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Form CP 10 20: Causes Of Loss - Broad Form

The CP 10 20, Causes Of Loss - Broad Form, is a named perils commercial property insurance form that specifies the causes of loss for which coverage is provided. It offers an intermediate level of protection, building upon the Basic Form (CP 10 10) by including additional covered perils. Essentially, if a peril is not specifically listed in this form, it is not covered. This form must be used in conjunction with a coverage form, such as the CP 00 10 - Building and Personal Property Coverage Form, and other necessary policy components to create a complete commercial property policy.

Key Covered Perils (in addition to Basic Form perils):

• Falling Objects: This covers damage caused by falling objects, but with an important limitation: it typically does not cover damage to personal property inside a building or the interior of the building itself unless the falling object first damages the building's roof or an exterior wall. For example, if a heavy tool drops from a crane inside a factory and damages machinery without first damaging the roof or an outside wall, this peril might not respond.
• Weight of Snow, Ice, or Sleet: This provides coverage for damage resulting from the weight of accumulated snow, ice, or sleet. This is particularly relevant for businesses in regions prone to heavy winter weather.
• Water Damage: This refers to accidental discharge or leakage of water or steam from a plumbing, heating, air conditioning, or other system or appliance (excluding sprinkler systems, which are typically covered separately). It also includes the cost to tear out and replace part of the building to repair the system or appliance from which the water or steam escaped. However, it does not cover the cost to repair the defect that caused the loss in the first place. Importantly, this peril does not cover flood, surface water, or water that backs up from a sewer or drain. Coverage for water damage can also be impacted by vacancy conditions outlined in the CP 00 10 form.
• Collapse (Additional Coverage): The Broad Form includes an additional coverage for collapse due to specified causes, such as the named perils in the form, hidden decay, hidden insect or vermin damage, weight of people or personal property, weight of rain that collects on a roof, or use of defective materials in construction if the collapse occurs during construction.

Classes of Business and Applicability

The CP 10 20 is suitable for a wide range of commercial enterprises that seek broader coverage than the Basic Form but may not require or qualify for the more comprehensive Special Form (CP 10 30). It's a common choice for:

• Retail Stores: A retail shop could benefit from coverage for water damage from a burst pipe or damage from the weight of snow on its roof.
• Office Buildings: An office building could suffer damage from a falling tree branch (falling objects) or leakage from an HVAC system.
• Light Manufacturing: Facilities with exposure to damage from the specified perils, such as a small workshop where the weight of snow could be a concern for the roof structure.
• Service Businesses: Businesses like restaurants or salons where water damage from plumbing or appliance leakage is a realistic exposure.
• Property Owners/Landlords: Owners of commercial buildings who want a balance between cost and coverage breadth.

This form is often selected when the insured and underwriter agree that the named perils approach is appropriate, and the additional perils offered by the Broad Form address significant exposures for the specific business.

Special Considerations

• Named Perils Basis: It is crucial to remember that this is a named perils form. The burden of proof in a claim typically falls on the insured to demonstrate that the loss was caused by one of the perils specifically listed in the form.
• Exclusions Still Apply: Even though it's broader than the Basic Form, the CP 10 20 still contains significant exclusions. Common commercial property exclusions such as ordinance or law, earth movement (other than sinkhole collapse), governmental action, nuclear hazard, power failure off-premises, war, and flood are present.
• Vacancy Clause: As with other commercial property forms, coverage for certain perils like vandalism, sprinkler leakage (if not winterized), building glass breakage, water damage, and theft can be limited or excluded if the building has been vacant for a specified period (typically 60 consecutive days) before the loss occurs, as per the conditions in the CP 00 10.
• Fungus, Wet Rot, Dry Rot, and Bacteria: The form includes limited coverage for "fungus," wet rot, dry rot, and bacteria, which is typically sub-limited (e.g., $15,000 in aggregate for a 12-month period) and applies only if the decay results from a specified cause of loss (other than fire or lightning) and meets other specific conditions.
• Windstorm/Hail and Interior Damage: For damage to the interior of a building or personal property within by rain, snow, sand, or dust, the wind or hail must first damage the building's exterior, creating an opening through which these elements enter.

Real-world example: A business owner has a CP 10 20. A severe hailstorm damages the roof, allowing rain to enter and damage inventory. The damage to both the roof and the inventory would likely be covered under the hail peril and the ensuing water damage provision. However, if a pipe bursts due to freezing because the owner left the building unheated during a prolonged vacancy, the water damage might be excluded based on the vacancy condition and the specific requirements for maintaining heat or draining systems.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters will carefully evaluate the specific exposures of the business to the additional perils covered by the Broad Form. For instance, the likelihood of damage from the weight of snow, ice, or sleet will be a greater concern for properties in northern climates. The quality of construction, age of the building, and maintenance of plumbing and HVAC systems are important for assessing water damage and collapse risks.
• Pricing: The premium for the CP 10 20 will generally be higher than for the Basic Form (CP 10 10) due to the expanded list of covered perils, but lower than the Special Form (CP 10 30).
• Coverage Gaps: Agents should clearly explain the limitations of a named perils form and the specific exclusions. For example, flood and earthquake are significant perils not covered by this form and would require separate policies or endorsements. It's also important to discuss the limitations on the "falling objects" and "water damage" perils.
• Comparison with Special Form (CP 10 30): The primary alternative for broader coverage is the Special Form (CP 10 30), which provides "all-risk" or open perils coverage, meaning it covers any direct physical loss unless specifically excluded or limited. Agents should help clients understand the difference in coverage breadth and when the CP 10 20 is a suitable middle ground versus the more comprehensive CP 10 30.
• Endorsements: While the CP 10 20 provides a defined set of coverages, various endorsements can be used to modify or add coverage, tailoring the policy to the insured's specific needs, subject to underwriting approval.
• Underwriting Guidelines (COPE): Standard underwriting considerations of Construction, Occupancy, Protection, and Exposure (COPE) are critical. For example, a building with an older roof (Construction) in an area prone to heavy snowfall (Exposure) might face stricter underwriting or higher premiums for coverage including the weight of snow, ice, or sleet.

Understanding the nuances of the CP 10 20, including its specific covered perils and inherent limitations, allows insurance professionals to effectively advise clients and underwrite risks appropriately. It offers a significant step up in coverage from the Basic Form for businesses seeking protection against a wider array of common loss scenarios.