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

Attaching Perils to the Coverage Form

The BPP describes WHAT is covered; a separate Causes of Loss form describes WHICH perils are covered. ISO publishes three escalating options, and the exam tests the exact perils added at each tier.

Causes of Loss — Basic Form (CP 10 10): a named-peril form covering 11 perils, remembered by the acronym WCSHAVVERS: Windstorm/hail, Civil commotion (riot), Smoke, Hail (with wind), Aircraft/vehicles, Vandalism, Volcanic action, Explosion, Riot, Sprinkler leakage, plus Fire/Lightning and Sinkhole collapse. (Different texts list 11 perils — fire, lightning, explosion, windstorm/hail, smoke, aircraft/vehicles, riot/civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.)

Broad and Special Forms

Causes of Loss — Broad Form (CP 10 20): the 11 Basic perils PLUS three more: (1) Falling objects, (2) Weight of snow, ice, or sleet, (3) Water damage (accidental discharge/leakage). The Broad Form also adds Collapse as an Additional Coverage.

Causes of Loss — Special Form (CP 10 30): the broadest, an open-peril (all-risk) form covering direct physical loss UNLESS specifically excluded. The burden of proof shifts: under named-peril forms the insured must prove the loss was caused by a listed peril; under the Special Form the insurer must prove an exclusion applies.

Key Exclusions and Theft Nuance

The Special Form's major exclusions (the anti-concurrent causation group) include: ordinance or law, earth movement, governmental action, nuclear hazard, utility service failure, war, water (flood, surface water, sewer backup), and the maintenance group (wear and tear, rust, mold, vermin, mechanical breakdown).

Theft trap: Theft is covered under the Special Form only — it is NOT a Basic or Broad named peril. Even under Special, theft of certain property is limited (e.g., money/securities are not covered as BPP; furs $2,500; jewelry $2,500 unless under $100 each; patterns/dies). Mysterious disappearance and shortage from inventory shortage/bookkeeping errors are excluded.

Memory aid: Going Basic → Broad → Special, coverage gets broader and premium gets higher; only Special covers theft and shifts the burden of proof to the insurer.

Anti-Concurrent Causation and the Water Exclusion

The Special Form's exclusions open with an anti-concurrent causation (ACC) lead-in: the insurer will not pay for the excluded loss "regardless of any other cause or event that contributes concurrently or in any sequence." This wording defeats the argument that a covered peril (say, wind) combined with an excluded peril (flood) should make the whole loss payable. If flood water and wind together destroy a wall, the ACC language lets the insurer deny the flood-caused damage even though wind was also involved.

This is why a separate flood policy (NFIP or private) is essential — standard commercial property never covers flood, surface water, or sewer backup as an unendorsed peril.

Collapse and Ordinance Treatment

Collapse under the Broad and Special forms is an Additional Coverage, not a peril, and applies only to abrupt collapse caused by specified causes (hidden decay, hidden insect/vermin damage, weight of people or property, defective construction if collapse occurs during construction). Gradual settling, cracking, bulging, or shrinkage is NOT collapse. Likewise, the increased cost to comply with building codes is excluded under all three forms unless Ordinance or Law is endorsed — a bridge to the endorsements covered in section 9.5.

Choosing the Right Form for a Risk

Producers match the causes-of-loss form to the client's exposure and budget. A low-value warehouse with stable contents and a tight premium might accept Basic Form named-peril coverage. A retailer holding theft-prone merchandise must have the Special Form, because theft is unavailable below it. A building in a snow-belt climate gains real value from the Broad Form's weight-of-snow and water-damage perils even if the client cannot justify full Special pricing.

When in doubt, the Special Form is the safest recommendation because it covers everything not excluded and places the burden on the insurer to prove an exclusion, but the producer must still warn the insured about the standard exclusions — flood, earthquake, and ordinance or law — and offer separate solutions for each. Documenting that offer protects the producer from later errors-and-omissions claims.

The Maintenance and Wear-and-Tear Group

Under the Special Form, the exclusion most often misread is the maintenance group: wear and tear, rust or corrosion, decay, deterioration, hidden or latent defect, smog, settling, and damage from insects, birds, rodents, or other animals. These are uninsurable maintenance exposures, not fortuitous losses, so the open-peril promise does not reach them.

However, the form often restores an ensuing loss - if one of these excluded conditions causes a covered peril (faulty wiring that ignites a fire), the resulting fire damage is paid even though the wiring defect is not. Reading the ensuing-loss carve-back correctly separates a full denial from a partial recovery.

Mechanical Breakdown and the Equipment Breakdown Bridge

The Special Form excludes mechanical breakdown, including the rupture of moving parts by centrifugal force, which is exactly the exposure that Equipment Breakdown (Boiler & Machinery) coverage fills. A boiler explosion, an electrical arcing failure, or an air-conditioning compressor burnout falls outside the causes-of-loss forms and requires the separate Equipment Breakdown coverage part. When a question describes an internal machinery failure rather than an external peril, route it to Equipment Breakdown, not to the Special Form.