Includes copyrighted material of Insurance Services Office, Inc., with its permission.
Reviewed August 10, 2011
Summary: The Common Policy Conditions form, IL 00 17 11 98, of the ISO simplified-language commercial property program contains six conditions that must be incorporated into any policy written under the program and that apply to all the policy's coverages. Most of these common policy conditions are restatements, modified in varying degrees, of provisions of the standard fire policy.
Topics covered:
Cancellation
1.The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.
2.We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:
a.10 days before the effective date of cancellation if we cancel for nonpayment of premium; or
b.30 days before the effective date of cancellation if we cancel for any other reason.
3.We will mail or deliver our notice to the first Named Insured's last mailing address known to us.
4.Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.
5.If this policy is cancelled, we will send the first Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.
6.If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
Either the insurer or the insured may cancel the policy by giving the other advance written notice. The notice may be mailed or delivered directly to the other party. If the insurer mails notice, proof of mailing is proof of notice. If the insurer cancels, it must give at least ten days notice when the cause is nonpayment of premium and thirty days for cancellation on any other grounds.
The insured receives a pro rata premium refund when the policy is cancelled by the insurer. For cancellation by the insured, the cancellation condition provides merely that any premium refund "may be less than pro rata." This language allows the insurer to use a short rate table to set the amount of premium refund on a policy cancelled by the insured. Many insurers cancel at pro rata less 10 percent for a cancellation requested by the insured. Cancellation is effective even if the insurer has not made or offered a refund.
Dealings between insurer and insured with respect to cancellation (and certain other matters—see following) are to be carried out by "the first Named Insured shown in the Declarations" when more than one insured is named in the policy. It is the first named insured who must mail or deliver notice of cancellation to the insurer and to whom the insurer mails or delivers the cancellation notice (at the last mailing address known to the insurer). Premium refund is also made to the first named insured.
This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy.
Analysis
This condition stipulates that any changes in the terms of the policy can be made only by endorsement issued by the insurer. Requests for changes on the insured's part must be made by the "first named insured."
We may examine and audit your books and records as they relate to this policy at any time during the policy period and up to three years afterward.
Analysis
This condition gives the insurer the right to audit books and records of the insured relating to the policy. The examination or audit may be made during the policy period or any time within three years after the policy period ends.
1.We have the right to:
a.Make inspections and surveys at any time;
b.Give you reports on the conditions we find; and
c. Recommend changes.
2.We are not obligated to make any inspections, surveys, reports or recommendations and any such actions we do undertake relate only to insurability and the premiums to be charged. We do not make safety inspections. We do not undertake to perform the duty of any person or organization to provide for the health or safety of workers or the public. And we do not warrant that conditions:
a.Are safe or healthful; or
b.Comply with laws, regulations, codes or standards.
3.Paragraphs 1. and 2. of this condition apply not only to us, but also to any rating, advisory, rate service or similar organization which makes insurance inspections, surveys, reports or recommendations.
4.Paragraph 2. of this condition does not apply to any inspections, surveys, reports or recommendations we may make relative to certification, under state or municipal statutes, ordinances or regulations, of boilers, pressure vessels or elevators.
Analysis
This condition gives the insurer the right (but does not impose any obligation) to conduct inspections, surveys, reports, and to make recommendations relating to insurability and premiums to be charged. This condition does not place the insurer (or any rating, advisory, or similar organization making inspections under the policy) in the position of warranting that conditions connected with the insured's operations are safe or healthful or that the insured is in compliance with legal requirements that may pertain to those operations.
The insurer does accept something of a role as safety inspector when it comes to the inspection and certification of boilers, pressure vessels, and elevators. Since paragraph 2 of this condition does not apply to inspections of and recommendations for boilers and pressure vessels and elevators, the insurer is telling the insured that it will make safety inspections of the named items and that safety recommendations, if any, will be made. If the insurer is going to certify to the safety of boilers and elevators, it certainly will make recommendations to the insured to bring such items up to state or municipal legal standards; otherwise, the insurer could be held liable for any injuries or damages that might occur should a boiler blow up or an elevator fall.
The first Named Insured shown in the Declarations:
1.Is responsible for the payment of all premiums; and
2.Will be the payee for any return premiums we pay.
Analysis
This condition specifies that responsibility for payment of premiums under the policy (as well as receipt of premium refunds as discussed above) rests with "the first Named Insured shown in the Declarations."
Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.
If you die, your rights and duties will be transferred to your legal representative but only while acting within the scope of duties as your legal representative. Until your legal representative is appointed, anyone having proper temporary custody of your property will have your rights and duties but only with respect to that property.
Analysis
The insurer's written consent is required for any transfer to another person of the insured's rights and duties under the policy. The single exception to this requirement of written consent is transfer to a legal representative upon the death of an individual named insured. In such cases, the legal representative exercises the deceased insured's rights and duties while acting as legal representative. Until a legal representative is appointed, rights and duties of the deceased insured with respect to the deceased insured's property pass to anyone having "proper temporary custody" of that property.