Summary: ISO is revising the commercial property Earthquake rules, Rules 73. Causes of Loss – Earthquake Form and Rule 75. Earthquake And Volcanic Eruption Endorsement (Sub-Limit Form). The rules are revised in connection with the new soft story rating factor in the ISO CLM that was recently introduced for commercial property. At the time the soft story factor was implemented it did not apply to earthquake coverage when the building has a soft story. The earthquake rules are now being revised to include a soft story modification factor. The proposed effective date of the revisions is 8/1/23.
Soft Story:
Soft story refers to a particularly weak, flexible or otherwise vulnerable ground floor, most common in older, wood-frame, multi-story buildings. A soft story often features relatively large window and door openings and has fewer partitions (less bracing) than the overlying levels. Examples of structures with a soft story include an apartment building with storefronts on the ground floor or a house with the living space constructed over the garage.
Soft story modification factors will not apply to buildings retrofitted or engineered to mitigate the seismic effects of soft story.
Rule 73 Revisions:
The cause of loss earthquake applies to all buildings and special structures in the course of construction, regardless of earthquake building class.
Special structures, radio and TV towers (steel) that do not exceed 75 feet in height located on buildings now references the building class and building deductible in lieu of an equivalent building class and base deductible.
Included in the revision are numerous editorial changes.
Rule 75 Revisions:
The rules include personal rate grades to select from with respect to property and personal property to be included in the calculation of the applicable earthquake coverage loss costs. A sprinkler factor may also be applied, as applicable.
The soft-story modification factors to be used in rating for the earthquake and volcanic eruption sub-limit endorsement are in Table 73.E.1.a.(2). At time of issue, the factors are 1.42 Building, 1.28 Personal Property, to be applied to the building and personal property rate.
The order in determining the earthquake and volcanic eruption sub-limit coverage rate is changed by applying the deductible/sub-limit factor after all other applicable rating factors have been applied, rather than prior to. As the factors are all multiplicative, this does not affect the result. Thus, to obtain the building and personal property rates for Earthquake And Volcanic Eruption Sub-limit Coverage, multiply the result after applying all other rating factors by the appropriate deductible/sub-limit factor The sub-limit percentage is the insurance-to-value ratio underlying the limit of insurance on the property.
Included in the revision are numerous editorial changes.
Earthquake and Volcanic Eruption Coverage endorsements CP 10 28 02 19 and CP 10 29 02 19 are not being changed at this time.
Includes copyrighted material of Insurance Services Office, Inc., with its permission.