ISO BUILDING AND PERSONAL PROPERTY COVERAGE FORM SAMPLE INSURANCE PROPOSAL LANGUAGE

(June 2022)

REPRINT PERMISSION

All PF&M subscribers are permitted to reprint the following insurance proposal sample language when preparing insurance presentations for their commercial insurance customers. Other uses require permission by The Rough Notes Company, Inc.

PROPOSAL DISCLAIMER

The following paragraph or similar language needs to be included in all insurance proposals:

Consult the policy for definitions and limitations. The terms of this proposal do not represent contract terms. The policy is subject to company underwriting practices.

TIPS FOR USING THIS PROPOSAL LANGUAGE

This proposal language is not intended to be an entire insurance proposal. A client specific section that includes the name and address of the insured, the insurance company(s) and the agent, and information about them, a list of locations, limits, deductibles, and similar customer specific items are not included and should be prepared.

The intent of any insurance proposal is not to be a reproduction of the insurance policy but to give a summary of possible coverages.

Paragraphs that explain coverages unique to this coverage form may be the most important addition to your insurance proposal and sales effort. Coverage examples can be tailored to your individual customer. Be careful when altering any proposal language not to expand coverage beyond what the policy intends.

This proposal should be combined with proposals for other lines of business, such as commercial general liability, time element, and workers compensation for a complete account proposal.

Related Articles:

ISO Commercial Property Program Available Endorsements and Their Uses

ISO Commercial Property Program Endorsements Checklist

SAMPLE PROPOSAL LANGUAGE FOR THE ISO BUILDING AND PERSONAL PROPERTY COVERAGE FORM

INTRODUCTION

Protecting the insured's real and business personal property is an important element of any insurance program. Even small commercial operations have a large percentage of their assets and resources tied up in their tangible property. The Insurance Services Office (ISO) has some of the most common standard commercial property programs regularly used at the present time.

BUILDING AND PERSONAL PROPERTY COVERAGE FORM

This coverage form insures against direct physical loss of or damage to covered property at the premises listed and described on the declarations. The loss or damage must be the direct result of a covered cause of loss.

COVERED BUILDING

When there is a limit of insurance for building on the declarations, the building or structure listed and described is covered property. The following is also considered covered building property:

• Completed additions
• Fixtures. This includes outdoor fixtures.
• Permanently installed machinery and equipment
• Personal property the insured owns and uses to service or maintain the building or premises
• Additions under construction, alterations, and repairs that other insurance does not cover. The materials, equipment, supplies, and temporary structures that are on or within 100 feet of the premises and used to make the additions, alterations, or repairs are also building.

COVERED PERSONAL PROPERTY

When there is a limit of insurance for business personal property on the declarations, coverage applies to the following owned property if it is inside the building or structure at the designated premises. It is also covered if it is outside the building or structure but within 100 feet of the building or premises. Such personal property outside can be either in the open or in or on a vehicle.

• Furniture and fixtures
• Machinery and equipment
• Stock
• All other personal property the insured owns and uses for business
• Labor, materials, or services the insured furnishes or arranges for on personal property of others
• The insured's interest in any improvements and betterments it made or acquired if the insured is a tenant
• Leased personal property the insured has a contractual responsibility to insure

Note: If the declarations has a limit for covered personal property of others, all coverage for leased property transfers to that limit and is removed from covered personal property.

COVERED PERSONAL PROPERTY OF OTHERS

Personal property of others is covered when there is a limit of insurance on the declarations but only when:

• It is in the insured's care, custody, or control
• It is either inside the building or structure at the listed and described premises or outside within 100 feet of the building or premises in either the open or in or on a vehicle.

The insurance company pays for loss or damage to personal property of others for only the account of that property's owner.

PROPERTY NOT COVERED

The following property is not covered unless endorsed or otherwise provided for:

• Accounts, bills, currency, food stamps, evidence of debt, money, notes, or securities. Lottery tickets held for sale are not considered securities.
• Animals. The exceptions are that animals as stock and kept inside the building are covered, and animals that are owned by others but boarded with the insured are also covered.
• Automobiles held for sale
• Bridges, roadways, walks, patios, or other paved surfaces
• Contraband or any property involved in illegal transportation or trade
• Costs to excavate, grade, fill, or backfill
• Foundations below the basement or the ground's surface if there is no basement
• Land, water, growing crops, or lawns. However, lawns on vegetated roofs are covered.
• Personal property while on aircraft or watercraft
• Bulkheads, pilings, piers, wharves, or docks
• Property that another coverage form or policy insures or covers. As an exception, this coverage will provide excess coverage over that other coverage.
• Retaining walls that do not make up part of a covered building
• Underground pipes, flues, or drains
• Most electronic data. Owned stock that consists of prepackaged software is covered. Data used to run heating, ventilating, air conditioning, lighting, elevators, or security systems is also covered.
• Costs necessary to research, replace, or restore information on valuable papers or records
• Vehicles or self-propelled machines licensed for use on public roads or operated principally away from the described premises
• Grain, hay, straw, crops, fences, radio or television antennas, and satellite dishes and trees, shrubs, or plants. Stocks of trees shrubs or plants are covered. Trees, shrubs, and plants in vegetated roofs are also covered.

COVERED CAUSES OF LOSS

There are three available causes of loss forms. The basic and broad forms list the causes covered. The special form covers any cause of loss not excluded.

• Causes of Loss–Basic Form

This causes of loss form includes fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, sprinkler leakage, vandalism, sinkhole collapse, and volcanic action.

• Causes of Loss–Broad Form

This causes of loss form is an intermediate level form that includes breakage of glass, falling objects, weight of snow, ice, or sleet, and water damage in addition to the causes of loss on the Causes of Loss–Basic Form.

• Causes of Loss–Special Form

This causes of loss form covers any cause of loss not excluded or limited.

ADDITIONAL COVERAGES

This coverage form includes following additional coverages as described. Each has its own limit of insurance, description of coverage, limitations, and exclusions:

• Debris removal

The cost to remove the debris of covered property after a covered loss occurs is limited to 25% of the value of the direct damage loss. However, the total value of the debris removal and the direct damage loss cannot exceed the limit of insurance. This coverage form provides an additional limit of $25,000 if the debris removal cost exceeds either of these limitations.

• Preservation of property

Covered property the insured removes to protect it from loss or damage from a covered cause of loss is covered in transit and at any location for up to 30 days. No exclusions apply to property this coverage form insures while being preserved.

• Fire department service charge

This coverage form provides a $1,000 limit per premises to apply to certain charges the insured must pay for fire department protection and service.

• Pollutant clean up and removal

This coverage form covers pollution cleanup and removal caused by or that resulting from a covered cause of loss. The limit is $10,000 on a per-policy annual aggregate basis.

• Increased cost of construction

The insured may have to make improvements to damaged property after a covered loss due to an ordinance or law with respect to construction, reconstruction, or repair being enforced or the insured complying with it. In that case, this coverage form provides a $10,000 limit or 5% of the value of the direct damage loss, whichever is less.

• Electronic data

There is coverage for damage to electronic data on a per-policy annual aggregate basis as a result of certain designated causes of loss occurring. The limit is $2,500.

COVERAGE EXTENSIONS

The following coverage extensions apply to personal property inside the building at the listed and described premises. They also apply to such property outside the premises in the open or in or on a vehicle within 100 feet of the premises. However, these extensions apply only at locations where coverage is written at 80% or higher coinsurance or on a value-reporting basis. Each extension is subject to specific limits, coverage descriptions, limitations, and exclusions. The limits for these extensions are additional amounts of insurance.

• Newly acquired or constructed property

This coverage extension provides a $250,000 limit on building and a $100,000 limit on business personal property coverage for certain newly acquired or constructed property for up to 90 days.

• Personal effects and property of others

This coverage extension provides a $2,500 limit on personal effects and property of others for the designated covered causes of loss. Theft coverage for personal effects is excluded.

• Property off-premises

This coverage extension provides a $10,000 limit at locations the insured does not own or occupy. This extension of coverage does not apply to property in transit or at exhibitions.

• Valuable papers and records (other than electronic data coverage)

This coverage extension insures loss of or damage to valuable papers and records stored in other than an electronic format. The limit is $2,500. Limited causes of loss apply.

• Outdoor property

This coverage extension insures fences, radio or television antennas, satellite dishes, and trees, shrubs, or plants, other than stock of trees, shrubs, and plants on vegetated roofs. Coverage applies to loss or damage due to fire, lightning, explosion, riot, civil commotion, or aircraft causes of loss and any debris removal expenses. The limit is $1,000 for each occurrence, and the debris expense must be paid within that limit. There is also a $250 sub-limit on any one tree, shrub, or plant.

• Non-owned detached trailers

This coverage extension insures such trailers that the insured is contractually responsible to insure. The limit is $5,000. However, coverage does not apply when the trailer is attached or connected to any motorized vehicle.

• Business personal property temporarily in portable storage units

This coverage extension insures such property for up to 90 days. The unit must be on the premises or within 100 feet of the building or premises. A $10,000 sub-limit is available. The storage unit must be temporary and may be a trailer. Coverage on property inside the unit ends after the unit has been on the premises more than 90 days.

EXCLUSIONS

Exclusions are part of every insurance coverage form or policy. It is important to be aware of these exclusions before a loss occurs so additional insurance may be purchased, or cash reserves established to handle such a loss. All covered causes of loss forms are subject to the following exclusions.

• Ordinance or law

This is any increase in the cost of a loss because of enforcing or complying with ordinances or laws. This applies even if the building must be torn down and rebuilt to meet and comply with building codes and ordinances.

• Earth movement

This is any form of earth movement. This includes earthquake, mudslide, mudflow, and volcanic eruption. There is an exception for limited coverage for loss or damage due to volcanic action.

• Governmental action

This is when the government takes over property for any reason and damages it. An exception applies when the reason for the damage is to stop the spread of a covered fire.

• Nuclear hazard

This is any loss or damage caused by nuclear radiation, radioactivity, and similar events.

• Utility services

This is when a utility service fails due to a problem at a location away from the insured's premises. Coverage also does not apply to a problem on the insured’s premises from equipment used to bring the off premises utility service onto the premises.

• War and military action

This is all and any war, warlike act, or military action.

• Water damage of any kind that water causes

This includes flood, backup of sewers and drains, wind driven rain, and similar events.

• Damage to property that mold, mildew, and fungus causes

This is excluded unless it is caused by or results from a covered fire loss.

CAUSES OF LOSS–SPECIAL FORM ADDITIONAL EXCLUSIONS

Due to the broad nature of the special causes of loss form, additional exclusions must be added to control insurance costs. Many of these exclusions address losses that are considered "costs of doing business." Others are catastrophic loss exclusions, and still others are better covered under a more specialized coverage form or policy. The following loss events are excluded:

• Electric arcing damage caused by artificially generated electricity arcing

• Delay or loss of market. Coverage does not apply if the insured cannot maximize its profits because of a delay in meeting a deadline or it loses a customer because a contract date expires.
• Smoke from agricultural or industrial smudging. These losses are usually intentional and preventable.
• Wear and tear affect virtually every kind of property. It is an issue the insured must assume outside of insurance coverage.
• Settling, cracking, and shrinking occurs naturally and involves both buildings and personal property. This exclusion applies to the resulting loss or damage.
• Animal infestations, such as those that involve bats, termites, raccoons, birds, and others. However, sudden events that involve animals, such as a bear damaging property to obtain food or a deer crashing through a sliding glass door, are covered.
• Mechanical and machinery breakdowns are regular occurrences and are a normal part of doing business. For these reasons, loss or damage due to such incidents is excluded.
• Marring and/or scratching. Normal handling of personal property subjects it to nicks and scratches that reduce its value. The insured must deal with this issue outside of insurance coverage.
• Steam boiler explosion that causes loss or damage. Equipment breakdown coverage forms and policies cover such events.
• Water that seeps for more than 14 days that causes loss or damage, and that continues without the insured acting or notifying anyone
• Loss or damage by water or other liquids caused by or that results from plumbing or other building systems freezing if heat in the building is not maintained or if water systems in an unheated building are not drained
• Dishonest acts by the named insured, its partners, employees, and others entrusted with property
• Trick, fraud, or deceit on the part of others against the insured or its employee that leads to the covered property being turned over to the perpetrator and lost
• Property in the open that rain or other climatic elements damages. Property stored outdoors and not otherwise protected must be able to withstand weather conditions.


• Collapse of any kind that causes loss or damage. However, limited collapse coverage is provided as additional coverage. This means that collapse coverage is limited to the specific types of collapse listed and described, not to every kind of collapse.
• Pollutant discharge of any kind, except as provided in additional coverages
• Neglect on the insured's part to save and preserve damaged property from further loss
• Weather conditions that cause an excluded cause of loss damaging covered property. An exception applies for any subsequent loss or damage if a covered cause of loss results.
• Acts or decisions, including the failure to act or decide, by any person, group, organization, or government entity that causes or results in loss or damage. An exception applies for any subsequent loss or damage if a covered cause of loss results.
• Faulty, inadequate, or defective planning, design, materials, or maintenance that results in loss or damage. An exception applies for any subsequent loss or damage if a covered cause of loss results.

LIMITS OF INSURANCE

The most the insurance company pays for any one loss or damage to covered property is the limit of insurance on the declarations that applies. The sub-limit for coverage on signs is $2,500. Limits for Fire Department Service Charges, Pollutant Clean-up and Removal, Increased Cost of Construction, and Electronic Data Additional Coverages and all Coverage Extensions are considered additions.

DEDUCTIBLES

Coverage and recovery applies only to losses that exceed the deductible on the declarations. The deductible applies per occurrence (not per coverage) and may not apply at all to certain additional coverages.

LOSS CONDITIONS

This section comes into play after a loss. Each party to the contract must act in accordance with the conditions set forth. These are not options, and they will be enforced.

• The insured cannot abandon damaged property to the insurance company without its consent.
• The appraisal loss condition explains how the insured and the insurance company can resolve disputes and agree on the value of lost, damaged, or destroyed property.
• The duties in the event of loss or damage condition explains what the insured must do after a loss in order to preserve property, save it from further damage, and maintain coverage.
• The loss payment condition explains how the insurance company handles and pays losses.
• The recovered property condition provides details on actions the insured and the insurance company must take if the property is recovered after the company paid the claim for it.
• The vacancy condition defines vacancy differently for tenants and building owners. It also explains how losses may be denied or reduced if the vacancy or unoccupancy extends beyond 60 consecutive days.
• The valuation condition explains how the insurance company determines the value of a loss.

ADDITIONAL CONDITIONS

This section of the coverage form explains the following additional conditions:

• The coinsurance condition explains how the coinsurance penalty is calculated if the insured does not insure to value.
• Mortgageholders have special rights that extend beyond the insured's rights. However, they must initiate certain actions, take certain steps, and do certain things to keep those rights. This condition explains the mortgageholder's rights and responsibilities.

OPTIONAL COVERAGES

The following optional coverages can be provided if there is an appropriate entry on the declarations:

• Agreed value coverage waives the coinsurance penalty. The insured must provide an annual statement of values at policy inception and at every subsequent renewal, or the policy will revert back to the coinsurance basis.
• Inflation guard protection automatically increases insurance limits throughout the policy year.
• Replacement cost valuation removes depreciation when determining the value of buildings and/or personal property after a covered loss occurs. It does not apply to certain listed types of property.
• Replacement cost for personal property of others allows the insured to extend replacement cost valuation to personal property of others in its care, custody, or control.

DEFINITIONS

Refer to the coverage form for the definitions.