1. Forms
2. CP
3. CP-10-10

What the Form Is

The Causes Of Loss - Basic Form (CP 10 10) is a commercial property insurance form that specifies the perils a property is insured against on a named perils basis. This means that for coverage to apply, the loss or damage must be caused by one of the perils specifically listed in the form. Perils not named are, by default, excluded. The CP 10 10 is one of three main causes of loss forms available in the Insurance Services Office (ISO) commercial property program, offering the most limited coverage compared to the Broad Form (CP 10 20) and the Special Form (CP 10 30). The covered perils typically include fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. This form is used in conjunction with a commercial property coverage form, such as the Building and Personal Property Coverage Form (CP 00 10), to complete the policy.

Classes of Business It Applies To

The CP 10 10 is suitable for a variety of commercial enterprises, particularly those with a lower risk profile or those seeking more affordable coverage options. It's often utilized for:

• Budget-conscious businesses: Due to its limited scope of covered perils, the Basic Form generally results in a lower premium compared to broader coverage options.
• Properties with specific, limited exposures: If a business owner is primarily concerned about a few specific risks (like fire and vandalism) and less so about others, the Basic Form might be considered. For example, a small retail shop owner might opt for this form to cover common risks while excluding less probable events for their specific operation and location.
• Vacant properties or properties under renovation: In some instances, insurers may only offer basic coverage for properties that present a higher hazard, such as vacant buildings.
• Certain habitational risks: Depending on the insurer's underwriting guidelines, some rental properties might be insured under a Basic Form, especially if the property is older or has a history of claims.
• Businesses in regions with specific predominant perils: While it might seem counterintuitive, a business in an area prone to a specific named peril (e.g., windstorm in a coastal area) might still use this form if they are primarily concerned with that peril and other basic ones, and are willing to self-insure or obtain separate coverage for other risks. However, it's crucial to ensure the named perils adequately address the significant exposures.

Special Considerations

There are several important factors to consider when using the CP 10 10:

• Named Perils Basis: The most critical aspect is that coverage only applies to perils specifically listed in the form. If a loss occurs due to an unlisted peril (e.g., flood, earthquake, theft by most definitions, weight of snow/ice/sleet, falling objects, or water damage from leaking appliances unless it's from sprinkler leakage), there is no coverage under this form. The burden of proof in the event of a claim rests with the insured to demonstrate that the loss was caused by a named peril.
• Comparison to Other Forms: It provides less coverage than the Broad Form (CP 10 20), which adds perils like falling objects, weight of snow, ice, or sleet, and water damage from certain system failures. It offers significantly less coverage than the Special Form (CP 10 30), which provides "all-risk" or "open perils" coverage, meaning it covers all direct physical losses except those specifically excluded.
• Specific Peril Limitations: Even for named perils, there are specific limitations and exclusions. For example:
  • Windstorm or Hail: Does not cover frost, cold weather, ice (other than hail), or snow, even if wind-driven. Damage to the interior of a building or its contents by rain, snow, sand, or dust is only covered if the building first sustains wind or hail damage to its roof or walls through which these elements enter.
  • Smoke: Covers sudden and accidental smoke damage, but typically excludes smoke from agricultural smudging or industrial operations.
  • Vandalism: May exclude theft, except for building damage caused by burglars breaking in or out. Some specific types of risks like vacant properties may have vandalism coverage restricted or excluded.
  • Explosion: While generally covered, it may exclude certain types of explosions, such as those from pressure relief devices or rupture due to expansion of contents caused by water.
• Relationship with CP 00 10: The CP 10 10 must be used with a coverage form like the CP 00 10 (Building and Personal Property Coverage Form), which describes the types of property covered (building, business personal property, personal property of others), additional coverages, and coverage extensions. The CP 00 10 also contains its own set of exclusions and limitations that apply in conjunction with the Causes of Loss form.
• Endorsements: Coverage can sometimes be modified by endorsements. For example, certain exclusions might be "bought back" or additional perils added, though this is less common with the Basic Form compared to broader forms.
• Cost vs. Coverage: While the premium for a policy with the Basic Form will likely be lower, it comes at the cost of significantly narrower coverage. Businesses must carefully weigh the premium savings against the potential for uninsured losses.

Key Information for Agents and Underwriters

Agents and underwriters should consider the following when dealing with the CP 10 10:

• Risk Assessment: A thorough risk assessment is crucial. For businesses with minimal exposures or those in highly protected environments, the Basic Form might be a consideration, but its limitations must be clearly communicated. For most operating businesses, broader coverage (Broad or Special Form) is generally recommended.
• Pricing: The Basic Form is the least expensive causes of loss option. However, pricing should still reflect the specific hazards associated with the named perils for the individual risk (e.g., a higher windstorm exposure for a coastal property).
• Coverage Gaps: Agents must clearly explain the significant coverage gaps inherent in the Basic Form. This includes perils like theft (other than building damage by burglars), water damage (other than sprinkler leakage or volcanic action causing water entry), and damage from falling objects or the weight of ice and snow. Misunderstanding these gaps can lead to significant E&O exposures for agents.
• Underwriting Guidelines: Underwriters will have specific guidelines for when the Basic Form is acceptable. It may be reserved for certain classes of business, properties with specific characteristics (e.g., older buildings, certain occupancies), or as a last resort when broader coverage cannot be offered. Some insurers may have stricter underwriting criteria for perils like vandalism on a Basic Form, especially for unoccupied or seasonal risks.
• Client Communication: It is paramount that clients understand exactly what is and is not covered. Using real-world claim scenarios can help illustrate the limitations of the Basic Form. For instance, explaining that if a pipe bursts (not part of a sprinkler system) and causes water damage, it would likely not be covered under the CP 10 10. Similarly, if a heavy snowfall causes a roof collapse, this form would not provide coverage.
• Alternatives: Always present the option of Broad Form (CP 10 20) and Special Form (CP 10 30) coverage, explaining the benefits of the wider protection these forms offer. The premium difference may be less significant than the potential for an uncovered loss.
• Claims Handling: For adjusters, claims under a Basic Form policy require careful verification that the cause of loss is one of the specifically named perils. The investigation will focus on identifying a listed peril as the proximate cause of the damage.