2.1 Causes of Loss / Named-Peril vs. Open-Peril

The Cause-of-Loss Form Is the Engine of Coverage

Every property policy answers one question before it pays a dime: what caused this loss, and is that cause covered? A peril is the cause of loss itself, such as fire, windstorm, or theft. In the commercial property program built by the Insurance Services Office (ISO), the peril decision lives in a separate document called the cause-of-loss form, which is attached to the Building and Personal Property Coverage Form.

There are three standard cause-of-loss forms, and the exam expects you to recognize each by name, edition, and breadth of coverage.

The Three ISO Commercial Cause-of-Loss Forms

The table below is heavily tested. Memorize the form numbers and which perils each one adds.

The Basic Form (CP 10 10) covers fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. A common memory aid is that Basic stops there.

The Broad Form (CP 10 20) adds the second tier: falling objects; weight of snow, ice, or sleet; water damage from accidental discharge; and the collapse provisions. The Special Form (CP 10 30) abandons the list entirely and covers risk of direct physical loss unless the policy excludes it.

Named Peril vs. Open Peril: Who Must Prove What

The single most tested consequence of the named-versus-open distinction is the burden of proof.

Under a named-peril form, the insured must show the damage came from a peril named in the form. If a windstorm is on the list, the insured proves wind caused the loss. Under an open-peril form, the insured only has to show that direct physical loss occurred; to deny the claim the insurer must prove a specific exclusion applies.

Worked Trigger Example

A meteorite punches through a warehouse roof. Under Basic Form, the insured searches the list, finds no entry for meteor or falling object, and recovers nothing. Under Broad Form, 'falling objects' is listed, so the loss is covered. Under Special Form, the loss is covered because no exclusion names meteors.

Open Peril Is Not 'Everything Covered'

The most dangerous misconception on the exam is that Special Form pays for any loss. It does not. The Special Form still excludes a long list of causes, and several are added back only by endorsement.

• Flood, surface water, and sewer backup are excluded; flood needs the National Flood Insurance Program (NFIP) or a private flood policy.
• Earthquake and volcanic eruption (earth movement) are excluded; add by the Earthquake (CP 10 40) endorsement.
• War, nuclear hazard, and governmental action are excluded as uninsurable.
• Wear and tear, rust, corrosion, mold, insects, and inherent vice are excluded as non-fortuitous.
• Ordinance or law (extra cost to rebuild to current code) is excluded; add by the Ordinance or Law (CP 04 05) endorsement.

Special Form also gives back coverage the named forms lack: it covers theft of property and breakage of building glass, both of which are not in Basic or Broad. That give-back is a frequent distractor.

Exam tip: a question that says 'special/open-peril form' and then names flood, earthquake, or wear and tear is testing whether you know the surviving exclusions, not the breadth of the form.

The Two Kinds of Exclusion: Concurrent Causation

Not all exclusions are written the same way, and the form's exclusion structure controls how it handles a loss with more than one cause. The Special Form groups its exclusions into two categories. The first group, often called the anti-concurrent-causation exclusions, is introduced by lead-in language stating that the listed causes are excluded 'regardless of any other cause or event that contributes concurrently or in any sequence to the loss.' Earth movement, flood and water, governmental action, nuclear hazard, war, and utility failure sit in this group.

The practical effect is severe: if an excluded peril such as flood contributes to a loss in any way, the entire loss tied to that cause is excluded, even where a covered peril such as wind acted alongside it. The standard claims response is to separate and document the wind-only damage so that portion is paid while the flood portion is denied.

Hurricane Wind-vs-Water Example

A hurricane drives wind that strips shingles (covered) and a storm surge that floods the first floor (excluded). The adjuster documents the roof and upper-floor wind damage separately from the surge line and pays only the wind portion. This wind-versus-water allocation is one of the most litigated and most tested areas in property insurance.

Peril, Hazard, and the Cause Behind the Cause

The exam separates the peril (the cause of loss) from the hazard (a condition that increases the chance or severity of loss), because a cause-of-loss form responds to perils, not hazards. Three hazard types recur:

A cause-of-loss form never lists 'careless storage' as a peril; it lists fire. The hazard merely made the fire more likely. This is why an exam question that describes oily rags is usually testing the hazard vocabulary, while the actual coverage turns on whether fire is a covered peril, which it is under all three forms. Anchoring on the underlying covered peril is the fastest way through these layered scenarios.