Form CP 00 18: Condominium Commercial Unit-Owners Coverage Form
1. What the form is
The CP 00 18 Condominium Commercial Unit-Owners Coverage Form is a commercial property insurance form designed specifically for businesses that own and operate out of a condominium unit. It serves as an alternative to the broader CP 00 10 Building and Personal Property Coverage Form, offering tailored coverage for the unique insurable interests of a commercial condominium unit-owner. This form covers the unit-owner's business personal property, as well as fixtures, improvements, and alterations they own or have made to the unit. A key aspect of this form is that it provides coverage on an excess basis over any insurance the condominium association might carry for the same property. It also explicitly excludes coverage for property that the condominium association is required to insure according to its agreement or bylaws.
2. Classes of business it applies to
This form is suitable for a wide array of businesses that own their commercial condominium units. Examples include:
- Retail Stores: Boutiques, specialty shops, or service-based retail located in a commercial condominium complex. For instance, a clothing store owner who has installed custom shelving and lighting in their unit.
- Professional Offices: Lawyers, accountants, consultants, or medical practitioners who own their office space within a condominium building. For example, a dental practice that has invested in specialized plumbing and cabinetry within their unit.
- Service Businesses: Repair shops, salons, or fitness studios operating in a commercial condo. For instance, a high-end hair salon that has made significant leasehold improvements like custom styling stations and wash basins.
- Wholesalers or Light Manufacturers: Businesses that may occupy a unit for storage, assembly, or light production, provided the condominium association rules permit such use. For example, a small electronics assembler that owns and has modified its unit to suit its operational needs.
Essentially, any business that owns its unit in a commercial or mixed-use condominium development and has a vested interest in the fixtures, improvements, and business personal property within that unit could be a candidate for this coverage.
3. Special considerations
Several important factors come into play when considering the CP 00 18:
- Condominium Agreement/Bylaws Review: It is crucial to meticulously review the condominium association's agreement and bylaws. These documents dictate the insurance responsibilities of both the association and the unit-owner, specifically outlining what property the association is obligated to insure. The CP 00 18 will not cover property the association is required to insure.
- Excess Coverage: This form clearly states that its coverage is excess over the condominium association's insurance when both policies cover the same property. Understanding the association's master policy limits and deductibles is therefore essential.
- No Building Coverage: The CP 00 18 is not designed to cover the building structure itself; that is typically the responsibility of the condominium association and insured under a form like the CP 00 17 Condominium Association Coverage Form. The CP 00 18 focuses on the interior space and the unit-owner's property within.
- Mortgageholders: Unlike the CP 00 10, the CP 00 18 does not automatically include a Mortgageholders additional condition. If there is a mortgage on the unit-owner's fixtures or improvements, this could be a significant gap and may require an endorsement or separate consideration.
- Valuation: The valuation provisions in CP 00 18 are amended compared to CP 00 10, as building valuation and tenants' improvements and betterments (from a tenant's perspective) are not relevant in the same way. It's important to ensure the limits are sufficient for the unit-owner's owned improvements and personal property.
- Optional Coverages: Endorsements like the CP 04 18 Condominium Commercial Unit-Owners Optional Coverages can be important to consider. This endorsement can provide coverage for loss assessments levied by the condominium association against unit-owners or for miscellaneous real property items.
Real-world example: A graphic design firm owns its office unit in a commercial condominium. They've installed custom built-in desks, high-end lighting, and a sophisticated server system. The condominium bylaws state the association is responsible for insuring the basic "bare walls" structure. The CP 00 18 would be appropriate for the design firm to cover their custom installations, office furniture, computers, and other business personal property, excess of the association's policy. If the association levies an assessment against all unit-owners to cover a large deductible on the master policy for a covered peril, an endorsed CP 04 18 could help cover the design firm's share of that assessment.
4. Key information for agents and underwriters
- Risk Assessment:
- Thoroughly examine the condominium association agreement and bylaws to determine the division of insurance responsibilities. This is paramount to avoid coverage gaps or overlaps.
- Assess the value of the unit-owner's business personal property, as well as the value of their owned fixtures, improvements, and alterations. Coinsurance provisions may apply, so accurate valuation is critical.
- Understand the nature of the business occupying the unit and any specific hazards associated with it.
- Review the association's master policy, paying attention to covered perils, limits, and deductibles.
- Pricing:
- Pricing will be influenced by the limits of coverage for business personal property and the unit-owner's improvements and betterments.
- The causes of loss form selected (Basic, Broad, or Special) will significantly impact the premium.
- Consider the potential for loss assessments and whether the insured wishes to purchase optional loss assessment coverage (e.g., via CP 04 18).
- Coverage Gaps:
- Be mindful of the exclusion for property the association is required to insure. If the bylaws are unclear or the association's coverage is inadequate, the unit-owner could face a gap.
- The absence of automatic mortgageholder protection for owned fixtures/improvements needs to be addressed if a lender has an interest in that property.
- Ensure that "Ordinance or Law" coverage is considered if significant upgrades might be required to meet current building codes after a loss.
- Underwriting Guidelines:
- The CP 00 18 is specifically for unit-owners. If the business is a tenant in a commercial condominium unit, other forms would be more appropriate for their business personal property and interests as a tenant.
- Verify that the unit-owner's operations are permissible under the condominium association rules.
- The form is designed for commercial exposures; residential unit-owners would typically be insured under an HO 00 06 or similar homeowners form.
- The CP 19 10 Your Business Personal Property – Separation of Coverage endorsement can be used with CP 00 18 to schedule and separately list items like stock, contents (except stock), machinery, furniture, and fixtures.
By carefully analyzing the specific circumstances of the commercial condominium unit-owner and the governing condominium documents, insurance professionals can effectively utilize the CP 00 18 to provide appropriate and necessary coverage.