Commercial Property Update

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Cause of Loss--Special Form CP 10 30 10 00

Earth Movement
Loss events involving movement of the earth, addressed under the Earth Movement exclusion, often involve sub-surface water or contraction or expansion of the soil.
A number of existing exclusions may be relevant to a particular loss event, e. g. Earth Movement, Water, and exclusions dealing with settling or weather conditions.

The Earth Movement exclusion is now separated to more specifically address the excluded areas, and includes explicit reference to soil conditions, actions of water, and settling.

Neglect
A Neglect exclusion is added to the Cause of Loss forms, changing the Duties After A Loss condition of the policy.

We will not pay for loss or damage caused by or resulting from...
Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.

An example of when this would be a concern is with mold claims.

Limitation on Electronic Media
Under the Special Exclusions, coverage on some types of property (including valuable papers an records) is limited to the "specified causes of loss" which are defined and are equivalent to Broad Form coverage.

The "specified causes of loss" do not include burglary or theft, though agents have questioned the application of this limitation to burglary or theft of prepackaged software programs such as stock of a retailer.

The form now states that, "valuable papers and records do not include prepackaged software programs". Therefore, the pre-packaged software is not subject to the limitation in coverage as indicated on the specified cause of loss and would include theft.

Collapse
The peril of Collapse has been controversial since the early days of insurance.

In both the 1886 and 1918 New York Standard Fire policies, there was a "fallen building" clause that suspended coverage any time a building or any part were to fall, except as a result of a fire. In 1943, that clause was eliminated in the New York Standard Fire policy.

In 1950, collapse coverage was first introduced as an endorsement under the name of "additional extended coverage."
In l983, ISO changed the status of collapse making it a coverage instead of a peril. According to ISO, the rationale for this change was that collapse, in most cases, is the result that is brought about by another peril, such as fire, windstorm or earthquake.

But additional special wording was still required because of the Concurrent Causation Doctrine, which came about by cases brought in the early l980's. The doctrine held, in essence, that when two independent causes of loss converge on property resulting in its loss, one cause being excluded and the other covered, that the entire loss is considered to be covered.

Because of the Concurrent Causation Doctrine, it became necessary to specifically itemize the limited covered causes of collapse. The problem in all of the edition dates dating back in time is that there has been no definition of "collapse" and accordingly interpretation has been one of common law. In response to this issue, a new definition has been added:

Additional Coverage--Collapse
With respect to buildings:
a. Collapse means an abrupt falling down or caving in or a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.
b. A building or any part of building that is in danger of falling down or caving in is not considered to be in a state of collapse.
c. A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building.
d. A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.

Property in transit is now covered at $5,000. Coverage for personal property in transit is limited to transit in or on a motor vehicle owned, leased, or operated by the insured. Coverage is limited to various named perils as listed.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.