1. Forms
2. CP
3. CP-10-28

What the Form Is

The CP 10 28, titled Earthquake and Volcanic Eruption Coverage with Flat-Dollar Deductible, is an endorsement to an ISO Commercial Property policy. Its primary function is to add earthquake and volcanic eruption as covered causes of loss for direct physical damage to the insured property. This endorsement is crucial because standard property policies typically exclude damage from earth movement. The CP 10 28 is distinct in that it applies a flat-dollar deductible to losses from these perils, rather than a percentage-based deductible often found in other earthquake endorsements. It's important to note that this form is not a standalone policy; it must be attached to a base Causes of Loss form (such as CP 10 10, CP 10 20, or CP 10 30) and a property coverage form (like CP 00 10 Building and Personal Property Coverage Form). The endorsement includes its own schedule where specific limits of insurance and the flat-dollar deductible amount for earthquake and volcanic eruption coverage are detailed.

Classes of Business It Applies To

This endorsement is suitable for a wide range of commercial enterprises that own or are responsible for insuring buildings and/or business personal property in areas exposed to seismic or volcanic activity. Examples include:

• Manufacturing facilities
• Retail stores and shopping centers
• Office buildings
• Habitational properties (apartment buildings, condominiums if covered under a commercial policy)
• Warehouses and distribution centers
• Educational institutions and healthcare facilities

Businesses that prefer the certainty of a fixed, flat-dollar deductible for earthquake and volcanic eruption losses, as opposed to a percentage deductible that can fluctuate with property values, would find this endorsement particularly applicable.

Special Considerations

• Not a Complete Buy-Back: While this endorsement adds coverage for earthquake and volcanic eruption, it does not eliminate the entire Earth Movement exclusion found in the base Causes of Loss form. It only modifies the exclusion to the extent provided by the endorsement's terms.
• Specific Schedule: The CP 10 28 contains its own schedule, which must be completed to specify the premises, covered property, applicable limits of insurance for earthquake/volcanic eruption, and the flat-dollar deductible.
• Interaction with Other Forms: It must be used in conjunction with a standard Causes of Loss form (Basic, Broad, or Special). The Ordinance or Law exclusion in the underlying policy still applies unless specific Ordinance or Law Coverage (e.g., CP 04 05) is also added.
• Masonry Veneer: There's a specific limitation regarding exterior masonry veneer. Coverage for loss or damage to exterior masonry veneer (other than stucco) that is attached to the wood frame of a building is excluded unless specifically stated as covered in the Declarations or if the masonry veneer constitutes less than 10% of the building's total exterior wall area.
• Single Occurrence: All earthquake shocks or volcanic eruptions that occur within any 168-hour period will constitute a single earthquake or volcanic eruption occurrence.

Key Information for Agents and Underwriters

• Deductible Choice: The primary distinguishing feature is the flat-dollar deductible. This can be an advantage for insureds who want predictability in their out-of-pocket expenses for an earthquake or volcanic eruption loss. Agents should discuss this versus percentage deductible options (like those in CP 10 40 or CP 10 45) with clients.
• Risk Assessment: Underwriters must carefully assess the seismic and volcanic risk associated with the insured property's location, construction type (including age and building materials), and soil conditions. The chosen flat-dollar deductible should be commensurate with the risk and the insured's capacity to absorb that amount.
• Accurate Scheduling: Ensure all information on the endorsement's schedule is accurate and complete, including the correct premises, covered property descriptions, limits, and the agreed-upon flat-dollar deductible.
• Coverage Gaps: Agents should explain the limitations, such as the masonry veneer exclusion and the continued application of the Ordinance or Law exclusion (unless bought back), to avoid misunderstandings at the time of a claim.
• Alternative Endorsements: Be aware of the suite of ISO earthquake endorsements (CP 10 29, CP 10 40, CP 10 45) to offer the most appropriate solution based on the insured's needs, whether it's a sub-limit, a percentage deductible, or a flat-dollar deductible. The CP 10 41 Earthquake Inception Extension might also be relevant for certain risks.
• Market Conditions: Availability and pricing for earthquake coverage can vary significantly by region and current market conditions.