Study guide
7.3 Causes of Loss Forms
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
7.3 Causes of Loss Forms
Key Takeaways Explain This Topic AI
Three causes of loss forms exist: Basic (CP 10 10), Broad (CP 10 20), and Special (CP 10 30, open-peril).
Theft is excluded by the Basic form but covered by both the Broad and Special forms — a classic exam distinction.
The Special form covers all direct physical loss except what is excluded, so the burden shifts to the insurer to prove an exclusion applies.
Flood, earthquake/earth movement, war, nuclear hazard, ordinance or law, and government action are excluded under ALL three forms unless separately endorsed.
Building water damage from burst pipes or appliances (Broad and Special) is NOT the same as flood, which is always excluded.
Last updated: June 2026
Why a Separate Form
A commercial property policy needs two forms: a coverage form (the BPP, CP 00 10) that says what is insured, and a Causes of Loss form that says which perils are covered. Choosing the causes of loss form is the single biggest driver of premium and of how a claim is adjusted.
Basic Form (CP 10 10) — 11 Named Perils
The Basic form is named-peril : the insured must prove the loss came from one of these listed perils.
- # Peril Exam note
- 1 Fire Hostile (out of place) fires only
- 2 Lightning Direct strike or resulting fire
- 3 Explosion Excludes steam-boiler explosion
- 4 Windstorm or Hail Interior damage only if wind first makes an opening
- 5 Smoke Sudden and accidental
- 6 Aircraft or Vehicles Self-propelled
- 7 Riot or Civil Commotion Includes looting during a riot
- 8 Vandalism Excluded if building vacant 60+ days
- 9 Sprinkler Leakage Automatic fire-protection systems
- 10 Sinkhole Collapse Sudden sinking into a void
- 11 Volcanic Action Airborne blast, ash, lava; not earthquake
Note: theft is NOT a Basic-form peril.
Broad Form (CP 10 20) — Adds Coverage
The Broad form includes all 11 Basic perils and adds:
- Falling objects (exterior must be penetrated first for interior damage)
- Weight of snow, ice, or sleet
- Water damage — sudden, accidental discharge from plumbing, HVAC, or appliances (NOT flood)
- Breakage of building glass (limited)
- Collapse as an additional coverage from specified causes
Theft becomes covered at the Broad level.
Special Form (CP 10 30) — Open Peril
The Special form flips the logic: it covers all risks of direct physical loss EXCEPT those excluded. Because coverage is presumed, the burden of proof shifts to the insurer to show an exclusion applies. This is the broadest and most expensive form and is the basis for the Businessowners Policy building coverage (7.5).
Exclusions Common to All Three Forms
- Exclusion Why
- Ordinance or Law Code-upgrade cost; needs CP 04 05
- Earth Movement Earthquake, landslide, mine subsidence
- Government Action Seizure or destruction by authority
- Nuclear Hazard Reaction, radiation, contamination
- Utility Services Off-premises power/water failure
- War and Military Action Declared or undeclared
- Water Flood, surface water, sewer backup, mudflow
Flood and earthquake are never covered by any of the three forms. Flood needs a separate flood policy (often through the NFIP); earthquake needs the CP 10 40 earthquake endorsement.
Additional Special-Form Exclusions
The Special form also excludes wear and tear; rust, corrosion, decay; mechanical breakdown; settling, cracking, and shrinking; insect, bird, rodent, or animal damage; fungus, wet/dry rot; smog; faulty design or workmanship; and voluntary parting with property induced by trick or fraud.
Side-by-Side Comparison
- Peril / feature Basic Broad Special
- Coverage approach Named Named Open peril
- Fire / lightning Yes Yes Yes
- Theft No Yes Yes
- Water damage (pipes/HVAC) No Yes Yes
- Weight of snow/ice No Yes Yes
- Glass breakage No Yes Yes
- Flood No No No
- Earthquake No No No
- Premium level Lowest Medium Highest
- Worked Scenario
A pipe bursts overnight and water ruins a retailer's inventory. The Broad and Special forms cover it as accidental discharge of water; the Basic form does not list water damage and pays nothing. If instead a river overflows into the store, no form pays — that is flood, requiring a separate flood policy.
The Anti-Concurrent-Causation Language
A subtle but tested feature of the exclusions is the anti-concurrent-causation lead-in: the excluded perils are excluded "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." This means that if an excluded peril (say, flood) and a covered peril (say, wind) combine to cause damage, the portion attributable to the excluded peril is still excluded. Adjusters use this language to apportion hurricane losses between covered wind and excluded storm surge.
Collapse as a Special Additional Coverage
Under the Broad and Special forms, collapse is not a peril but an additional coverage triggered only by specified causes: a Causes of Loss peril; hidden decay; hidden insect or vermin damage; weight of people or personal property; weight of rain that collects on a roof; or use of defective material or methods during construction (if the collapse occurs during construction). Settling, cracking, shrinking, bulging, and expansion are not collapse. A building that merely cracks has no collapse claim; a roof that caves in from concealed rot does.
Picking the Right Form
- Situation Best fit Reason
- Tight-budget warehouse, low theft risk Basic Lowest premium, fire/lightning core
- Retailer wanting theft + water + snow Broad Adds theft, water damage, weight of snow
- High-value or hard-to-foresee exposures Special Open-peril; insurer must prove exclusion
Because the Special form covers anything not excluded, it picks up oddball losses — a forklift puncturing a wall, paint accidentally spilled across stock — that a named-peril form would never list. That breadth is exactly why it commands the highest premium and why exclusions, not inclusions, are the study focus.
Theft Sublimits Inside the Special Form
Even where the Special form covers theft, certain property carries special limits : typically $2,500 for furs, $2,500 for jewelry and watches (loss by theft), $2,500 for patterns and dies, and $250 for theft of stamps, tickets, and letters of credit. Candidates who assume open-peril means unlimited theft recovery on jewelry are walking into a classic trap.
Common Traps
Theft is the single most-missed item: Basic excludes it, Broad and Special cover it.
Water damage ≠ flood. Internal pipe leaks can be covered; rising surface water never is.
A building vacant more than 60 consecutive days loses vandalism, water-damage, theft, glass, and sprinkler-leakage coverage, and other covered losses are cut 15 percent.
Open-peril does not mean unlimited — theft of jewelry, furs, and similar property carries $2,500 special sublimits.