Filling in the gap
Questioning insureds or prospects to discover if there is a need to insure property not covered—or with very limited coverage—is a way to skillfully provide protection for a customer who could otherwise be unpleasantly surprised after a loss.
By Paul Martin, CPCU
When experienced and well-educated producers are working with a new commercial account, they can usually explain to the customer what property is covered and not covered under standard Insurance Services Office (ISO) forms. This is an important skill in doing their job. However, occasionally a producer can miss property that may not be covered if they fail to ask probing questions.
A producer in North Dakota discovered this recently when writing a new account and was discussing how coverage did and didn’t apply to the foundation of a building. It seems this large manufacturing building had a “heated” foundation. The foundation had a system of piping, much like a radiator, that kept the floor of the building from becoming too cold for the operations the business was conducting. The producer knew that there were limitations to the coverage for foundations in the Building and Personal Property Coverage form ISO CP 00 10, so a review of the language was in order.
The form says, “Covered Property does not include … Foundations of buildings, structures, machinery or boilers if their foundations are below: (1) The lowest basement floor; or (2) The surface of the ground, if there is no basement;” Also considered “Property Not Covered” were “… underground pipes, flues, or drains.”
Thinking about this language raises questions. So, is every part or aspect of the foundation that is below the surface of the ground not covered, assuming it was a simple slab? It would seem that this is a correct interpretation. This would exclude for example “pilings” (vertical parts of a slab) that are connected to and a part of the foundation that are designed to keep the foundation from moving laterally and to withstand heavier loads. They are often concrete and extend down into the soil enough to support the building. The piping “underground” could also be problematic with the producer not knowing exactly if it was below ground or not.
The producer knew the radiator plumbing was part of the foundation. It was part of the slab, but how much of it extended below the surface of the ground? One solution to this problem was to affirmatively make sure that all of the foundation is covered property. The ISO CP 14 10 Additional Covered Property endorsement can do just that. The endorsement itself is quite simple. It lists the categories of “property not covered” on the CP 00 10 (that can be insured) and coverage is triggered for that type of property with simply marking an “X” in a box. By each “X,” the Premises and Building numbers are designated. Of course, the producer in this case would want to be sure that the value of the building shown in the Declarations had a sufficient limit to replace the building, including the full cost of the heated foundation.
Finding a “fill-in” endorsement
While the use of the Additional Covered Property endorsement solved that specific producer’s problem, there are other categories of Property Not Covered in the ISO form that the CP 14 10 endorsement can address as well. Animals are a category of property that is not covered by the form but can be covered with the endorsement. Paved surfaces are considered property not covered as well. This would include “Bridges, roadways, walks, patios …”. It’s not uncommon to see whole parking lots of businesses having to be replaced or heavily resurfaced or rebuilt due to an extreme fire loss at a business. If those values of paved surfaces would be a burden to a business suffering a total loss, it could be appropriate to include in the building limit and insure using the CP 14 10.
If an insured’s operations were near water and components of their building included “Pilings, piers, wharves, docks or bulkheads,” they could again insure those with the CP 14 10. In the same way, retaining walls that are not a part of the building can be covered with the Additional Covered Property endorsement.
There are other categories of ISO’s Property Not Covered that don’t have an endorsement available to provide coverage. Consider these:
- Accounts, bills, money and securities coverage comes in the Crime program
- For autos “held for sell,” look to Garage coverage or Dealers physical damage coverage
- Contraband is simply uninsurable, as are the costs of excavation or grading as a practical matter
- Property that is airborne or waterborne can be insured with Inland Marine policies
- Valuable papers, which have a small amount of coverage in the CP 00 10, are better insured with inland marine coverage, as well
- Vehicles are also considered Property Not Covered, so they are insured using Commercial Auto forms.
There are also several categories of Property Not Covered that may have a small amount of coverage, such as $1,000 or $2,500, provided in the Coverage Extensions of the CP 00 10, but this coverage may be inadequate. For these, four different endorsements are designed to provide insurance for them.
If the insured or prospect has a radio or television antenna that needs to be insured, the Radio or Television Antennas endorsement CP 14 50 is available. On the endorsement, the premises number, building number, limit of insurance, causes of loss that apply (insured’s choice), and coinsurance percentage applicable are shown. Coverage is provided for lead-in wiring as well as the antenna and tower. Some weather-related exclusions are included in the wording.
If the insured has an outdoor sign and wants to insure it for more than the $1,000 provided in the CP 00 10, they can attach the Outdoor Signs endorsement CP 14 40. The premises number, building number, a space to describe the sign, two boxes to show whether the sign is entirely metal or other, the limit of insurance, and the coinsurance percentage applicable are shown on this endorsement.
If the prospect has particular outdoor plants they would like to insure, there is an endorsement titled Outdoor Trees, Shrubs, and Plants CP 14 30. This endorsement allows the insured to select a separate limit that would apply to each plant category—each tree, shrub, or other plant—and then an “all items” limit. The insured can also select the Causes of Loss form that they would like to apply to the plants. A special vehicle exclusion option is also available.
Weather exclusions apply such as dampness or dryness, extremes of temperature, and rain, snow or sleet. It is notable that there is no windstorm exclusion that applies. This is not surprising, considering windstorm is one of the most likely perils to threaten plants.
Producers should keep in mind that flooding is of course excluded on Causes of Loss forms and represents a significant threat to plants. If an insured has a particular exposure to covering trees or plants, such as a golf course, the producer may want to contact their inland marine underwriter to explore whether special program policies are available.
Fences are another category of outdoor property for which an insured may need special protection. The ISO program uses the Additional Covered Property endorsement, previously described, to move fences into a fully covered category rather than limited in the Coverage Extensions, which provides no more than $1,000.
Questioning insureds or prospects to discover if there is a need to insure property not covered—or with very limited coverage—is a way to skillfully provide protection for a customer who could otherwise be unpleasantly surprised after a loss. Knowing these simple endorsements could make the producer a hero when the worst arrives.
The author
Paul Martin, CPCU, is director of academic content at The National Alliance for Insurance Education & Research headquartered in Austin, Texas. Paul works to develop, maintain, and deliver quality educational programs for the organization. Paul has over three decades in the insurance and risk management industry.
