Exclusions, limitations, and related provisions

Additional coverage and coverage extensions

Limit of insurance

Deductible

Other insurance

Additional Covered Cause of Loss

The Flood Coverage Endorsement, CP 10 65 10 12, provides an additional covered cause of loss that is added to the covered causes of loss section of the commercial property causes of loss forms—flood.

C. Additional Covered Cause Of Loss 

The following is added to the Covered Causes of Loss: 

Flood, meaning a general and temporary condition of partial or complete inundation of normally dry land areas due to:  

1. The overflow of inland or tidal waters;  

2. The unusual or rapid accumulation or runoff of surface waters from any source; or  

3. Mudslides or mudflows which are caused by flooding as defined in C.2. above. 

For the purpose of this Covered Cause of Loss, a mudslide or mudflow involves a river of liquid and flowing mud on the surface of normally dry land areas as when earth is carried by a current of water and deposited along the path of the current. 

All flooding in a continuous or protracted event will constitute a single flood.

Analysis 

Flood is defined as a general and temporary condition of partial or complete inundation of normally dry land areas due to several factors: the overflow of inland or tidal waters, the unusual or rapid accumulation or runoff of surface waters from any source, or mudslides or mudflows that are caused by flooding. For the purposes of this covered cause of loss, a mudslide or mudflow involves a river of liquid and flowing mud on the surface of normally dry land areas as when earth is carried by a current of water and deposited along the path of the current.

The endorsement states that all flooding in a continuous or protracted event will constitute a single flood.

The term flood is defined in a fairly understandable way and it is clear that all flooding, even one that lasts several days or weeks and continues to wreak havoc is supposed to be considered one flood, that is, one loss.

 Exclusions, Limitations, and Related Provisions

D. Exclusions, Limitations And Related Provisions  

1. The Exclusions and Limitation(s) sections of the Causes Of Loss form (and the Exclusions section of the Mortgageholders Errors And Omissions Coverage Form and the Standard Property Policy) apply to coverage provided under this endorsement except as provided in D.2. and D.3. below. 

 2. To the extent that a part of the Water Exclusion might conflict with coverage provided under this endorsement, that part of the Water Exclusion does not apply.  

3. To the extent that a tsunami causes the overflow of tidal waters, the exclusion of earthquake, in the Earth Movement Exclusion, does not apply.  

4. The Ordinance Or Law Exclusion in this Coverage Part continues to apply with respect to any loss under this Coverage Part including any loss under this endorsement, unless Ordinance Or Law Coverage is added by endorsement.

Analysis

The exclusions, limitations, and related provisions part of CP 10 65 modifies some commercial property exclusions and limitations and adds exclusions specifically pertaining to flood claims.

This section states that the exclusions and limitations sections of the causes of loss form and the exclusions section of the Mortgageholders Errors and Omissions Coverage form and the Standard Policy apply to the coverage provided by CP 10 65 except when modified by the provisions that follow in this section of the endorsement.

If part of the water exclusion conflicts with the coverage provided by the endorsement, that part of the water exclusion does not apply. Likewise, if a tsunami causes the overflow of tidal waters, the earthquake portion of the earth movement exclusion does not apply. The ordinance or law exclusion continues to apply with respect to any loss under the coverage part, including losses under the endorsement, unless an ordinance or law coverage endorsement is added.

5. The following exclusions and limitations are added and apply to coverage under this endorsement:  

a. We will not pay for any loss or damage caused by or resulting from any Flood that begins before or within 72 hours after the inception date of this endorsement. However, this limitation does not apply to a particular location if Flood coverage was in effect for that location for at least 72 hours immediately prior to the inception date of this endorsement, under a policy issued by us or by another insurer, and this policy replaces the previous policy without a lapse in coverage. If you request and we provide an increase in the stated Limit of Insurance for Flood during the term of this policy, with the exception of an increase at the time of renewal of the policy, the increase will not apply to loss or damage from any Flood that begins before or within 72 hours after your request was made.

 If the Flood is due to the overflow of inland or tidal waters, then the Flood is considered to begin when the water first overflows its banks. 

b. We will not pay for loss or damage caused by or resulting from destabilization of land arising from the accumulation of water in subsurface land areas.  

c. Under this Coverage Part, as set forth under Property Not Covered in the Coverage Form to which this endorsement is attached, land is not covered property, nor is the cost of excavations, grading, backfilling or filling. Therefore, coverage under this endorsement does not include the cost of restoring or remediating land due to the collapse or sinking of land caused by or resulting from Flood. However, coverage under this endorsement includes damage to the covered portions of the building and to covered personal property, caused by collapse or sinking of land along the shore of a body of water as the result of erosion or undermining caused by waves or currents of water which exceed the cyclical levels and cause Flood.  

d. We do not cover loss or damage by Flood to personal property in the open except to the extent that such coverage, if any, is specified in the Flood Coverage Schedule or in the Declarations.  

e. Property Not Covered, in the Coverage Form to which this endorsement is attached, is amended and supplemented as follows with respect to Flood Coverage:  

(1) Property Not Covered includes any building or other property that is not eligible for flood insurance pursuant to the provisions of the Coastal Barrier Resources Act, 16 U.S.C. 3501 et seq. and the Coastal Barrier Improvement Act of 1990, Pub. L. 101-591, 16 U.S.C. 3501 et seq.  

(2) Property Not Covered includes boat houses and open structures, and any property in or on the foregoing, if the structure is located on or over a body of water. 

 (3) If bulkheads, pilings, piers, wharves, docks, or retaining walls that are not part of a building, have been removed from Property Not Covered and added as Covered Property by separate endorsement, this Flood Coverage Endorsement does not apply to such property. 

(4) The following are removed from Property Not Covered and are therefore Covered Property:  

(a) Foundations below the lowest basement floor or the subsurface of the ground; and  

(b) Underground pipes, flues and drains.  

f. We will not pay for loss or damage caused by discharge of water or waterborne material from a sewer, drain or sump unless such discharge results from Flood and occurs within 72 hours after the Flood recedes.

The insurer will not pay for any loss or damage caused by or resulting from any flood that begins before or within seventy-two hours after the inception date of this endorsement. If a particular location was insured under another policy for at least seventy-two hours prior to the inception date of the endorsement, and that coverage was replaced by this endorsement, the limitation does not apply. If the insured requests an increase in the flood limit of insurance during the term of the policy, with exception to a request for increase at the time of renewal, the increase will not apply to damage caused by a flood beginning before or within seventy-two hours after the request is made.

In the 2012 commercial property revisions, ISO made the distinction for renewal policies, waiving the seventy-two-hour waiting period when the prior policy included flood coverage and the policy periods are consecutive, and when a policy limit increase is executed at the time of renewal.

If the flood is due to the overflow of inland or tidal waters, then the flood is considered to begin when the water first overflows its banks.

The insurer will not pay for loss or damage caused by or resulting from destabilization of land arising from the accumulation of water in subsurface land areas. This endorsement will not apply to sinkhole damage or collapsing hillsides if caused by water accumulating under that land.

Since land and the cost of excavations, grading, backfilling, or filling are not covered, the endorsement does not include coverage for the cost of restoring or remediating land due to the collapse or sinking of land caused by or resulting from flood. Coverage is included for damage to covered portions of the building and covered personal property caused by collapse or sinking of land along the shore of a body of water as a result of erosion or undermining caused by waves or currents of water exceeding cyclical levels and causing a flood.

The insurer will not pay for loss or damage by flood to personal property in the open, except to the extent that such coverage, if any, is specified in the flood coverage schedule or in the declarations. If the insured wants flood coverage for his personal property that is outside the building, in the open, he must put that intent in writing in the declarations or in the flood coverage schedule. This way, there should be no confusion or disputes over whether some item is to be covered for flood damage.

The endorsement amends the property not covered section of the underlying policy to include buildings or other property that is not eligible for flood insurance under the Coastal Barrier Resources Act. Property not covered also includes boat houses and open structures and any property on or in them if the structure is located on or over a body of water. Bulkheads, pilings, piers, wharves, docks, and retaining walls are generally listed as property not covered on commercial property forms. If they are added as covered property by a separate endorsement, the Flood Coverage Endorsement does not apply to this type of property. The endorsement removes foundations below the lowest basement floor or the subsurface of the ground and underground pipes, flues, and drains from property not covered, making them covered property under the endorsement.

Loss and damage caused by the discharge of water or waterborne material from a sewer, drain, or sump—unless the discharge results from flood and occurs within seventy-two hours after the flood recedes—are not covered.

 Additional Coverages and Coverage Extensions

With respect to flood coverage, the debris removal additional coverage (and any additional limit for debris removal under a limit of insurance clause or an endorsement) is not applicable and is replaced by the following coverage information.

E. Additional Coverages And Coverage Extensions  

1. With respect to Flood Coverage, the Debris Removal Additional Coverage (and any additional limit for Debris Removal under a Limit of Insurance clause or an endorsement) is not applicable and is replaced by the following:

Debris Removal  

a. 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 Flood. However, we will not pay to remove deposits of mud or earth from the grounds of the described premises. 

b. We will also pay the expense to remove debris of Covered Property that has floated or been hurled off the described premises by Flood.  

c. This coverage for Debris Removal, as set forth in E.1.a. and E.1.b. above, does not increase the applicable Limit of Insurance for Flood. Therefore, the most we will pay for the total of debris removal and loss or damage to Covered Property is the Limit of Insurance for Flood that applies to the Covered Property at the affected described premises covered under this endorsement.  

2. With respect to Flood Coverage, the Coverage Extension for Newly Acquired or Constructed Property is amended by adding the following:  

a. With respect to Flood Coverage, this Coverage Extension does not apply to any building or structure that is not fully enclosed by walls and roof. 

b. With respect to a building or structure covered under this Coverage Extension, the amounts of coverage stated in the Coverage Extension do not apply to Flood Coverage. Instead, the most we will pay for all loss or damage to property covered under this Coverage Extension is 10% of the total of all Limits of Insurance for Flood Coverage as provided under this endorsement. Such coverage does not increase the Limit of Insurance for Flood. 

 3. With respect to any applicable Additional Coverages and Coverage Extensions in the Coverage Form to which this endorsement is attached, other than those addressed in E.1. and E.2. above, amounts payable under such other provisions, as set forth therein, do not increase the Limit of Insurance for Flood. 

F. Coinsurance 

1. The Coinsurance Condition, if any, in the applicable Coverage Form applies to the coverage provided under this endorsement, unless the No-Coinsurance Option, in the Flood Coverage Schedule or in the Declarations, is specified as being applicable.

 2. Various Coverage Extensions, in the Coverage Form to which this endorsement is attached, require coinsurance. If the No-Coinsurance Option applies, then the coinsurance requirement for such Coverage Extensions is eliminated.

Analysis

The insurer will pay the named insured's expenses to remove debris of covered property and other debris that is on the described premises when such debris is caused by or results from flood. However, the insurer will not pay to remove deposits of mud or earth from the grounds of the described premises. So, if the force of the flood deposits parts of the covered building or personal property from inside the building all over the insured premises, this endorsement will pay to remove those items.

Furthermore, if the covered property has floated or been hurled off the described premises by the power of the flood, CP 10 65 will also pay the expense to remove such debris.

The coverage for debris removal does not increase the applicable limit of insurance for flood coverage. So, the most the insurer will pay for the total of debris removal and loss or damage to covered property is the limit of insurance for flood that applies to the covered property at the affected described premises covered under this endorsement; the expenses for debris removal are not in addition to the declared flood limit of insurance.

The endorsement also amends coverage extension for newly acquired or constructed property. The coverage extension does not apply to any building or structure that is not fully enclosed by walls and roof; that is, buildings under construction can be excluded from coverage if they are not fully enclosed at the time of the flood. Moreover, the most the insurer will pay for this coverage extension is 10 percent of the total of all limits of insurance for flood coverage as provided under this endorsement. Such coverage does not increase the limit of insurance for flood.

As a catch-all statement, the final clause in this part of CP 10 65 declares that, with respect to any applicable additional coverages and coverage extensions in the property coverage form, any amounts payable under such provisions do not increase the limit of insurance for flood. The declared flood limit of insurance is the limit, period.

The coinsurance provision in the property coverage policy applies to the coverage provided by CP 10 65 unless the no-coinsurance option in the flood coverage schedule or in the declarations is specified as being applicable.

Also, various coverage extensions in the property coverage policy require coinsurance. If the no-coinsurance option applies, then the coinsurance requirement for such coverage extensions is eliminated.

Limit of Insurance

G. Limit Of Insurance  

1. General Information 

Flood Coverage may be written at a Limit of Insurance that is equal to or less than the Limit of Insurance which applies to other Covered Causes of Loss (e.g., Fire) under this Commercial Property Coverage Part. The Limit Of Insurance for Flood is shown in the Flood Coverage Schedule or in the Declarations. If such Limit is not shown, then the Limit applicable to Fire also applies to Flood. 

2. Application Of Limit And Aggregate 

The Limit of Insurance for Flood is the most we will pay in a single occurrence of Flood for loss or damage caused by the Flood. If there is more than one Flood in a 12-month period (starting with the beginning of the present annual policy period), the most we will pay for the total of all loss or damage sustained during that period of time and caused by Flood is the amount that is identified as the Annual Aggregate for Flood as shown in the Flood Coverage Schedule or the Declarations. 

If the Limit of Insurance and the Annual Aggregate amount are the same, or if there is no amount stated as an Annual Aggregate, then the Limit of Insurance is the most we will pay for the total of all loss or damage that is caused by Flood in a 12-month period (starting with the beginning of the present annual policy period), even if there is more than one occurrence of Flood during that period of time. Thus, if the first Flood does not exhaust the applicable Limit of Insurance, then the balance of that Limit is available for a subsequent Flood(s). 

If a single occurrence of Flood begins during one annual policy period and ends during the following annual policy period, any Limit of Insurance or Annual Aggregate applicable to the following annual policy period will not apply to that Flood.  

3. Ensuing Loss In the event of covered ensuing loss, for example, loss caused by Fire, Explosion and/or Sprinkler Leakage which results from the Flood, the most we will pay, for the total of all loss or damage caused by flood, fire, explosion and sprinkler leakage, is the Limit of Insurance applicable to Fire. We will not pay the sum of the Fire and Flood Limits.

EXAMPLES – ENSUING LOSS 

Two examples follow, using these facts: The Commercial Property Coverage Part, in these examples, includes the Causes Of Loss – Basic Form (which covers fire) and this Flood Coverage Endorsement. A building is damaged by Flood and by Fire which is caused by the Flood. The value of the damaged building is $1,000,000. The Limit of Insurance applicable to the building, for the Basic Causes of Loss, is $800,000. The Limit of Insurance for Flood is $400,000. The Flood Deductible amount is $5,000. 

EXAMPLE 1 

The damage due to Flood is $500,000. The damage due to Fire is $500,000. 

Payment for Flood damage is $400,000 ($500,000 damage minus $5,000 Flood deductible = $495,000; Limit is $400,000). 

Payment for Fire damage is $400,000 ($500,000 damage capped at the difference between the Basic Limit and the Flood Limit). 

Total Loss Payment is $800,000. 

EXAMPLE 2 

The damage due to Flood is $800,000. The damage due to Fire is $100,000. 

Payment for Flood damage is $400,000 ($800,000 damage minus $5,000 Flood deductible = $795,000; Limit is $400,000). 

Payment for Fire damage is $100,000 (amount of damage). Total Loss Payment is $500,000.

Note: These examples are given only to illustrate the situation of Flood and ensuing loss. Therefore, the loss payment stated for Flood damage does not address the situation where another policy also covers the Flood damage.

Analysis

Flood coverage may be written at a limit of insurance that is equal to or less than the limit of insurance that applies to other covered causes of loss. The chosen limit of insurance for flood is shown in the flood coverage schedule or in the declarations. However, if the limit is not shown, the limit applicable to fire loss also applies to flood loss.

The limit of insurance for flood is the most the insurer will pay in a single occurrence of flood for loss or damage caused by the flood. If there is more than one flood in a twelve-month period, the most the insurer will pay for the total of all loss or damage sustained during that period of time is the amount identified as the annual aggregate for flood as shown in the flood schedule or the declarations. If the limit of insurance and the annual aggregate amount are the same, or if there is no amount stated as an annual aggregate, then the limit of insurance is the most the insurer will pay for the total of all loss or damage caused by the flood in a twelve-month period. This is so even if there is more than one occurrence of flood during that period of time. Thus, if the first flood does not exhaust the applicable limit of insurance, then the balance of that limit is available for a subsequent flood.

If a single occurrence of flood begins during one annual policy period and ends during the following annual policy period, any limit of insurance or annual aggregate applicable to the following annual policy period will not apply to that flood. In other words, there is no accumulation of limits over separate policy periods even if the flood overlaps two separate policy periods.

In the event of a covered ensuing loss (for example, a loss caused by fire), that results from the flood, the most the insurer will pay for the total of all loss or damage caused by the flood and the ensuing loss is the limit of insurance applicable to the fire loss limits. So, the insurer will not pay the sum of the flood limits and the fire limits.

This ensuing loss situation is explained in CP 10 65 by way of two examples. Both examples use the following facts: the causes of loss coverage is the basic form and CP 10 65; a building is damaged by flood and by fire caused by the flood; the value of the damaged building is $1,000,000. The limit of insurance applicable to the building, for the basic causes of loss, is $800,000. The limit of insurance for flood is $400,000. The flood deductible is $5,000. (These examples do not address the situation where another policy also covers the flood damage.)

In example one, the damage due to flood is $500,000 and the damage due to fire is $500,000. Payment for flood damage is $400,000 ($500,000 damage minus $5,000 flood deductible equals $495,000, but the limit of insurance is $400,000). Payment for the fire damage is $400,000 ($500,000 damage capped at the difference between the basic limit and the flood limit). So, the total loss payment is $800,000.

In example two, the damage due to flood is $800,000 and the fire damage is $100,000. Payment for flood damage is $400,000 ($800,000 damage minus $5,000 flood deductible equals $795,000 but flood limit is $400,000). Payment for fire damage is $100,000 (the amount of damage). And the total loss payment is $500,000.

Deductible

H. Deductible 

1. The Deductible for coverage provided under this endorsement is the Deductible applicable to Flood as shown in the Flood Coverage Schedule or in the Declarations. 

2. We will not pay that part of the loss that is attributable to any Deductible(s) in the National Flood Insurance Program policy. 

3. If Flood results in another Covered Cause of Loss and if both Covered Causes of Loss cause loss or damage, then only the higher deductible applies (e.g., the Flood deductible or the Fire deductible).

The deductible for coverage provided under CP 10 65 is the deductible shown in the flood coverage schedule or in the declarations. The insurer will not pay that part of the loss that is attributable to any deductible in the National Flood Insurance Program (NFIP) policy. And, if the flood results in another covered cause of loss and if both covered causes of loss cause loss or damage, then only the higher deductible applies; so, only one deductible is going to apply to the combination loss.

 Other Insurance

I. Other Insurance 

The Other Insurance Commercial Property Condition is replaced by the following with respect to the coverage provided under this endorsement:  

1. If the loss is also covered under a National Flood Insurance Program (NFIP) policy, or if the property is eligible to be written under an NFIP policy but there is no such policy in effect, then we will pay only for the amount of loss in excess of the maximum limit that can be insured under that policy. This provision applies whether or not the maximum NFIP limit was obtained or maintained, and whether or not you can collect on the NFIP policy. We will not, under any circumstances, pay more than the applicable Limit Of Insurance for Flood as stated in the Flood Coverage Schedule or the Declarations of this Coverage Part. However, this Provision I.1. does not apply under the following circumstances:  

a. At the time of loss, the property is eligible to be written under an NFIP policy but such policy is not in effect due solely to ineligibility of the property at the time this Flood Coverage Endorsement was written; or 

 b. An NFIP policy is not in effect because we have agreed to write this Flood Coverage Endorsement without underlying NFIP coverage. There is such an agreement only if the Flood Coverage Schedule or the Declarations indicate that the Underlying Insurance Waiver applies.  

2. If there is other insurance covering the loss, other than that described in I.1. above, we will pay our share of the loss. Our share is the proportion that the applicable Limit of Insurance under this endorsement bears to the total of the applicable Limits of Insurance under all other such insurance. But we will not pay more than the applicable Limit Of Insurance stated in the Flood Coverage Schedule or the Declarations of this Coverage Part.

Analysis

The other insurance condition in the commercial property forms is replaced by the clauses in CP 10 65.

The CP 10 65 other insurance clauses begin with a reference to the National Flood Insurance Program (NFIP). If the flood loss is also covered under an NFIP policy (or if the property is eligible to be written under an NFIP policy but there is no such policy in effect), then the insurer will pay only for the amount of loss in excess of the maximum limit that can be insured under that policy. This provision applies whether or not the maximum NFIP limit was obtained or maintained and whether or not the named insured can collect on the NFIP policy. The insurer declares it will not, under any circumstances, pay more than the applicable limit of insurance for flood as stated in the schedule or declarations.

However, this provision does not apply under certain circumstances.

The provision does not apply if, at the time of loss, the property is eligible to be written under an NFIP policy but such policy is not in effect due solely to the ineligibility of the property at the time CP 10 65 was written. Also, the provision does not apply if the NFIP policy is not in effect because the insurer has agreed to write the flood coverage with CP 10 65 without underlying NFIP coverage; there is such an agreement only if the flood coverage schedule or the declarations indicate that the underlying insurance waiver applies.

If there is other insurance coverage for the loss (other than that previously described), the insurer will pay its share of the loss. This share is the proportion that the applicable limit of insurance under CP 10 65 bears to the total of the applicable limits of insurance under all other such insurance.

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