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3. DP-00-02

Form DP 00 02: Dwelling Property 2 - Broad Form

The Dwelling Property 2 - Broad Form (DP 00 02) is a named perils insurance policy that provides coverage for dwellings, other structures, and personal property. It offers broader protection than the Basic Form (DP 00 01) by including additional perils. This form is one of three standard dwelling property forms in the Insurance Services Office (ISO) portfolio, sitting between the basic form and the special form (DP 00 03) in terms of coverage breadth.

Key Coverages within the DP 00 02 include:

• Coverage A - Dwelling: Covers the dwelling structure at the described location, including structures attached to the dwelling and materials/supplies on or next to the premises used for construction, alteration, or repair.
• Coverage B - Other Structures: Covers other structures on the residence premises that are separated from the dwelling by clear space (e.g., detached garages, sheds, fences). However, buildings with business use are generally excluded, except for those rented as a private garage.
• Coverage C - Personal Property: Covers personal property usual to the occupancy as a dwelling, owned or used by the insured or their family residing with them, while on the described location. At the insured's request after a loss, it can also cover personal property of a guest or servant. There is no automatic Coverage C limit; a specific limit must be selected and a premium paid.
• Coverage D - Fair Rental Value: Provides coverage for lost rental income if a covered peril makes the rented portion of the described location unfit for its normal use.
• Coverage E - Additional Living Expense: Covers the necessary increase in living expenses incurred by the insured to maintain their normal standard of living if a covered loss makes the part of the residence premises where they reside uninhabitable.

The DP 00 02 typically provides coverage on a replacement cost value (RCV) basis for the dwelling and other structures, meaning it pays the cost to repair or replace the damaged property without a deduction for depreciation, provided certain insurance-to-value requirements are met. Personal property losses are usually settled on an actual cash value (ACV) basis, which accounts for depreciation. Some insurers may offer endorsements to modify these settlement terms.

Classes of Business It Applies To

The DP 00 02 is primarily designed for residential properties that are not eligible for a homeowners policy or where the insured does not require the broader coverage of a homeowners form. Common scenarios include:

• Rental Properties: This is a common use for the DP 00 02, providing coverage for landlords who rent out dwellings to tenants. For example, an individual who owns a single-family home and rents it out would be a typical candidate for this form.
• Dwellings Occupied by Someone Other Than the Owner: This could include properties occupied by family members where the owner does not reside.
• Vacation Homes or Seasonal Dwellings: Properties that are not the insured's primary residence.
• Older Homes: Where the replacement cost of the dwelling might be significantly different from its market value, or where certain underwriting criteria for homeowners policies are not met.
• Dwellings with no more than four apartments or units.
• Dwellings under construction may also be eligible, though sometimes restricted to the DP 00 01 form.

It's important to note that the DP 00 02, like other dwelling forms, does not automatically include liability coverage. Personal liability and medical payments coverage can typically be added by endorsement, such as the Personal Liability Supplement (DL 24 01).

Special Considerations

When considering the DP 00 02, several factors come into play:

• Named Perils: The DP 00 02 covers direct physical loss caused by a specific list of perils. If a loss occurs due to a peril not listed, there is no coverage. The insured bears the burden of proving the loss was caused by a named peril. Covered perils typically include those found in the Basic Form (fire, lightning, internal explosion) plus additional perils such as:
  • Windstorm or Hail
  • Explosion (broader than internal explosion)
  • Riot or Civil Commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism or Malicious Mischief
  • Damage by Burglars (but not theft of property itself, though some policies might offer limited theft coverage or it can be endorsed). Note: No coverage if dwelling vacant for more than 60 days.
  • Falling Objects (e.g., trees). This peril does not include loss to the inside of a building unless the roof or an outside wall is first damaged by the falling object.
  • Weight of Ice, Snow, or Sleet
  • Accidental Discharge or Overflow of Water or Steam (from a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or from a household appliance). This coverage may not apply if the dwelling has been vacant for a specified period (e.g., 60 days) before the loss.
  • Sudden and Accidental Tearing Apart, Cracking, Burning, or Bulging (of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water)
  • Freezing (of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or of a household appliance, but only if the insured has used reasonable care to maintain heat or shut off the water supply).
  • Sudden and Accidental Damage from Artificially Generated Electrical Current (power surges).
• Limitations:
  • Vacancy: Coverage for certain perils, like vandalism and damage by burglars, may be suspended if the dwelling has been vacant for a specified period (typically more than 60 consecutive days) immediately before the loss. A dwelling under construction is not considered vacant.
  • Excluded Property: Certain types of personal property are typically not covered, such as animals, birds, fish, motorized land conveyances (with exceptions for those servicing the premises or for the handicapped), aircraft, and property of roomers, boarders, or tenants (unless they are related to the insured).
  • Water Damage Exclusion: Like most property policies, there are specific exclusions for water damage, such as flood, surface water, waves, tidal water, overflow of a body of water, water that backs up through sewers or drains, or water below the surface of the ground.
  • Ordinance or Law: Increased costs due to the enforcement of any ordinance or law regulating the construction, repair, or demolition of a building are generally excluded, though some limited coverage might be provided under "Other Coverages," or it can be added by endorsement.
• Other Coverages: The DP 00 02 includes several "Other Coverages" which extend or broaden the primary coverages. These can include:
  • Debris Removal
  • Improvements, Alterations, and Additions (up to 10% of Coverage C limit if the insured is a tenant)
  • Worldwide Coverage (up to 10% of Coverage C limit for personal property away from the premises)
  • Reasonable Repairs (to protect property from further damage after a covered loss)
  • Property Removed (to protect property endangered by a covered peril, providing coverage against any cause of loss for up to 30 days while removed).
  • Trees, Shrubs, and Other Plants (typically up to 5% of Coverage A, with a per-item limit, for loss by specified perils).
  • Fire Department Service Charge (e.g., $500).
  • Collapse (due to specified causes).
  • Glass or Safety Glazing Material.
  It's important to note that Fair Rental Value and Additional Living Expense coverage under the DP 00 02 is up to 20% of the Coverage A limit and, unlike the DP 00 01, using this coverage does not reduce the Coverage A limit for the same loss.
• Minimum Limits: ISO rules may suggest minimum limits for Coverage A (e.g., $12,000) and Coverage C (e.g., $4,000 without Coverage A) for the DP 00 02.

Key Information for Agents and Underwriters

• Risk Assessment:
  • Occupancy: The nature of occupancy (owner-occupied, tenant-occupied, seasonal, vacant) is a critical underwriting factor. Tenant-occupied properties may present different risks than owner-occupied dwellings. Vacancy, especially for extended periods, significantly increases the risk of vandalism, undetected maintenance issues (like water leaks), and other losses.
  • Age and Condition of Property: Older properties may have outdated electrical, plumbing, and HVAC systems, increasing the risk of loss from perils like fire, water damage, or freezing. The overall maintenance and condition of the roof, foundation, and structure are key.
  • Location: Proximity to coastlines (windstorm/hail risk), flood zones, areas with high crime rates, or regions prone to specific perils like wildfires or earthquakes will influence underwriting and pricing.
  • Protection: Availability of fire protection (hydrants, fire department response time) and protective devices (smoke detectors, burglar alarms) can impact risk.
• Pricing Considerations:
  • Premiums will be based on the amount of coverage, selected perils, location, construction type, age and condition of the property, occupancy, and any prior loss history.
  • The broader named perils coverage of the DP 00 02 will generally result in a higher premium than the DP 00 01, but a lower premium than the "all-risk" coverage for the dwelling provided by the DP 00 03.
• Coverage Gaps and Endorsements:
  • Theft of Personal Property: The base DP 00 02 covers damage by burglars but not necessarily theft of personal property. Agents should discuss options for adding theft coverage if needed by the insured.
  • Liability: As mentioned, liability coverage is not included and must be added via endorsement (e.g., DL 24 01). This is a crucial point for landlords.
  • Water Backup and Sump Overflow: This is a common exclusion that can often be bought back via endorsement.
  • Ordinance or Law: Increased costs to comply with building codes after a loss can be significant. Endorsement DP 04 71 can provide this coverage.
  • Functional Replacement Cost: For older homes where true replacement cost might be prohibitive or unnecessary, the Functional Replacement Cost endorsement (DP 05 30) can be considered, allowing repair or replacement with functionally equivalent materials.
• Underwriting Guidelines:
  • Insurers will have specific guidelines regarding the eligibility of properties for the DP 00 02. This may include maximum age of the dwelling, condition of the roof, updates to systems (electrical, plumbing, heating), and occupancy standards.
  • Properties undergoing significant renovation may only be eligible for a DP 00 01 until work is complete.
  • FAIR Plans (Fair Access to Insurance Requirements) may offer DP 00 02 coverage for properties unable to obtain insurance in the voluntary market, often with specific eligibility criteria and inspection requirements.
• Comparison with DP 00 01 and DP 00 03:
  • DP 00 01 (Basic Form): Covers fewer named perils and typically settles losses on an Actual Cash Value (ACV) basis for both dwelling and personal property, unless endorsed. Coverage E (Additional Living Expense) must be added by endorsement.
  • DP 00 03 (Special Form): Provides "all-risk" or "open perils" coverage on the dwelling and other structures (meaning it covers all perils unless specifically excluded), and named perils coverage on personal property (similar to the DP 00 02). This is the most comprehensive of the three ISO dwelling forms.

The DP 00 02 serves as a mid-tier option, offering a good balance of coverage and affordability for many types of dwellings that don't fit the homeowners policy mold, particularly for rental properties. Agents and underwriters must carefully assess the specific risks of each property and the needs of the insured to determine if the DP 00 02 is the appropriate form and what endorsements may be necessary to provide adequate protection.