1. Forms
2. CP
3. CP-10-41

What the form is

The CP 10 41, titled Earthquake Inception Extension, is an endorsement used in commercial property insurance. Its primary purpose is to address potential coverage gaps for earthquake or volcanic eruption losses that begin shortly before a policy's inception date but cause damage that continues into the new policy period. Specifically, this endorsement provides coverage for physical loss or damage that occurs on or after the policy inception date, provided that the earthquake shocks or volcanic eruption causing the damage began within 72 hours immediately preceding the policy's inception. It is important to note that the endorsement only covers the portion of the loss or damage that occurs after the policy inception date. This helps ensure continuity of coverage when an insured is transitioning between policies that both include earthquake coverage, or when adding earthquake coverage to an existing policy.

Classes of business it applies to

This endorsement is applicable to any commercial entity that has purchased or is purchasing earthquake and volcanic eruption coverage as part of their commercial property policy (e.g., through forms such as CP 10 40, CP 10 28, CP 10 29, or CP 10 45). It is particularly relevant for businesses located in geographical areas with known seismic activity. Examples of businesses that would find this endorsement useful include:

• Owners of commercial buildings (offices, retail spaces, industrial buildings)
• Manufacturing and industrial operations
• Large habitational properties such as apartment complexes
• Any business that relies on the physical integrity of its property and has opted for earthquake coverage.

For instance, if a business in California is renewing its property insurance and earthquake coverage, and an earthquake begins 48 hours before the new policy starts, causing aftershocks and damage after the new policy's inception, this endorsement would clarify that the post-inception damage is covered under the new policy.

Special considerations

There are several important considerations regarding the CP 10 41 endorsement:

• 72-Hour Window: The earthquake or volcanic eruption must commence within the 72-hour period immediately prior to the policy's inception for the endorsement to apply. Events starting outside this window are not addressed by this specific endorsement.
• Post-Inception Damage Only: The endorsement explicitly states that it only covers loss or damage that occurs on or after the policy inception date. Any damage that occurred before the policy started is not covered by this endorsement or the new policy.
• Not Standalone Coverage: The CP 10 41 is not a standalone earthquake coverage. It must be attached to a policy that already provides earthquake and volcanic eruption coverage through another endorsement (like the CP 10 40).
• Compatibility: The 02 19 and later versions of this endorsement are designed to be used with any of the ISO commercial property earthquake endorsements.

Key information for agents and underwriters

For Agents:

• This endorsement should be considered and offered to clients who are purchasing or renewing earthquake coverage, particularly in areas prone to seismic events, to prevent potential coverage disputes for events that span across policy periods.
• Clearly explain the 72-hour limitation and the fact that only post-inception damage is covered to manage client expectations.

For Underwriters:

• The CP 10 41 clarifies coverage intent for a very specific scenario and does not significantly broaden the overall earthquake risk beyond what is contemplated in the primary earthquake endorsement.
• The primary underwriting and risk assessment should focus on the underlying earthquake exposure and the limits/deductibles of the main earthquake coverage endorsement.
• Ensure that the main earthquake coverage endorsement (e.g., CP 10 40) is properly attached to the policy.
• While the direct premium impact of this endorsement may be minimal, its inclusion can prevent costly coverage disputes and enhance policy clarity.