Transcript Slide 1

ISO New Commercial Property Forms 2012
Laurie Infantino, CIC, AFIS,
CISC, ACSR, CISC, CRIS
President and Co-Founder of
The Insurance Community
Center
Community Webinars
www.insurancecommunitycenter.com
 Presents Monthly Webinars Free to
Community Members
 Community webinars are archived on the
Community homepage under the right hand
tab titled: Webinar Archive
www.InsuranceCommunityUniversity.com
2
 Effective date of
form change 10/2012. The
changes include:
 New edition dates of existing form numbers;
 Forms that are being withdrawn
 New forms that are being introduced. The
information, upon which this article relies, is the
ISO Circular dated January 3, 2012. This multistate
revision will be applicable to the following
jurisdictions:
www.InsuranceCommunityUniversity.com
3
Alabama
Alaska
Kentucky
Maine
Ohio
Oklahoma
Arizona
Maryland
Oregon
Arkansas
Massachusetts
Pennsylvania
California
Michigan
Rhode Island
Colorado
Minnesota
South Carolina
Connecticut
Missouri
South Dakota
Delaware
Montana
Tennessee
District of Columbia
Nebraska
Texas
Florida
Nevada
Utah
Georgia
New Hampshire
Vermont
Guam
New Jersey
Virgin Islands
Illinois
New Mexico
Virginia
Indiana
New York
West Virginia
Iowa
North Carolina
Wisconsin
Kansas
North Dakota
Wyoming
4
 Many of the ISO changes have already been
adopted in insurance company forms while
other changes represent clarification of the
“intent” of the form.
 There are many instances where there is no
change in “intent” of coverage. What this
means, typically, is that the language of the
form has been modified by adding or
removing a word or substituting a word that is
clearer.
www.InsuranceCommunityUniversity.com
5
 Some changes result in a coverage increase
typically in a sub-limit that is provided.
 Some changes result in coverage being
reduced for example removing an extension
or sub-limit that appeared in a prior edition
date.
 We MUST notify if a reduction has occurred
www.InsuranceCommunityUniversity.com
6
 Some changes will show coverage is
broadened which typically means that form
language has been added to make the
coverage more comprehensive.
 There are some new endorsements that are
being introduced that we will discuss in more
detail as they are new to the form series.
www.InsuranceCommunityUniversity.com
7
 Good News—This series form change, for the
most part, improves and broadens
Commercial Property Policies.
www.InsuranceCommunityUniversity.com
8
Always Check the Edition Dates that your Insurance Company is Using.
This may vary from Company to Company and State to State
9
Building and Personal
Property Form
CP 00 10
Debris Removal: The
additional limit provided
is increased from
$10,000 to $25,000.
Coverage is increased
and expanded in
definition
Building and Personal
Property Form
CP 00 10 (various)
The coverage provided for No change in intent
Business Personal
Property is clarified to
cover both in the building
or structures covered in
the policy.
Building and Personal
Property Form
CP 00 10 (various)
Property in Storage
Units: Business Personal
Property Temporarily in
Portable Storage Units.
The coverage is for 90
days with a sub-limit of
$10,000. The property
must be located within
100 feet of the described
premises.
New Extensions
A higher limit can be
indicated on the
Declarations Page
10
 This is one of the new “green” extensions in
Commercial Property.
 Currently the property form excludes trees,
shrubs, plants and lawns and then sub-limits the
coverage. (amount and perils—can endorse)
 The property form is revised to include lawns,
trees shrubs and plants which are part of a
vegetated roof and thereby treating such
property as an insured part of the building so
that an existing vegetated roof can be replaced
with like kind in the event of a loss.
www.InsuranceCommunityUniversity.com
11
www.InsuranceCommunityUniversity.com
12
 Additional benefits include:
 Reducing city "heat island effect
 Reduce summer CO2 impact
 Reduce summer air conditioning cost
 Reduce winter heat demand
 Potentially lengthen roof life 2 to 3 times
 Treat nitrogen pollution in rain
 Negate acid rain effect
 Help reduce volume and peak rates of
stormwater
www.InsuranceCommunityUniversity.com
13
 Electronic Data in Building
Equipment: Currently ISO
Commercial Property forms limit coverage for
electronic data to $2,500 on an annual aggregate
basis.
 The form is revised to remove the $2,500 limitation
with respect to loss or damage to electronic data
which is integrated in and operates or controls the
building’s elevator, lightning, heating, and
ventilation, air conditioning or security systems.
 CAUTION: Cause of Loss
www.InsuranceCommunityUniversity.com
14
Business Income Form
The form revises the 30
CP 00 30 and CP 00 32
days to 60 days.
Extended Business Income,
Extended Period of
Indemnity:
Coverage is increased.
Note: Many insurance
company forms
automatically include more
than 30 days.
Cause of Loss CP10 10, CP10 The term “earthquake” now No change in coverage
20, CP 10 30
incorporates tremors and
Earth Movement Exclusion: aftershocks. Clarifies Earth
movement is excluded
regardless of whether it is
caused by an act of nature or
is otherwise caused.
Options for Increasing
Specified Limits
This change allows for
increased coverage via
Declarations for the
additional coverages of
Electronic Data; Newly
Acquired Locations;
Interruption of Computer
Operations and Limitations
for Theft.
No change in coverage
15
Debris Removal and
Outdoor Trees, Shrubs and
Plants
CP 04 15 and CP 14 30
Debris Removal:
The $10,000 additional
limit for debris removal is
increased to $25,000.
Coverage is broadened.
Still need Debris Removal
Coverage. Does not
change BO requirement
Building Glass Tenants
Policy Endorsement
CP 14 70
This endorsement was first
No change in coverage
introduced in 2007 to
facilitate writing coverage
for building glass under a
tenant’s policy that did not
cover the building. This
endorsement simply allows
for the deductible for this
coverage to be added on the
endorsement rather than on
the Declarations Page
16
 The payroll endorsement is being modified to
provide a means of limiting or excluding the payroll
expense of “any category of employees or individual
employees.
 ” The term “ordinary payroll expense” and its
definition are removed from the endorsement.
 The title, also, will no longer refer to the word
“ordinary” and the word “ordinary” will no longer
appear in other sections such as the “coinsurance
section”.
www.InsuranceCommunityUniversity.com
17
 The revised endorsement serves the same
purpose as the prior one but can be used to
address any category of employee on the
insured’s payroll.
www.InsuranceCommunityUniversity.com
18
 The following are subject to the provisions of
this endorsement if so indicated in this
Schedule
 All employees and job classifications including
officers, executives, management personnel and
contract employees
 All employees and job classifications other than
officers, executives, management personnel and
contract employees
www.InsuranceCommunityUniversity.com
19
 All employees and job classifications
(including officers, executives, management
personnel and contract employees) except
 Only the following job classifications and/or
employees
 CAUTION: Discretionary Payroll Endorsement
www.InsuranceCommunityUniversity.com
20
Utility Services—
Wastewater Removal
(Time Element)
CP 15 45
The Utility Service Time
Element endorsement is
adds a new category of
utility service: wastewater
removal property. By
definition, wastewater
removal property is a
utility system for removing
wastewater and sewage
from the described
premises .
Coverage is broadened
Types of Utilities are
activations. Differ from
form to form
Earthquake Sprinkler
Leakage Deductible
CP 10 40; CP 10 45
Clarified that EQ Ded. does
not apply to EQSL
No change in coverage-Clarification
Green Upgrades
Endorsement Revision
CP 04 02
The schedule on the form is
revised to identify which
property is subject to
upgrade when not all
personal property is not to
be covered for Green
Upgrades
Clarification
21
Not all Companies must adopt all of the forms within
the form series
22
 Specified Property Away from the Premises
 Provides BPP coverage temporarily away from the
described premises in the course of daily business
activities
 Higher Limits
 An endorsement to increase limits as opposed to
entry on the Declarations Page
 Protective Safeguards (Fire)
 This replaces the interline form IL 0415 and
pertains only to Commercial Property
www.InsuranceCommunityUniversity.com
23
 Suspension or Reinstatement of Coverage
for Loss
Caused by Breakdown of Certain Equipment
 is used with new equipment breakdown endorsement
 Deductible by Location
 schedule
 Limitation on Coverage
for Roof Surfacing
 allows the company to ACV on roof surfacing for certain
perils
www.InsuranceCommunityUniversity.com
24
 The new endorsement provides an option for insuring
additional expenses when the costs of labor and/or
building materials increase as a result of a disaster
AND the total cost of repair or replacement exceeds
the applicable limit of insurance.
 Buildings to be insured are indicated on the endorsement
with a % in the Additional Expense column
 Coverage will only apply as a result of an event that is
declared a disaster by federal or state authorities as well as
damage resulting from an event which occurs in close
proximity to the disaster
 Coverage is on an annual aggregate basis
www.InsuranceCommunityUniversity.com
25
 Revises:
 Business Income from Dependent Properties—




Limited International Coverage
Extra Expense from Dependent Properties—
Limited International Coverage
Business Income Broad Form
Business Income Limited Form
Extra Expense from Dependent Properties
www.InsuranceCommunityUniversity.com
26
 Dependent Property Coverage is written by scheduling
the business locations that the insured is “dependent
upon” and have chosen to insure.
 The new endorsement allows for secondary
dependencies.
 An example provided by the ISO of a secondary
dependency is a situation in which the insured’s supplier (a
dependent property identified in the schedule of the
current endorsement) is unable to deliver
products/services due to interruption in the business of an
entity (for example, a manufacturer) upon which the
supplier depends but was NOT a supplier that the insured
directly depended upon or was identified in the
endorsement.
www.InsuranceCommunityUniversity.com
27
 The new option for covering secondary dependencies
is focused on contributing and recipient locations as
defined in the form. (List on form)
 Business Income losses arising out of physical loss or
damage at the secondary location is subject to the
same Limit of Insurance that applies to the scheduled
dependent location and does not increase the
coverage.
 The coverage territory is reiterated on the form to
avoid any confusion that the coverage goes beyond
the stated territory of the policy for example for
locations outside of the United States.
www.InsuranceCommunityUniversity.com
28
 New Cause of Loss form for Equipment Breakdown
that is compatible with the Special Cause of Loss Form.
 Currently in the Special Cause of Loss Form there are
three major categories of exclusions that relate to
equipment breakdown: artificially generated electrical
current; mechanical breakdown; explosion of steam
boilers…
 By use of this new endorsement those exclusions are
eliminated.
 There are limitations specific to Equipment Breakdown
coverage that is then added in the form language.
www.InsuranceCommunityUniversity.com
29
 Ammonia Contamination and Hazardous
Substance amounts of insurance can be
scheduled on the form.
 Because of the introduction of the new
Equipment Breakdown Form, the ISO has also
introduced the Suspension or Reinstatement
of Coverage for Loss Caused by Breakdown of
Certain Equipment to allow the insurance
companies to either suspend or reinstate
coverage for certain pieces of equipment.
www.InsuranceCommunityUniversity.com
30
 This new option covers extra expenses and
business income loses arising out of food
contamination and pertains to the Business
Income And Extra Expense Coverage Form.
Coverage is limited to loss of income/extra
expense due to the closure of the business.
 Covered expenses include: cost of cleaning
equipment; cost of replacing food; medical
testing and vaccination and advertising
expense.
www.InsuranceCommunityUniversity.com
31
 This endorsement is as a result of the
landlord/tenant business risks relating to the
rental of the property.
 While the landlord may enter into a lease
that holds the tenant responsible for damages
arising from a variety of causes, the insurance
contract is not intended to compensate a
landlord for the expected consequences of
usage of the rental premises as intended.
www.InsuranceCommunityUniversity.com
32
 One example provided by the ISO in
explanation would be when a premise is
leased for use as a restaurant and there is
damage from the residue of the cooking
operation. This is deemed a business risk
innate to the occupancy not loss
compensated by insurance.
www.InsuranceCommunityUniversity.com
33
 This question becomes much more interesting and
complex when the property is rented for illegal
purposes such as the rental of premises that is used as
a methamphetamine laboratory in which the damage
from methamphetamine “cooking” operations can be
likened to the residue from cooing operations in a
restaurant.
 Needless to say there are many issues at the heart of
this discussion that goes beyond the coverage issue
such as: did the landlord know about the operation;
should the landlord have known about the operation
and so on.
www.InsuranceCommunityUniversity.com
34
 A case in point that the ISO used in their
circular was the Graff v. Allstate Insurance
Company, 113 Wash, App.799; 54P.3d 1266
(Wash, Ct. App.2001). In the case the insured
filed a claim for cleanup expenses after a
tenant’s methamphetamine laboratory
damaged his rental house and the insurer
denied the claim citing the policy’s
contamination exclusion.
www.InsuranceCommunityUniversity.com
35
 The insured sued and the trial court held in
favor of the insured finding that his insurance
policy covered the cleanup expenses. The
appellate court affirmed the lower court’s
decision and stated that the operation of a
methamphetamine laboratory is vandalism
and therefore covered under the policy. Thus
both the contamination and vandalism issues
came into play.
www.InsuranceCommunityUniversity.com
36
 The Insurance company,
(plaintiff),
contended that coverage is not intended to
extend to the inevitable effect of a production
operation which is emphasized in the
language of the Special Form. As a result of
this case and similar claims, the ISO has
introduced this endorsement to be attached
to all polices issued to owners and tenants of
rental property.
www.InsuranceCommunityUniversity.com
37
 Most of the changes are editorial
 There are some improved extensions and
clarified methods for showing/increasing
coverage
 There are new endorsements that add
coverage and others that clarify coverage.
www.InsuranceCommunityUniversity.com
38
Upcoming CE Classes
3/21
Installation Floater
3/27
Website Review
3/29
Installation Floater and Contractors Equipment
FREE Community Classes
4/4
Insuring Wineries
4/10
Email Encryption
Join the Community TODAY at:
www.insurancecommunitycenter.com
39
www.InsuranceCommunityUniversity.com
Upcoming CE Classes
4/5/12
Integrated Disability Management
4/11 – 4/12
Errors & Omissions
4/18/12
Manufacturers Insurance Coverages
FREE Community Classes
4/4
Insuring Wineries
4/10
Email Encryption
Join the Community TODAY at:
www.insurancecommunitycenter.com
40
www.InsuranceCommunityUniversity.com