Commercial Cause of Loss Forms: Basic, Broad, and Special — What Your Policy Actually Covers

Your commercial property policy does not cover every type of loss. What it covers depends almost entirely on which cause of loss form is attached to the policy. There are three standard ISO cause of loss forms, and the difference between them is the difference between a covered claim and a denial letter. Most business owners have no idea which form they have until they file a claim and discover the answer the hard way.

Unlike residential HO-3 policies — which cover the dwelling on an open-peril basis and contents on a named-peril basis — commercial property policies separate the cause of loss coverage into a standalone form that is attached to the Commercial Property Coverage Part. The property form (CP 00 10, CP 00 20, or CP 00 30) describes what is covered. The cause of loss form describes what perils are covered. You need both to have a complete picture. For an overview of how commercial policies are structured differently from residential, see our article on how commercial claims differ from residential.

How the Three Forms Work

The fundamental distinction is between named peril and open peril(sometimes called “all risk”) coverage:

• Named peril (Basic and Broad forms): The policy lists specific perils that are covered. If the cause of your loss is not on the list, there is no coverage. The burden of proof is on the insured to show that the loss was caused by a listed peril.
• Open peril (Special form): The policy covers all causes of loss unlessspecifically excluded. The burden of proof shifts to the insurer — the insurer must prove that an exclusion applies. This is a fundamentally different starting point and it matters enormously when a claim is disputed.

CP 10 10 — Basic Form (Named Peril)

The Basic form provides the narrowest coverage. It covers loss caused by only the following perils:

1. Fire
2. Lightning
3. Explosion
4. Windstorm or hail
5. Smoke
6. Aircraft or vehicles
7. Riot or civil commotion
8. Vandalism
9. Sprinkler leakage
10. Sinkhole collapse
11. Volcanic action

That is the entire list. If the cause of your loss is not one of those eleven perils, the Basic form provides no coverage. Some of the most common commercial losses — burst pipes, accidental water discharge, falling objects, weight of snow or ice, collapse — are not covered under the Basic form.

Limitations Within the Basic Perils

Even the listed perils come with limitations:

• Windstorm or hail: Does not include frost, cold weather, ice (other than hail), or snow, whether driven by wind or not. Does not cover damage to the interior of the building or its contents unless the building first sustains damage to the roof or walls from wind/hail that allows the elements in.
• Vandalism: The insurer will not pay for vandalism damage if the building has been vacant for more than 60 consecutive days before the vandalism occurred. See our article on vacancy and unoccupancy clauses.
• Sprinkler leakage: Does not cover the cost of repairing the sprinkler system itself, only the damage caused by the discharge.

CP 10 20 — Broad Form (Named Peril)

The Broad form includes all eleven Basic form perils plus the following additional perils:

12. Falling objects
13. Weight of snow, ice, or sleet
14. Water damage (accidental discharge or leakage from plumbing, HVAC, fire protection, or other systems)

The Broad form also adds collapseas an additional coverage (not a listed peril — an important distinction). Collapse coverage under the Broad form applies only when the collapse is caused by specific listed causes, including the listed perils, hidden decay, hidden insect or vermin damage, weight of people or personal property, weight of rain on a roof, and use of defective materials or methods in construction or renovation.

Limitations in the Broad Form Additions

• Falling objects: Does not cover damage to the interior of the building or its contents unless the falling object first damages the roof or exterior wall. A tree branch that smashes through the roof and damages inventory inside is covered. An object that falls inside the building is not.
• Weight of snow, ice, or sleet: Only covers damage to personal property inside the building if the roof or exterior wall is first damaged by the weight.
• Water damage: Specifically limited to accidental discharge or leakage from plumbing, heating, air conditioning, fire protection systems, or household appliances. Does not cover continuous or repeated seepage over a period of 14 days or more. Does not cover water that backs up from a sewer or drain.

CP 10 30 — Special Form (Open Peril)

The Special form is fundamentally different from the Basic and Broad forms. Instead of listing which perils are covered, it covers all causes of loss unless specifically excluded. This is called “open peril” or “all risk” coverage, and it is the gold standard for commercial property insurance.

The practical effect is enormous. Under the Basic or Broad form, if a loss occurs and the cause is ambiguous — the insured has the burden of proving the loss was caused by a listed peril. Under the Special form, the burden shifts to the insurer. The insured only needs to prove that a covered loss occurred. The insurer must then prove that a specific exclusion applies. If the cause of loss is genuinely unknown, the insured wins under the Special form and loses under the Basic or Broad form.

Exclusions in the Special Form

The Special form achieves its broad coverage by covering everything and then carving out exclusions. The major exclusion categories include:

• Ordinance or law (unless covered by endorsement)
• Earth movement (earthquake, landslide, mine subsidence, earth sinking/shifting)
• Governmental action (seizure, confiscation, destruction by government order)
• Nuclear hazard
• Utility services (failure of power, water, gas, telephone, or other utility if the failure originates off-premises)
• War and military action
• Water (flood, surface water, waves, tidal water, overflow from bodies of water, mudslide/mudflow, and sewer/drain backup)
• Fungus, wet rot, dry rot, and bacteria (with limited exceptions)
• Virus or bacteria (added by CP 01 40 endorsement after COVID-19)
• Wear and tear, deterioration, rust, corrosion, decay
• Mechanical breakdown (unless covered by equipment breakdown endorsement)
• Settling, cracking, shrinking, bulging, or expansion
• Theft in certain circumstances (from open buildings, uncompleted buildings)
• Rain, snow, sand, or dust to the interior unless the exterior is first damaged by a covered cause
• Missing property where the only evidence of loss is unexplained shortfall in inventory
• Voluntary parting with property through trick, scheme, or false pretense
• Artificially generated electrical, magnetic, or electromagnetic energy (power surge)
• Delay, loss of use, or loss of market
• Smoke, vapor, or gas from agricultural or industrial operations

Even with this long list of exclusions, the Special form covers vastly more than the Basic or Broad forms. Theft from a secured building is covered. Accidental damage from construction or renovation is covered. Damage from causes that cannot be precisely identified is covered — so long as no exclusion applies.

Side-by-Side Comparison

Why the Cause of Loss Form Matters More Than You Think

Burden of Proof

Under the Basic and Broad forms, the insured must prove that the loss was caused by a listed peril. If the cause is ambiguous — the damage could be from wind, could be from settling, could be from water — the insured loses unless they can affirmatively prove it was a listed peril. Under the Special form, the insured proves a loss occurred, and the insurer must prove an exclusion applies. If the cause is ambiguous, the insured wins.

Concurrent Causation

When a loss involves multiple causes — some covered, some not — the cause of loss form determines the analysis. Under the Special form, insurers often include anti-concurrent causation (ACC) clauses that attempt to deny the entire claim if any excluded cause contributed. In California, ACC clauses are unenforceable under the efficient proximate cause doctrine. Under the Basic and Broad forms, the insured must still prove the loss was caused by a listed peril even if concurrent causes exist.

Theft Coverage

Neither the Basic nor the Broad form covers theft. Only the Special form includes theft as a covered cause of loss (with certain limitations for open buildings, uncompleted construction, and inventory shortages). A business that relies on its commercial property policy for theft protection and has a Basic or Broad form has no coverage. This is a gap that many business owners discover only after a break-in.

Common Claim Scenarios by Form

A Pipe Bursts and Floods the Building

Basic form: Denied. Water damage from plumbing failure is not a listed peril. Broad form: Covered, subject to the 14-day continuous seepage limitation. Special form: Covered, unless the water damage exclusion for continuous seepage applies.

A Tree Falls on the Roof During a Calm Day

Basic form: Denied. Falling objects is not a listed peril, and the windstorm peril requires wind. Broad form: Covered under the falling objects peril (if it damaged the exterior first). Special form: Covered.

Inventory Stolen in a Night Break-In

Basic form: Denied. Theft is not a listed peril. Broad form: Denied. Theft is still not a listed peril. Special form: Covered, provided the building was secured and the theft was not from an open or uncompleted building.

Damage from Unknown Cause

A business owner discovers cracking in a wall. The cause is not immediately apparent. Basic and Broad forms: Denied. The insured cannot prove a listed peril caused the damage. Special form: Potentially covered. The insured proves a loss occurred, and the insurer must prove that settling, earth movement, wear and tear, or another specific exclusion applies.

How the Cause of Loss Form Interacts with Other Coverage Parts

The cause of loss form does not stand alone. It works in conjunction with the property coverage form and the commercial property conditions form:

• Property coverage form (CP 00 10 for buildings and BPP) describes whatis covered — the building, business personal property, or both.
• Cause of loss form (CP 10 10, 10 20, or 10 30) describes what perils trigger coverage.
• Commercial property conditions(CP 00 90) sets out the rules — duties after loss, vacancy limitations, loss payment procedures.
• Business income form (CP 00 30 or CP 00 32) uses the same cause of loss form to determine whether a business income claim is covered. If the property damage cause of loss is not covered, the resulting business income loss is not covered either.

The Premium Difference and the Cost-Benefit Reality

The Special form costs more than the Broad form, which costs more than the Basic form. The premium difference reflects the broader coverage. But the cost difference is often surprisingly small relative to the coverage difference. A business paying $15,000 per year for a Basic form policy might pay $17,000 to $19,000 for the Special form — a 15 to 25 percent increase for a fundamentally different level of protection.

The cost-benefit analysis is straightforward: a single uncovered loss under the Basic or Broad form will cost far more than a lifetime of premium differences for the Special form. A $200,000 water damage claim denied because the Basic form does not cover burst pipes makes the $2,000 annual premium difference irrelevant. Talk to your broker about upgrading to the Special form at your next renewal.

What to Do If You Have the Wrong Form

1. Check your declarations page now. Look for the cause of loss form number. If you see CP 10 10 or CP 10 20, understand the limitations.
2. Request a quote for the Special form. Ask your broker to quote the premium difference. You may be surprised how small it is.
3. If you cannot get the Special form, make sure you understand exactly what is and is not covered. Adjust your risk management and loss prevention practices accordingly.
4. Consider supplemental coverage. Equipment breakdown endorsements, inland marine policies, and crime policies can fill specific gaps left by the Basic or Broad forms.
5. If your broker placed you on a Basic or Broad form without explanation, you may have a claim against the broker if a loss occurs that would have been covered under a Special form.

Key Takeaways

• The cause of loss form (CP 10 10, CP 10 20, or CP 10 30) is the single most important factor in determining whether your commercial property claim is covered.
• The Basic form (CP 10 10) covers only 11 named perils. Burst pipes, theft, falling objects, and snow loads are not covered.
• The Broad form (CP 10 20) adds falling objects, weight of snow/ice, water damage, and collapse to the Basic perils. Theft is still not covered.
• The Special form (CP 10 30) covers all causes of loss unless specifically excluded. The burden of proof shifts to the insurer.
• The cause of loss form also determines whether your business income and extra expense claims are covered.
• The premium difference between forms is often small relative to the coverage difference. A single uncovered loss will cost more than years of premium differences.