1. Forms
2. CP
3. CP-11-10

Form CP 11 10: Builders Risk - Reporting Form

1. What the form is

The CP 11 10, Builders Risk - Reporting Form, is a crucial endorsement used in conjunction with the Builders Risk Coverage Form (CP 00 20) in commercial property insurance. Its primary purpose is to provide a mechanism for adjusting coverage limits and corresponding premiums as the value of a construction project changes over time. Instead of a fixed coverage amount for the entire project duration, this form allows the insured to periodically report the increasing value of the property under construction. This ensures that the coverage adequately reflects the current insurable interest and that premiums are based on the actual values at risk at different stages of the project. The form facilitates a more accurate and often more economical way to insure projects where the value escalates significantly from inception to completion.

2. Classes of business it applies to

This form is specifically designed for construction projects where the value of the property increases incrementally. It is particularly well-suited for:

• General Contractors and Builders: Especially those who undertake multiple projects or larger projects where the value changes substantially over the construction period. For example, a contractor building a multi-story office building or a large residential development would benefit from this form by only paying premiums on the value actually exposed at each reporting period.
• Real Estate Developers: Developers managing new construction projects, from single-family homes to large commercial complexes, can use this form to align insurance costs with the project's progress. For instance, a developer building a shopping mall would see the value grow significantly as foundations are laid, structures are erected, and interior finishes are installed.
• Property Owners undertaking significant construction or renovation: While often the contractor procures this coverage, an owner directly managing a large construction or renovation project might also utilize this reporting structure.

Essentially, any construction project insured under a Builders Risk Coverage Form (CP 00 20) where property values are reported periodically can utilize the CP 11 10. It is commonly used for builders who construct more than five homes annually or build multiple commercial structures of the same type each year.

3. Special considerations

Several important factors must be considered when using the CP 11 10:

• Accurate and Timely Reporting: This is paramount. The insured is responsible for submitting accurate reports of value by the agreed-upon deadlines (typically monthly). Failure to report, late reporting, or underreporting values can have severe consequences in the event of a loss, potentially leading to claim penalties or insufficient coverage. For example, if a report understates the value by 20%, the claim payment might also be reduced by 20%. If no report is filed, coverage might revert to the value at the policy's inception, which could be zero for a new construction project.
• Definition of "Values": It's crucial to understand what constitutes the "value" to be reported. This typically includes the cost of labor, materials, and overhead associated with the construction, and may also include profit, depending on the policy terms. Change orders that increase project value must also be reflected in reported values.
• Coverage Inception for New Starts: For a new construction start to be covered under a reporting form policy, it generally needs to be properly reported on time, and the premium must accompany the report. A "start" is often considered to have occurred once materials that will be part of the completed structure are delivered to the site.
• Relationship with CP 00 20: The CP 11 10 modifies the underlying Builders Risk Coverage Form (CP 00 20). All terms, conditions, and exclusions of the CP 00 20 still apply unless specifically amended by the CP 11 10 or other endorsements.
• Not Suitable for All Insureds: Businesses that cannot commit to prompt and accurate reporting of values should avoid this form, as the potential for underinsurance or claim disputes is high.

4. Key information for agents and underwriters

Agents and underwriters play a critical role in ensuring the proper use and understanding of the CP 11 10:

• Pricing: The reporting form allows for more precise premium calculation based on actual exposed values, which can be attractive to clients. However, underwriters must ensure that the rates applied to the reported values are adequate for the risks involved at each stage of construction. The premium is typically adjusted based on each report.
• Risk Assessment: Underwriters need to assess the insured's ability and commitment to comply with the reporting provisions. A history of late or inaccurate reporting on previous policies could be a red flag. The nature of the project, the types of materials used, site security, and the contractor's experience are also key underwriting considerations.
• Coverage Gaps: Agents must clearly explain the implications of reporting errors to the insured. It's vital to emphasize that failure to report correctly can create significant coverage gaps. For example, if a loss occurs after a reporting deadline has passed and no report was submitted for that period, coverage might be limited to the values stated in the last accepted report.
• Underwriting Guidelines: Underwriters should establish clear guidelines for acceptable reporting intervals and the consequences of non-compliance. They also need to be clear on how "completed value" is defined and what elements should be included in the reported values. Agents should ensure their clients understand these guidelines thoroughly.
• Monitoring Reports: Insurers should have a system to track the receipt and accuracy of reports. Some insurers provide agents with weekly "starts reports" to help track reporting form activity. Diligent follow-up on missing or questionable reports is essential.
• Audit Provisions: While not explicitly detailed in the CP 11 10 summary, policies with reporting provisions often include audit rights for the insurer to verify the accuracy of reported values. This can be a tool for underwriters to ensure compliance and correct premium calculations.

The CP 11 10, when used correctly, offers a flexible and fair method for insuring builders risk exposures. However, its effectiveness hinges on the insured's diligence in reporting and the clear communication of its requirements by insurance professionals.