Includes copyrighted material of Insurance Services Office, Inc., with its permission.
Reviewed August 11, 2011
ISO Commercial Property Program
Summary: All policies issued under the ISO commercial property program must include the Commercial Property Conditions Form CP 00 90 07 88. (The one exception is when the Mortgage Holders Errors and Omissions Form—CP 00 70 06 07—is the only coverage form under the commercial property coverage part. Form CP 00 70 itself includes the pertinent conditions.) Form CP 00 90 becomes part of a complete policy when added to a Declarations page, a Common Policy Conditions Form, (IL 00 17 11 98), a coverage form (such as the Building and Personal Property Form CP 00 10 06 07), and a causes of loss form (such as the CP 10 30 06 07). Following is a discussion of the conditions found in this form.
Topics covered:
Introduction
The commercial property conditions form CP 00 90 contains nine conditions. Although there are differences, most are either substantially identical to or are revised versions of conditions contained in the standard fire policy or in earlier editions of commercial property forms.
A.Concealment, Misrepresentation or Fraud
This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:
1.This Coverage Part;
2.The Covered Property;
3.Your interest in the Covered Property; or
4.A claim under this Coverage Part.
Analysis
This condition is similar to the concealment or fraud condition of the standard fire policy but with slightly different language that, when read alone, could prove to be more limiting of coverage. It voids coverage should the named insured commit a fraudulent act or if the named insured or any other insured intentionally conceals or misrepresents a material fact about the coverage, the covered property, a claim, or the named insured's interest in the property.
Reference to "any other insured" appeared for the first time in the 1988 edition of the form. The language does not state that the act of "any other insured" voids the policy only as to that individual. Conceivably, therefore, the act of any insured could void the policy as to all other insureds, including the named insured. A number of courts have interpreted the language "the insured" under the concealment, fraud, or neglect provisions of the standard fire policy as applying only to the individual insured guilty of the fraud, giving coverage to other innocent insureds.
Illinois appellate courts have found the "any insured" language ambiguous and have ruled in favor of the innocent insureds on this point. In State Farm Fire & Casualty Insurance Co. v. Micelli, 518 N.E.2d 357 (1987), the court found the policy ambiguous because it did not state that the policy would be void as to all insureds or only as to the guilty insured. The insurer argued that the named insureds could not recover when it appeared that their son, who lived with them, was involved in the theft and vandalism from which their claim arose. The court found that it was reasonable for the parents to assume that their rights and obligations were not dependent upon those of their children. The Micelli court quoted from another case involving almost identical language, West Bend Mutual Insurance Co. v. Salemi, 511 N.E.2d 785 (1987). The West Bend case involved a property seller who was named as "also insured" under the buyer's insurance in the sales contract. The insurer denied coverage to the seller due to the buyer's alleged arson, but the appellate court, using the reasoning later followed in Micelli, held that the innocent seller was not barred from recovery. See Arson—Recovery By Innocent Coinsureds for a discussion of recovery by innocent insureds in arson situations. See the Control of Property section in this article for further discussion of problems with interpretation.
Other federal court decisions have interpreted language similar to the ISO "any other insured" phrase in certain fire policies as "unambiguously" precluding coverage to innocent, as well as guilty, insureds. A Missouri case is illustrative, Employers Mutual Casualty Company v. Tavernaro, 4 F. Supp. 2d 868 (1998).
The Tavernaros owned a restaurant and were both named insureds on the businessowners policy (BOP) issued by Employers Mutual. The restaurant suffered a fire and Steve Tavernaro subsequently confessed to setting that fire. Tiffany attempted to collect the proceeds of the policy as an innocent coinsured because the issue had never been clearly decided either in court or in the legislature. However, the court cited previous decisions that the language "any other insured" was clear and unambiguous, thus barring her recovery.
It is important to note that the concealment, misrepresentation, or fraud condition works to void coverage whether the fraud, concealment, or misrepresentation occurs before or after a loss. The concept of "any time" was introduced in the 1988 edition of the form.
B.Control of Property
Any act or neglect of any person other than you beyond your direction or control will not affect this insurance.
The breach of any condition of this Coverage Part at any one or more locations will not affect coverage at any location where, at the time of loss or damage, the breach of condition does not exist.
Analysis
This condition provides that the acts of others not under the direction or control of the named insured will not affect coverage and that when more than one location is insured under the policy, the breach of any policy condition will affect coverage only with respect to the location where the breach occurred.
The control of property condition exempts (and protects) an innocent insured when damage results from the act or neglect of another person and that act or neglect relates to some control over the property. For example, if one insured negligently leaves a can of gasoline out and a fire results, another insured's coverage is not affected. However, the language of the control of property condition leaves open the question of whether an innocent insured's coverage remains unaffected by the "acts" of another insured when those "acts" involve concealment, misrepresentation, or fraud.
The language of the second part of the "control of property" condition states that the breach of any condition at one or more locations does not affect coverage at any location where the breach does not exist at the time of loss. Since there is no specific exemption regarding the fraud, misrepresentation, or concealment condition, it is reasonable to assume that the second part of the "control of property" condition applies equally to the fraud provision.
C.Insurance Under Two or More Coverages
If two or more of this policy's coverages apply to the same loss or damage, we will not pay more than the actual amount of the loss or damage.
Analysis
This condition prevents more than one coverage under a single policy from making available double recovery in the event of loss, which would violate the principle of indemnity. It stipulates that, in such a case, the actual amount of loss or damage will be the maximum the policy will pay.
D.Legal Action Against Us
No one may bring a legal action against us under this Coverage Part unless:
1.There has been full compliance with all of the terms of this Coverage Part; and
2.The action is brought within 2 years after the date on which the direct physical loss or damage occurred.
Analysis
If the insured wishes to bring suit against the insurer, the insured must first be in full compliance with the terms of the policy. Furthermore, such an action must be brought within two years following the loss or damage (not two years after a formal denial of the claim). Earlier policies that incorporated the standard fire policy language gave the insured one year in which to bring suit.
E.Liberalization
If we adopt any revision that would broaden the coverage under this Coverage Part without additional premium within 45 days prior to or during the policy period, the broadened coverage will immediately apply to this Coverage Part.
Analysis
Any liberalization of coverage produced by a revision of the commercial property coverage part that is introduced during the policy period or in the forty-five days preceding its inception will immediately apply to the insured's unrevised policy, as long as the revision does not entail any extra premium. This provision is standard in many insurance forms.
F.No Benefit to Bailee
No person or organization, other than you, having custody of Covered Property will benefit from this insurance.
Analysis
In other words, the policy will not cover the liability of a bailee for property in the bailee's possession. Again, this provision is common to many insurance forms.
G.Other Insurance
1.You may have other insurance subject to the same plan, terms, conditions and provisions as the insurance under this Coverage Part. If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.
2.If there is other insurance covering the same loss or damage, other than that described in 1. above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.
Analysis
The condition does not state that the insured cannot have other insurance. Rather, many insureds with commercial property to insure will carry more than one policy or more than one company will insure a specific risk. The other insurance condition recognizes this but reduces all situations in which other insurance might apply to two: (1) the existence of other insurance written with the same plan, terms, conditions, and provisions as the commercial property policy, in which case the policy responds pro rata by limits; and (2) the existence of other insurance written on any other basis, in which case the policy responds as excess insurance, even if the insured is unable to collect under the other policy.
H.Policy Period, Coverage Territory
Under this Coverage Part:
1.We cover loss or damage commencing:
a.During the policy period shown in the Declarations; and
b.Within the coverage territory.
2.The coverage territory is:
a.The United States of America (including its territories and possessions);
b.Puerto Rico; and
c.Canada.
Analysis
To be covered under the commercial property policy, loss or damage must begin during the policy period shown in the declarations. (This condition may be superseded when earthquake insurance is included in the policy. See Causes of Loss Forms. Loss must also commence within the coverage territory: the United States (including its territories and possessions), Canada, and Puerto Rico.
I.Transfer of Rights of Recovery Against Others to Us
If any person or organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them. But you may waive your rights against another party in writing:
1.Prior to a loss to your Covered Property or Covered Income.
2.After a loss to your Covered Property or Covered Income only if, at time of loss, that party is one of the following:
a.Someone insured by this insurance;
b.A business firm:
(1)Owned or controlled by you; or
(2)That owns or controls you; or
c.Your tenant.
This will not restrict your insurance.
Analysis
This condition defines the insurer's subrogation rights under the policy, which arise when the insurer makes a payment to or for "any person or organization." The provision preserves the insurer's subrogation rights with respect to third parties who might recover for a loss under the policy—a mortgagee or bailor, for instance. It clarifies that the insurer takes over the subrogation rights of not only the named insured, but also of any third-party claimant but only to the extent of any payment made to that third party.
The insured's right to waive possible recovery against third parties is retained if the waiver is made before a loss or after a loss, when the third party is another insured, a business owned or controlled by the insured or owning or controlling the insured, or a tenant of the insured. Whether the insured waives or retains possible recovery against third parties, the insurance coverage is not restricted.