Summary: Insurance Services Offices (ISO) under the simplified commercial property program provides for the particular needs of commercial condominium unit owners under a separate coverage form, CP 00 18 10 12. The form is available for business or professional firms that own commercial condominium units. The form closely follows the Building and Personal Property Coverage form, CP 00 10 10 12, but is modified to fit the needs of commercial condominium unit owners. In addition, ISO has provided an optional endorsement, form CP 04 18 10 12, offering loss assessment coverage and miscellaneous real property coverage.
Following is a discussion of the current form, with differences from the previous form and the CP 00 10 noted.
Topics covered:
Covered property Property not covered Extensions of coverage Condominium association insurance Loss assessment coverage Miscellaneous real property coverage
Introduction
As with other commercial coverage forms in ISO's commercial property program, the Condominium Commercial Unit-Owners Coverage Form, CP 00 18 10 12, is used in conjunction with policy declarations, common policy conditions, commercial property conditions, one of three causes of loss forms, and any other desired endorsements, to produce a monoline property policy. The same forms, along with appropriate declarations, conditions, and coverage for other kinds of property and casualty coverage are added to form a package policy, in any combination desired. This article analyzes the CP 00 18 form, the differences from form CP 00 10, and discusses the Condominium Commercial Unit-Owners Optional Coverages endorsement, CP 04 18 10 12. (For a discussion of form CP 00 10, see Building and Personal Property Coverage Form.
Covered Property
1.Covered Property
Covered Property, as used in this Coverage Part, means the following type of property described in this section, A.1., and limited in A.2., Property Not Covered, if a Limit Of Insurance is shown in the Declarations for that type of property.
a.Your Business Personal Property consists of the following property located in or on the building or structure described in the Declarations or in the open (or in a vehicle) within 100 feet of the building or structure or within 100 feet of the premises described in the Declarations, whichever distance is greater:
(1)Furniture;
(2)Fixtures, improvements and alterations making up part of the building and owned by you;
(3)Machinery and equipment;
(4)”Stock”;
(5)All other personal property owned by you and used in your business;
(6)Labor, materials or services furnished or arranged by you on personal property of others;
(7)Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Personal Property of Others.
b.Personal Property of Others, that is:
(1)In your care, custody or control; and
(2)Located in or on the building or structure described in the Declarations or in the open (or in a vehicle) within 100 feet of the building or structure or within 100 feet of the premises described in the Declarations, whichever distance is greater.
However, our payment for loss of or damage to personal property of others will only be for the account of the owner of the property.
Analysis
There are two principal areas of difference between forms CP 00 18 and CP 00 10. First are the adaptations to the needs of condominium ownership, and second, elimination of building coverage for the unit owner (except for coverage of building fixtures, improvements, and alterations owned by the unit owner). This arrangement recognizes that insurance on the unit owner's building is generally provided by the condominium association rather than the individual unit owner.
Three provisions that relate to the insured's status as condominium unit owner, not found in form CP 00 10, are added to form CP 00 18. First, under covered property, the definition of business personal property includes as item 1.a.(2) “Fixtures, improvements and alterations making up part of the building and owned by you.” The intent is to extend the personal property coverage to any portions of the unit itself that the condominium declarations set out as solely owned by the unit owner and that are not insured by the association. Portions solely owned by the unit owner but required by the condominium association agreement to be insured by the association, although seemingly included for coverage under item (2) are excluded by property not covered item l., as discussed later.
In cases of bare walls ownership by the unit owners in common, the unit owner may be sole owner of and be responsible for insuring the entire interior of the unit inside the unfinished exterior walls, floor, and ceiling of the unit. The form extends the personal property item to include this property and in the process makes the value of this property, along with the unit owner's personal property, subject to the coinsurance provision. It is important in writing property insurance for a commercial unit owner that the unit owner's responsibility for insuring any portion of the building is identified and its value taken into account in fixing the limit of insurance.
The CP 00 18, through use of the CP 19 10 06 95, Your Business Personal Property – Separation of Coverage, allows the insured to schedule contents and stock as separate items.
h.Electronic data, except as provided under the Additional Coverage, Electronic Data. Electronic data means information, facts or computer programs stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software), on hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other repositories of computer software which are used with electronically controlled equipment. The term computer programs, referred to in the foregoing description of electronic data, means a set of related electronic instructions which direct the operations and functions of a computer or device connected to it, which enable the computer or device to receive, process, store, retrieve or send data. This paragraph, h., does not apply to your “stock” of prepackaged software, or to electronic data which is integrated in and operates or controls the building's elevator, lighting, heating, ventilation, air conditioning or security system;
Analysis
The 2012 edition of the form broadened coverage by excluding “electronic data which is integrated in and operates or controls the building's elevator, lighting, heating, ventilation, air conditioning or security system” from property not covered in section h. Electronic data.
A second modification in the unit owners form is insertion of item l. in “property not covered.”
l.Any of the following types of property contained within a unit, regardless of ownership, if your Condominium Association Agreement requires the Association to insure it:
(1)Fixtures, improvements and alterations that are a part of the building; and
(2)Appliances, such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security or housekeeping.
Analysis
This excludes from coverage fixtures, improvements, and alterations that are a part of the building (the same property described as insured if owned by the unit owner in personal property item (2)) and appliances “such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security, or housekeeping,” when the condominium association agreement requires that such property be insured by the association. This provision is an absolute exclusion and applies even when the association insurance is not properly written and does not, in fact, provide the coverage required by the agreement.
4. Additional Coverages
a. Debris Removal
(1)Subject to Paragraphs (2), (3) and (4), we will pay your expense to remove debris of Covered Property and other debris that is on the described premises, when such debris is caused by or results from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date of direct physical loss or damage.
(2)Debris Removal does not apply to costs to:
(a)Remove debris of property of yours that is not insured under this policy, or property in your possession that is not Covered Property;
(b)Remove any property that is Property Not Covered, including property addressed under the Outdoor Property Coverage Extension;
(c)Remove property of others of a type that would not be Covered Property under this Coverage Form;
(d)Remove deposits of mud or earth from the grounds of the described premises;
(e)Extract “pollutants” from land or water; or
(f)Remove, restore or replace polluted land or water.
(3)Subject to the exceptions in Paragraph (4), the following provisions apply:
(a)The most we will pay for the total of direct physical loss or damage plus debris removal expense is the Limit of Insurance applicable to the Covered Property that has sustained loss or damage.
(b)Subject to (a) above, the amount we will pay for debris removal expense is limited to 25% of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage. However, if no Covered Property has sustained direct physical loss or damage, the most we will pay for removal of debris of other property (if such removal is covered under this Additional Coverage) is $5,000 at each location.
(4)We will pay up to an additional $25,000 for debris removal expense, for each location, in any one occurrence of physical loss or damage to Covered Property, if one or both of the following circumstances apply:
(a)The total of the actual debris removal expense plus the amount we pay for direct physical loss or damage exceeds the Limit of Insurance on the Covered Property that has sustained loss or damage.
(b)The actual debris removal expense exceeds 25% of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage. Therefore, if (4)(a) and/or (4)(b) applies, our total payment for direct physical loss or damage and debris removal expense may reach but will never exceed the Limit of Insurance on the Covered Property that has sustained loss or damage, plus $25,000.
Analysis
The debris removal additional coverage was revamped in the 2012 edition of the form. Not only is the removal of debris of covered property covered, but other debris on the described premises is included, as well. This broadening of coverage has required the additional coverage to be more specific, adding four items to the list describing to what debris removal cost does not apply: removal of the insured's debris that are not insured under the policy or that is in the insured's possession that is not covered property; removal of property classified as property not covered; removal of property of others of that type of property would not be covered under the form; and removal of deposits of mud or earth from the grounds.
The 2012 form also saw an increase in the limit under this additional coverage—from $10,000 to $25,000. The examples were updated to include the new limit. The limit for the removal of property of others is $5,000.
g.Business Personal Property Temporarily In Portable Storage Units
(1)You may extend the insurance that applies to Your Business Personal Property to apply to such property while temporarily stored in a portable storage unit (including a detached trailer) located within 100 feet of the building or structure described in the Declarations or within 100 feet of the premises described in the Declarations, whichever distance is greater.
(2) If the applicable Covered Causes of Loss form or endorsement contains a limitation or exclusion concerning loss or damage from sand, dust, sleet, snow, ice or rain to property in a structure, such limitation or exclusion also applies to property in a portable storage unit.
(3)Coverage under this Extension:
(a)Will end 90 days after the business personal property has been placed in the storage unit;
(b)Does not apply if the storage unit itself has been in use at the described premises for more than 90 consecutive days, even if the business personal property has been stored there for 90 or fewer days as of the time of loss or damage.
(4)Under this Extension, the most we will pay for the total of all loss or damage to business personal property is $10,000 (unless a higher limit is indicated in the Declarations for such Extension) regardless of the number of storage units. Such limit is part of, not in addition to, the applicable Limit of Insurance on Your Business Personal Property. Therefore, payment under this Extension will not increase the applicable Limit of Insurance on Your Business Personal Property.
(5)This Extension does not apply to loss or damage otherwise covered under this Coverage Form or any endorsement to this Coverage Form or policy, and does not apply to loss or damage to the storage unit itself.
Analysis
ISO added a coverage extension for business personal property in storage units with the 2012 revision. The coverage is provided for ninety days for property temporarily stored in a portable storage unit located within one hundred feet of the described premises. The limit is $10,000, regardless of the number of storage units, but the limit can be increased if a different amount is entered in the declarations.
The CP 00 18 omits references to building, not only in the coverage extensions, but in the valuation clause as well. One effect of this omission is to make the fixtures, improvements, and alterations coverage apply to real property items not usually covered by building insurance, such as costs of excavation, underground foundations, flues, pipes and drains, and piers or wharves, if a part of the building. The value of all such property owned by the unit owner (and not required under the association agreement to be insured by the association) is subject to the coinsurance clause, if it applies.
Condominium Association Insurance
3.Condominium Association Insurance
The Condominium Association may have other insurance covering the same property as this insurance. This insurance is intended to be excess, and not to contribute with that other insurance.
Analysis
The third difference between form CP 00 18 and CP 00 10 is insertion of loss condition 3, condominium association insurance. This clause provides that when the condominium association has insurance covering the same property covered by the unit owner's policy, the unit owner's insurance is excess over and not contributory with the association insurance. This provision seems to conflict with property not covered item l., discussed in earlier. The only kind of property to which condition three could apply, in light of item k., is property the association is not required to insure by the association agreement but which is nonetheless also insured by the association. Presumably, if the association agreement is silent as to insurance, and the requirement to insure is found in the bylaws or by action of the condominium unit owners, officers, or board of directors, then condition three rather than item l. applies.
Endorsement form CP 04 18, Condominium Commercial Unit-Owners Optional Coverages, is available for use by commercial unit owners to add loss assessment coverage or miscellaneous real property coverage or both to the condominium commercial unit owners coverage.
Item A. of endorsement CP 04 18, the loss assessment coverage, is limited to liability for assessments charged to all unit owners arising out of insufficiency of the association's property insurance, and only from causes of loss covered by the unit owner's property insurance. The loss must be to property in which each unit owner has an undivided ownership interest, and the assessment must be made within the policy period shown in the unit owners declarations. Condominium ownership typically includes an undivided fractional interest in common areas as well as ownership of the unit itself, so coverage would apply in the case of assessments pertaining to common areas.
The loss assessment coverage can be purchased with a limit of $1,000 or multiples of $1,000, but there is a fixed $1,000 limit per unit on liability for assessments resulting from a deductible in the association's coverage. This coverage has a $250 deductible for each unit insured per occurrence. A unit owner may own and insure more than one unit; the deductible applies separately to each.
Miscellaneous Real Property Coverage
Endorsement CP 04 18 may also be used to insure miscellaneous real property.
Item B. of endorsement CP 04 18 covers miscellaneous real property subject to a separate limit of insurance. This coverage is intended to insure real property items other than those that are covered as a part of the personal property. It also provides excess coverage on miscellaneous real property items pertaining to the unit when these items are insured by the condominium association.
Miscellaneous real property is defined as “condominium property that is not included under Your Business Personal Property.” The property must pertain to the insured's condominium unit only and that the insured has a duty to insure according to the condominium association agreement. Examples of the kinds of property for which this coverage can be used include structures in an outside area of the unit, or even in a common area, if owned by the unit owner and used exclusively for that unit.
The real property items listed as property not covered in form CP 00 10 are not excluded from coverage in the miscellaneous real property coverage. Thus, there is coverage for any real property items that pertain to the unit, including those items customarily excluded from building coverage, as discussed earlier.