Causes of Loss Forms
Domain 3 - Causes of Loss Forms
This domain tests which perils each causes of loss form covers, how exclusions interact with ensuing loss, and when an endorsement is needed.
Basic form (CP 10 10)
Named perils: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Theft is not included. Each peril carries its own exclusions - smoke from agricultural smudging or industrial operations is excluded; windstorm does not cover interior damage unless the exterior is first breached.
Broad form (CP 10 20)
Adds breakage of building glass, falling objects (exterior), water damage (accidental discharge or leakage from plumbing, HVAC, sprinklers, or appliances), and weight of snow, ice, or sleet. Water damage does not include flood, surface water, or repeated seepage over 14 days or more.
Special form (CP 10 30)
Covers risks of direct physical loss unless excluded, including theft and accidental damage. Core exclusions: ordinance or law; earth movement (with a limited exception for sinkhole collapse); governmental action; nuclear hazard; utility services; war; water (flood, surface water, waves, tides, overflow); fungus, wet rot, dry rot, and bacteria; pollution; wear and tear, rust, corrosion, smog, latent defect, mechanical breakdown, and error in design; employee dishonesty; artificially generated electrical current. Ensuing-loss language restores coverage when an excluded cause leads to a separate covered peril.
Worked example
Windstorm tears off part of a roof; rain enters and damages stock. Under the Special form, the wind loss is covered and the rain damage is covered because the building was first damaged by a covered peril. Under the Basic form, windstorm is covered but the rain damage is not - interior water damage needs a rain endorsement. Same facts, different form, opposite result.
Traps
- Assuming the Special form covers flood; it does not - flood needs a separate policy or endorsement.
- Confusing "water damage" (Broad) with "flood" (excluded).
- Missing that ordinance or law excludes demolition, debris removal, and increased construction cost.
- Forgetting that vacancy and protective-safeguard conditions apply regardless of form.
- Overlooking that collapse is an additional coverage with enumerated causes, not a named peril.