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

Why a Separate Causes of Loss Form

The BPP says what property is covered; a Causes of Loss Form says which perils trigger that coverage. ISO offers three commercial forms — Basic (CP 10 10), Broad (CP 10 20), and Special (CP 10 30) — plus an Earthquake form. Choosing the form is a separate decision from choosing limits, and the exam tests which perils each one adds.

Basic and Broad are named-peril (open the form, the listed perils are covered). Special is open-peril/all-risk (everything is covered unless excluded), which shifts the burden of proof: under named-peril the insured proves the cause was listed; under Special the insurer must prove an exclusion applies.

Basic vs. Broad Named Perils

Basic (CP 10 10) covers eleven perils. Remember the mnemonic "WCSHAFTER + V": Fire, Lightning, Explosion, Windstorm/hail, Smoke, Aircraft/vehicles, Riot/civil commotion, Vandalism, Sprinkler leakage, Sinkhole collapse, Volcanic action.

Broad (CP 10 20) adds to the Basic list:

• Falling objects
• Weight of snow, ice, or sleet
• Water damage (accidental discharge from plumbing/appliances)
• Glass breakage
• Collapse (as an Additional Coverage, from specified causes)

Special Form and Its Exclusions

Special (CP 10 30) covers all direct physical loss except what it excludes. Because it is broadest, it is the most common choice. Key exclusions to memorize:

• Ordinance or law (cost to comply with codes) — buy back with CP 04 05
• Earth movement and flood (the "big two" — need separate coverage)
• War, nuclear hazard, governmental action
• Wear and tear, mechanical breakdown, rust, corrosion, faulty workmanship
• Pollution, mold, insects/vermin/rodents

Special also adds theft as a covered peril (Basic and Broad never cover theft) but imposes special limits, such as $2,500 on theft of furs, jewelry, and patterns and $2,500 on theft of certain stamps/tickets.

Trap: Flood and Earth Movement Are Excluded on All Three

No commercial Causes of Loss Form covers flood or earthquake/earth movement. These require a separate flood policy (often NFIP) or an earthquake form/endorsement. A common stem describes a sinkhole or mudslide and asks whether Special pays — the answer is no for earth movement, even though Basic separately lists sinkhole collapse as a covered peril (a narrow exception distinct from general earth movement).

Anti-Concurrent Causation and Ensuing Loss

The commercial property exclusions open with an anti-concurrent causation lead-in: certain excluded perils (earth movement, flood, ordinance/law, war, nuclear, governmental action) are excluded regardless of any other cause or event contributing concurrently or in any sequence. So if an earthquake (excluded) causes a building to shift and a gas line then ignites, the insurer can deny the shaking damage even though fire is normally covered.

However, the forms preserve ensuing loss: if an excluded event leads to a separate, otherwise-covered peril, the resulting loss is paid. The classic example: faulty wiring (excluded as faulty workmanship) starts a fire — the wiring repair is excluded, but the fire damage is covered because fire is a covered ensuing cause. Distinguishing the excluded cause from the covered ensuing loss is a recurring exam theme.

Special-Form Limitations and Collapse

Beyond outright exclusions, the Special Form contains Limitations — perils covered only under specified conditions. Examples: damage to steam boilers from their own condition (need equipment breakdown), loss to the interior of a building from rain/snow only if the exterior is first breached by a covered peril, and breakage of building glass subject to special handling. Theft is covered but with the $2,500 sub-limits on furs, jewelry, and patterns noted earlier.

Collapse is handled as an Additional Coverage (not a listed peril) under both Broad and Special, covering abrupt collapse from specified causes such as hidden decay, hidden insect/vermin damage, weight of people or contents, and defective construction discovered during construction. Settling, cracking, shrinking, or bulging alone is not collapse. Choosing Special over Broad mainly buys the open-peril burden shift plus theft, not extra collapse breadth.

The Three Causes of Loss Forms

Commercial property perils live in a separate Causes of Loss form attached to the BPP. The three forms parallel the dwelling/HO tiers:

The Special Form and Its Exclusions

The Special form (CP 10 30) insures on an open-peril basis but carries the standard commercial exclusions: ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war, water (flood/surface/backup/seepage), and "the certain computer-related losses." It also excludes maintenance perils - wear and tear, rust, corrosion, hidden decay, smog, settling, insects/vermin, and mechanical breakdown. The exam tests that open-peril does not mean "everything," and that the insurer carries the burden to prove an exclusion.

Special-Form Limitations

Beyond outright exclusions, the Special form has limitations that reduce rather than eliminate coverage: theft losses have special proof requirements; interior water damage from rain/snow is covered only if the building first sustains wind/hail damage to the roof or walls; and certain property (steam boilers, the interior of buildings under construction) has narrowed terms. Distinguishing an exclusion (no coverage) from a limitation (reduced or conditioned coverage) is a recurring multiple-choice trap.

Equipment Breakdown - the Boiler & Machinery Gap

The Causes of Loss forms exclude loss from mechanical breakdown, artificially generated electrical current, and steam-boiler explosion - the gap filled by an Equipment Breakdown (boiler & machinery) coverage part. A candidate should recognize that an electrical arc damaging a transformer, or a pressure-vessel rupture, is not paid under the property Causes of Loss form and requires the equipment-breakdown coverage.