1. Forms
2. CP
3. CP-DS-06

What the form is

The CP DS 06 - Earthquake – Volcanic Eruption Coverage Schedule (Sub-Limit Form) is a declarations schedule used in Commercial Property insurance. Its primary purpose is to provide the specific details required when earthquake and volcanic eruption coverage is added to a policy using certain endorsements that allow for a sub-limit – meaning a limit of insurance for earthquake/volcanic eruption that is lower than the overall policy limits for other perils. This form does not provide coverage itself but is a crucial component for defining the scope and limits of the earthquake and volcanic eruption coverage provided by endorsements like the CP 10 45 (Earthquake And Volcanic Eruption Coverage (Sub-Limit Form With Percentage Deductible)) or CP 10 29 (Earthquake And Volcanic Eruption Coverage (Sub-limit With Flat Dollar Deductible)). It itemizes the premises or locations covered, the applicable sub-limit of insurance for earthquake and volcanic eruption, and the deductible that applies to this specific coverage.

Classes of business it applies to

This schedule applies to any class of business that has purchased Commercial Property insurance and has opted to include earthquake and volcanic eruption coverage on a sub-limit basis. This is common for businesses located in areas with some seismic risk, but where the insured may not want or need to purchase earthquake coverage up to the full limits of their property policy due to cost or perceived risk level. Examples include:

• Manufacturing plants
• Retail stores
• Office buildings
• Habitational properties like apartment complexes or condominium associations
• Warehouses

Essentially, any commercial property owner who desires earthquake coverage but finds a full limit policy too expensive or unnecessary might use an endorsement that necessitates this schedule.

Special considerations

There are several important points to consider when using the CP DS 06:

• Mandatory Attachment: This schedule is required when specific earthquake endorsements that provide coverage on a sub-limit basis (like CP 10 45 or CP 10 29) are attached to the policy. Without this schedule, the terms of the sub-limited earthquake coverage would be incomplete.
• Sub-Limit Specificity: The form clearly defines that the limit of insurance for earthquake and volcanic eruption is a sub-limit, separate and distinct from the general property limits. All premises or locations intended to be part of the sub-limit must be entered.
• Deductible Application: The schedule will also specify the deductible applicable to the earthquake and volcanic eruption coverage, which can be a percentage or a flat dollar amount, depending on the accompanying endorsement.
• Multiple Sub-limits: If there are multiple sub-limits (e.g., different sub-limits for different locations or types of property), multiple CP DS 06 schedules may be needed.

Real-world example: A commercial building owner in an area with moderate earthquake risk has a building insured for $5 million. To manage premium costs, they opt for an earthquake sub-limit of $1 million using endorsement CP 10 45. The CP DS 06 schedule would be completed to show the $1 million sub-limit and the applicable percentage deductible for the earthquake coverage on that specific building.

Key information for agents and underwriters

• Accurate Scheduling: Agents must ensure all locations to be covered under the earthquake sub-limit are accurately listed on the schedule, along with the correct sub-limit amount and deductible information. Any omission or error could lead to coverage gaps.
• Risk Assessment: Underwriters will use the information on this schedule, in conjunction with the underlying property details and geographic location, to assess the specific earthquake and volcanic eruption risk and price the coverage appropriately. The chosen sub-limit and deductible are key factors in this assessment.
• Coinsurance Clarification: It's important to note that an endorsement like CP 10 45, which uses this schedule, is typically not subject to the standard policy coinsurance provision for the earthquake peril, allowing for the sub-limit to be less than the overall policy limit. This differs from endorsements like CP 10 40, which may require the earthquake limit to be the same as the policy limit and subject to coinsurance.
• Client Communication: Agents should clearly explain to the insured how the sub-limit and separate deductible for earthquake coverage function, as detailed on the CP DS 06, to avoid misunderstandings at the time of a claim.