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

Three Forms That Decide Which Perils Are Covered

The BPP says what is insured; a Causes of Loss form attached to it says which perils are insured. ISO offers three (plus an Earthquake form). The exam expects you to rank them from narrowest to broadest and to know exactly which perils each adds.

The critical conceptual split: Basic and Broad are named-peril forms — a loss is covered only if it results from a listed peril, and the burden is on the insured to prove the cause was listed. Special is open-peril ('all-risk') — every direct physical loss is covered unless excluded, and the burden shifts to the insurer to prove an exclusion applies.

What Each Named-Peril Form Covers

Basic (CP 10 10) covers these perils — a common memory device is "WCSHAVVER + Sprinkler Leakage":

• Fire, Lightning
• Explosion
• Windstorm or Hail
• Smoke
• Aircraft or Vehicles
• Riot or Civil Commotion
• Vandalism
• Sprinkler Leakage
• Sinkhole Collapse
• Volcanic Action

Broad (CP 10 20) adds to all of the above:

• Breakage of building glass
• Falling objects
• Weight of snow, ice, or sleet
• Water damage (sudden accidental discharge from a system — not flood)
• Collapse as an Additional Coverage (from specified causes)

Trap: 'Water damage' in Broad means accidental discharge or leakage from plumbing/appliances. Flood and surface water are always excluded in all three forms and require a separate flood policy or DIC.

The Three Causes-of-Loss Forms

Commercial property coverage selects perils through a separate Causes of Loss form attached to the coverage form. There are three principal forms, and the choice sets the breadth of coverage and the burden of proof:

The Special form is the commercial equivalent of "all-risk": broadest coverage, highest premium, and the insurer bears the burden of proving an exclusion applies.

Key Exclusions and the Special Form's Limitations

All three causes-of-loss forms share a core set of exclusions: ordinance or law, earth movement, governmental action, nuclear hazard, utility services failure, war, water (flood, surface water, sewer backup), and fungus/mold (limited). The Special form adds a list of limitations and additional exclusions that name-peril forms do not need — wear and tear, rust/corrosion, hidden decay, insects/vermin, mechanical breakdown, and gradual causes — because under open-peril coverage the insurer must explicitly carve out these maintenance-type losses.

A frequently tested nuance is the ensuing-loss exception: even when a cause like faulty workmanship or a specified exclusion applies, a separate covered peril that results (for example, a fire that ensues from an excluded electrical defect) is still paid. The collapse provision is an additional coverage on Broad and Special forms (not a covered peril per se), and theft is covered under Special but can be excluded by endorsement. Matching a loss scenario to the right form and knowing which exclusions are unique to the Special form is the central exam skill here.

Special Form: Open Peril Minus Exclusions

Under Special (CP 10 30) you do not look for a covered peril; you look for an exclusion. The major excluded causes (the "OWEN"-style groups the exam tests) include:

• Ordinance or Law, Earth Movement (earthquake/landslide), Governmental Action, Nuclear Hazard, Utility Services, War, Water (flood, surface water, sewer backup).
• Plus 'anti-concurrent causation' wording: if an excluded cause and a covered cause combine, the loss is still excluded.
• Other exclusions: wear and tear, rust, corrosion, hidden decay, insects/vermin, mechanical breakdown, and gradual seepage.

Special is the only form that covers theft as standard (Basic and Broad do not cover theft). Because the insurer must prove an exclusion applies, Special is the most coverage-friendly to the insured and commands the highest premium.

Burden-of-proof worked logic: Under Broad, if a warehouse floor buckles from an unknown cause, the insured cannot collect because they cannot prove a named peril. Under Special, the same loss is paid unless the insurer proves it was wear, settling, or another listed exclusion.

Limited Coverages and Special-Form Sub-Limits

Even the Special form contains internal limited coverages with their own caps, which the exam treats as distinct from outright exclusions:

• Theft of certain property is limited: building glass, furs/fur garments capped at $2,500, jewelry/watches/precious stones capped at $2,500 (except as stock), patterns/dies/molds capped at $2,500, and stamps/tickets/letters of credit at $250.
• Property in transit is not covered unless extended.
• Fungus, wet/dry rot, and bacteria are limited to $15,000 per 12-month period and only when resulting from a specified cause.

Trap: candidates assume Special = unlimited. It covers all causes except exclusions, but several property types carry dollar sub-limits even when the cause is covered. Distinguish an excluded cause (flood) from a limited recovery (jewelry theft capped at $2,500).

Choosing a Form on the Exam

A recurring question type describes a business and asks which causes-of-loss form best fits. Apply this logic: if the client wants the broadest protection and can pay more, recommend Special (CP 10 30) — open peril, theft included, insurer bears proof. If the client wants moderate protection at lower cost, Broad (CP 10 20) adds the everyday perils (weight of snow, falling objects, accidental water) most small risks face. Basic (CP 10 10) is the bare-bones, lowest-premium choice for cost-sensitive insureds willing to forgo theft, glass, and water coverage.

Remember the universal exclusions that no commercial property form covers without a separate solution: flood (needs NFIP or a Difference-in-Conditions policy), earthquake (needs CP 10 40 or a DIC), and equipment/mechanical breakdown (needs an Equipment Breakdown / boiler-and-machinery policy).