Mind the Gap
By Marc McNulty, CIC, CRM
LESSER-KNOWN ENDORSEMENTS: PART ONE
A look at commercial property and crime coverage endorsements
It’s impossible for producers who are new to the industry to soak up all the knowledge needed to propose comprehensive programs to their prospects; there simply aren’t enough hours in the day. Honestly, that’s one of the reasons I love the insurance industry: Just when you start to think you have everything figured out, you realize you don’t! There’s always a new coverage to get excited about, a new exclusion to get frustrated about, or an old endorsement to learn about that you had no idea existed.
There’s always a new coverage to get excited about, a new exclusion to get frustrated about, or an old endorsement to learn about that you had no idea existed.
Some of my favorite continuing education courses have included overviews of endorsements that aren’t always used by producers. Let’s start the new year off with a handful of such endorsements that are available for accounts with commercial property and crime coverage.
Additional Covered Property (CP 14 10)
This is one of my favorite lesser-utilized property endorsements that has been used by our agency over the years. I first brought this one up in the Mind the Gap column in the June 2017 issue of Rough Notes, and the language in the form is about as simple as it gets:
The following is withdrawn from PROPERTY NOT COVERED and added to COVERED PROPERTY:
A schedule then follows, and columns appear for premises number, building number, paragraph reference, description of property, and type of property coverage (building or personal property).
You may be scratching your head and wondering how this endorsement works, especially with the “paragraph reference” curveball thrown into the mix.
Fear not, as the beauty of this form lies in its simplicity. This endorsement allows you to take various items that are listed in the “Property Not Covered” section of the CP 00 10 (or carrier-equivalent Building and Personal Property Coverage Form) and add them back as either covered building or personal property items.
For example, following are some of the items included under the “2. Property Not Covered” section of the CP 00 10:
d. Bridges, roadways, walks, patios or other paved surfaces;
g. 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;
l. Retaining walls that are not part of a building;
m. Underground pipes, flues or drains;
Can you envision your clients having an exposure to loss with some of these items? If so, you can get them covered by using the CP 14 10 and listing the covered location and building number(s) on the form along with the appropriate paragraph and description of property from the “Property Not Covered” section of the CP 00 10.
Of course, most underwriters will want to makesure the replacement cost of these items is account-ed for in the building or BPP limit that you have on the policy, but that’s not a big ask considering you can look like a hero after a loss that would normally be excluded on an unendorsed property form.
Legal Liability Coverage Form (CP 00 40)
Despite the title, this is a property form as opposed to a liability form. The endorsement language reads: “Covered Property as used in this Coverage Form, means tangible property of others in your care, custody or control that is described in the Declarations or on the Legal Liability Coverage Schedule.” The form’s covered cause of loss is whichever form is shown in the policy declarations (Basic, Broad, or Special).
Who needs this form? Tenants who are legally responsible for buildings and/or contents that are in their care, custody, or control.
If you were in a classroom and learned about this, you may have had to resist the urge to throw your hand up in the air and wave it back and forth, as you already know how this type of exposure can be covered.
General liability declarations pageshave a “damage to premises rented to you limit” on them, right? Yes, they do.However, keep in mind that this specific limit pertains to the following language found at the end of the Coverage A (Bodily Injury and Property Damage Liability) exclusionary language in the CG 00 01:
Exclusions c. through n. do not apply to damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner. A separate limit of insurance applies to this coverage as described in Section III – Limits Of Insurance.
The key word in this paragraph is fire. What if your client rents a warehouse space and one of his forklift operators crashes into a load-bearing column, thereby causing a partial collapse of the roof? The general liability form won’t apply, will it?
Depending on the situation, you can always choose to increase the Property of Others limit in the property form; however, the CP 00 40 is usually a less expensive way to do so.
Include Specified Non-Compensated Officers as Employees (CR 25 08)
Like the CP 14 10, this is another simple form that can prove to be quite powerful at the time of a loss. When addressing commercial crime coverage, specifically employee theft coverage, you’ll need to pay close attention to the definition of “employee” in the coverage form, as sometimes it is not broad enough to include all individuals who may have access to an organization’s bank accounts. You’ll see this on occasion with various nonprofits and other organizations that don’t utilize a typical employer/employee structure.
If you find that you need to expand the definition of “employee” so that non-compensated officers are covered from an employee theft standpoint, you can add this form, which reads:
The definition of “employee” is amended to include your non-compensated officers shown in the schedule.
The schedule that is on the form allows you to list the names or titles of non-compensated officers. I’m sure you’ll agree with me that it is to your advantage to list titles whenever you can, as you don’t want to necessarily tie coverage to a specific individual’s name. People come and go, and coverage shouldn’t be limited as a result.
Include Volunteer Workers as Employees (CR 25 09)
This endorsement is critical for accounts such as social clubs that have fundraising events where volunteers are handling money. Again, the definition of “employee” in the CR 00 20 and CR 00 21 is clear, so you’ll want to make sure your clients have proper crime protection against volunteers who may decide to keep some of the funds for themselves.
Include Designated Persons or Classes of Persons as Employees (CR 25 41)
Like the last two endorsements, this crime form expands the “employee” definition to include specific individuals or groups of people who are listed on the policy form schedule.
You’re probably ready to wave your hand again, right? Especially since we just mentioned it is to your advantage to not list specific individuals on the CR 25 08 form.
Yes, you are correct; however, in some cases, you may have a specific person who works part-time for several organizations that have common ownership and his or her status as an “employee” might be questionable under the crime form. You can clear that up by specifically listing the person on this form so that employee theft coverage will apply to losses that are caused by the listed individual (or group of persons listed).
Hopefully, you have found this information to be of use as you look to start the new year off by wowing your clients and prospects with your advanced knowledge. Stay tuned for a follow-up in which we will explore additional endorsements available on the Commercial General Liability and Business Auto coverage forms.
Marc McNulty, CIC, CRM, is a principal at The Uhl Agency in Dayton, Ohio, and has been with the agency since 2001. He divides his time among sales, marketing, technology and operational duties. You can reach Marc at email@example.com