9.3 Causes of Loss Forms (Basic, Broad, Special)

Choosing the Peril Set

A BPP describes what is covered, but a separate Causes of Loss Form decides which perils are insured. ISO offers three, increasing in breadth and price.

Basic Form (CP 10 10) — named perils

The Basic Form covers a fixed list, easily remembered as "Fire-Lightning-Explosion-and-friends" plus WCSHARVE: Windstorm or hail, Civil commotion/riot, Smoke, Hail, Aircraft/vehicles, Riot, Vandalism, Explosion — together with Fire, Lightning, Smoke, Sprinkler leakage, Sinkhole collapse, and Volcanic action. Because it is a named-peril form, the insured must prove the loss came from a listed peril.

Broad Form (CP 10 20) — Basic plus three

The Broad Form adds to everything in Basic:

• Falling objects
• Weight of snow, ice, or sleet
• Water damage (accidental discharge/leakage from a system)

It also adds a limited collapse Additional Coverage (caused by specified perils such as hidden decay or vermin damage, weight of people/property, and use of defective materials during construction).

Special Form (CP 10 30) — open perils

The Special Form is "all-risk" / open-peril: it covers any direct physical loss unless specifically excluded. This shifts the burden of proof to the insurer, which must show an exclusion applies. This is the single most important distinction on the exam: named-peril forms put the burden on the insured; open-peril forms put it on the insurer.

Exclusions and traps

All three forms share major exclusions: ordinance or law, earth movement (earthquake), governmental action, nuclear hazard, utility services failure, war, and water (flood, surface water, sewer backup). These are excluded so that they can be bought back separately (e.g., Earthquake CP 10 40, Flood via the NFIP, Ordinance or Law CP 04 05).

The Special Form adds its own list of exclusions and limitations — for example, theft of building materials, dishonest acts by the insured, wear and tear, rust, vermin, mechanical breakdown, and a limited dollar cap on theft of certain property (jewelry, furs, patterns/dies). A frequent trap: "all-risk" does not mean "all losses paid." The Special Form still excludes the major catastrophe perils above. Another trap: only the Special Form covers theft as a default peril — neither Basic nor Broad covers theft.

Anti-concurrent causation and the ordering exclusions

The major exclusions are written with an anti-concurrent causation lead-in: loss is excluded "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." This defeats the argument that because a covered peril also contributed, the whole loss should be paid. The classic exam application is flood plus wind: when a hurricane drives both wind and storm surge, the surge (flood) portion stays excluded even though wind is covered. Adjusters must separate wind damage (covered) from flood damage (excluded).

A second tier of exclusions applies only if loss by a Covered Cause of Loss results — the so-called "ensuing loss" exceptions. For example, faulty workmanship is excluded, but if defective wiring causes a fire, the resulting fire damage is covered because fire is a covered cause of loss. Watch for questions that hinge on whether an ensuing covered peril broke the chain.

Form selection on the exam

When a question asks you to recommend a form, weigh breadth against cost. Choose Special for a business that wants the widest protection and is willing to pay more; it is the default expectation for most commercial risks and is required if the insured wants theft covered. Choose Broad as a middle ground that adds the three common weather/water perils. Basic is the budget option for low-hazard occupancies or where a lender only requires fire and extended coverage.

Remember the relationship: every Broad peril includes every Basic peril, and Special covers everything except its named exclusions. So if a loss is paid under Basic, it is also paid under Broad and Special. The exam phrasing "which is the LEAST/broadest coverage that responds" is testing exactly this nesting.

Buying Back the Excluded Perils

The major exclusions shared by all three causes-of-loss forms exist precisely so that they can be bought back with a separate form or endorsement when the insured needs them:

Quick Answer: 'All-risk' (Special Form) does not mean all losses are paid. Flood, earthquake, ordinance-or-law, war, nuclear, and wear-and-tear stay excluded on every form and must be added back separately.

Theft, Ensuing Loss, and Anti-Concurrent Causation Recap

Three subtle distinctions decide many commercial-property questions:

• Theft is a covered cause of loss only under the Special Form — neither Basic nor Broad covers theft, and the Special Form still caps theft of certain property (furs, jewelry, patterns/dies) at sublimits.
• Ensuing loss exceptions restore coverage when an excluded cause leads to a covered peril — faulty wiring is excluded, but a fire that results from it is covered because fire is a covered cause of loss.
• Anti-concurrent causation language excludes a loss caused by an excluded peril 'regardless of any other cause that contributes concurrently or in any sequence,' which is why hurricane storm surge (flood) stays excluded even though the accompanying wind is covered. Adjusters must separate the wind portion (paid) from the flood portion (denied).