1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions

The Five Parts of a Policy (DICED)

Most standardized P&C forms — including ISO's Homeowners (HO-3, HO 00 03), Personal Auto Policy (PP 00 01), Dwelling (DP-3), and the Commercial Package Policy (CPP) with its Building and Personal Property Coverage Form (CP 00 10) — share five building blocks. Mnemonic DICED:

• Declarations
• Insuring Agreement
• Conditions
• Exclusions
• Definitions

An ISO commercial policy is physically assembled from a Common Policy Declarations, Common Policy Conditions (IL 00 17), one or more coverage forms, applicable causes-of-loss forms (Basic / Broad / Special — CP 10 10/20/30), and endorsements.

Declarations and Insuring Agreement

The Declarations ("Dec page") is the customized front page answering who, what, where, how much:

• Named insured(s) and mailing address
• Policy period (effective and expiration dates, 12:01 a.m. standard time)
• Property/location insured and the coverage limits (e.g., Coverage A dwelling $400,000)
• Deductibles, premium, mortgagee/lienholder, and a list of attached forms and endorsements

The Insuring Agreement is the broad promise: "We will pay for direct physical loss to covered property caused by a covered cause of loss." It defines the scope of coverage before exclusions and conditions narrow it. On liability forms it reads "we will pay those sums the insured becomes legally obligated to pay as damages," plus the duty to defend.

Conditions and Exclusions

Conditions are the rules of the deal — duties the insured must perform and procedures both parties follow. Common ones tested:

• Duties after loss: prompt notice, protect from further damage, file a sworn proof of loss (often within 60 days), cooperate, submit to examination under oath.
• Cancellation/nonrenewal, assignment (needs insurer consent), appraisal (resolves value disputes), subrogation, and other insurance.

Exclusions remove coverage to keep premiums viable. The classic property exclusions are flood, earth movement (earthquake/landslide), war, nuclear hazard, ordinance or law, wear and tear/deterioration, and intentional acts. Liability forms exclude expected/intended injury, business pursuits, and contractual liability (with carve-backs).

Coverage Triggers: Occurrence vs. Claims-Made

Liability coverage is triggered one of two ways, and the distinction is heavily tested on the Commercial General Liability (CGL, CG 00 01) form:

• Occurrence trigger: responds to bodily injury or property damage that happens during the policy period, no matter when the claim is filed. Best for long-tail exposures.
• Claims-made trigger: responds to claims first made during the policy period (or extended reporting period), provided the injury happened on or after the retroactive date.

Claims-made adds two concepts: the retroactive date (no coverage for injury before it) and the Extended Reporting Period (ERP / "tail") — a Basic ERP (automatic 60-day/5-year mini-tails) and an optional Supplemental ERP purchased to report claims after the policy ends. TRAP: an endorsement always overrides conflicting policy language.

Limits, Deductibles, and How Endorsements Modify Coverage

The Dec page also fixes how much the insurer pays. Common limit structures:

• Per-occurrence limit — the most paid for any one event.
• Aggregate limit — the most paid for all losses in the policy period (CGL has a separate General Aggregate and Products-Completed Operations Aggregate).
• Split limits (auto) — e.g., 100/300/50 means $100,000 bodily injury per person / $300,000 BI per accident / $50,000 property damage.
• Combined Single Limit (CSL) — one limit (e.g., $500,000) for BI and PD combined, offering more flexibility than split limits.

Worked split-limit example: a 100/300/50 policy pays at most $100,000 to any one injured person; if three people are hurt for $80,000 each ($240,000), the per-accident BI cap of $300,000 is not breached, so all three are paid in full.

Endorsements (riders) add, delete, or change coverage — scheduling jewelry, adding earthquake (DIC), or removing a vehicle. When endorsement language conflicts with the base form, the endorsement controls.

Reading the Declarations and the Hierarchy of Policy Provisions

The declarations page is the customized front of the policy. The exam expects you to identify what lives there versus elsewhere.

When Provisions Conflict

A core rule: a more specific provision controls a general one, and an endorsement controls the body of the policy where they conflict, because the endorsement is the later, more specific agreement. Handwritten or typed entries control printed text.

Exam trap: Where an endorsement and the policy form conflict, the endorsement prevails. Where a coverage grant and an exclusion conflict, the exclusion narrows the grant - coverage is read as "covered except as excluded."

Ambiguity Favors the Insured

Because the policy is a contract of adhesion drafted by the insurer, genuine ambiguity is construed against the drafter (contra proferentem) and in favor of coverage. This is not a license to invent ambiguity - clear exclusions are enforced - but it explains why insurers draft exclusions so precisely.