1. Forms
2. CP
3. CP-00-20

CP 00 20: Builders Risk Coverage Form

1. What the form is

The CP 00 20 Builders Risk Coverage Form, developed by the Insurance Services Office (ISO), is a commercial property insurance form that provides coverage for direct physical loss or damage to buildings or structures while they are under construction. It can also cover renovations, remodeling, or improvements to existing buildings. This form is designed to protect the financial interests of those involved in the construction project, such as the building owner or contractor, or both jointly. Coverage applies to the building or structure itself, foundations, and materials, supplies, and equipment that will become a permanent part of the completed structure and are located on or within 100 feet of the premises. It also includes temporary structures on-site, like storage trailers or scaffolding. The CP 00 20 is a filed, standardized form, which means its rates and cancellation provisions are subject to state insurance regulations, offering a degree of protection and predictability to the named insured. It forms the basis of a complete builders risk policy when combined with a declarations page, common policy conditions, commercial property conditions, and a causes of loss form (Basic, Broad, or Special).

2. Classes of business it applies to

The CP 00 20 is versatile and can be used for any type of building under construction, regardless of its intended final occupancy. This includes:

• New residential construction: Single-family homes, multi-unit dwellings, and apartment complexes. For example, a developer constructing a new suburban housing development would use this form.
• Commercial building construction: Office buildings, retail stores, warehouses, manufacturing facilities, and mixed-use properties. A company building a new headquarters or a shopping mall developer would utilize this coverage.
• Institutional construction: Schools, hospitals, government buildings, and churches. For instance, a university expanding its campus with a new library would be an applicable scenario.
• Renovations and additions: Significant alterations, remodels, or additions to existing structures, whether residential or commercial. An example would be a homeowner undertaking a major home renovation or a business expanding its current facility.
• Even dwellings and farm buildings during their construction phase can be covered under this form.

3. Special considerations

Several important factors should be considered when using the CP 00 20:

• Coverage inception and termination: ISO rules suggest that policy inception should be no later than when construction starts above the lowest basement floor, or the start of construction if there's no basement. Coverage typically ceases under specific conditions, such as 90 days after construction completion, 60 days after the building is occupied in whole or part, or when the property is put to its intended use. It's crucial to arrange permanent property insurance to coincide with the termination of the builders risk coverage.
• Valuation: The amount of coverage is generally based on the completed value of the building, including permanent fixtures and decorations, from the outset of construction.
• Insurable Interest: Payment for a covered loss is made only to the extent of each named insured's financial interest in the property. It's vital to keep track of any changes in financial interest during the policy term.
• Excluded Property: Certain property is typically not covered, such as land, water, outdoor antennas, and detached signs (though some limited coverage for signs may be available or can be endorsed). The cost of excavations, grading, or backfilling is also commonly excluded.
• Relationship with CP 00 10: If the CP 00 20 is attached to a policy, its coverage for a construction project will generally supersede the more limited coverage for additions under construction found in the standard Building and Personal Property Coverage Form (CP 00 10).
• Renovations (CP 11 13): When dealing with renovations of existing structures, the Builders Risk Renovations endorsement (CP 11 13) is often used in conjunction with the CP 00 20. This endorsement modifies the CP 00 20 to specifically address repairs to buildings under renovation. It's important to note that under this endorsement, there may be no coverage for the value of the existing building prior to the improvements unless specifically addressed.
• Alternative Forms: While the CP 00 20 is a standard ISO form, many insurers use their own manuscripted builders risk policies or non-filed inland marine forms, which can offer more flexibility but may vary significantly in terms and conditions.

4. Key information for agents and underwriters

Agents and underwriters should focus on the following when working with the CP 00 20:

• Risk Assessment: Thoroughly evaluate the scope of the project, including construction type, materials used, site security, and the contractor's experience and financial stability. The project owner's financial backing is also a key consideration.
• Determining Insurable Values: Ensure the limit of insurance accurately reflects the completed value of the project. Underinsurance can lead to significant out-of-pocket expenses for the insured in the event of a loss.
• Identifying all Insurable Interests: It is crucial to identify and properly name all parties with a financial interest in the project (owner, contractor, subcontractors, lenders) to avoid coverage disputes. The Loss Payable Provisions endorsement (CP 12 18) can be used to protect the interests of a loss payee.
• Causes of Loss Forms: The choice of Causes of Loss form (Basic CP 10 10, Broad CP 10 20, or Special CP 10 30) significantly impacts the breadth of coverage. The Special Form (CP 10 30) provides the most comprehensive coverage by covering all risks of direct physical loss unless specifically excluded.
• Coverage Gaps and Endorsements:
  • The standard CP 00 20 does not automatically cover the contractor's tools and equipment; this often requires separate coverage or an inland marine policy.
  • Coverage for "soft costs," such as additional interest, legal fees, or lost rental income due to a covered delay in completion, typically requires specific endorsements (e.g., Delay in Completion Coverage).
  • Ordinance or Law coverage may be necessary to cover the increased costs of complying with building codes after a loss.
  • Theft of building materials may have limitations or require specific endorsements, though the CP 00 20 itself can cover building materials intended to be a permanent part of the structure.
  • Consider endorsements for specific exposures like testing of newly installed equipment, faulty workmanship (resulting damage), or water intrusion not caused by a covered peril like flood.
• Policy Structure: Remember that the CP 00 20 is just one part of the overall policy. It must be combined with declarations, conditions forms, and a causes of loss form.
• Transition to Permanent Coverage: Proactively manage the transition from the builders risk policy to permanent property coverage once the project is complete and the building is occupied or put to its intended use to avoid gaps.