restoration”, we will pay for loss and/or expense sustained during the delay (regardless of when such a delay occurs during the “period of restoration”), but such coverage is limited to 30 days. The days need not be consecutive.**
Analysis
In the 2002 edition, the insured receives an annual aggregate amount of $15,000 for mold that results from any covered cause of loss except fire, lightning, and flood (if flood insurance is purchased). However, the $15,000 is a lifetime limit for mold caused by the same event.
Basic and Broad Form Limitation
D. Limitation
We will pay for loss of animals only if they are killed or their destruction is made necessary.
Analysis
To conform coverage under the basic and broad causes of loss forms with that provided under the special form, these forms add a limitation of coverage pertaining to animals. The basic and broad forms provide that coverage for animals applies only if they are killed or their destruction is made necessary. Without the limitation, coverage for animals under the basic and broad forms was broader than under the special causes of loss form, an inequity considering the higher premiums charged for special causes of loss coverage.
Special Form Limitations
C. Limitations
The following limitations apply to all policy forms and endorsements, unless otherwise stated.
1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
a. Steam boilers, steam pipes, steam engines or steam turbines caused by or resulting from any condition or event inside such equipment. But we will pay for loss of or damage to such equipment caused by or resulting from an 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.
b. Hot water boilers or other water heating equipment caused by or resulting from any condition or event inside such boilers or equipment, other than an explosion.
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or
(2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.
d. Building materials and supplies not attached as part of the building or structure, caused by or resulting from theft.
However, this limitation does not apply to:
(1) Building materials and supplies held for sale by you, unless they are insured under the Builders Risk Coverage Form; or
(2) Business Income coverage or Extra Expense coverage.
e. Property that is missing, where the only evidence of the loss or damage is a shortage disclosed on taking inventory, or other instances where there is no physical evidence to show what happened to the property.
f. Property that has been transferred to a person or to a place outside the described premises on the basis of unauthorized instructions.
2. We will not pay for loss of or damage to the following types of property unless caused by the “specified causes of loss” or building glass breakage:
a. Valuable papers and records, such as books of account, manuscripts, abstracts, drawings and card index systems, including those which exist on film, tape, disc, drum, cell or other data processing, recording or storage media. Valuable papers and records do not include prepackaged software programs.
b. Animals, and then only if they are killed or their destruction is made necessary.
c. Fragile articles such as statuary, marbles, chinaware and porcelains, if broken. This restriction does not apply to:
(1) Glass; or
(2) Containers of property held for sale.
d. Builders' machinery, tools, and equipment you own or that are entrusted to you, provided such property is Covered Property.
However, this limitation does not apply:
(1) If the property is located on or within 100 feet of the described premises, unless the premises is insured under the Builders Risk Coverage Form; or
(2) To Business Income coverage or to Extra Expense coverage.
3. The special limit shown for each category, a. through d., is the total limit for loss of or damage to all property in that category. The special limit applies to any one occurrence of theft, regardless of the types or number of articles that are lost or damaged in that occurrence. The special limits are:
a. $2,500 for furs, fur garments and garments trimmed with fur.
b. $2,500 for jewelry, watches, watch movements, jewels, pearls, precious and semi-precious stones, bullion, gold, silver, platinum and other precious alloys or metals. This limit does not apply to jewelry and watches worth $100 or less per item.
c. $2,500 for patterns, dies, molds and forms.
d. $250 for stamps, tickets, including lottery tickets held for sale, and letters of credit.
These special limits are part of, not in addition to, the Limit of Insurance applicable to the Covered Property.
This limitation, C.3., does not apply to Business Income coverage or to Extra Expense coverage.
4. We will not pay the cost to repair any defect to a system or appliance from which water, other liquid, powder or molten material escapes. But we will pay the cost to repair or replace damaged parts of fire extinguishing equipment if the damage:
a. Results in discharge of any substance from an automatic fire protection system; or
b. Is directly caused by freezing.
Analysis
Coverage for losses involving certain perils or certain kinds of property is further modified under special causes of loss form CP 10 30 by a set of “limitations.” These limitations rule out coverage for (1) damage to steam boilers, pipes, engines, or turbines caused by any “event” inside such steam equipment, while preserving coverage for explosion of fuel or gases in the furnace or flues of a fired vessel; (2) damage to water heating equipment from any event inside the equipment other than explosion; (3) loss to building interiors (and in the 1991 edition, loss to personal property in the building or structure) by rain, snow, sleet, ice, sand, or dust unless the exterior of the building is first damaged by any covered cause of loss or the damage itself is a result of thawing of snow, sleet, or ice on the building (this last provision regarding thawing of ice or snow spells out coverage in circumstances that have historically given rise to arguments under earlier property forms); (4) theft of building materials and supplies not attached to the building unless the property is held for sale by the insured (the exception does not apply when the special causes of loss form is attached to the builders' risk coverage form); (5) property that turns up missing when no physical evidence of what happened to it exists; (6) unauthorized transfer of covered property to a person or place outside the described premises (a limitation aimed principally at excluding computer fraud).
Certain categories of property are covered under special form CP 10 30 only with respect to building glass breakage (as a cause of loss) or one of the form's fourteen “specified causes of loss” (see following). These categories are: valuable papers and records; animals (and then only covered when the animal is killed or its destruction is made necessary by the covered cause of loss); fragile articles other than glass or containers of property held for sale; and builders' machinery, tools, and equipment owned by or entrusted to the named insured and away from the insured premises. (If this cause of loss form is attached to builders' risk coverage form CP 00 20, the limitation applies to builders' machinery, tools, and equipment whether the property is on or off the insured premises.)
A final set of limitations in special form CP 10 30 places maximum dollar amounts on recovery of specific kinds of property from specific perils.
Special form CP 10 30, unlike the basic and broad causes of loss forms, covers theft losses unless theft has been specifically excluded by endorsement (see below). For this reason, form CP 10 30 applies internal limits to the following property in the following amounts specifically with respect to theft: $2,500 on furs, including fur and fur-trimmed garments; $2,500 on jewelry, watches, precious metals, and similar property; $2,500 on patterns, dies, molds, and forms; and $250 on stamps, tickets, and letters of credit. The 1991 form edition clarifies that “tickets” includes lottery tickets held for sale. The question of whether “stamps” includes philatelic items or collections is not addressed (see Numismatic and Philatelic Property for discussion of this subject). Each of these categories of property may be more specifically insured under one of several commercial inland marine forms.
Special Form Coverage Extensions
E. Additional Coverage Extensions
1. Property In Transit. This Extension applies only to your personal property to which this form applies.
a. You may extend the insurance provided by this Coverage Part to apply to your personal property (other than property in the care, custody or control of your salespersons) in transit more than 100 feet from the described premises. Property must be in or on a motor vehicle you own, lease or operate while between points in the coverage territory.
b. Loss or damage must be caused by or result from one of the following causes of loss:
(1) Fire, lightning, explosion, windstorm or hail, riot or civil commotion, or vandalism.
(2) Vehicle collision, upset or overturn. Collision means accidental contact of your vehicle with another vehicle or object. It does not mean your vehicle's contact with the road bed.
(3) Theft of an entire bale, case or package by forced entry into a securely locked body or compartment of the vehicle. There must be visible marks of the forced entry.
c. The most we will pay for loss or damage under this Extension is $5,000.
This Coverage Extension is additional insurance. The Additional Condition, Coinsurance, does not apply to this Extension.
2. Water Damage, Other Liquids, Powder or Molten Material Damage. If loss or damage caused by or resulting from covered water or other liquid, powder or molten material damage loss occurs, we will also pay the cost to tear out and replace any part of the building or structure to repair damage to the system or appliance from which the water or other substance escapes. This Coverage Extension does not increase the Limit of Insurance.
3. Glass
a. We will pay for expenses incurred to put up temporary plates or board up openings if repair or replacement of damaged glass is delayed.
b. We will pay for expenses incurred to remove or replace obstructions when repairing or replacing glass that is part of a building. This does not include removing or replacing window displays.
This Coverage Extension, E.3., does not increase the Limit of Insurance.
Analysis
CP 10 30 offers coverage extensions to the insured dealing with property in transit, liquid damage, and glass.
The property in transit coverage applies to personal property covered under the commercial property form, and the coverage is limited to certain causes of loss and to a maximum of $5,000. If the insured wants an open perils type coverage for property in transit, an inland marine form needs to be purchased.
As for the liquid damage coverage extension, CP 10 30 offers to pay the cost to tear out and replace any part of the building or structure that is needed in order to repair the damage to the system or appliance from which the liquid escaped. So, if the damaged appliance is behind a wall in the covered building, this clause removes the uncertainty as to whether the insurer will pay to have the wall torn out when it is necessary to do so in order to get at the appliance and fix it.
The glass coverage extension notes that the insurer will pay for boarding up openings if repair or replacement of damaged glass is delayed. This is meant to lessen the threat that the interior of the covered building and property in the building will be damaged or lost.
The amounts paid under both the liquid damage extension and the glass extension are within the limits of insurance. The amount for the property in transit extension is in addition to the limits of insurance.
Definitions
F. Definitions
”Specified Causes of Loss” means the following: Fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage.
1. Sinkhole collapse means 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.
2. Falling objects does not include loss or damage to:
a. Personal property in the open; or
b. The interior of a building or structure, or property inside a building or structure, unless the roof or an outside wall of the building or structure is first damaged by a falling object.
3. Water damage means accidental discharge or leakage of water or ateam as the direct result of the breaking apart or cracking of any part of a system or appliance (other than a sump system including its related equipment and parts) containing water or steam.
Analysis
This definitions section is found on CP 10 30, the special form causes of loss. It may seem strange that an open perils coverage form lists a set of specified causes of loss. But, these specified cause of loss are used throughout CP 10 30 to clarify just what is covered or not covered.
For example, CP 10 30 excludes loss or damage caused by wear and tear or mechanical breakdown, but it will cover loss or damage caused by one of the specified causes of loss if the wear and tear or mechanical breakdown results in such a cause of loss. In other words, if the mechanical breakdown causes a fire or explosion, that damage is a covered cause of loss.
The limitations section of CP 10 30 declares that it will not pay for loss or damage to certain types of property—such as, valuable papers, animals, fragile articles—unless the loss or damage is caused by the specified causes of loss. For example, if the insured owns a fragile porcelain vase and it is damaged due to vandalism, CP 10 30 covers the loss. On the other hand, theft of the porcelain vase is not covered because theft is not one of the specified causes of loss.
The specified causes of loss come into play again under the collapse coverage section of CP 10 30. If any of those specified causes of loss cause the collapse of the covered building, the loss is covered.
Sinkhole collapse, falling objects, and water damage are all further defined in this section of CP 10 30 in order to clarify coverage questions.