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

Why a Separate Form

A commercial property policy needs two forms: a coverage form (the BPP, CP 00 10) that says what is insured, and a Causes of Loss form that says which perils are covered. Choosing the causes of loss form is the single biggest driver of premium and of how a claim is adjusted, so the exam tests it heavily.

Basic Form (CP 10 10) - 11 Named Perils

The Basic form is named-peril: the insured must prove the loss came from one of the listed perils.

Note: theft is NOT a Basic-form peril.

Broad Form (CP 10 20) - Adds Coverage

The Broad form includes all 11 Basic perils and adds:

• Falling objects (exterior must be penetrated first for interior damage)
• Weight of snow, ice, or sleet
• Water damage - sudden, accidental discharge from plumbing, HVAC, or appliances (NOT flood)
• Breakage of building glass (limited)
• Collapse as an additional coverage from specified causes

Theft becomes covered at the Broad level.

Special Form (CP 10 30) - Open Peril

The Special form flips the logic: it covers all risks of direct physical loss EXCEPT those excluded. Because coverage is presumed, the burden of proof shifts to the insurer to show an exclusion applies. This is the broadest and most expensive form and is the basis for the Businessowners Policy building coverage (Section 9.5).

Exclusions Common to All Three Forms

The Vacancy Provision

All three forms include a vacancy provision that bites when a building has been vacant for more than 60 consecutive days before a loss. A building is vacant when it does not contain enough business personal property to conduct customary operations. Once the 60-day threshold passes:

• No coverage at all for vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft.
• Other covered losses are reduced by 15 percent of what would otherwise be paid.

Worked example: a building has been vacant 75 days when a covered windstorm causes $20,000 of damage. Windstorm is not on the suspended-perils list, so it is paid, but reduced 15 percent: $20,000 x 0.85 = $17,000 before the deductible. Had the loss been vandalism, recovery would be $0.

Burden of Proof - The Most-Tested Distinction

Flood and Earthquake Are Always Excluded

None of the three causes of loss forms covers flood (surface water, rising water, overflow) or earth movement (earthquake, landslide, mudflow). Flood requires NFIP or a Difference-in-Conditions policy; earthquake requires the CP 10 40 endorsement. A stem describing a river overflowing into a stockroom is not covered under Basic, Broad, or Special - a frequent trap because candidates assume the open-peril Special form covers everything.

Choosing a Form - Premium vs. Protection

The three forms sit on a ladder of price and breadth. Basic is cheapest and narrowest; Special is most expensive and broadest. A risk manager weighs the insured's exposures: a sprinklered concrete warehouse storing non-theft-prone bulk goods may accept Basic, while a downtown electronics retailer with high theft exposure and varied perils needs Special. The exam often frames this as a recommendation question - match the breadth of the form to the variety and severity of the insured's likely losses.

Special Form Additional Coverages

Beyond shifting the burden of proof, the Special form adds limited coverage the named-peril forms lack, such as a small amount for building glass and broader collapse from specified causes. It still does not override the universal exclusions: ordinance or law, earth movement, flood, war, nuclear hazard, and wear and tear remain excluded even under open-peril coverage. This is why "Special covers everything" is a wrong answer - it covers everything not excluded.

Common Traps

• Theft is excluded on Basic; covered Broad and Special.
• Flood and earthquake are excluded on all three forms, including Special.
• The vacancy threshold is 60 consecutive days; the penalty on still-covered perils is a 15 percent reduction.
• On Special, the insurer bears the burden of proving an exclusion - the reverse of Basic and Broad.
• "Special covers everything" is false; it covers all direct physical loss except the listed exclusions.