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3. CP-00-99

Standard Property Policy - CP 00 99

The CP 00 99 Standard Property Policy is a self-contained commercial property policy developed by the Insurance Services Office (ISO). It serves as a limited-option alternative to the more comprehensive CP 00 10 Building and Personal Property Coverage Form. Its primary function is to provide basic property coverage for direct physical loss or damage to scheduled property at a described premises. Notably, this policy includes its own set of conditions, meaning the standard Common Policy Conditions (IL 00 17) and Commercial Property Conditions (CP 00 90) do not apply.

Key characteristics of the CP 00 99 include:

• Valuation: Always Actual Cash Value (ACV). Replacement Cost coverage is not an option with this form.
• Causes of Loss: The form automatically includes coverage for fire, lightning, and explosion. Other Basic Causes of Loss, such as windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, sinkhole collapse, volcanic action, vandalism, and sprinkler leakage, can be added by specific declaration on the policy. If all options are selected, the coverage is similar to that provided by the CP 10 10 Causes of Loss – Basic Form.
• Coinsurance: Coinsurance always applies and is a mandatory part of the policy. Agreed Value and Inflation Guard are not available options.
• Self-Contained: It functions as a standalone policy rather than a coverage form that attaches to a larger policy structure.

Classes of Business It Applies To

The CP 00 99 is available to any commercial entity on a monoline basis and has no specific eligibility limitations or exclusions regarding the type of business. However, it is often utilized in specific circumstances:

• Businesses with Limited Resources: Start-up companies or small businesses that may not need or cannot afford broader coverage options might find the CP 00 99 suitable.
• High-Risk Properties: It is often used for properties that, for underwriting reasons, might otherwise be uninsurable or difficult to place in the standard market. This can include properties with certain condition issues or those located in high-risk areas.
• Basic Coverage Needs: For insureds who only require protection against a limited set of named perils and are comfortable with Actual Cash Value settlement.
• FAIR Plans: Some state FAIR (Fair Access to Insurance Requirements) Plans may use the CP 00 99 or a similar form to provide basic fire and other limited peril coverage to property owners unable to obtain insurance through the voluntary market. For example, the Ohio FAIR Plan offers commercial fire coverage for non-manufacturing eligible property under the CP 00 99. Similarly, the Connecticut FAIR Plan and Oregon FAIR Plan utilize this form for commercial properties.

Real-world example: A small retail shop in an older building, where the owner has limited funds for insurance premiums but needs basic protection against fire and vandalism, might be insured under a CP 00 99. Another example could be a vacant building undergoing minor renovations that doesn't qualify for broader builders risk coverage but still needs protection against fire.

Special Considerations

There are several important factors and limitations to consider when using the CP 00 99:

• Limited Coverage Scope: This policy offers significantly less coverage than the CP 00 10. If replacing a CP 00 10 with a CP 00 99, it is crucial to make the insured aware of these coverage reductions in writing and obtain their acknowledgment.
• Actual Cash Value Only: The lack of a Replacement Cost option means that in the event of a loss, depreciation will be factored into the claim settlement, which could result in a significant out-of-pocket expense for the insured.
• Cancellation Notice: The policy may allow for a shorter notice period for cancellation by the insurer (e.g., only five days' notice to the named insured, though state-specific rules may apply). Mortgageholders might also receive a shorter notice, such as ten days.
• Vacancy Conditions: Coverage for vandalism may be excluded if the premises has been vacant or unoccupied for a specified period (e.g., more than 30 consecutive days). For other covered causes of loss, coverage might cease if the premises is vacant or unoccupied for a longer period (e.g., more than 60 consecutive days), unless the vacancy is usual or incidental to the risk.
• No Package Policy: The CP 00 99 cannot typically be added to a Commercial Package Policy (CPP).
• Coverage Territory: Coverage Extensions generally apply only in the state where the described locations are.
• Underwriting Scrutiny: Due to its use for potentially higher-risk exposures, properties insured under CP 00 99 may face more stringent underwriting criteria, such as requirements for property maintenance, security measures, and occupancy levels. For instance, some FAIR plans using this form require the property to be at least 50% occupied and free of unrepaired damage.

Real-world example: An underwriter might offer a CP 00 99 to an owner of an older, unoccupied commercial building that doesn't meet the eligibility criteria for a standard property policy due to its condition or lack of protective safeguards. The owner accepts the limited perils and ACV valuation to at least have some coverage in place, particularly for fire.

Key Information for Agents and Underwriters

Agents and underwriters should be particularly mindful of the following when dealing with the CP 00 99:

• Risk Assessment: This form is often a "last resort" type of coverage. Underwriters must carefully assess the specific risks associated with the property and the insured's operations. The fact that an insured is seeking coverage under CP 00 99 may indicate underlying risk factors that prevented them from obtaining broader coverage.
• Pricing: While rating procedures are similar to other commercial property forms, a specific rating credit (e.g., a 2% credit or a .98 factor applied to basic Group I and Group II rates) may apply when using the CP 00 99, reflecting its restrictive nature. However, the overall premium may still be significant if the risk is high.
• Coverage Gaps: Agents must clearly explain the significant coverage gaps compared to more comprehensive forms like the CP 00 10. This includes the ACV valuation, the limited named perils, and the absence of options like Replacement Cost, Agreed Value, or Inflation Guard. Misunderstanding these limitations can lead to errors and omissions claims.
• Underwriting Guidelines:
  • Thoroughly investigate the reasons why broader coverage is not being sought or is unavailable.
  • Pay close attention to occupancy and vacancy, as these significantly impact coverage.
  • Verify that the property meets any specific underwriting criteria, such as freedom from existing damage, compliance with public safety laws, and security against trespass, especially if placed through a residual market mechanism.
  • Ensure the named insured on the declarations accurately reflects all entities requiring coverage, as only listed entities are covered.
• Documentation: It is critical to document all communications with the insured regarding the limitations of the CP 00 99, especially if it's replacing a more comprehensive policy. A signed acknowledgment from the insured is highly recommended.
• Endorsements: While the CP 00 99 is a self-contained policy, certain standard endorsements may still be applicable or necessary to tailor coverage, though options are more limited than with CP 00 10. For example, endorsements for Ordinance or Law (though only ACV-based aspects would apply), or to specify business personal property temporarily away from premises might be considered. However, endorsements like those providing replacement cost are not compatible.

Real-world example for underwriters: An underwriter receives an application for CP 00 99 on a warehouse that has been vacant for several months and has a history of minor unrepaired damage. The underwriter would need to decide if the risk is acceptable even on this restrictive form, potentially requiring an inspection, specific repairs to be made prior to binding, or the application of higher deductibles or specific peril exclusions (if permissible and available by endorsement).