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

Why a Separate Form

A commercial property policy needs two documents: a coverage form (the BPP, CP 00 10) that says what is insured, and a Causes of Loss form that says which perils are covered. Choosing the causes of loss form is the single biggest driver of premium and of how a claim is adjusted.

Basic Form (CP 10 10) — 11 Named Perils

The Basic form is named-peril: the insured must prove the loss came from one of these listed perils.

Note: theft is NOT a Basic-form peril.

Broad Form (CP 10 20) — Adds Coverage

The Broad form includes all 11 Basic perils and adds:

• Falling objects (exterior must be penetrated first for interior damage)
• Weight of snow, ice, or sleet
• Water damage — sudden, accidental discharge from plumbing, HVAC, or appliances (NOT flood)
• Breakage of building glass (limited)
• Collapse as an additional coverage from specified causes

Theft becomes covered at the Broad level.

Special Form (CP 10 30) — Open Peril

The Special form flips the logic: it covers all risks of direct physical loss EXCEPT those excluded. Because coverage is presumed, the burden of proof shifts to the insurer to show an exclusion applies. This is the broadest and costliest form, and it is the basis for Businessowners Policy building coverage (Section 9.5).

Exclusions Common to All Three Forms

Flood and earthquake are never covered by any of the three forms. Flood needs a separate flood policy (often through the National Flood Insurance Program); earthquake needs the CP 10 40 earthquake endorsement.

Anti-Concurrent Causation and the Special Form's Extra Exclusions

The excluded perils carry an anti-concurrent-causation lead-in: they are excluded "regardless of any other cause or event that contributes concurrently or in any sequence." So if flood (excluded) and wind (covered) combine, the flood portion stays excluded. Adjusters use this to split hurricane losses between wind and storm surge.

The Special form also excludes wear and tear; rust, corrosion, and decay; mechanical breakdown; settling, cracking, and shrinking; insect, bird, or rodent damage; fungus and wet or dry rot; faulty design or workmanship; and voluntary parting with property induced by trick or fraud.

Even where the Special form covers theft, special limits apply: typically $2,500 for furs and $2,500 for jewelry and watches by theft, so open-peril does not mean unlimited theft recovery.

Side-by-Side Comparison and a Worked Scenario

Worked scenario: a pipe bursts overnight and water ruins a retailer's inventory. The Broad and Special forms cover it as accidental discharge of water; the Basic form pays nothing. If instead a river overflows into the store, no form pays — that is flood, requiring a separate policy.

Common Traps

• Theft is the most-missed item: Basic excludes it; Broad and Special cover it.
• Water damage is not flood — internal pipe leaks can be covered; rising surface water never is.
• A building vacant more than 60 consecutive days loses vandalism, water, theft, glass, and sprinkler-leakage coverage, and other covered losses are cut 15 percent.

The Three Causes-of-Loss Forms

Commercial property coverage breadth is set by which causes-of-loss form is attached, mirroring the basic/broad/special tiers of personal lines:

The theft distinction is a classic exam trap: theft is excluded under Basic but covered under Broad and Special. The Special form covers all direct physical loss except what is excluded, putting the burden of proof on the insurer to show an exclusion applies.

Exclusions Common to All Three Forms

Regardless of which causes-of-loss form is chosen, the same catastrophe and non-fortuitous exclusions appear and must be addressed separately:

• Flood and surface water - require a separate flood policy (NFIP or private)
• Earthquake / earth movement - requires the CP 10 40 earthquake form
• Ordinance or law - the extra cost of code-compliant rebuilding (CP 04 05)
• War, nuclear hazard, and governmental action
• Wear and tear, deterioration, and inherent vice - non-fortuitous

A frequent point of confusion is internal water damage: the Broad and Special forms cover sudden accidental discharge from burst pipes or appliances, which is not the same as flood. Flood is always excluded and bought back separately, while a burst supply line inside the building is covered on Broad and Special.