1. Forms
2. CP
3. CP-10-29

What the form is

The CP 10 29 - Earthquake and Volcanic Eruption Coverage (Sub-Limit Form with Flat-Dollar Deductible) is an endorsement used with Commercial Property policies to provide coverage for direct physical loss or damage to covered property caused by earthquake or volcanic eruption. This form modifies the standard property policy, which typically excludes these perils. A key feature of this endorsement is that the coverage is subject to a specific sub-limit of insurance, which is lower than the overall policy limit for other perils, and a flat dollar deductible applies per location. This endorsement does not contain its own schedule, so the CP DS 06–Earthquake – Volcanic Eruption Coverage schedule (Sub-limit Form) must be attached to specify the premises or locations covered, the applicable sub-limit(s), and the coverages that are part of that sub-limit.

Classes of business it applies to

This endorsement can be used for various classes of commercial business that wish to obtain coverage for earthquake and volcanic eruption perils, particularly those located in areas with some seismic exposure but perhaps not high enough to warrant full limits coverage. Examples include:

• Owners of commercial buildings such as offices, retail stores, or light manufacturing facilities.
• Businesses holding significant business personal property.
• It can apply to direct damage coverages as well as time element coverages (like Business Income and Extra Expense) if specified in the schedule.

For instance, a retail business operating in a region with moderate earthquake risk might opt for this endorsement to gain some financial protection against earthquake damage to its building and inventory, with a defined sub-limit and a manageable flat dollar deductible per store location, rather than paying for full earthquake limits which might be prohibitively expensive.

Special considerations

• Mandatory Schedule: The CP DS 06 schedule is crucial and must be completed and attached when using the CP 10 29. This schedule details the specific locations, the sub-limit amount, and the coverages to which the earthquake and volcanic eruption coverage applies.
• Flat Dollar Deductible: The deductible is a flat dollar amount that applies per location for all loss or damage from an earthquake or volcanic eruption at that single scheduled location. If another covered cause of loss occurs concurrently with an earthquake or volcanic eruption, only the earthquake deductible is applied.
• Interaction with Earth Movement Exclusion: This endorsement does not eliminate the entire Earth Movement exclusion found in the standard Causes of Loss forms. It only modifies the exclusion to the extent of providing the specific coverage for earthquake and volcanic eruption as described in the endorsement.
• Not a Stand-Alone Form: The CP 10 29 is not a stand-alone causes of loss form. One of the primary Causes of Loss forms (e.g., CP 10 10 Basic Form, CP 10 20 Broad Form, or CP 10 30 Special Form) must also be part of the policy.
• Masonry Veneer: Coverage for loss or damage to exterior masonry veneer attached to a wood frame building may be limited or excluded unless specifically included or if it constitutes less than 10% of the building's total exterior wall area.
• Ordinance or Law: The standard ordinance or law exclusion in the causes of loss forms generally still applies unless the CP 04 05–Ordinance or Law Coverage endorsement is also attached.

Key information for agents and underwriters

• Risk Assessment: Underwriters need to carefully assess the seismic exposure of each scheduled location. The sub-limit and flat dollar deductible should be appropriate for the specific risk and the insured's risk appetite.
• Pricing: Pricing for this endorsement will depend on the geographic location, construction type of the insured property, the chosen sub-limit, and the deductible amount.
• Coverage Gaps: Agents should ensure clients understand that this is sub-limited coverage and may not cover the full replacement cost of property in a major event. The flat dollar deductible applies per location, which could result in significant out-of-pocket expenses if multiple locations are affected.
• Scheduling: Accuracy in completing the CP DS 06 schedule is paramount. All premises or locations intended to be covered under the sub-limit must be clearly listed. Multiple schedules can be used if there are multiple sub-limits.
• Alternative Endorsements: This is one of several earthquake endorsements available. Agents and underwriters should be familiar with other options, such as those with percentage deductibles (e.g., CP 10 40, CP 10 45) or flat-dollar deductibles with their own schedules (CP 10 28), to offer the most suitable coverage. The CP 10 41–Earthquake Inception Extension can be used with any of the earthquake endorsements to address potential gaps at the beginning of the policy period.