Commercial Property Causes of Loss & Endorsements
This domain tests which perils are covered under the Basic, Broad, and Special causes of loss forms, how exclusions operate, and when endorsements add back coverage. The exam focuses on the difference between named-peril and open-peril coverage and on exclusion exceptions.
The three causes of loss forms
- Basic (CP 10 10): named perils only-fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.
- Broad (CP 10 20): Basic plus breakage of glass, falling objects, weight of snow, ice, or sleet, and water damage.
- Special (CP 10 30): open peril-covers direct physical loss or damage unless excluded. The insured must prove a named peril under Basic or Broad; under Special, the insurer must apply an exclusion to deny coverage.
Exclusions that drive exam questions
Special excludes ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war, water (including flood, surface water, and mudslide), fungus, wear and tear, insects or vermin, settling or cracking, pollution, and dishonest acts. Named forms exclude many of the same causes, but the reasoning differs because the peril was never named.
Endorsements
Earthquake and flood are usually excluded and must be added. Earthquake coverage is written through CP 10 40; flood through a flood endorsement. Water backup and sump overflow, windstorm or hail deductibles, and ordinance or law coverage also require endorsements. These endorsements often carry separate deductibles or sublimits.
Worked example
A building insured on the Special form is shaken by an earthquake. A wall collapses and breaks a sprinkler pipe; water damages stock. The building collapse is excluded as earth movement. However, the earth movement exclusion contains an ensuing-loss exception for fire, explosion, volcanic action, or sprinkler leakage. The stock damage from sprinkler leakage is therefore covered, subject to the deductible and any sublimit, while the earthquake damage to the building is not.
Traps that cost marks
“Special” does not mean “all risks.” Flood is not the same as accidental water damage from plumbing. The ensuing-loss exception does not bring the excluded peril itself back into coverage. Named-peril forms require the insured to identify a listed peril. Ordinance or law and utility services exclusions commonly defeat claims that seem covered at first glance.