7.2 CPP Structure, Common Policy & Commercial Property Conditions (CP 00 90), Condominium and Builders Risk Forms & Key Endorsements
Key Takeaways
- A commercial package policy combines common policy declarations and conditions with two or more coverage parts; a monoline policy contains a single coverage part.
- The Commercial Property Conditions (CP 00 90) include concealment/fraud, control of property, legal action against us within two years, liberalization, no benefit to bailee, other insurance, policy period and territory, and transfer of rights of recovery.
- The Condominium Association Coverage Form insures the association's building and property, and the Condominium Commercial Unit-Owners Coverage Form insures a commercial unit-owner's business personal property and improvements.
- Ordinance or Law coverage (CP 04 05) adds Coverage A for the value of the undamaged portion, Coverage B for demolition cost, and Coverage C for increased cost of construction.
- The Value Reporting Form (CP 13 10) and Peak Season Limit endorsement (CP 12 30) address fluctuating inventory, while CP 10 40 and CP 10 65 add earthquake and flood.
How a Commercial Package Policy Is Built
The Commercial Package Policy (CPP) is modular. A public adjuster must identify every piece in force on the date of loss.
| Component | Contents |
|---|---|
| Common policy declarations | Named insured, mailing address, policy period, which coverage parts are included, total premium |
| Common policy conditions (IL 00 17) | Cancellation, changes, examination of books and records, inspections and surveys, premiums, transfer of rights and duties |
| Coverage parts | Each part (commercial property, general liability, inland marine, equipment breakdown, crime, commercial auto, farm) has its own declarations, conditions form, one or more coverage forms, and, for property, a causes of loss form |
| Endorsements | Interline and coverage-part endorsements, including state amendatory endorsements |
Monoline vs. package: a monoline policy contains one coverage part. A package contains two or more, often earning a package discount. For claims, the difference matters because a single loss (for example, a fire that destroys stock, disables equipment, and damages a customer's goods) may trigger several coverage parts with different conditions and deductibles.
Common Policy Conditions (IL 00 17)
- Cancellation: the first named insured may cancel. Insurer cancellation follows the policy and, in New York, the state amendatory endorsement implementing Ins. Law § 3426.
- Changes: only the first named insured may request changes, and only with the insurer's written endorsement.
- Examination of books and records: the insurer may examine the insured's books and records relating to the policy during the policy period and for three years afterward.
- Inspections and surveys: the insurer may inspect but does not guarantee safety.
- Premiums: the first named insured is responsible for payment and receives return premium.
- Transfer of rights and duties: the insured's rights may not be transferred without the insurer's written consent, except on the death of an individual named insured.
Commercial Property Conditions (CP 00 90)
| Condition | Rule | Adjusting significance |
|---|---|---|
| Concealment, misrepresentation, or fraud | Coverage is void for intentional concealment or misrepresentation of a material fact, before or after a loss | The fraud defense insurers cite at an EUO |
| Control of property | An act or neglect of a person outside the insured's control does not affect coverage. A breach at one location does not affect other locations. | Protects landlords from tenants' acts |
| Insurance under two or more coverages | Total payment cannot exceed the actual loss | Prevents double recovery |
| Legal action against us | Only after full compliance and within two years after the date of direct physical loss | New York's Standard Fire Policy floor for fire is 24 months after inception of the loss |
| Liberalization | A broadening revision adopted within 45 days before or during the policy period applies automatically | Section 4.2 |
| No benefit to bailee | A bailee for hire cannot use the insurance | Section 4.2 |
| Other insurance | Pro rata share if other insurance has the same plan, terms, conditions, and provisions; otherwise excess | Apportionment math in Section 4.2 |
| Policy period, coverage territory | Covers loss during the policy period in the U.S. (and its territories and possessions), Puerto Rico, and Canada | |
| Transfer of rights of recovery against others to us | The insurer is subrogated to the extent of payment. The insured may waive recovery in writing before a loss, and after a loss only against another insured, a business the insured owns or controls or that owns or controls the insured, or a tenant | Pre-loss lease waivers are permitted; post-loss releases can destroy subrogation and coverage |
Other Commercial Property Coverage Forms
Condominium Association Coverage Form
Insures the condominium association's interest: the building (including, if the association agreement requires, fixtures, improvements, and alterations within units) and the association's business personal property. It does not cover unit-owners' personal property. It includes a waiver of the insurer's subrogation rights against unit-owners, and it treats the association's coverage as primary when a unit-owner has other insurance on the same property.
Condominium Commercial Unit-Owners Coverage Form
Insures a commercial unit-owner's business personal property and the fixtures, improvements, and alterations that are part of the building and owned by the unit-owner. Where the association's policy also covers the same property, the unit-owner's coverage is excess.
Builders Risk (outline reference: CP 11 21)
Insures a building under construction, usually written at completed value. Coverage ends at the earliest of the events the form lists, such as the policy expiring or being cancelled, the building being accepted by the purchaser, the insured's interest ending, construction being abandoned, a set period after construction is complete, or the building being occupied or put to its intended use. A PA handling a loss at a renovation site first asks whether the owner's building form, a builders risk form, or the contractor's installation or equipment floater responds.
Commercial Property Endorsements on the Outline
| Endorsement | Purpose | Adjusting example |
|---|---|---|
| Ordinance or Law (CP 04 05) | Coverage A: value of the undamaged portion of a building that must be demolished by law. Coverage B: demolition cost. Coverage C: increased cost of construction to meet code. | A fire damages 60% of a building. The city requires demolition of the rest and rebuilding to current code. Coverages A, B, and C each respond to a different piece of that cost. |
| Spoilage (CP 04 40) | Spoilage of perishable stock from breakdown or contamination of refrigeration, or from power outage | A supermarket's frozen inventory thaws after a compressor fails |
| Earthquake and Volcanic Eruption (CP 10 40) | A causes-of-loss form adding earthquake and volcanic eruption, with its own deductible | Buys back the earth movement exclusion |
| Flood Coverage (CP 10 65) | Adds flood to commercial property, usually with a separate limit and deductible, often excess of NFIP | Surge damage to a waterfront warehouse |
| Peak Season Limit of Insurance (CP 12 30) | Raises the business personal property limit during specified periods | A retailer's holiday inventory build-up |
| Value Reporting Form (CP 13 10) | The insured reports stock values periodically, and premium adjusts to reported values | Losses are limited by the accuracy and timeliness of reports: under-reporting reduces recovery proportionally, and a late report limits recovery to the last reported values |
Under the Commercial Property Conditions (CP 00 90), when may an insured waive its rights of recovery against another party without impairing coverage?
A fire damages part of an old commercial building. The municipality requires the undamaged remainder to be demolished and the building rebuilt to current code. Which CP 04 05 coverage pays the cost of tearing down the undamaged portion?
Under the Common Policy Conditions (IL 00 17), for how long after the policy period may the insurer examine the insured's books and records relating to the policy?