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3. CP-00-10

Form CP 00 10: Building And Personal Property Coverage Form

The Building and Personal Property Coverage Form (CP 00 10) is a foundational insurance form used in Commercial Property insurance. Its primary purpose is to provide coverage for direct physical loss or damage to an insured's buildings and/or business personal property, as well as personal property of others in the insured's care, custody, or control, from a covered cause of loss. This form outlines what property is covered, what property is not covered, additional coverages, and coverage extensions. It is crucial to note that the CP 00 10 does not define the covered causes of loss; that is the function of separate Causes of Loss forms (e.g., CP 10 10 Basic Form, CP 10 20 Broad Form, or CP 10 30 Special Form) which must be attached to the policy.

Classes of Business It Applies To

The CP 00 10 is versatile and applies to a wide array of commercial enterprises that own or lease buildings or have business personal property. Examples include:

• Retail Stores: Covers the building (if owned), shelving, inventory ("stock"), cash registers, and office equipment. For example, a clothing boutique would use this form to cover its storefront, clothing inventory, display racks, and point-of-sale systems.
• Manufacturing Operations: Insures the factory building, machinery, equipment, raw materials, and finished goods. A metal fabrication plant, for instance, would rely on this form for its production facility and the specialized machinery within it.
• Office Buildings: Provides coverage for the office structure, furniture, computers, and other office equipment. A law firm owning its office building would use this form.
• Wholesalers and Distributors: Covers warehouses, stored inventory, and material handling equipment.
• Service Businesses: For businesses like repair shops or dry cleaners, it covers their building and the equipment used to provide services, as well as customers' property in their care (if a limit for Personal Property of Others is shown in the declarations).
• Real Estate Lessors: Owners of commercial buildings leased to others would use this form to insure the structure itself.
• Cooperatives and Homeowner Associations: This form is used to provide building coverage for cooperatives and homeowner association buildings. It is important to distinguish this from condominium associations, which typically use the CP 00 17 Condominium Association Coverage Form.

Coverage for business personal property generally applies when the property is located in or on the described building or in the open (or in a vehicle) within 100 feet of the described premises or building, whichever is greater.

Special Considerations

There are several important considerations when utilizing the CP 00 10:

• Valuation: The CP 00 10 typically provides coverage on an Actual Cash Value (ACV) basis unless endorsed for Replacement Cost Value (RCV). Agents and underwriters must clearly establish the valuation method, as this significantly impacts claim settlements. The Declarations page will specify if replacement cost applies. Functional Replacement Cost is another valuation option available via endorsement (CP 04 38), which can be suitable for older buildings where RCV might be excessive.
• Coinsurance: This form is subject to a coinsurance clause, which requires the insured to carry a certain percentage of the property's value (e.g., 80%, 90%, or 100%). Failure to meet this requirement can result in a penalty at the time of loss. The "Agreed Value" option (CP 12 20, though the form number might vary by edition/state) can suspend the coinsurance provision if selected.
• Property Not Covered: The form contains a list of property that is not covered, such as land, foundations below the lowest basement floor (or below ground level if no basement), and outdoor plants. Certain types of property, like bridges, roadways, walks, and patios, are typically excluded but can sometimes be added back via endorsement (e.g., CP 14 10 Additional Covered Property).
• Coverage Extensions: The CP 00 10 includes several built-in coverage extensions, which provide additional amounts of insurance for specific situations, often with their own sub-limits. These can include Newly Acquired or Constructed Property, Personal Effects and Property of Others, Valuable Papers and Records, Property Off-Premises, and Outdoor Property. For example, the Outdoor Signs coverage has an automatic limit (e.g., $2,500, though this can vary by policy edition).
• Electronic Data: Coverage for electronic data is limited and specific. Even if the policy has a Special Causes of Loss form, coverage for electronic data is typically restricted to specified causes of loss and may not apply to perils added by endorsement.
• Improvements and Betterments: For tenants, this form covers improvements and betterments they have made to a rented space. If the insured cannot legally remove these improvements, coverage applies to their use value.
• Leased Personal Property: The form can cover leased personal property for which the insured has a contractual responsibility to insure.
• Modular Nature: The CP 00 10 is just one piece of a complete Commercial Property policy. It must be combined with a Declarations page, a Commercial Property Conditions form (CP 00 90), one of the Causes of Loss forms (CP 10 10, CP 10 20, or CP 10 30), and any applicable endorsements.

Key Information for Agents and Underwriters

Agents and underwriters should focus on the following when working with the CP 00 10:

• Accurate Limits: Ensuring adequate limits of insurance is critical, especially considering coinsurance requirements and the chosen valuation method (ACV vs. RCV). Underinsuring can lead to significant out-of-pocket expenses for the insured at the time of a loss.
• COPE Factors: Underwriters heavily rely on "COPE" (Construction, Occupancy, Protection, Exposure) to assess risk and determine pricing.
  • Construction: The building materials used (e.g., frame, joisted masonry, non-combustible).
  • Occupancy: The nature of the business and the hazards associated with it (e.g., a woodworking shop presents higher fire risk than a law office).
  • Protection: Fire protection measures like sprinkler systems, fire alarms, and proximity to a responsive fire department.
  • Exposure: External hazards, such as the proximity to flammable properties or susceptibility to natural disasters.
• Causes of Loss Selection: Recommending the appropriate Causes of Loss form is crucial. The Special Form (CP 10 30) offers the broadest coverage ("all-risk" or open perils), covering direct physical loss unless specifically excluded. This shifts the burden of proof in a claim scenario to the insurer to prove an exclusion applies.
• Identifying Coverage Gaps: Agents should carefully review the "Property Not Covered" section and exclusions in the chosen Causes of Loss form to identify potential gaps. Endorsements may be needed to cover specific exposures (e.g., flood, earthquake, equipment breakdown).
• Endorsements: Numerous endorsements are available to tailor the CP 00 10. Examples include:
  • Ordinance or Law Coverage (CP 04 05): Addresses increased costs due to the enforcement of building codes after a loss.
  • Spoilage Coverage (CP 04 40): For businesses with perishable stock.
  • Business Income and Extra Expense (CP 00 30 or CP 00 32): While separate coverage forms, these are often written in conjunction with the CP 00 10 to cover loss of income and additional expenses following a covered property loss.
• Understanding Policy Revisions: ISO periodically revises its forms. Professionals must stay updated on changes to the CP 00 10 and related endorsements, as these can impact coverage (e.g., changes to outdoor sign limits, debris removal provisions, or electronic data coverage). For example, past revisions have clarified coverage for property on loading docks or vegetated roofs.

By thoroughly understanding the nuances of the CP 00 10, insurance professionals can effectively structure commercial property coverage that meets the specific needs of their clients while accurately assessing and pricing the associated risks.