Commercial Property Insurance

Fast Facts

• Protects commercial businesses, their buildings, and contents.
• Commercial Property Policy: Insures commercial buildings and property.
• Commercial Package Policy: Combines commercial property and Commercial General Liability (CGL) coverages.
• Policy Forms:
  • Common Policy Conditions Form: Applies to all commercial insurance policies (IL 00 17).
  • Commercial Property Conditions Form: Specific to commercial property policies (CP 00 90).
  • Coverage Forms:
    • Building and Personal Property (CP 00 10)
    • Condominium Association
    • Condominium Commercial Unit-Owners
    • Builders Risk
    • Business Income and Extra Expense
    • Legal Liability
  • Causes of Loss Forms:
    • Basic (CP 10 10)
    • Broad (CP 10 20)
    • Special (CP 10 30)
  • Optional Endorsements: Ordinance or Law, Spoilage, Peak Season, Flood Coverage.

Introduction to Commercial Property Insurance

Commercial insurance policies, published by the Insurance Services Office (ISO), protect commercial buildings and contents. Policies can be self-contained (e.g., workers compensation) or modular, combining multiple forms around a common conditions form.

Components of a Commercial Property Policy

• Declarations Page: Lists insured’s name, premises address, insurance limits, deductible, and applicable causes of loss form.
• Common Policy Conditions (IL 00 17): Applies to all ISO commercial policies, covering:
  • Cancellation
  • Changes
  • Examination of books/records
  • Inspections and surveys
  • Premiums
  • Transfer of rights/duties
• Commercial Property Conditions (CP 00 90): Specific to property policies, covering:
  • Concealment, misrepresentation, fraud
  • Control of property
  • Insurance under multiple coverages
  • Legal action against insurer
  • Liberalization
  • No benefit to bailee
  • Other insurance
  • Policy period and coverage territory
  • Transfer of rights of recovery
• Coverage Forms: Describe insured property and limitations/exclusions.
• Causes of Loss Forms: Specify covered perils and exclusions.
• Endorsements: Broaden or narrow coverage (e.g., Earthquake/Volcanic Eruption - CP 10 40).

Package vs. Monoline Policies

Package Policy: Combines multiple coverages (e.g., property and CGL) in one policy, reducing gaps/overlaps, using consistent terms, and often offering discounts.

Monoline Policy: Covers a single type of insurance (e.g., property only). Workers compensation must be monoline.

Coverage Forms

Building and Personal Property Coverage Form (CP 00 10): Covers:

• Building Property: Buildings, structures, fixtures (e.g., HVAC, light poles), and construction materials within 100 feet.
• Business Personal Property: Furniture, machinery, stock, improvements/betterments, leased property within 100 feet.
• Personal Property of Others: Property in insured’s care, custody, or control within 100 feet.

Other Coverage Forms:

• Condominium Association: Covers association property; unit owner coverage is primary.
• Condominium Commercial Unit-Owners: For businesses in condos, covers improvements and personal property.
• Builders Risk: Covers buildings under construction, materials, and temporary structures.
• Business Income and Extra Expense: Covers income loss and extra expenses during restoration (72-hour waiting period for income).
• Legal Liability: Covers accidental damage to others’ property in insured’s care.

Causes of Loss Forms

Basic (CP 10 10) and Broad (CP 10 20) are named perils forms. Special (CP 10 30) is an open perils form, covering more, including most thefts.

Named Perils (Basic and Broad):

• Fire, Lightning, Explosion, Windstorm/Hail, Smoke, Aircraft/Vehicles, Riot/Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole Collapse, Volcanic Action, Limited Fungus/Rot/Bacteria.
• Broad Form Only: Falling Objects, Weight of Snow/Ice/Sleet, Water Damage, Collapse.

Exclusions (Basic and Broad):

• Water (flood), Earth Movement, Ordinance or Law, Governmental Action, Nuclear Hazard, War, Utility Services, Artificially Generated Current, Boiler Explosion, Mechanical Breakdown, Neglect.
• Basic Only: Water damage (except sprinkler leakage or covered causes).

Special Form Exclusions: Includes above plus wear/tear, rust, mold, employee dishonesty, and more.

Selected Endorsements

• Ordinance or Law (CP 04 05): Covers demolition, reconstruction, and compliance costs for building codes.
• Spoilage (CP 04 40): Covers perishable items due to equipment failure or power outage.
• Peak Season (CP 12 30): Increases coverage limits during high-inventory periods.
• Flood Coverage (CP 10 65): Covers flood losses (overflow, runoff, mudslide).

For Your Review