5.2 Commercial Causes of Loss Forms: Basic, Broad, and Special
Key Takeaways
The ISO Commercial Causes of Loss forms establish three tiers of peril coverage: CP 10 10 (Basic - 11 named perils), CP 10 20 (Broad - 14 named perils plus Collapse), and CP 10 30 (Special - open perils subject to specific exclusions and sublimits).
The Anti-Concurrent Causation (ACC) preamble strictly bars coverage for losses caused directly or indirectly by eight core perils—including flood, earth movement, and ordinance or law—regardless of any other cause or event contributing concurrently or in any sequence.
Under CP 10 30 Special Form, the legal burden of proof rests entirely on the insurer to demonstrate that an exclusion applies, whereas Basic and Broad forms place the affirmative burden on the insured to prove an enumerated peril caused the loss.
CP 10 30 Special Form imposes strict internal theft sublimits: $2,500 for furs, $2,500 for jewelry and precious metals, $2,500 for patterns, dies, and molds, and $250 for stamps, tickets, and lottery tickets.
Water damage coverage under Broad and Special forms excludes continuous or repeated seepage or leakage occurring over 14 days or more, as well as interior water damage from rain unless the building envelope first sustains physical breach by wind or hail.
Hierarchy of ISO Causes of Loss Forms
In the ISO Commercial Property Program, direct property coverage forms such as the CP 00 10 do not identify perils within their insuring text. Instead, perils are established by attaching one of three standardized Causes of Loss Forms. The choice of form fundamentally determines the scope of protection, the pricing structure, and the evidentiary burden of proof during claims adjustment.
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| ISO CAUSES OF LOSS PERIL HIERARCHY |
+---------------+-------------------------------------+-------------------+
| Form Code | Form Designation | Peril Scope |
+---------------+-------------------------------------+-------------------+
| CP 10 10 | Basic Form | 11 Named Perils |
| CP 10 20 | Broad Form | 14 Named Perils |
| | | + Collapse Cov |
| CP 10 30 | Special Form | Open Perils |
| | | (Risks of Loss) |
+---------------+-------------------------------------+-------------------+
The Legal Burden of Proof
- Named Perils (Basic CP 10 10 & Broad CP 10 20): The insured policyholder carries the affirmative burden of proving that the physical loss or damage was directly caused by an enumerated peril scheduled in the contract.
- Open Perils (Special CP 10 30): The insured needs only to prove that direct physical loss occurred to covered property during the policy period. The burden of proof then shifts completely to the insurer to establish that a specific policy exclusion or limitation bars coverage.
CP 10 10 Basic Form Perils
The Basic Form provides restricted named-peril protection against 11 specified causes of loss:
- Fire: Hostile combustion outside its intended container.
- Lightning: Naturally generated atmospheric electrical discharge.
- Explosion: Catastrophic structural rupture, including furnace explosion. Excludes steam boiler explosions, steam pipe rupture, or bursting of moving pressure equipment.
- Windstorm or Hail: Exterior structural damage caused by wind or hail. Interior contents damage from rain, snow, sand, or dust is excluded unless wind or hail first damages the building envelope, creating an opening through which elements enter.
- Smoke: Sudden and accidental damage from smoke. Excludes smoke from agricultural smudging or industrial manufacturing operations.
- Aircraft or Vehicles: Physical contact by aircraft, spacecraft, or vehicles. Excludes damage caused by vehicles owned or operated by the named insured.
- Riot or Civil Commotion: Civil disturbances, strikes, and employee looting occurring during a strike or lock-out.
- Vandalism: Willful, malicious physical damage. Excludes theft, except building damage resulting directly from the breaking in or exiting of burglars.
- Sprinkler Leakage: Accidental leakage or discharge from an automatic fire suppression system, including structural collapse of sprinkler water storage tanks.
- Sinkhole Collapse: Sudden settlement or collapse of land into subterranean hollows created by the action of water on limestone or dolomite rock formations. Excludes sinkholes caused by man-made subterranean excavations, mining, or the cost of filling earth cavities.
- Volcanic Action: Direct physical damage from volcanic blast, airborne shockwaves, ash, dust, or lava flow. Excludes earthquake tremors and the labor cost of removing ash that does not cause structural damage.
CP 10 20 Broad Form Perils
The Broad Form incorporates all 11 Basic Form perils plus three additional causes of loss, along with an expanded Additional Coverage for Collapse:
- Falling Objects: Exterior roof or walls must first be breached by the falling object before damage to interior personal property is covered. Excludes damage to the falling object itself.
- Weight of Snow, Ice, or Sleet: Structural damage to buildings or contents caused by the accumulation of frozen precipitation. Excludes damage to outdoor gutters, downspouts, awnings, fences, retaining walls, pavements, or bulkheads.
- Water Damage: Accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of a plumbing, heating, air conditioning, or other system or appliance located on the described premises. Includes the reasonable cost of tearing out and replacing structural portions of the building to access and repair the damaged system. It does not cover the cost of repairing the defect or appliance from which the water escaped.
Additional Coverage — Collapse (CP 10 20 & CP 10 30)
Broad and Special forms include structural collapse coverage, defined as an abrupt falling down or caving in of a building or any part of a building with the result that the building cannot be occupied for its intended purpose. Covered collapse causes include:
- Specified causes of loss (fire, windstorm, sprinkler leakage, etc.)
- Hidden building decay (unobserved rot or insect damage undiscovered prior to collapse)
- Weight of people or personal property
- Weight of rain collected on a roof
- Defective materials or methods used in construction or remodeling, provided the collapse occurs during the course of the construction or renovation work.
The Anti-Concurrent Causation (ACC) Preamble and Group I Exclusions
Commercial property disputes frequently center around multiple concurrent or sequential causes of damage. To prevent courts from applying the common-law "efficient proximate cause" doctrine to find coverage when an excluded peril combines with a covered peril, ISO forms incorporate a strict Anti-Concurrent Causation (ACC) preamble preceding Group I exclusions:
"We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss."
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| GROUP I EXCLUSIONS (GOVERNED BY THE ACC PREAMBLE) |
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| 1. Ordinance or Law (Enforcement of building codes / demolition costs) |
| 2. Earth Movement (Earthquake, landslide, mine subsidence, tremors) |
| 3. Governmental Action (Seizure/destruction by order of civil authority)|
| 4. Nuclear Hazard (Nuclear reaction, radiation, radioactive fallout) |
| 5. Utility Services (Failure of power/water/comm occurring off premises)|
| 6. War and Military Action (Insurrection, rebellion, warlike acts) |
| 7. Water (Flood, surface water, waves, sewer backup, hydrostatic) |
| 8. Fungus, Wet Rot, Dry Rot, and Bacteria (Limited to $15,000 aggregate)|
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Detailed Analysis of Core Group I Exclusions
1. Ordinance or Law
Bars recovery for loss caused by the enforcement of any ordinance, municipal law, or land-use regulation governing the construction, use, repair, or demolition of any building. To restore coverage for these immense exposures, public adjusters recommend attaching the Ordinance or Law Endorsement (CP 04 05), which provides three distinct coverages:
- Coverage A: Loss to the undamaged portion of the building.
- Coverage B: Demolition cost of the undamaged structural elements.
- Coverage C: Increased cost of construction to bring the rebuilt structure into code compliance.
2. Earth Movement
Excludes earthquake, landslide, mine subsidence (common in central and southern Illinois), earth sinking, rising, or shifting, and volcanic eruption (other than airborne volcanic action). A resulting fire or explosion caused by earth movement is covered as an exception.
3. Governmental Action
Excludes seizure or destruction of property by governmental or municipal order. Crucial exception: coverage remains intact if the government orders the destruction of a building to prevent the spread of a covered hostile fire.
4. Utility Services (Off-Premises)
Excludes the failure of power, water, communication, or other utility services supplied to the described premises if the failure originates away from the described premises. However, if off-premises power failure causes a surge that ignites an on-premises fire, the resulting fire damage is covered.
5. Water (The Comprehensive Flood Exclusion)
Encompasses four primary water hazards:
- Flood, surface water, waves, tidal water, storm surge, or overflow of any body of water.
- Mudslide or mudflow.
- Water that backs up or overflows from a sewer, drain, or sump pump.
- Underground water exerting hydrostatic pressure on foundations, basements, walls, floors, or paved surfaces.
6. Fungus, Wet Rot, Dry Rot, and Bacteria
Strictly excluded under ACC language. However, the policy provides a "Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria" grant: up to $15,000 annual aggregate for mold cleanup, testing, and structural restoration, provided the fungal growth is the direct result of a covered cause of loss (such as fire department water discharge).
Group II Exclusions: Standard Causation
Unlike Group I, Group II exclusions are not governed by the draconian ACC preamble. Instead, traditional proximate cause standards apply. If an excluded peril in Group II results in a covered cause of loss, the resulting loss is covered.
- Electrical Current: Artificially generated electrical current that damages electronic equipment, wiring, or circuitry (resulting fire is covered).
- Delay, Loss of Use, or Loss of Market: Consequential indirect economic losses (requires business interruption coverage).
- Smoke, Vapor, or Gas: From agricultural smudging or industrial manufacturing.
- Wear, Tear, and Maintenance Exclusions: Wear and tear, rust, corrosion, decay, deterioration, hidden or latent defect, smog, and settling or cracking of pavements, foundations, walls, or roofs.
- Infestation: Nesting, infestation, or discharge of waste products by insects, birds, rodents, or other vermin.
- Mechanical Breakdown: Mechanical rupture or failure of rotating parts caused by centrifugal force.
- Continuous or Repeated Seepage of Water: Continuous or repeated seepage or leakage of water, or the presence or condensation of humidity, moisture, or vapor, that occurs over a period of 14 days or more.
- Freezing of Plumbing: Excluded unless the insured exercised reasonable care to maintain heat in the building or completely drained the water systems and shut off the supply.
- Dishonest or Criminal Acts: Dishonesty or embezzlement by the named insured, partners, employees, directors, or trustees.
- Pollution: Discharge, dispersal, seepage, migration, release, or escape of pollutants unless caused by a "specified cause of loss."
- Faulty, Inadequate, or Defective (Planning, Design, Workmanship): Defective zoning, design, specifications, workmanship, repair, construction, or materials. If defective workmanship results in a covered cause of loss (e.g., faulty wiring causes a fire), the resulting fire damage is payable, but the cost to correct the defective wiring itself is excluded.
CP 10 30 Special Form Theft Limitations
The Special Form covers theft as an open peril because theft is not excluded in the base insuring agreement. However, to curb severe moral hazard and prevent commercial property forms from functioning as commercial crime policies, the CP 10 30 enforces strict theft dollar limitations:
| Property Subject to Theft Limitation | Special Form Dollar Sublimit |
|---|---|
| Furs, Fur Garments, and Garments Trimmed with Fur | $2,500 per occurrence |
| Jewelry, Watches, Precious Stones, Gold, Silver, Platinum | $2,500 per occurrence (does not apply to items worth $100 or less) |
| Patterns, Dies, Molds, and Forms | $2,500 per occurrence |
| Stamps, Tickets, Lottery Tickets Held for Sale | $250 per occurrence |
Important
Theft vs. Fire Sublimit Application: These limitations apply strictly to the peril of theft. If a fire destroys a $100,000 inventory of designer fur coats or $50,000 of jeweler's gold, the $2,500 theft sublimit has zero legal application. The loss is payable up to the declared Coverage B policy limit.
A severe hurricane strikes a coastal commercial district. Sustained 110 mph winds tear off the warehouse roof, allowing torrential rains to enter and cause $300,000 in interior water damage. Simultaneously, a 6-foot tidal storm surge inundates the ground floor of the warehouse, causing $200,000 in flood damage. The commercial policy contains the standard CP 10 30 Special Causes of Loss form. How is the claim adjusted under the Anti-Concurrent Causation (ACC) preamble?
The entire $500,000 claim is denied because flood contributed to the total loss sequence.
The entire $500,000 claim is paid because windstorm was the efficient proximate cause that initiated the structural destruction.
The $200,000 flood loss is paid under the Water Damage peril, but the $300,000 wind-driven rain loss is excluded.
The $300,000 wind and rain damage through the torn roof is covered as a direct windstorm loss, while the $200,000 storm surge damage is strictly barred by the Water exclusion under the ACC preamble.
A jewelry boutique insured under a CP 00 10 policy with a CP 10 30 Special Causes of Loss form and a $150,000 Coverage B limit suffers a commercial burglary. Thieves break through a security gate and steal $40,000 worth of fine gold necklaces, diamond rings, and luxury watches. How will the insurer settle this theft loss under the Special Causes of Loss form?
The insurer pays $2,500 because the CP 10 30 Special Form imposes a $2,500 per-occurrence limitation on the theft of jewelry, precious stones, and precious metals.
The insurer pays the full $40,000 claim because burglary involves forcible entry, which bypasses theft sublimits.
The insurer pays $10,000 under the Property Off-Premises extension.
The loss is completely excluded because commercial property forms never cover theft of jewelry without a dedicated inland marine jeweler's block policy.
A commercial property owner notices damp drywall and peeling paint in a commercial tenant's breakroom. An inspection reveals that a concealed copper water pipe behind the wall has been pinhole leaking continuously for approximately 25 days, causing $18,000 in water and framing damage. How does the CP 10 20 Broad Form respond to this claim?
The entire loss is covered under the Broad Form Water Damage peril because the leak originated within a domestic plumbing system.
The claim is excluded because water damage caused by continuous or repeated seepage or leakage of water occurring over a period of 14 days or more is specifically excluded.
The insurer must pay the claim up to the $10,000 Pollutant Clean-up and Removal limit.
The loss is settled at Actual Cash Value, but the insurer is legally prohibited from applying depreciation to copper piping.
Sections you finish are checked off in the contents.