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

Choosing the Perils: Three Causes of Loss Forms

The BPP coverage form is inert until a Causes of Loss form is attached to supply the perils. ISO publishes three:

• Basic Form (CP 10 10) — a named-peril form listing eleven perils.
• Broad Form (CP 10 20) — the eleven Basic perils plus three (and adds a Collapse additional coverage).
• Special Form (CP 10 30) — open-peril ("all-risk"): covers direct physical loss UNLESS specifically excluded.

The eleven Basic perils

Fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

Broad adds three

The Broad Form adds: (1) falling objects, (2) weight of snow/ice/sleet, and (3) water damage (accidental discharge/leakage from a plumbing or appliance system — not flood). It also adds a Collapse additional coverage for collapse caused by specified causes such as hidden decay or the weight of people/property. A handy mnemonic: Broad gives you "the 3 extra perils plus collapse." Note that the water-damage peril here is internal (a burst pipe), which is very different from the external flood that all three forms exclude — mixing the two is a frequent trap.

How agents choose a form

Basic suits a low-budget risk willing to self-insure odd perils. Broad is the common middle ground for many small commercial buildings. Special is the default for any client who can afford it, because open-peril coverage closes gaps no one anticipated and shifts the burden of proof to the insurer. Price rises Basic to Broad to Special, tracking the breadth of perils. When an exam scenario asks "which form provides the broadest protection," the answer is always Special; when it asks "which is least expensive," the answer is Basic.

Limitations even under Special

Special is open-peril but not unlimited. It carries limitations that cap or condition certain losses: theft of furs, jewelry, and precious metals is sublimited; loss to fragile articles (glassware, statuary) from breakage is limited unless caused by a specified peril; and loss from steam-boiler explosion is excluded (insure under Equipment Breakdown). These limitations sit between "covered" and "excluded" — partial coverage with conditions — and the exam tests whether you can place a given loss in the correct bucket of covered, limited, or excluded.

Burden of Proof, Theft, and Common Exclusions

The burden-of-proof flip

Under named-peril forms (Basic and Broad), the insured must prove the loss was caused by a listed peril. Under the Special (open-peril) form, the burden flips: the insurer must prove an exclusion applies to deny the claim. This single difference is why Special costs more and is heavily tested.

Theft

Theft is covered ONLY under the Special form. Neither Basic nor Broad lists theft, so a stolen-inventory loss is denied under those two forms.

Exclusions common to all three forms

The forms exclude (no coverage even under Special): flood and surface water, earthquake, ordinance or law, governmental action, nuclear hazard, war, utility-service interruption, and "wear and tear"/inherent vice. Flood and earthquake require separate forms or endorsements — for example, CP 10 40 (Earthquake), or flood through the NFIP or a Difference-in-Conditions policy.

The key teaching point: none of these excluded perils is bought back simply by upgrading from Broad to Special. Each needs its own endorsement or a separate policy. Students often assume the open-peril Special form "covers everything" — it does not. It covers everything except the named exclusions, and the flood/earthquake/ordinance/war/nuclear/government group survives even under Special. Recognizing an excluded peril in a scenario, then identifying the correct buy-back form, is a recurring two-step exam pattern.

The vacancy provision

If a building has been vacant for more than 60 consecutive days before a loss, coverage is reduced: certain perils (vandalism, sprinkler leakage, theft, water damage, glass breakage) are excluded entirely, and all other covered losses are paid at 85% (a 15% reduction). A building is "vacant" when it holds less than 31% of its rentable area in use.

Concurrent causation and anti-concurrent language

When two perils combine — one covered, one excluded — the Special form's anti-concurrent causation wording controls. For excluded perils such as flood and earth movement, the form states the loss is excluded "regardless of any other cause or event contributing concurrently or in any sequence." So a covered windstorm followed by an excluded storm-surge flood does not drag the flood damage into coverage. Distinguish damage you can attribute to wind (covered) from damage attributable to flood (excluded) — adjusters allocate the loss, and this allocation is a heavily litigated, exam-favored concept after hurricanes.

Form Numbers, Mnemonics, and the Collapse/Glass Add-Ons

Memorize the ISO form numbers and what each adds:

The Broad and Special forms include collapse as an additional coverage for specified causes (hidden decay, vermin, defective construction during construction). Trap: the Basic form does not cover water damage or weight of ice/snow — those first appear in the Broad form. Special form theft is included but subject to exclusions; Basic/Broad commercial forms do not cover theft.