Cause of Loss Forms (USA)

Cause of loss forms in the U.S. are standardized forms used in Commercial Property Insurance policies to specify the perils (causes of loss) that are covered by the policy. They define the extent of coverage and help clarify what types of events will trigger insurance protection.

There are three main cause of loss forms used in the U.S.

1. Basic Form:

Limited Coverage: This form provides the most basic level of coverage, protecting against a limited number of named perils, including:

• Fire
• Lightning
• Explosion
• Windstorm
• Hail
• Smoke
• Aircraft or vehicle damage
• Riot or civil commotion
• Vandalism
• Sprinkler leakage
• Sinkhole collapse
• Volcanic action
• Exclusions: The basic form excludes coverage for many common perils, such as water damage, theft, and falling objects.

2. Broad Form:

Expanded Coverage: This form offers broader coverage than the basic form, including all the perils covered in the basic form plus additional perils, such as:

• Falling objects
• Weight of snow, ice, or sleet
• Water damage from plumbing, heating, or air conditioning systems
• Collapse of building or part of a building
• Exclusions: The broad form still excludes coverage for certain perils, such as earthquakes, floods, and wear and tear.

3. Special Form:

• “All-Risk” Coverage: This form provides the most comprehensive coverage, often referred to as “all-risk” coverage. It covers all causes of loss except those specifically excluded in the policy.
• Exclusions: Common exclusions in the special form include:
  • Earthquakes
  • Floods
  • War
  • Nuclear hazards
  • Wear and tear
  • Intentional acts
  • Government action

Choosing the Right Form

The choice of cause of loss form depends on the specific needs and risk tolerance of the policyholder.

• Basic Form: Suitable for businesses with limited budgets or those seeking basic protection against common perils.
• Broad Form: Offers a balance of coverage and affordability.
• Special Form: Provides the most comprehensive protection but is typically more expensive.

Importance

Cause of loss forms are a crucial part of commercial property insurance policies, defining the scope of coverage and helping policyholders understand what types of losses are covered and excluded. It’s essential to carefully review the cause of loss form in your policy to ensure that you have adequate protection for your business’s specific needs and risk exposures.