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

Why a Causes of Loss Form Is Required

A commercial property coverage form (like the BPP) describes what property is covered and how much, but it does not state which perils are insured. That job belongs to a separate Causes of Loss Form. ISO publishes three: Basic (CP 10 10), Broad (CP 10 20), and Special (CP 10 30). Without one attached, the property coverage form is incomplete.

The single most tested distinction: Basic and Broad are named-peril forms (the insured must show a listed peril caused the loss), while Special is open-peril (any direct physical loss is covered unless excluded, and the insurer must prove the exclusion).

What Each Form Covers

Mnemonic for Basic: WC SHAVERS type lists are common, but recognize the structure rather than rote letters: the fire/lightning/explosion/wind/smoke core plus the social-disturbance and equipment perils.

Exclusions Common to All Three Forms

The causes of loss forms share a standard exclusion architecture, often introduced by an anti-concurrent-causation lead-in ("We will not pay... regardless of any other cause or event that contributes concurrently"). Frequently tested exclusions:

• Ordinance or Law (cost to comply with codes — buy back with CP 04 05)
• Earth Movement (earthquake, landslide — buy back with CP 10 40)
• Governmental Action (seizure/destruction by order, except to prevent spread of fire)
• Nuclear Hazard
• Utility Services failure (buy back with CP 04 17)
• War and Military Action
• Water (flood, surface water, sewer backup, underground water)

Special form adds exclusions for wear and tear, rust, mechanical breakdown, and dishonest acts by the insured, but its open-peril breadth still gives the broadest protection of the three.

Burden of Proof Trap

Exam writers test the proof shift constantly. Under Basic or Broad, if a building suffers an unusual loss, the insured must affirmatively show that a named peril (e.g., windstorm) caused it; an unlisted cause means no recovery. Under Special, the same loss is presumed covered, and the insurer must point to a specific exclusion to deny. This is why Special carries a higher premium: it is broader and the insurer bears the evidentiary risk on ambiguous causes.

Theft, Limited Coverage, and Special-Form Sublimits

Only the Special form provides theft coverage as part of its open-peril breadth; Basic and Broad have no theft coverage at all (an insured needing theft protection on a named-peril form must add Crime coverage). Even under Special, theft of certain property is sublimited: the form caps recovery on stolen furs, jewelry/watches/precious stones, patterns/dies/molds, and stamps/tickets/letters of credit at modest amounts unless higher limits are scheduled.

Special also adds limited coverage categories with their own internal caps, such as property in transit, water damage from sudden plumbing discharge (but not seepage over weeks), and collapse as an additional coverage. Recognize that 'open peril' does not mean 'unlimited' — the exclusions and sublimits sculpt the grant, and the gradual/wear-and-tear losses are deliberately carved out so property insurance does not become a maintenance contract.

Anti-Concurrent Causation and Buy-Backs

The anti-concurrent-causation (ACC) lead-in is the most litigated phrase in property forms. It states the insurer will not pay for an excluded loss 'regardless of any other cause or event that contributes concurrently or in any sequence.' Practically, if a hurricane brings both covered wind and excluded flood, the ACC language lets the insurer deny the flood-caused portion even though a covered peril contributed.

Many exclusions are buy-back opportunities through endorsements: Earthquake (CP 10 40) restores earth-movement coverage, CP 04 17 restores utility-service damage, and Ordinance or Law (CP 04 05) restores code-upgrade costs. On the exam, when a fact pattern features an excluded peril, the correct answer often is not 'denied' outright but 'covered only if the appropriate endorsement was added.' Knowing which form buys back which exclusion separates a passing score from a failing one.

Choosing a Form and Premium Trade-offs

The three forms create a clear premium ladder: Basic is cheapest because it lists the fewest perils and excludes theft; Broad costs more for its added water, weight-of-ice, falling-objects, and glass coverage; Special is the most expensive because it covers everything not excluded and shifts proof to the insurer. A budget-conscious warehouse storing non-perishable goods might accept Basic, while a retailer with valuable, theft-prone inventory needs Special for its theft grant.

Producers must match the form to the exposure. A common errors-and-omissions claim arises when a producer sells Basic to a client who assumed 'all-risk' protection and then suffers a theft or water-discharge loss with no coverage. Documenting the form selection and the perils each covers protects both the insured and the producer, and the licensing exam frequently frames questions around this advisory duty.