INSURANCE I.Q

Commercial Property Insurance: Causes of Loss Forms Explained

A causes of loss form is used to establish and define the types of perils covered in a commercial property policy. Insurance Services Office (ISO)—an organization known for developing standard policy forms and filing information with state regulators provides three causes of loss forms policyholders can choose from for their commercial property coverage: basic, broad and special.

These three causes of loss forms vary in terms of the scope of perils they cover, with some forms being more restrictive than others. As such, it is crucial for insureds to have a clear understanding of these forms and determine which form best suits their specific commercial property coverage needs. This article explains the differences between basic, broad and special causes of loss forms and highlights covered perils under each form.

Basic Causes of Loss Forms

As they are the most restrictive of the three forms, basic causes of loss forms are employed in commercial property policies that provide named perils coverage. Such coverage only offers protection for losses caused by perils specifically outlined in a policy. The following perils are covered under basic causes of loss forms: • Fires • Lightning • Explosions • Windstorms and hail • Smoke • Aircraft or vehicle accidents • Riots or civil commotion • Vandalism • Sprinkler leakages • Sinkhole collapses • Volcanic action

Broad Causes of Loss Forms

Like basic causes of loss forms, broad causes of loss forms also offer coverage for these perils: • Falling objects • Weight of snow, ice, or sleet • Water damage (only due to appliance leakages)

Furthermore, broad causes of loss forms include collapse additional coverage, which provides protection for losses stemming from building or property collapses caused by specified perils. It is important to note that this coverage does not apply to collapses resulting from design errors, poor workmanship or faulty materials.

Special Causes of Loss Forms

In contrast to basic and broad causes of loss forms, special causes of loss forms are used in commercial property policies that provide open perils coverage. Formerly called “all risk” insurance—a term that is rarely used in policies to avoid suggesting coverage may be broader than it is. This coverage offers protection for losses caused by any perils, apart from those specifically excluded in a policy (e.g., flooding, earthquakes or equipment breakdowns).

Special causes of loss forms are considered the least restrictive and the most used. Premiums vary between the forms mimicking the good, better and best routine.

Conclusion

Overall, ISO’s three causes of loss forms provide varying commercial property coverage options to consider. Policyholders should carefully review their property exposures and related coverage needs to determine which form makes the most sense for their circumstances. Additionally, policy endorsements or other types of specialized coverage may be necessary to fill ongoing insurance gaps.

In any case, it is best to consult trusted insurance professionals when making coverage decisions. For further insurance guidance, contact Brad Schmid, CIC at CBIZ today at (612) 799-3312 or bschmid@cbiz.com.

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LEGISLATIVE UPDATE

continued from pg. 5 and Energy Finance and Policy Committee, have indicated they have no interest in following California’s lead in fully banning gas-powered vehicles by 2035. Instead, in the absence of banning sales of new gas cars, Long hopes to pass a bill to offer EV rebates and fund electric vehicle chargers. (See bit.ly/MNCAban).

Given the controversial nature of this issue and California’s move to an even more stringent standard will ensure the policy will be front and center of the 2023 legislative session, regardless of party control. Please stay tuned for the next issue of AASP-MN News, where we’ll do a deep-dive into election results, what it might mean for industry-specific issues, and most importantly, AASP-MN members’ priorities.

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