California Property & Casualty Broker-AgentProperty InsuranceHard
A business customer purchases a Commercial Property Policy with a Causes of Loss - Special Form. Which of the following losses would likely be covered?
- ADamage caused by a collapse due to hidden decay.
- BDamage caused by wear and tear.
- CDamage caused by an earthquake, as standard.
- DDamage caused by a flood, as standard.
Show answer & explanationAnswer & explanation
Correct answer: A. Damage caused by a collapse due to hidden decay.
The Causes of Loss - Special Form is an 'open perils' form, meaning it covers all perils unless specifically excluded. Flood, earthquake, and wear and tear are standard exclusions. However, collapse caused by hidden decay is typically an additional coverage or 'other coverage' under the Special Form, not a general exclusion.
Why the other options are wrong
- B. Wear and tear is a standard exclusion, as it's an expected deterioration, not a sudden accidental loss.
- C. Earthquake is a standard exclusion and requires an endorsement or separate policy.
- D. Flood is a standard exclusion on commercial property policies and requires a separate flood policy.
Causes of Loss - Special Form (Commercial)
An 'open perils' form in commercial property insurance, covering all direct physical losses to covered property except those specifically excluded. It provides the broadest coverage of the standard causes of loss forms.
- Covers 'any direct physical loss' not excluded.
- Exclusions typically include flood, earthquake, war, nuclear hazard, wear and tear, inherent vice, governmental action, ordinance or law.
- Often includes 'additional coverages' like collapse, water damage, and glass breakage.
Memory trick: Open Perils: All In Unless Excluded.