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

Attaching Perils to the Coverage Form

The BPP form describes what is covered; a Causes of Loss form describes which perils trigger coverage. ISO offers three: Basic (CP 10 10), Broad (CP 10 20), and Special (CP 10 30). Premium rises with breadth of coverage. The exam tests the named-peril list and the open-peril (all-risk) structure of Special form, plus the perils that exist in Broad but not Basic.

Basic Form Perils (CP 10 10)

A classic mnemonic is "WC SHAVERS" — the eleven named perils of the Basic form:

• Windstorm or hail
• Civil commotion (riot)
• Smoke
• Hail (grouped with windstorm)
• Aircraft or vehicles
• Volcanic action
• Explosion
• Riot
• Sprinkler leakage / Sinkhole collapse
• Plus Fire and Lightning (the foundational perils)

Basic form is named-peril: if the peril is not on the list, there is no coverage. Note that vandalism is included in Basic, and that water damage from plumbing is generally NOT a Basic peril.

Broad Form Perils (CP 10 20)

The Broad form includes everything in Basic PLUS three groups of additional perils:

Broad form is still named-peril — the insured must prove the loss came from a listed cause.

Special Form Perils (CP 10 30) — Open Peril

The Special form is open-peril ("all-risk"): it covers direct physical loss UNLESS specifically excluded. This is the most significant structural shift, because it reverses the burden of proof:

• Under Basic/Broad (named-peril), the insured must prove the loss was caused by a covered peril.
• Under Special (open-peril), the insurer must prove an exclusion applies to deny the claim.

Key Special-form exclusions include flood, earthquake, war, nuclear, wear and tear, ordinance or law, and — importantly — a theft sublimit and conditions. The Special form provides theft coverage that Basic and Broad do not.

Common Exclusions Across All Forms

Regardless of which Causes of Loss form is selected, certain perils are always excluded and require separate coverage or endorsement:

• Flood — needs NFIP or private flood policy / Flood endorsement
• Earthquake — needs Earthquake Causes of Loss form (CP 10 40)
• War and military action
• Nuclear hazard
• Ordinance or law — added via CP 04 05
• Governmental action (seizure/destruction)

Mnemonic for the "always-excluded" group is sometimes taught as covering the catastrophic and predictable losses insurers will not absorb in standard property forms.

Choosing the Right Form and Watching the Sublimits

Producers match the Causes of Loss form to the client's risk tolerance and budget. A low-value warehouse with limited contents may accept Basic to save premium; a tech firm with theft and equipment exposure needs Special. Remember that even on the Special open-peril form, coverage is not unlimited: several perils are covered only up to sublimits or with special conditions.

For example, the Special form covers theft but applies special limitations and excludes certain dishonesty losses; it limits coverage for damage to building glass, for interior water damage from roof leaks absent storm-created openings, and for damage by rain, snow, or sleet to personal property in the open.

The form also continues to exclude wear and tear, rust, corrosion, inherent vice, insect/vermin damage, and mechanical breakdown — these are maintenance issues, not fortuitous losses. A common exam trap presents a gradual seepage or long-term leak and asks if Special form pays: the answer is no, because the loss is not sudden and accidental.

Special Form Exclusions and the Burden Shift

Because the Special Form (CP 10 30) is open-peril, its exclusions define the real boundary, and the burden of proving an exclusion falls on the insurer. The standard exclusions mirror the personal lines set: ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war, water (flood, surface water, sewer backup), and "certain computer-related losses," plus property-condition exclusions for wear and tear, rust, corrosion, hidden decay, insects and vermin, mechanical breakdown, and faulty workmanship or design.

Several carry an ensuing-loss exception — if an excluded cause leads to a covered peril such as a resulting fire or water discharge, the ensuing loss is paid.

Earthquake, Flood, and Equipment Breakdown Solutions

Three perils excluded on every causes-of-loss form have dedicated solutions the exam expects you to name. Earthquake and volcanic eruption are added by the Earthquake and Volcanic Eruption (CP 10 40) form or a difference-in-conditions policy. Flood requires the NFIP or a private flood/difference-in-conditions policy. Mechanical or electrical breakdown of boilers, pressure vessels, and machinery is insured under an Equipment Breakdown (boiler and machinery) coverage part, because the Special Form expressly excludes that artificially generated cause of loss.

Matching a stated gap to the correct add-on is the practical skill tested here.