The Insurance Services Office has made more than 40 changes to its commercial property policy forms and endorsements. The forms, which have an edition date of October 2012, will be effective in most states on April 1.
Agents need to be aware of the changes, especially any reductions in coverage, to curb their errors & omissions exposure. In addition, not all companies are adopting them, so check with your carriers to find out if they’re using the new forms.
Below are some of the changes that broaden coverage:
Changes in the Policy Form
Debris Removal Additional Coverage
This change adds removal of other debris (other than covered property debris) that is on the described premises when caused by a covered cause of loss. The coverage does not apply to the cost of:
- Removing debris of insured’s property not insured on the policy, or property in the insured’s possession that is not covered property.
- Removing debris of property owned by or leased to the landlord, unless there is a contractual obligation to insure and the property is insured on the policy.
- Removing any property not covered, including property addressed in the outdoor property coverage extension.
- Removing property of others of a type not covered on the form.
- Removing deposits of mud or earth.
When no covered property sustains direct damage, coverage for removal of debris of others’ property is limited to $5,000. The additional limit is increased from $10,000 to $25,000.
In addition, the outdoor property extension is revised to include debris removal of trees, shrubs and plants not owned by the insured—except when the insured is a tenant and the trees, shrubs and plants are owned by the owner of the described premises.
This is broadened coverage for removal of certain property of others, and increased additional limit of insurance and trees, shrubs and plants that are property of others.
Extended Business Income, Extended Period of Indemnity
The business income forms are revised to double the number of days for extended business income at the end of the “period of restoration” from 30 days to 60 days. Any additional days provided by the extended period of indemnity option will begin after the automatic 60-day extension.
When a described premise for tenant’s property is identified in terms of a room or suite instead of a building number or location address, coverage currently extends 100 feet from the described premises. The change states that the radius will be 100 feet from the building or 100 feet from the described premises, whichever distance is greater.
This change applies to your business personal property, personal property of others and business income.
Exclusion 2.h. in the special cause of loss form excludes loss or damage caused by or resulting from dishonest or criminal acts by “anyone to whom you entrust property for any purpose,” which could apply to tenants or bailees.
The revision distinguishes between those who have a role in the insured’s business—partners, managers, employees—and others to whom property may be entrusted—tenants and bailees. The exclusion is narrowed to apply only to theft to any person “to whom you entrust property.”
Wear and Tear Exclusion—Special Form
The current form excludes wear and tear unless the wear and tear results in a “specified cause of loss.” Coverage is being expanded for water damage in the “specified causes of loss” to include accidental discharge, leakage, water or waterborne material as the result of the breaking apart or cracking of certain off-premise systems due to wear and tear.
The provision in the form is revised to make it explicit that there is no coverage for losses that are otherwise excluded under the terms of the policy’s water damage exclusion.
Changes to Endorsements
Debris Removal; Outdoor Trees, Shrubs and Plants
Under the debris removal additional coverage in the policy form, the additional limit has been increased from $10,000 to $25,000. The form also revises the outdoor property extension to include debris removal expense for trees, shrubs or plants not owned by the insured, or, if the insured is a tenant, by the insured’s landlord.
Debris Removal Additional Insurance (CP 04 15)
The endorsement is revised to reference $25,000 as the underlying amount of additional insurance. This revision does not change the coverage.
Outdoor Trees, Shrubs and Plants (CP 14 30)
The endorsement is revised to specify that the applicable limit of insurance for loss or damage includes debris removal expense. The revision broadens coverage to include debris removal expense.
Business Income Report/Work Sheet (CP 15 15)
The extended business income and extended period of indemnity provisions in the business income form have been changed to increase the number of days from 30 to 60. The work sheet is being revised to reflect the change to 60 days. There is no change in the usage of the report/worksheet.
Specified Property Away from Premises (CP 04 04)
CP 04 04 Specified Business Personal Property Temporarily Away from Premises is being introduced to provide coverage for property temporarily away from the described premises in the course of daily business activities, such as a laptop while it’s off-premises.
The property must be described in the schedule and a limit must be entered. It is not intended to apply to sales activities and does not cover property held by salespersons.
Also, it does not apply to property in the care of a common or contract carrier or bailee for hire. Theft from a vehicle is covered if there is evidence of theft. The exclusion of waterborne or airborne property is reiterated and the policy territory applies.
There could be some overlap with other policy provisions, such as the property off-premises extension and property in transit additional coverage extension. In such cases, the endorsement specifies the insured can elect to be paid under the provision that affords the most coverage, but will not be paid under more than one provision.
Ted Kinney is director of education and technical affairs for the Alabama Independent Insurance Agents.
This is the first story in a three-part series on 2012 revisions to policy forms and endorsements. Look to upcoming editions of IN&V for stories on changes that represent new coverage and those that are expected to leave coverage unchanged.
For more information on the October 2012 edition ISO commercial property form and endorsement changes, including other revisions that broaden coverage, watch a recorded webinar from the Big “I” Virtual University.