Commercial insurance policies, for many years, were characterized by a constant evolution of forms, endorsements and extensions of coverage to protect an insured’s business exposures. When a new need arose, a new form was created to satisfy that need.
Prior to the advent of the Commercial Package Policy (CPP), insurers offered such individual commercial insurance contracts as the General Property form, Comprehensive General Liability form, Business Auto form, Boiler and Machinery form, and Business Crime form, among others. The CPP provides much more flexibility than the previous forms. It has a broader scope of commercial insurance coverage as well.
With a CPP, the insured is not required to carry specific coverages. He/she may choose one coverage part and the contract is monoline. When another is added, the policy becomes a true package policy. Again, the insured is not required to select any particular coverage part that is available. There are several coverage parts available to be added to the policy, including, but not limited to, liability, commercial property, inland marine, crime, auto, boiler and machinery, and farms.
A common declarations page is attached to the CPP. The information in this section applies to any coverage part added to the policy. The common declarations page will typically include the following information:
The CPP also includes a common conditions form to which all coverage parts are subject. This form consists of several conditions that apply to all coverage parts added, including:
Cancellation
Policy Changes
Examination of Books and Records
Inspection and Surveys
Transfer of Rights and Duties
Premiums
This coverage part includes its own declarations and conditions. Several specific coverage forms are available to an insured to add to this coverage part based on the property exposures of the business.
Common commercial property coverage forms include:
This is the standard form used for insuring most types of business property. Coverage may be written to cover buildings only, personal property only, or both.
Coverage A is for the “building” and includes:
Coverage B covers business personal property and includes furniture and fixtures, machinery and equipment, stock, and all other personal property owned by the insured and used for business purposes. This business personal property must be located in or on the building described in the declarations or within 100 feet of the described premises.
Coverage C covers the personal property of others that is in the insured’s care, custody, or control.
Property not covered under the Building and Personal Property Coverage Form includes:
This extends coverage to buildings under construction at the described location. Coverage is also provided for newly acquired locations up to a maximum of $100,000. The insured may extend the insurance on the building to apply to a new building while being built on the described premises and buildings acquired at other locations intended for similar use or as a warehouse. Insurance under this extension for each newly acquired or constructed property will end when:
-OR-
Additional Coverages provides additional coverages that are similar to those provided by dwelling and HO policies. They include debris removal, preservation of property, fire department service charges and pollutant cleanup and removal.
The coverage amount may increase or decrease during the year in relation to the fluctuating inventories. A final premium is determined at the end of the year when the experience is complete.
The insured must provide reporting of the changes occurring during the year. The insured must report 100% of the values of the property insured. Late reports or underestimates may result in a penalty at the time of loss. The full reporting value clause states that if the insured under reports, the amount of a loss will be based on the last value reported. For instance, if the insured reports only 1/3 of his/her value, the insurer will only pay 1/3 of the loss.
This is another available commercial property coverage form that will protect the insured against the loss of earnings sustained as a result of a covered loss. Business income coverage will pay an insured if business operations are suspended due to a direct (covered) physical loss to the insured location. There are two available forms. One form includes extra expense coverage, and the other one provides business income coverage without extra expense coverage.
This provides 30 days of automatic coverage for continued loss of business income once restoration is complete. The thirty day period begins on the date when the property is actually repaired, rebuilt or replaced.
Extra expense coverage insures against the necessary extra expenses during the period of restoration that would not have been incurred had there been no underlying property loss. This coverage includes expenses incurred to avoid or minimize the suspension of operations, at either the described location or at a replacement premises or a temporary location.
This form pays for damage to structures while they are being built. Any other property or equipment is covered, if necessary, for the maintenance of the structure being constructed. Coverage under this form terminates when the building has been occupied or 90 days after construction of the new building is concluded.
The property of a condominium association would be protected against covered perils under this coverage form.
This form furnishes protection for loss to property owned by a real estate investor.
Written to cover certain perils that may otherwise be excluded by the standard fire policy or commercial package policy (usually with a large deductible).
This endorsement provides coverage for perishable stock due to power outage, mechanical breakdown or contamination. This coverage applies to losses resulting from change in temperature or humidity, or contamination resulting from a power outage either on or off the premises, or resulting from mechanical breakdown.
Once the desired coverage forms are added, the named insured must determine which cause of loss form to attach to the policy to specify the perils insured against. There are four available forms, including:
Basic Cause of Loss
This form covers loss caused by the same perils that are available to be included in a Dwelling Property Basic form, including:
Broad Cause of Loss
This form includes all the perils of the basic form plus:
The water damage coverage does not include flood damage but does cover damage from leakage or discharge of water or steam from an appliance or the bursting of water pipes. Similar exclusions like those found in the basic form are present in this form.
Special Causes of Loss
This is the all-risk cause of loss form. It covers all perils found in the broad form plus any other cause of loss except those specifically excluded, such as:
Earthquake Form
Another form available to be added to commercial property coverages protects an insured against loss caused by an earthquake or volcanic eruption. Without the addition of this form, coverage for earthquake damage is excluded.
Additional commercial property endorsements are available, which may modify the basis on which property is insured, including:
Peak Season
Ordinance or Law
Blanket Insurance
Glass
The Commercial Package Policy (CPP) simplifies commercial insurance by offering a flexible and comprehensive approach to covering various business exposures. It allows an insured to select coverage parts based on their needs, making it a monoline contract until additional coverage parts are added.
The CPP includes Common Declarations, which provide essential details about the policy, such as the insured’s name, policy period, premium, and more. There are also Common Conditions that apply across all coverage parts, covering aspects like cancellation, policy changes, and premium responsibilities.
This coverage part includes various forms like Building and Personal Property, Business Income, and more to cater to different property exposures in a business.
Once coverage forms are selected, a cause of loss form must be chosen to specify the perils insured against. Options include Basic, Broad, Special, and Earthquake forms, each with specific coverage details and exclusions.
Endorsements offer additional modifications to property insurance, such as Peak Season for inventory fluctuations, Ordinance or Law for building code enforcement, Blanket Insurance for covering multiple properties under one policy, and Glass coverage for specialized glass protection.
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