Commercial Property: Basic, Broad, and Special Forms

In the world of commercial insurance, the Commercial Property Policy (CPP) is highly modular. While the Building and Personal Property Coverage Form defines what property is covered, the Causes of Loss forms define how that property is protected—specifically, which perils (causes of damage) will trigger a claim. For the complete NY P&C exam guide, candidates must distinguish between the three primary forms: Basic, Broad, and Special.

New York insurance regulations require a clear understanding of these forms to ensure businesses are adequately protected against local risks, ranging from fire and windstorm to more complex internal failures. Each form offers a different level of protection and carries a different premium cost, making the selection a critical part of the risk management process.

The Basic Form is a named perils form. This means that if a peril is not explicitly listed in the policy, it is not covered. It is the least expensive option and provides the narrowest scope of coverage. For the New York exam, you should memorize the 11 primary perils covered under this form:

• Fire: Damage resulting from unfriendly fire.
• Lightning: Natural electricity discharge.
• Windstorm or Hail: Including hurricanes (though specific deductibles may apply in NY coastal areas).
• Smoke: Sudden and accidental damage (excluding smoke from industrial operations).
• Aircraft or Vehicles: Physical contact with the insured property.
• Riot or Civil Commotion: Including acts of striking employees.
• Vandalism: Willful and malicious damage.
• Sprinkler Leakage: Leakage from an automatic fire protective system.
• Sinkhole Collapse: Earth sinking into underground empty spaces created by water on limestone.
• Volcanic Action: Damage from lava, ash, or airborne shockwaves.
• Explosion: Including furnace explosions (but excluding steam boiler explosions).

The Broad Form is also a named perils form, but it expands upon the Basic Form. It includes all 11 perils found in the Basic Form plus several additional coverages that are common causes of commercial loss in New York's varied climate.

Key additions in the Broad Form include:

• Falling Objects: Damage to the exterior and subsequently the interior (if the exterior is breached first).
• Weight of Snow, Ice, or Sleet: Critical for New York businesses facing harsh winters.
• Water Damage: Accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of a plumbing, heating, or air conditioning system.
• Collapse: Coverage for the abrupt falling down or caving in of a building, provided it was caused by specific perils like hidden decay, insect damage, or weight of people/property.

The Special Form is the most common form used in commercial property insurance today. Unlike the Basic and Broad forms, it is an Open Perils form (formerly known as 'All Risk'). Instead of listing what is covered, it states that all causes of loss are covered unless they are specifically excluded.

This shift is vital for the practice NY P&C questions because it changes the burden of proof. In a named perils policy, the policyholder must prove the damage was caused by a listed peril. In an open perils policy, the insurer must prove an exclusion applies to deny the claim.

Common exclusions in the Special Form include:

• Wear and tear, rust, or hidden defects.
• Mechanical breakdown.
• Employee dishonesty (this requires a Crime policy).
• Flood and Earthquake (requires separate endorsements or policies).
• Pollutants and governmental action.
• Ordinance or Law (unless added by endorsement).