Cause of Loss Form Changes Earth Movement Exclusion. According to ISO, the revised earth movement exclusion does not alter the breath of coverage currently provided. The reworded exclusion simply strengthens the intent of the form to reinforce that earth movement is excluded regardless of the cause of the earth movement. Also earthquake is redefined to include tremors and aftershocks to add clarification to the intent of the exclusion.
Water Exclusion. The exclusionary wording currently found in the
CP 10 32 - Water Exclusion is incorporated into the cause of loss forms. This change makes the CP 10 32 unnecessary and the endorsement shall be withdrawn. Inclusion of this endorsement's wording into the cause of loss forms creates no change in coverage as this was apparently an automatic endorsement. The new policy wording differs from the previous wording in the following ways:
- Water from tidal waves, tsunamis, and storm surge is specifically excluded;
- Damage caused by any water discharged from a sewer, drain, sump, sump pump, or related equipment is excluded;
- Damage caused by waterborne material carried or in any way moved by water or mudslide/mudflow is excluded; and
- The exclusion applies regardless of the cause of the water - whether it be caused by an act of nature or "otherwise caused."
Entrusted Property. ISO actually broadens coverage with this revision to the special cause of loss form (CP 10 30). The current wording excludes loss caused by anyone to whom the insured entrusts insured property; as ISO points out in its filing, this could be used to exclude coverage for damage caused by tenants and bailees. The new wording differentiates between those persons who are part of the insured's business (managers, officers, employees, etc.) and "others" not part of the business (such as the aforementioned tenants and bailees). With respect to the "others" category, the exclusion is limited to loss caused by theft. Additionally, the exception to the exclusion is revised to extend coverage to damage caused by authorized representatives (although theft is still excluded).
Wear and Tear Exclusion - Special Form. Another broadening of coverage by ISO, this time by redefining
water damage within the defined phrase "specified causes of loss" found in the special cause of loss form (CP 10 30). The new wording adds coverage for accidental discharge or leakage of water... as the direct result of the breaking or cracking of a municipal water or sewer system
off the described premises. The breaking or cracking must be by wear and tear. The form clearly states that this broadened coverage does not extend to include losses excluded in the form's water exclusion.
Covered Causes of Loss. A quick history lesson: Prior to 1983, ISO used the term "all risks" to indicate the cause of loss form we know today as the "special form." Courts did not interpret the term as the insurance industry intended, courts said that "all risk" meant just that - all risks of loss were covered. In the 10 83 edition of the special cause of loss form the word "all" was deleted and the industry began using the term (within the policy language) "risk of direct physical loss."
Well, the courts relatively recently jumped on this phrase as well. A 2005 case decided by the Pennsylvania Supreme Court interpreted the meaning of the phrase, as it related to a collapse claim, broader than the industry intended and industry professionals understand it.
ISO has reworded the form to delete the word "risk" (how funny, "all" and "risk" are now gone). The new CP 10 30 Cause of Loss - Special Form simply states that the policy's meaning of "Covered cause of loss" is "direct physical loss unless the loss is excluded or limited in this policy."
Effectively, there is no change in coverage. This appears to simply be the most current attempt to avoid over-extension of coverage by the courts.
Changes Affecting Both Coverage Forms and Cause of Loss Forms
Vegetated Roofs. Because of the "growing" trend in green building construction methods, vegetated roofs are becoming more accepted, though not necessarily common. ISO is revising the Property Not Covered wording to make an exception for lawns, trees, shrubs and plants which are part of vegetated roofs. The exception serves to make vegetated roofs covered property. However, there are limitations; the special cause of loss form (CP 10 30) specifies that there is no coverage for loss to the vegetation caused by: 1) Dampness or dryness of atmosphere or soil; 2) Changes in or extremes of temperature; 3) Disease; 4) Frost; 5) Hail; 6) Rail; 7) Snow; 8) Ice; or 9) Sleet. Also, the Additional Coverage - Mold will not apply to the vegetation on vegetated roofs (it still applies to the support system).
Ordinance or Law Exclusion. No change in coverage is created by the new ordinance or law exclusionary wording; the new wording is simply a policy modernization stating that the exclusion applies to the enforcement of "
or compliance with" (added wording) any ordinance or law.... The term "compliance" seems to indicate that the insured is voluntarily complying with the current ordinance or law - which is a requirement of the permitting process anyway. So, punitive "enforcement" is not required for the exclusion to apply - and it never did. A second change to the provisions related to ordinance or law is found in the increased cost of construction wording ("e." under Additional Coverages). The phrase "enforcement of" is replaced with "the minimum standards of...." Again, there is no change in coverage or intent, simply recognition of the "required voluntary" nature of complying with a jurisdiction's building codes. Thirteen coverage forms are altered by this modernization.
Options for Increasing Specified Limits. Four types of property subject to sub-limits now have a new option for increasing the limit of coverage. Previously the only method for increasing coverage was by entry on the declarations page. These property types are:
- Electronic Data ($2,500 basic aggregate limit)
- Newly Acquired Locations (for Business Income coverage) ($100,000 per location basic limit)
- Interruption of Computer Operations (in Business Income forms) ($2,500 basic aggregate limit)
- Limitations for Theft (allows an increase for all theft sub-limits in the form)
Editorial Changes to Policy Forms Several forms contain editorial changes only. These create no change in coverage and generally serve to clarify the intent of the current policy wording. Some of the editorial changes in the upcoming commercial property filing include:
- "Stock" is a defined term in the Condominium Association Coverage Form (CP 00 17) however the word is not defined in the policy (the form depends on the Building and Personal Property Coverage Form (CP 00 10) for the definition). ISO is inserting the definition onto the CP 00 17.
- The term "policy" replaces the term "Coverage" in the Standard Property Policy's (CP 00 99) Concealment, Misrepresentation or Fraud Additional Coverage. This change is made for consistency purposes.
- Both the Cause of Loss - Basic Form (CP 10 10) and the Cause of Loss - Broad Form (CP 10 20) add wording below the form title to state that words and phrases appearing in quotation marks have special meaning and refer the reader to the definitions section to read the definitions of the terms.
Next Week ISO's 28 endorsement changes found in the upcoming filing are introduced and discussed in next week's email. You do not want to miss it; some changes are very important.
I would love to hear your feedback, please send me an email
cboggs@ijacademy.com.
Until next time,
Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS
Director of Education
Academy of Insurance
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