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

How Causes-of-Loss Forms Work

A commercial property coverage form (like the BPP) tells you what is insured and for how much; a separate Causes of Loss Form tells you which perils are covered. ISO publishes three:

With named-peril forms, the insured must show the loss was caused by a listed peril. With Special, coverage is presumed for any direct physical loss unless an exclusion applies.

The same three forms can be attached to most ISO commercial property coverage forms — the BPP, the Condominium forms, the Builders Risk form, and others — so the causes-of-loss form is a modular choice independent of the coverage form. Premium rises as you move from Basic to Broad to Special because each step widens the perils insured and shifts more uncertainty to the carrier. Agents select the form based on the insured's risk tolerance, lender requirements, and budget.

Basic vs. Broad perils

Basic Form (CP 10 10) covers these named perils — remember the mnemonic FLAVERS-W: Fire, Lightning, Aircraft/vehicles, Vandalism, Explosion, Riot/civil commotion, Smoke, Windstorm/hail — plus sinkhole collapse and volcanic action.

Broad Form (CP 10 20) adds to the Basic list:

• Falling objects
• Weight of ice, snow, or sleet
• Water damage — accidental discharge or leakage of water/steam from a system or appliance
• A limited collapse provision (e.g., collapse from hidden decay or vermin)

Broad does not cover theft — only the Special Form does.

Special Form and the burden of proof

The Special Form (CP 10 30) is open-peril: it covers any direct physical loss unless specifically excluded. This is the broadest commercial property coverage and the only one that includes theft.

The key exam concept is the burden-of-proof shift:

• Named-peril (Basic/Broad): the insured must prove the loss was caused by a covered peril.
• Open-peril (Special): the insurer must prove an exclusion applies to deny the claim.

That reversal is why Special costs more and why claims are easier for the insured to collect.

Standard exclusions and special limits

All three forms share core exclusions — watch for these traps:

• Ordinance or Law (cost to comply with building codes) — buy back with CP 04 05.
• Earth Movement (earthquake, landslide) — separate endorsement/policy.
• Flood and surface water — covered only by the NFIP or a DIC.
• War, Nuclear Hazard, Governmental Action.
• Wear and tear, deterioration, hidden defect, mechanical breakdown (use Equipment Breakdown).

Under the Special Form, certain property has special theft limits (e.g., furs, jewelry, precious metals, stamps/tickets/letters of credit). Read the dollar caps in the form before assuming full coverage.

Additional coverages and exam traps

The causes-of-loss forms also grant small additional coverages that the exam likes to test. The Special Form, for example, includes limited coverage for collapse from specified causes (hidden decay, vermin, defective construction during the course of building), and a limited fungus/wet-rot provision capped at $15,000. It also extends to property in transit and certain water-related claims that result from a covered peril.

A recurring trap is the difference between an excluded peril and an excluded loss. Flood is an excluded peril everywhere, so no causes-of-loss form covers it. But an ensuing-loss clause can restore coverage when an excluded peril leads to a covered one: if faulty wiring (excluded as a defect) causes a fire, the resulting fire damage is covered because fire is an insured peril. Watch for questions that describe a chain of events and ask whether the final, ensuing loss is paid.

The Special Form's Extra Exclusions

Because the Special (open-peril) Causes of Loss Form (CP 10 30) covers everything not excluded, it carries additional exclusions the Basic and Broad forms do not need: wear and tear, rust/corrosion, hidden decay, insects/vermin, mechanical breakdown, settling/cracking, and dishonest acts of the insured. These keep open-peril from becoming a maintenance contract. Several have ensuing-loss exceptions (e.g., excluded faulty work, but resulting fire covered).

Earthquake and Flood Are Separate Forms

Neither earthquake nor flood is included in Basic, Broad, or Special. Earthquake is added by the Earthquake and Volcanic Eruption form (CP 10 40); flood requires the NFIP or a private/Difference-in-Conditions policy. A distractor that lists flood among "special form" perils is wrong.

Form-Selection Recap

Knowing which perils jump from Basic to Broad (falling objects; weight of ice, snow, sleet; water damage; collapse; glass breakage) is a frequent exam item, as is the burden-of-proof reversal on the Special form.