Which of the following is not a covered cause of loss under the basic causes of loss form?
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Mathematics with Business Applications6th EditionMcGraw-Hill Education 3,760 solutions Business Math17th EditionMary Hansen 3,684 solutions Prior to working in the insurance industry, I purchased insurance because I had to. I did not really understand the ins and outs of what I was purchasing or exactly what risks it would or would not protect me from. An insurance policy can be intimidating and sometimes confusing, but it is important to understand your coverage prior to a loss rather than after the damage is done to avoid unexpected gaps. There are three commercial property forms (basic, broad and special) that identify the causes of loss (or perils) for which coverage is provided. The basic and broad causes of loss forms are named peril forms whereas the special cause of loss form is an opened peril form. The named peril form provides coverage for losses caused by only those specifically listed while the open peril coverage form is an all risk form that provides coverage for losses by any cause unless it is specifically excluded. Please give your agent a call today if you have any questions on the coverage forms within your policy. Commercial Property There are three alternatives insureds may select from when arranging the scope of coverage desired under ISO's commercial property program, basic, broad or special, which are differentiated by the scope of covered perils. This describes those forms.Basic, Broad, and Special Forms Available Summary: There are three alternatives insureds may select from when arranging the scope of coverage desired under ISO’s commercial property program. A policy written under the simplified language commercial property program of Insurance Services Office must incorporate one of three alternative causes of loss forms—basic form CP 10 10 10 12, broad form CP 10 20 10 12, or special form CP 10 30 10 12—which are differentiated by the scope of covered perils (referred to in the forms as causes of loss rather than perils) each provides. A fourth cause of loss form, CP 10 40 10 12, provides earthquake coverage for insureds who choose to add it to their policies. A number of optional causes of loss endorsements are also available to modify the terms of the policy. This premium content is locked forInsurance Coverage Law Center subscribers only.Enjoy unlimited access to the single source of objective legal analysis, practical insights, and news for the insurance industry.
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account? Sign In Now You've made it to Part VII of The Basics of Commercial Lines Rating! If you need a review, don't hesitate to explore our previous entries in this series. The Special Causes of Loss form is just that, special. It provides coverage for risks of direct physical loss unless, of course, they are excluded or limited. Unlike the Basicand Broad forms, which only cover what’s listed, the Special form covers everything except what’s listed in the called-out exclusions, limitations, and conditions. The Special Causes of Loss form provides different coverage forcommercial property than the Basic or Broad form provides. Related: |
Occupancy Category | Loss Cost |
Residential Apartments and Condominiums | .187 |
Offices | .177 |
Mercantile – High | .246 |
Mercantile – Medium | .210 |
Mercantile – Low | .161 |
Motels and Hotels | .120 |
Institutional – High | .120 |
Institutional – Low | .079 |
Industrial and Processing – High | .210 |
Industrial and Processing – Low | .177 |
Service – High | .192 |
Service – Low | .147 |
Contractors | .268 |
Territory (County) | Territorial Multiplier |
King | 1.206 |
Pierce | 1.111 |
Balance of State | 1.000 |
Factors to exclude theft from Personal Property coverage:
Occupancy Category | Theft Exclusion Factor |
Residential apartments and Condominiums | .60 |
Motel-hotel Risks | .60 |
Contractors Risks | .20 |
All Other Risks | .40 |
Applying rate factors
BGI and BGII Loss Costs: When rating these for a Special form policy, apply the same rate factors in the same order as for a Basic form policy.
Special form Loss Costs: Apply applicable rate factors in the following order:
- Company filed Loss Cost multiplier
- Territory multiplier
- Coinsurance adjustment, if applicable
- Watchman service and/or burglar alarm system modification
- Theft exclusion factor
- Limit of Insurance relativity factor, if LOI rating method is used (interpolated)
- Factors or charges required by individual rules
- Taxes, unless local requirements dictate otherwise
- Payment plan factor
Remember to apply additive factors before applying multiplicative factors unless a rule states otherwise.
The “formula” to rate a policy with Special Causes of Loss without factors or charges dictated by individual rules — using (LOI) methodology would look like this:
Group I: Building coverage and Contents coverage
- Basic Loss Cost X Company Loss Cost Multiplier X Protection Class Multiplier (if class rated) X Territory
- Multiplier (if class rated) X Coinsurance X Interpolated LOI Relativity Factor = Final Rate.
- Final Rate X Limit of Insurance per 100 = Group I premium.
Group II: Building coverage and Contents Coverage
- Basic Loss Cost X Company Loss Cost Multiplier X Coinsurance X Interpolated LOI Relativity Factor = Final Rate.
- Final Rate X limit of Insurance per 100 = Group II premium.
It is important to note that Territory and Protection Class multipliers do not apply to Group II.
Special Causes of Loss: Building coverage and Contents coverage
- Basic Loss Cost X Company Loss Cost Multiplier X Territory Multiplier X Coinsurance X Theft Exclusion
- Factor (if applicable) X Interpolated LOI Relativity Factor = Final Rate.
- Final Rate X Limit of Insurance per 100 = Special Causes of Loss Premium.
Note that the Protection Class Multiplier does not apply to Special Causes of Loss.
You will find the complete Causes of Loss — Special Form Rule (Rule 72) in Division Five of the Commercial Lines Manual.
This concludes The Basics of Commercial Rating series, which we designed to cover the foundations of this often-complex topic.