TIME ELEMENT DEPENDENT
PROPERTIES COVERAGE FORMS—CP 15 08, CP 15 09, CP 15 01, CP 15 34, AND CP 15 02
(December 2025)
Many businesses depend
on external companies for materials, supplies, services, parts, sales, and
attracting customers. These are known as dependent properties since the insured
relies on them for financial stability. Standard business income and extra expense
coverage forms, without endorsements, only cover shutdowns resulting from
direct losses at the insured’s location.
To provide coverage for
dependent property locations, time element coverage can be added through one or
more of the following endorsements.
As more businesses
outsource functions and rely heavily on external goods and services, these
coverage endorsements are increasingly important.
NOTE: This analysis is based on the 10 12
edition of these coverage forms, and changes are noted in bold print.
Dependent properties
are those managed by a business or entity the named insured relies on for
materials, supplies, services, or parts. They cannot be listed as an insured on
the policy but can be included as dependent properties in one of the four categories
of dependent properties as described below.
This broad category
includes locations that produce or supply raw materials or products to the
insured for their manufacturing processes. These sites may also produce goods
that the insured sells through wholesale or retail channels.
A contributing location
may also provide a service essential to the insured. Coverage for time element
at these dependent sites is especially important when the materials or services
are custom-made for the insured’s exclusive use or originate from a unique or
remote location.
Examples of business
operations that may face disruptions due to direct damage loss at a
contributing location include:
These locations receive
products or services from the named insured. If the insured serves only a
limited number of customers, coverage for business income from dependent
properties becomes essential.
Examples of business operations that could be
impacted by direct damage loss at a recipient location include:
This category is
sometimes mistaken for contributing locations, but it actually refers to
specific businesses that accept orders for third-party products. It encompasses
manufacturers’ representatives or companies that sell products under their own
brand, even if these products are made by other manufacturers.
Examples
of business operations that could face direct damage loss at a manufacturing
facility include:
Leader locations
attract customers to the insured's business. While they are mainly associated
with retail, various other types also exist. Business activities that might be
affected by direct damage to a leader's location include:
The coverage
endorsement attaches to a Business Income Coverage form to protect the insured
from income loss due to direct damage at dependent properties. The named
insured must not own, operate, or manage the dependent location to qualify for
coverage. All dependent property locations must be listed in the endorsement
schedule; if there are multiple dependent locations, each must be included on
the schedule for coverage to apply. ISO offers two different coverage
endorsements:
·
CP
15 08–Business Income From Dependent Properties–Broad Form
·
CP
15 09–Business Income From Dependent Properties–Limited Form
This coverage is available only if it is selected on the
endorsement schedule.
Coverage
is only available when two separate but connected events occur. If the
dependent property is a contributing location, the secondary dependent location
must first experience a covered cause of loss. Additionally, the dependent
location must be unable to supply materials or services to the named insured
because the damaged secondary dependent location cannot provide the materials
or services.
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Example:
Krazy Kind of Gifts, LLC sells unique
gifts, mainly supplied by Unique and Unusual, Inc., which is listed on CP 15
08’s schedule. All gifts from Unique and Unusual, Inc. are packaged in
animal-shaped boxes manufactured by Animals for Fun, LLC. Animals for Fun, LLC sustains a fire
and cannot supply boxes to Unique and Unusual, Inc. for six months. Although Unique
and Unusual has some boxes remaining, once depleted, they will be unable to
ship gifts to Krazy. INSURED: Krazy Kind of Gifts, LLC DEPENDENT PROPERTY: Unique and Unusual, Inc SECONDARY DEPENDENT - CONTRIBUTING
LOCATION: Animals for Fun, LLC Scenario
1: Under
the 06 07 edition of CP 15 08, Krazy Kind of Gifts, LLC would not have
coverage for the income loss caused by its inability to receive gifts from
Unique, as Unique did not experience the fire loss. Scenario 2: Under the 10 12 edition of CP 15 08, if
Krazy Kind of Gifts, LLC selected the Secondary Contributing Locations
option, coverage would apply for the income loss caused by Animals for Fun,
LLC's covered loss, as this loss triggered a series of events that prevented
Krazy from receiving the gifts to sell. |
If the
dependent property is a recipient location, the secondary dependent location
must first sustain a covered loss. The dependent location must then not be able
to accept material and services the named insured provides because of the covered
loss at the secondary dependent location.
|
Example:
Marshall Machines Parts supplies
components to Heavenly Places Manufacturing. These parts are essential for a
lawnmower engine. Padre Motors supplies the engine block to Heavenly
Places. After a tornado damages Padre’s, it remains closed for six months.
Heavenly has only a limited supply of engine blocks and must halt operations
once stock is exhausted, waiting for Padre’s to resume operations. During
this period, Heavenly is unable to accept parts from Marshall's. INSURED: Marshall Machines Parts DEPENDENT PROPERTY: Heavenly Places Manufacturing SECONDARY DEPENDENT - RECIPIENT
LOCATION: Padre Motors Scenario
1: Under the 06 07 edition of CP 15 08, Marshall
Machines does not have coverage for this interruption since Heavenly Places
Manufacturing did not sustain a covered loss. Scenario 2: Under the 10 12 edition of CP 15 08, if Marshall Machines selected the
Secondary Recipient Location option, coverage would apply for the income loss
since Heavenly Places Manufacturing is not willing to order from Marshal
because of Padre’s covered loss. |
Similar to other business income losses, coverage does not
apply if the only damage at the secondary dependent location involves
electronic data. However, if other property is also damaged, in addition to
electronic data, coverage is available, but only until that property is
repaired, replaced, or rebuilt.
The insurance limit for Secondary Dependencies–Contributing
and Recipient Locations is identical to the business income coverage limit. It
does not provide additional coverage, even if multiple dependent or secondary
dependent properties are damaged.
This coverage applies
when a business experiences income loss due to a covered physical damage loss
at an unscheduled dependent location. The coverage is limited to .03% of the
business income coverage limit for each day the insured operations are suspended
due to a covered loss to the dependent property.
Structures such as roads, bridges,
tunnels, waterways, pipelines, and airfields are excluded from the category of
miscellaneous locations.
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Examples:
Scenario 1: Perry Tools, Inc. manufactures machine parts and
sells them to its 15 customers. It lists five of them as dependent properties
on CP 15 08. An unscheduled customer sustains a loss, resulting in
Perry losing 90 days of business income. Perry’s business income limit of
insurance is $1,500,000. As a result, the limit of insurance available for
the miscellaneous location is the limit of insurance multiplied by .0003
(.03%). This daily loss coverage figure is then multiplied by 90 days. As a
result, the total limit available is $40,500. $1,500,000 business income limit of insurance x
.0003 = $450 limit per day x 90 days = $40,500 Scenario 2: Perry Tools, Inc. ships all of its property by
truck. The only entrance or exit to the plant requires crossing a bridge that
suddenly collapses. Perry cannot ship the product and must suspend operations
until the bridge is rebuilt or engineers design a different workaround. Perry does not have business income coverage in
this case because the bridge is not listed as a dependent property and is not
considered a miscellaneous location. |
The limit of insurance for Miscellaneous Locations is the same
as the limit of insurance for business income. It is not an additional
insurance limit even if multiple dependent properties, secondary dependent
properties, and/or miscellaneous properties are damaged.
A secondary location cannot also be considered a
miscellaneous location if coverage is provided for it.
The named insured
should actively seek alternative sources for materials and product outlets.
Failing to do so will reduce any loss by the amount of time that could have
been saved if these sources had been utilized. This highlights the importance
of businesses actively managing their supply chains to avoid potential losses.
This refers to
locations the named insured does not operate but depends on for services or
supplies, which include the following:
·
Recipient
Locations – depend on the insured’s product or service.
·
Manufacturing
Locations – contractually manufacture and deliver products to the insured’s customers.
·
Leader
Locations – insured depends on to attract customers.
Although there are
different types of dependent properties, it's important to remember that
locations providing the following services are neither considered dependent
properties nor classified as contributing, recipient, manufacturing, or leader
locations:
·
Water
·
Power
·
Communication
·
Wastewater removal services
NOTE: Utility service interruptions can be
covered under CP 15 45 – Utility Services – Time Element.
Related Article: CP 15
45–Utility Services–Time Element
This is similar to the
business income period of restoration definition, but it applies to the
dependent property or secondary location instead of the insured’s premises.
·
Coverage
starts 72 hours after the direct physical damage from a covered loss.
·
Coverage
ends when the property should be repaired, rebuilt, or replaced within a
reasonable timeframe and with similar quality.
·
It
does not include an extension of time due to any ordinance or law.
·
The
policy expiration date will not decrease the restoration period.
·
This
location cannot be listed on the schedule.
·
It
cannot be owned or operated by any contributing location shown on the schedule.
·
It
must provide materials or services to the contributing location shown on the
schedule.
o
The
contributing location must then use the material or services to provide
services or materials to the named insured.
·
It
does not include: roads, bridges, waterways, airfields, pipelines, or any
similar property
·
It
also does not include services provided by:
o
Water,
power, or communication supply services
o Wastewater removal services
·
This
location cannot be listed on the schedule.
·
It
cannot be owned or operated by a recipient location listed on the schedule.
·
It
must receive materials or services from the identified recipient location,
which in turn receives services or materials from the named insured.
·
It
does not include: roads, bridges, waterways, airfields, pipelines, or similar property.
Coverage applies only
to losses or damages occurring at dependent properties, secondary locations,
and miscellaneous sites within the Coverage Territory.
This endorsement
closely resembles CP 15 08 above, except the insured can tailor the business
income coverage to meet their needs. The insured selects the insurance limit
for each scheduled dependent property, ensuring this coverage is separate from
the business income coverage for the named insured’s operations. This is
especially important if the insured does not have business income coverage for
their own operations.
The business name, occupancy
description, and location of each dependent property must be provided in the
designated area on the endorsement schedule, along with the limit of insurance
for each location.
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Example:
Melina is a manufacturer’s
representative who works out of an office and does not keep any stock on
hand. She would not face a business income loss if her office location was
destroyed. However, she would suffer a significant
business income loss if either of the two companies she represents
experienced a loss, because she only receives a commission after goods are
delivered. So, she decides to schedule a $50,000 limit for Company X and a
$30,000 limit for Company Z on CP 15 09. Since Melina does not carry business
income coverage, there is no limit listed on the declarations. |
The CP 15 09 provides
the same coverage as the CP 15 08.
The insuring agreement
in the business income from dependent properties coverage endorsements replaces
that in the standard business income coverage forms. It provides coverage for
the actual loss of business income or extra expenses the insured incurs if
operations are suspended.
This suspension must
result from direct physical loss or damage to a dependent property listed on
the endorsement schedule. It can also occur due to direct damage to a secondary
contributing or recipient location, if shown in the declarations. The
damage must be caused by a covered peril.
However, there is a
limitation. Coverage does not apply to loss of business income from the
suspension of the named insured’s operations when the loss at the dependent or
secondary property involves damage to electronic data. This provision is
the same as in each of the two standard coverage forms. It shows the reluctance
of insurance companies to cover losses to data networks, off-premises storage,
or supply sources.
Both endorsements
redefine the period of restoration to include dependent property, but the
definition remains unchanged otherwise. In addition, the terms “dependent
property,” “secondary contributing
location,” and “secondary recipient location” are added to the definitions.
This coverage
endorsement modifies the extra expense coverage form, similar to how CP 15 09
modifies the business income coverage forms. It allows the named insured to
customize the extra expense coverage they need and does not tie the coverage
limit to the named insured’s premises extra expense coverage. A specific limit
of insurance is scheduled for each listed location. There is no requirement for
the named insured to purchase coverage at its premises.
Each dependent property’s name,
description, location, and insurance limit must be provided in the designated
fields on the endorsement schedule. Coverage for secondary contributing
location and/or secondary recipient location is available if selected on the
endorsement schedule.
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Example:
Kevin is a
manufacturer's representative for seasonal products. He represents three
manufacturers for his Christmas line. He schedules a limit of $25,000 for
extra expense coverage from dependent properties for each manufacturer. One of Kevin’s
manufacturers suffers a covered loss in November and is unable to supply the
needed Christmas products. Kevin's customers still depend on him, so to
fulfill their needs, he pays extra to source the same products elsewhere,
incurring an additional $20,000 in costs. Since Kevin has this
coverage, his insurance company reimburses the $20,000 extra expense. |
The insuring agreement
for the dependent properties coverage endorsement replaces the extra expense
coverage form’s insuring agreement. Although it functions similarly, it
provides coverage for the extra expense incurred by the named insured due to
direct physical loss or damage to a dependent property listed on the
endorsement schedule.
If selected on the
declarations, this covers expenses caused by a direct loss at a secondary
recipient or contributing location. The damage must result from a covered cause
of loss.
If a miscellaneous
location's loss or damage results in an extra expense, .03% of the total limits
on the endorsement is allocated as a sub-limit to cover the loss.
This coverage
endorsement extends the period of restoration to include dependent property, secondary
contributing, and recipient locations, while the overall definition
remains unchanged.
Additionally, the terms
“dependent property,” “secondary contributing location,” and “secondary
recipient location” are now included in the definitions.
Standard dependent
property time element coverage forms have the same coverage territory as other
property coverage forms. However, they may need coverage for locations outside
the United States, its territories and possessions, and Canada as more
businesses become international in scope. The following coverage endorsements address
this issue:
The coverage these endorsements
provide is nearly identical to that of CP 15 09 and CP 15 34, but there are
several important differences. The differences include:
This coverage is highly
important for certain businesses, but market conditions can sometimes render it
unavailable or too expensive. Insurers might refuse to offer it because the
insured person does not control the dependent property. It is possible that
neither the insured nor the insurer may be able to perform loss control
inspections or enforce compliance with recommendations after such inspections.
The insurer can refuse
coverage for locations it cannot inspect or that do not meet recommended
standards. To properly underwrite the dependent property, the insurer requires
the same type of information used for insuring the property against direct physical
loss or damage.
Examples of necessary
information need for the dependent location include:
Both the insurance
agent and the insurance company must fully understand the hazards, conditions,
and exposures associated with each applicable cause of loss form. Underwriting
for dependent properties should be conducted with the same care and
thoroughness as for primary insurance, given the exposures and insurance limits
involved.
Including secondary
contributing and recipient locations makes underwriting this endorsement more
complex. Although listing these secondary locations is not mandatory, it can
still be beneficial for underwriting purposes. As well, providing a schematic
of the named insured’s supply chain, especially when adding secondary
contributing and recipient locations, can help in managing risk assessment.
As with any business
income and extra expense coverage, it is important to assess the steps the
named insured takes to reduce losses. If a dependent property experiences a
loss, it doesn't automatically mean the named insured also suffers a loss. The
underwriter should analyze the dependency relationship and consider
alternatives available to the insured. For instance, if a flagship store burns
down, what actions does the insured take? Do these actions vary depending on
how long the flagship store remains closed?
The most challenging
dependent property risks to underwrite are those with an exclusive relationship
to the named insured. Savvy business owners develop contingency plans for
covered losses and also consider scenarios where the dependent property permanently
ceases operations, relocates to another state, or dramatically changes its
business strategy and adopts a different business model.