Summary: Coverage for losses resulting from vandalism or sprinkler leakage is automatically included when the commercial property basic form CP 10 10 06 07, broad form CP 10 20 06 07, or special form CP 10 30 06 07 is attached to the CP 00 10 06 07. But in some instances, the insurer may elect to exclude these coverages.
Coverage for loss resulting from radioactive contamination may be added to a commercial property policy by endorsement.
The following discussion looks at the coverages, limitations of coverage, and any exclusions for vandalism and sprinkler leakage, and the coverage provided by the endorsement for radioactive contamination.
In the past, coverage for vandalism, sprinkler leakage, and radioactive contamination was usually added to standard fire policies by means of separate endorsements, since they were considered extended coverages. Currently, vandalism and sprinkler leakage insurance are provided automatically on the commercial building and personal property coverage form CP 00 10 when the basic form causes of loss CP 10 10, broad form causes of loss CP 10 20, or the special form CP 10 30 is attached. Radioactive contamination coverage, on the other hand, can be purchased by the insured through the use of an endorsement, CP 10 37 10 00.
Obviously, most insureds do not need coverage for radioactive contamination. To include it automatically in the commercial property forms would make coverage extremely expensive. Therefore, it is effectively excluded from most property insurance contracts by one or more standard exclusions referred to as nuclear hazard exclusions.
The term vandalism is defined on the basic and broad causes of loss forms as "willful and malicious damage to or destruction of the described property." In order for a loss to be considered vandalism, both intent (willful) and motive (malice) must be established. Vandalism does not include loss or damage caused by or resulting from theft, except for building damage caused by the burglars breaking in or exiting.
These two limitations on vandalism may need to be explained to a client. For example, a child's hitting a baseball through a window causes damage, but unless the child hit the ball intentionally through the window, it is not vandalism. The second limitation is somewhat more complicated due to the possible difficulty of separating damage resulting from theft from damage caused by vandalism. It is clear that if a burglar breaks a door in order to get into the insured building, the vandalism clause will apply; however, if that burglar rips up a floorboard looking for something of value to steal, such damage does not fall within the vandalism peril.
Remember, the vandalism peril, with its limitations of coverage, appears in the basic and broad form causes of loss (CP 10 10 and CP 10 20). The special form causes of loss (CP 10 30) covers a loss such as that above simply because there is no applicable exclusion or limitation.
The current building and personal property form (CP 00 10) states that if the building where loss or damage occurs has been vacant for more than sixty consecutive days before the loss, the insurer will not pay for any loss or damage caused by vandalism. Buildings under construction are specifically exempt from this vacancy provision. When the policyholder owns the building, the entire building is considered vacant if 70 percent or more of its square footage is not rented, or is not used to conduct customary operations. If the policyholder is a tenant, that part of the building rented or leased to the tenant is considered vacant when it does not contain enough business personal property to conduct customary operations.
Vandalism can be excluded by use of endorsement CP 10 55 06 07, vandalism exclusion. This endorsement is an underwriting tool to be used if the vandalism exposure is too severe under an underwriter's guidelines. Vandalism as a cause of loss or damage of the described property is deleted wherever it appears. In the CP 10 20 broad form causes of loss, vandalism is deleted as a cause of loss in the additional coverage of collapse. When the form is attached to the CP 10 30 causes of loss special form, vandalism as a covered cause of loss also is excluded for property in transit (additional coverage extension) and as a specified cause of loss.
All causes of loss forms—basic, broad, and special—provide sprinkler leakage coverage. Loss resulting from direct damage to insured property, real or personal, caused by leakage or discharge of any substance from an automatic sprinkler system, is covered. That the damage may be caused by any substance leaking from a sprinkler system is important, since many modern fire extinguishing systems do not contain water. Many systems today contain dry chemicals or carbon dioxide, so if the coverage referred only to leakage of water there would be a gap in coverage.
Loss or damage resulting from collapse of a tank that is part of the system is also covered. Since many system tanks are located on the roof of a building, this coverage is important. Water weighs 8.33 pounds per gallon (at 20 degrees Celsius; 68 degrees Fahrenheit), so a water tank filled with 50,000 gallons of water weighs at least 208 tons—208 tons for the water plus the weight of the tank itself.
A sprinkler leakage loss, to be covered, need not occur from sprinkler systems under the insured's control or even on the premises of the insured. So, damage from sprinkler systems maintained by the landlord, if the insured is a tenant, or by other tenants, or even damage from sprinkler leakage in another building is covered. Covered as well is the cost to repair or replace damaged parts of the insured's system, plus the cost of tearing out and replacing part of the building in order to repair damage to the sprinkler system.
The vacancy clause in the building and personal property form affects sprinkler leakage coverage. If the building where loss occurs has been vacant for more than 60 consecutive days before a loss, the insurer will not pay for damage due to sprinkler leakage unless the named insured has protected the system against freezing.
Coverage is provided automatically on the causes of loss forms, but it can be excluded by use of an endorsement, CP 10 56 06 07 sprinkler leakage exclusion. An underwriter may determine that the exposure is too great, and attach this endorsement. Sprinkler leakage is thus deleted in the basic, broad, and special forms as a covered cause of loss. However, in the special form, the cost to repair damaged parts of fire extinguishing equipment is covered provided the damage was caused by freezing and the insured did his or her best to maintain heat in the building.
Coverage for sprinkler loss or damage caused by earthquake or volcanic eruption, explosion or effusion may be arranged by attaching endorsement CP 10 39 07 88 sprinkler leakage—earthquake extension.
Radioactive contamination coverage is secured through endorsement CP 10 37 10 00. This endorsement offers coverage for limited radioactive contamination or broad contamination. Radioactive contamination is defined on the form as "direct physical loss or damage caused by sudden and accidental radioactive contamination, or resultant radiation damage to the described property."
The endorsement is intended for use for those organizations that have a radioactive contamination exposure on their premises other than a nuclear reactor. (Those facilities are insured under nuclear energy policies.) Research facilities and hospitals that use radioactive material may thus obtain coverage that would otherwise be eliminated by the nuclear hazard exclusion. Time element coverage is included in the coverage.
Two alternatives are possible. First, section A. limited radioactive contamination covers contamination that results from a covered cause of loss. For example, if a fire on an insured premises burns away a lining that guards some radioactive material and this results in contamination of the insured building, this coverage applies to the loss caused by the radioactive contamination.
Section B. broad radioactive contamination treats contamination as a covered peril in itself. The broad radioactive contamination clause applies to direct physical loss or damage caused by sudden and accidental radioactive contamination or resultant radiation damage to the described property. Therefore, no intermediate other cause of loss, such as fire, is required to trigger the coverage under this section of the endorsement.
If the described premises contains a nuclear reactor or new or used nuclear fuel, neither the limited nor broad radioactive contamination coverage applies. Loss resulting from radioactive material not located at the described premises is not covered. Section A. limited radioactive coverage may not be used with the special causes of loss form CP 10 30.