Monthly Archives: February 2013

Ethics in the Workplace – Six (6) Points To Consider

1) Define your values – remember this is what you are willing to enforce and live to…so make certain that you

Pavilion Office Building

can and will do just that.

2) If you post it, you MUST practice it – walk the talk and talk the walk

3) Integrate it into your workplace – measure it and incorporate it into your everyday processes

4) Watch for the “slippery slope” – make certain that there is a “line in the sand” aver which NO ONE can step…once beyond that line things tend to get a bit slippery

5) Be above reproach – Stay WAY above your line in the sand. It makes it easier to live with that line every day.

6) Get past your self-protective behavior – you are going to make mistakes. When you do own up to them promptly, it is far better for you, your organization and all of those folks you work with on a regular basis.

Written By:

Casey Roberts, ACSR, AFIS, CIC
Laurus Insurance Consulting 


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New Commercial Property Forms Update Eff Date 4-1-2013

New Commercial Property Forms Update

 Proposed Effective Date 4/1/13

Materials are copy written by ©Insurance Services Office, Inc., 2011

The ISO has submitted significant changes for the Commercial Property Forms that have an effective date of 10/2012. While the forms carry a 10/12 date the proposed effective date on the April 1, 20l3 is proposed by ISO in all jurisdictions where the ISO establishes dates.  This date places more importance on these significant changes as the companies begin to actually adopt the language.

This is the biggest change in forms that we have seen for many years.  The majority of the key forms are taking on some sort of change.  Some of the changes are minor but carry new edition dates of existing form numbers; forms that are being withdrawn and new forms that are being introduced. The information, upon which this article relies, is the ISO Circular dated January 3, 2012 and review of the forms within the 10/12 series.   This multi-state revision will be applicable to the following jurisdictions:

Alabama Kentucky Ohio
Alaska Maine Oklahoma
Arizona Maryland Oregon
Arkansas Massachusetts Pennsylvania
California Michigan Rhode Island
Colorado Minnesota South Carolina
Connecticut Missouri South Dakota
Delaware Montana Tennessee
District of Columbia Nebraska Texas
Florida Nevada Utah
Georgia New Hampshire Vermont
Guam New Jersey Virgin Islands
Illinois New Mexico Virginia
Indiana New York West Virginia
Iowa North Carolina Wisconsin
Kansas North Dakota Wyoming

Many of the ISO changes have already been adopted in insurance company forms while other changes represent clarification of the “intent” of the form.  We will include a listing of the forms that will be part of the 10/2012 edition date. Specifically we will highlight those changes that have any significant impact and new endorsements to the form series. This chart is a summary of the form changes and each form must be reviewed in its entirety to understand the impact of the changes. As you review the impact of the form changes you will note that there are many instances where there is no change in coverage.  What this means, typically, is that the language of the form has been modified by adding or removing a word or substituting a word that is clearer.  There is no change in the intent of the form.  Some changes result in a coverage increase typically in a sub-limit that is provided.  Some changes result in coverage being reduced for example removing am extension or sub-limit that appeared in a prior edition date.  Some changes will show coverage is broadened which typically means that form language has been added to make the coverage more comprehensive. There are some new endorsements that are being introduced that we will discuss in more detail as they are new to the form series.


CP 00 10 Building and Personal Property CP 00 50 Extra Expense Coverage
CP 00 17 Condominium Association Coverage CP 00 70 Mortgage holders Errors and Omissions
CP 00 18 Condominium Unity Owners CP 00 80 Tobacco Sales Warehouses Coverage
CP 00 20 Builders Risk CP 00 99 Standard Property Policy
CP 00 30 Business Income and Extra Expense CP 1010 Causes of Loss—Basic Form
CP 00 32 Business Income Without Extra Expense CP 10 20 Causes of Loss—Broad Form
CP 00 40 Legal Liability Coverage Form CP 10 30 Causes of Loss—Special Form


CPDS 65 Flood Coverage Schedule CP 10 47 Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment
CP 03 21 Windstorm or Hail Percentage Deductible CP 10 66 Flood Coverage Endorsement
CP 03 29 Deductibles by Location CP 11 21 Builders Risk-Theft of Building Materials, Fixtures, Machinery, Equipment
CP 04 02 Increased Cost of Loss and Related Expenses for Green Upgrades CP 12 18 Loss Payable Changes
CP 04 04 Specified Business Personal Property Temporarily Away from Premises CP 14 30 Outdoor Trees , Shrubs and Plants
CP 04 05 Ordinance or Law CP 14 70 Building Glass Tenant’s Policy
C CP 04 08 Higher Limits CP 1501 Business Income From Dependent Properties Limited International Coverage
CP 04 09 Increase in Rebuilding Expenses Following Disaster (Additional Expense Coverage on Annual Aggregate Basis) CP 15 02 Extra Expense From Dependent Properties Limited International Coverage
CP 04 11 Protective Safeguards CP 15 15 Food Contamination Business Interruption and Extra Expense
CP 04 15 Debris Removal Additional Expense CP 15 08 Business Income From Dependent Properties Broad Form
CP 04 17 Utility Services Direct Damage CP 15 09 Business Income from Dependent Properties Limited Form
CP 04 18 Condominium Commercial Unit Owners Optional Coverages CP 15 10 Payroll Limitation or Exclusion
CP 04 38 Functional Building Valuation CP 15 15 Business Income Report/Worksheet
CP 04 60 Vacancy Changes CP 15 25 Business Income Changes Educational Institutions
CP 10 32 Water Exclusion Endorsement CP 15 21 Ordinance or Law Increased Period of Restoration
CP 10 33 Theft Exclusion CP 15 34 Extra Expense from Dependent Properties
CP 10 34 Exclusion of Loss Due to By Products of Production or Processing Operations (Rental Properties) CP 15 45 Utility Services Time Element
CP 10 36 Limitations on Coverage for Roof Surfacing CP 15 50 Radio or Television Antennas—Business Income or Extra Expense
CP 10 38 Discharge from Sewer, Drain or Sump (Not Flood-Related) CP l7 98 Condominium Commercial Unit Owners Changes Standard Property Policy
CP 10 40 Earthquake and Volcanic Eruption CP 17 99 Condominium Association Changes Standard Property Policy
CP 10 44 Theft of Building Materials and Supplies (Other than Builders Risk) IL 04 15 Protective Safeguards
CP 10 45 Earthquake and Volcanic Eruption Sub Limit Form  
CP 10 46 Equipment Breakdown Cause of Loss  


Highlights on some NEW ENDORSEMENTS:

Exclusion of Loss Due to By Products of Production or Processing Operations (Rental Properties) CP 10 34

This endorsement is as a result of the landlord/tenant business risks relating to the rental of the property.  While the landlord may enter into a lease that holds the tenant responsible for damages arising from a variety of causes, the insurance contract is not intended to compensate a landlord for the expected consequences of usage of the rental premises as intended. One example provided by the ISO in explanation would be when a premise is leased for use as a restaurant and there is damage from the residue of the cooking operation.  This is deemed a business risk innate to the occupancy not loss compensated by insurance.  This question becomes much more interesting and complex when the property is rented for illegal purposes such as the rental of premises that is used as a methamphetamine laboratory in which the damage from methamphetamine “cooking” operations can be likened to the residue from cooing operations in a restaurant.  Needless to say there are many issues at the heart of this discussion that goes beyond the coverage issue such as:  did the landlord know about the operation; should the landlord have known about the operation and so on.

A case in point that the ISO used in their circular was the Graff v. Allstate Insurance Company, 113 Wash, App.799; 54P.3d 1266 (Wash, Ct. App.2001).  In the case the insured filed a claim for cleanup expenses after a tenant’s methamphetamine laboratory damaged his rental house and the insurer denied the claim citing the policy’s contamination exclusion.  The insured sued and the trial court held in favor of the insured finding that his insurance policy covered the cleanup expenses.  The appellate court affirmed the lower court’s decision and stated that the operation of a methamphetamine laboratory is vandalism and therefore covered under the policy. Thus both the contamination and vandalism issues came into play.  The Insurance company,  (plaintiff),  contended that coverage is not intended to extend to the inevitable effect of a production operation which is emphasized in the language of the Special Form.  As a result of this case and similar claims, the ISO has introduced this endorsement to be attached to all polices issued to owners and tenants of rental property.

Equipment Breakdown Cause of Loss CP 10 46

Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment CP 1047

The ISO is introducing a new Cause of Loss form for Equipment Breakdown that is compatible with the Special Cause of Loss Form. Currently in the Special Cause of Loss Form there are three major categories of exclusions that relate to equipment breakdown:  artificially generated electrical current; mechanical breakdown; explosion of steam boilers…  By use of this new endorsement those exclusions are eliminated.  There are limitations specific to Equipment Breakdown coverage that is then added in the form language.   Ammonia Contamination and Hazardous Substance amounts of insurance can be scheduled on the form. Because of the introduction of the new Equipment Breakdown Form, the ISO has also introduced the Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment to allow the insurance companies to either suspend or reinstate coverage for certain pieces of equipment.

Increase in Rebuilding Expenses Following Disaster CP 04 09

This endorsement is introduced as a response to nationwide disasters and catastrophic events that have tested the limits of the policy as relates costs of labor; cost of materials due to demand and limited resources (demand surge). The ISO circular references Hurricanes Katrina and Rita wherein estimates per square footage of housing reconstruction quadrupled in the first six months after the events.

The new endorsement provides an option for insuring additional expenses when the costs of labor and/or building materials increase as a result of a disaster AND the total cost of repair or replacement exceeds the applicable limit of insurance.  Some significant sections of the endorsement include:

  1. Buildings to be insured are indicated on the endorsement
  2. Coverage will only apply as a result of an event that is declared a disaster as well as damage resulting from an event which occurs in close proximity to the disaster
  3. Coverage is on an annual aggregate basis
  4. The maximum amount of additional coverage is determined by applying a specified percentage to the limit of insurance for specific insurance.

Dependent Properties in the Supply Chain (Business Interruption)

Dependent Property Coverage is written by scheduling the business locations that the insured is “dependent upon” and have chosen to insure.  The new endorsement allows for secondary dependencies. An example provided by the ISO of a secondary dependency is a situation in which the insured’s supplier (a dependent property identified in the schedule of the current endorsement) is unable to deliver products/services due to interruption in the business of an entity (for example, a manufacturer) upon which the supplier depends but was NOT a supplier that the insured directly depended upon or was identified in the endorsement.

The new option for covering secondary dependencies is focused on contributing and recipient locations as defined in the form.  Business Income losses arising out of physical loss or damage at the secondary location is subject to the same Limit of Insurance that applies to the scheduled dependent location and does not increase the coverage.  The coverage territory is reiterated on the form to avoid any confusion that the coverage goes beyond the stated territory of the policy for example for locations outside of the United States.

Form Change Impact


Building and Personal Property FormCP 00 10 Debris Removal:  The additional limit provided is increased from $10,000 to $25,000. When no Covered Property sustains direct physical loss there is coverage in the amount of $5,000 provided for removal of debris of others’ property. Coverage is increased and expanded in definition
Building and Personal Property FormCP 00 10 Fire Department Service Charge:  The policy clarifies that the $1000.00 limit provided applies to each premises insured. No change in coverage
Building and Personal Property FormCP 00 10 (various) Business Personal Property in Described Structures:  The coverage provided for Business Personal Property is clarified to cover both in the building orstructures covered in the policy. No change in coverage
Building and Personal Property FormCP 00 10 (various) Coverage Radius:  The language is clarified as relates “where” coverage must occur for coverage to apply.  The form extends coverage to 100 feet from the building or 100 feet from the described premises, whichever distance is greater. The revision broadens coverage with respect to a tenant in a multiple-occupancy building in such situation where the premises are described in terms of the actual area (quarters) occupied by the tenant. Note:  many company forms already include this clarification.
Building and Personal Property FormCP 00 10 (various) Property in Storage Units:  A new coverage extension is introduced on the Commercial Property Form for Business Personal Property Temporarily in Portable Storage Units.  The coverage is for 90 days with a sub-limit of $10,000.  The property must be located within 100 feet of the described premises. A higher limit can be indicated on the Declarations Page. This can be considered an extension of coverage, however, if an insurer previously treated property in storage as property in the open then then coverage is decreased to the sub-limit.
Building and Personal Property FormCP 00 10 Newly Acquired Business Personal Property: Currently the Commercial Property forms provide $100,000 additional coverage at each building covering newly acquired business personal property.  This provision has been removed.  There is no change for newly acquired business personal property located at newly acquired locations.  If the insured has “newly acquired” property at their location, the coverage should be increased accordingly to reflect that limit. Coverage is reduced
Building and Personal Property FormCP 00 10 & Cause of Loss Forms Vegetated Roofs:  This is one of the new “green” extensions in Commercial Property. Currently the property form excludes trees, shrubs, plants and lawns and then sub-limits the coverage. The property form is revised to include lawns, trees shrubs and plants which are part of a vegetated roof and thereby treating such property as an insured part of the building so that an existing vegetated roof can be replaced with like kind in the event of a loss.  There are some exclusions that are revised to relate directly to a vegetated roof. Coverage is broadened.
Building and Personal Property FormCP 00 10 & Business Income Form (various) Electronic Data in Building Equipment:  Currently ISO Commercial Property forms limit coverage for electronic data to $2,500 on an annual aggregate basis. The form is revised to remove the $2,500 limitation with respect to loss or damage to electronic data which is integrated in and operates or controls the building’s elevator, lightning, heating, and ventilation, air conditioning or security systems.    Coverage is broadened
Building and Personal Property FormCP 00 10; Business Income Form  CP 00 30/00 32; Cause of Loss Forms(various) Ordinance or Law Exclusion:  The form is revised to include the word “compliance”.  The new form states the “enforcement of or compliance with any ordinance or law.  This is a clarification of language No change in coverage
Building and Personal Property FormCP 00 10; Business Income Form  CP 00 30/00 32; Cause of Loss Forms(various) Options for Increasing Specified Limits:  The coverage forms currently include the ability to increase coverage via an entry on the Declarations Page for certain categories of coverage.  This change allows for increased coverage via Declarations for the additional coverages of Electronic Data;  Newly Acquired Locations; Interruption of Computer Operations and Limitations for Theft. These changes are new coverage options
Business Income FormCP 00 30 and CP 00 32 Extended Business Income, Extended Period of Indemnity:  The Business Income forms provide automatic coverage for 30 days’ following the end of the period of restoration for residual loss of income. The form revises the 30 days to 60 days. Coverage is increased.  Note: Many insurance company forms automatically include more than 30 days.
Cause of LossCP10 10, CP10 20,CP 10 30 Earth Movement Exclusion:  The term “earthquake” now incorporates tremors and aftershocks. Language is added to the Earth Movement exclusion to reinforce that earth movement is excluded regardless of whether it is caused by an act of nature or is otherwise caused. No change in coverage
Cause of LossCP10 10, CP10 20,CP 10 30 Water Exclusion:  The Water Exclusion CP 1032 and is now incorporated in the base policy forms No change in coverage
Cause of LossCP 10 30 Entrusted Property:  The revision is included to distinguish between those who have a role in the insured’s business such as partners/employees and others to whom property may be entrusted such as bailees or tenants. Specifically there is an exclusion for loss or damage caused by…dishonest or criminal acts by…anyone to whom the insured entrusts the property. Coverage is broadened
Cause of LossCP 10 30 Wear and Tear Exclusion—Special Form:  The coverage is expanded to include coverage for water damage in the “specified causes of loss” to include accidental discharge or leakage of water or waterborne material as the direct result of the breaking apart or cracking of certain off-premises systems due to wear and tear. Coverage is broadened
Cause of LossCP 10 30 Covered Cause of Loss:  The term “risk of” is deleted.  This change has been done specifically to clarify the collapse exclusion but has a broader impact. This is modified for clarity purposes No change in coverage
Form Change Impact


Business Income Report/Work Sheet:CP 15 15 The worksheet has been modified to 60 days rather than 30 days for the Extended Period of Indemnity as modified in the Business Income Form No change in coverage
Debris Removal and Outdoor Trees, Shrubs and PlantsCP 04 15 and CP 14 30 Debris Removal:The $10,000 additional limit for debris removal is increased to $25,000. Note: Many company forms automatically include this limit automatically.

Outdoor Trees, Shrubs and Plants:

This specifies that debris removal is included in the limit provided for this coverage

Coverage is broadened
Radio or Television Antennas—Business Income or Extra ExpenseCP 15 50 The endorsement removes a “reference” to the Cause of Loss Earthquake.  If the Earthquake Form were attached to the policy it’s terms and conditions are therein specified No change in coverage
Utility Services—Overhead Transmission LinesCP 04 17 (Direct) and CP 15 45 (Time Element) The endorsement clarifies that the term “transmission lines” also includes “distribution lines” which is the vernacular in the power industry for a system that provides electricity to residential and commercial users by reducing voltage through the use of substations, transformers and other devices.  The forms now reinforce the intent to cover both transmission and distribution systems which serve in the transmission of power or communication service. No change in coverage
Ordinance or LawCP 04 05; CP 04 38; CP 15 01; CP 15 02; CP 15 08; CP 15 09; CP15 25; CP 15 31; CP 15 34 Ordinance or Law:  The endorsement form is revised in the same manner as theexclusion in the Coverage Forms to include the word “compliance”.  The new form states the “enforcement of or compliance with any ordinance or law. This is a clarification of language No change in coverage
Condominium Commercial Unit-Owners Changes—Standard Property PolicyCP 17 98 The endorsement modifies three sections of the Condominium Unit Owners Policy: Coverage Radius; Business Personal Property in Described Structures; and Newly Acquired Property.

  1. Coverage Radius is modified to state 100 feet from the building or described premises whichever is greater
  2. Clarifying that coverage applies both in a building or structure


No change in coverage
Building Glass Tenants Policy EndorsementCP 14 70 This endorsement was first introduced in 2007 to facilitate writing coverage for building glass under a tenant’s policy that did not cover the building. This endorsement simply allows for the deductible for this coverage to be added on the endorsement rather than on the Declarations Page No change in coverage
Theft Exclusion EndorsementCP 10 33 The Theft Exclusion Endorsement currently does not contain a schedule.  The new edition date will display a schedule of locations so that there is clarity as to which location the exclusion applies No change in coverage
Flood Coverage Endorsement and ScheduleCP 10 65; CP DS 65 Currently the Flood Endorsement states there is no coverage for loss from any Flood that begins before or within 72 hours after the inception date of the endorsement.  The prior form did not make any distinction concerning renewal policies. The revised form provides that the 72 hour waiting period will not apply when the prior policy included flood coverage and the policy periods are consecutive without a break in coverage. Coverage is broadened
Payroll Limitation or Exclusion OptionCP 15 10 The payroll endorsement is being modified to provide a means of limiting or excluding the payroll expense of “any category of employees or individual employees” The term “ordinary payroll expense” and its definition are removed from the endorsement.  The title, also, will no longer refer to the word “ordinary” and the word “ordinary” will no longer appear in other sections such as the “coinsurance section”. The revised endorsement serves the same purpose as the prior one but can be used to address any category of employee on the insured’s payroll. No change in intent—clarification of definition
Condominium Commercial Unit-Owners Optional Coverage:  Loss AssessmentCP 04 18 Currently the endorsement places a $1,000 limitation on an assessment as a result of a deductible on the condominium association policy.  This endorsement provides a means for selecting a higher limit. Coverage is broadened
Utility Services—Wastewater Removal (Time Element)CP 15 45 The Utility Service Time Element endorsement is being revised to add a new category of utility service:  wastewater removal property. By definition, wastewater removal property is a utility system for removing wastewater and sewage from the described premises other than a system designed primarily for draining storm water. The utility property includes sewer mains, pumping stations and similar equipment for moving the effluent to a holding, treatment or disposal facility; and includes such facilities. Coverage is broadened
Earthquake Sprinkler Leakage DeductibleCP 10 40; CP 10 45 In 1999, the EQSL Endorsement CP 10 39 was withdrawn from the series and EQSL could be purchased by activating the EQSL ONLY option on the EQ endorsements CP 10 40 and CP 10 45. The revision in this form adds language providing that the EQ deductible provisions outlined in the EQ endorsement (that is, the percentage deductible) do not apply to the EQSL—Only coverage. Instead the Fire deductible applies. Coverage is clarified and broadened
Builders Risk—Theft of Building Materials, Fixtures, Machinery, EquipmentCP 11 21 This change relates back to the issue of “entrusted property” discussed above. Entrusted Property:  The revision is included to distinguish between those who have a role in the insured’s business such as partners/employees and others to whom property may be entrusted such as bailees or tenants. Specifically there is an exclusion for loss or damage caused by…dishonest or criminal acts by…anyone to whom the insured entrusts the property. There is no change in “intended coverage”
Green Upgrades Endorsement RevisionCP 04 02 The schedule on the form is revised to identify which property is subject to upgrade when not all personal property is not to be covered for Green Upgrades. No change in coverage
Form Change Impact


Exclusion of Loss Due to By-Products of Production or Processing Operations (Rental Properties)CP 10 34 New form introduced to be attached to policies issued to owners and tenants of rental premises.Discussion of the change is included above. There is no change in “intended coverage”
Specified Property Away from PremisesCP 04 04 New form introduced to provide coverage for business personal property temporarily away from the described premises in the course of daily business activities, while in the care, custody or control of the insured or an employee of the insured.  Coverage is broadened
Higher LimitsCP 04 08 Currently the insurance form has many options to increase coverage via the Declarations Page. This endorsement is an alternative to activating the coverages on the Declarations Page by using this multi-purpose endorsement No change in coverage but new coverage option
Equipment BreakdownCP 10 46 This is a new optional endorsement which is compatible with the Special Form Cause of Loss CP 00 13.Discussion of the change is included above New Coverage Option
Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment CP 10 47 Because of the introduction of the new Equipment Breakdown Form, the ISO has also introduced the Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment to allow the insurance companies to either suspend or reinstate coverage for certain pieces of equipment.Discussion of the change is included above New Coverage Option
Deductible By LocationCP 03 29 Currently there is a Multiple Deductible Form CP 03 20 adopted in most states which is designed to allow for the selection of different deductible by location and peril.  This schedule of endorsement shows separate locations and the deductible for each location. This is a new optional way to show deductibles but does not affect existing deductible options.
Limitations on Coverage for Roof SurfacingCP 10 36 This endorsement provides options for insuring roof surfacing on an ACV basis and for excluding cosmetic damage to roof surfacing. The cosmetic exclusion option applies only to the perils of wind and hail, and could be written without regard to the underlying valuation clause. New Coverage Option. This would be chosen by an insurer when they deem it necessary typically on an older building
Increase in Rebuilding Expenses Following Disaster CP 04 09 This is a new endorsement to add additional expenses following a disaster.Discussion of the change is included above New Coverage Option
Dependent Properties in the Supply Chain (Business Interruption)Endorsement to CP 15 01; CP 15 02; CP 15 08; CP 15 09; CP 15 34. Dependent Property Coverage is written by scheduling the business locations that the insured is “dependent upon” and have chosen to insure.  The new endorsement allows for secondary dependencies.Discussion of the change is included above New Coverage Option
Discharge From Sewer, Drain or SumpCP 10 38 This is a new endorsement to cover discharge from a sewer, drain or sump and pertains to physical damage and/or time element loss as indicated in the schedule. The amounts stated in the schedule are sub-limits and therefore do not increase the underlying limits of the insurance provided.  An annual aggregate limitation can be selected via the schedule on the endorsement. New Coverage Option
Theft of Building Materials and Supplies (Other Than Builders Risk)CP 10 44 Currently there is a limitation under the Special Cause of Loss form for theft coverage for building materials and supplies that are not part of the building or structure to that which is held for sale by the insured.  The new endorsement provides coverage for the theft of building materials and supplies that are located on or within 100 feet of the premises when such property is intended to become a permanent part of the building or structure. New Coverage Option
Protective Safeguards (Fire)CP 04 11 The new endorsement replaces the interline form IL 04 15.  This endorsement, therefore, only pertains to Commercial Property insurance and contains the same provisions as the current endorsement. No Change in Coverage
Food Contamination (Business Interruption and Extra Expense)CP 15 05 This new option covers extra expenses and business income loses arising out of food contamination and pertains to the Business Income And Extra Expense Coverage Form.  Coverage is limited to loss of income/extra expense due to the closure of the business. Covered expenses include: cost of cleaning equipment; cost of replacing food; medical testing and vaccination and advertising expense. New Coverage Option

Written by:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center


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Green Changes in the NEW Commercial Property

Green Changes in the NEW Commercial Property 10/12 Edition Date

Your Insured Needs to Know about this BEFORE they have a loss!!

For many years insurance companies, such as Fireman’s Fund, has provided specialty coverages for constructing buildings in compliance with standards that make them more environmentally friendly; cost efficient; and self-sustaining. As the new construction standards have evolved and laws and regulations for building have emerged, the insurance forms have attempted to provide solutions of individuals who want to replace their structures according to green standards.  In the new series of forms, the first modification that has occurred is that existing forms have been modified.

  1. 1.      The Building and Personal Property Coverage Form CP 00 10 on page 2 modified the Property Not Covered.

(h) Land (including land on which the property is located) water, growing crops or lawns (other than laws which are part of a vegetated roof)

The following while outside the building

(q)fences, radio or television antennas (including satellite dishes) and their lead in wiring masts or towers, trees, shrubs or plants (other than trees, shrubs or plants which are “stock” or are part of a vegetated roof)

Outdoor Property

You may extend the insurance provided by this Coverage Form to apply to your outdoor fences, radio and television antennas (including satellite dishes) trees , shrubs and plants (other than trees shrubs or plants, which are stock or are part of a vegetated roof…… for specified causes of loss…..subject to limitation.

  1. 2.     Cause of Loss Special Form CP 1030 on Page 6


g. Lawns, trees shrubs or plants which are part of a vegetated roof, caused by or resulting from

(1) Dampness or dryness of atmosphere or of soil supporting the vegetation

(2)Changes in or extremes of Temperature

(3) Disease,

(4) Frost or Hail….

Those are the forms that took on some changes specifically related to Vegetated Roofs.  In addition, the ISO has introduced a new endorsement for Green Upgrades.  The endorsement, while available, is fairly complex and sets difficult guidelines as to how limits are to be set and payment for a loss would be determined.  What follows is an overview of the endorsement.

CP 04 02 Increased Cost of Loss and Related Expenses for Green Upgrades

The Green Upgrades Endorsement modifies the Replace Cost Valuation clause on the forms to which this endorsement can be attached which include: the Building and Personal Property Form; Business Income with and without Extra Expense; Condominium Association and Unit Owner Form and the Extra Expense Form.

Prior to the ISO introducing Green Coverage, several insurance companies have written this coverage for many years. Fireman’s Fund was one of the first companies to come out with comprehensive green coverage and the Equipment Breakdown coverage forms have included limited amounts of the coverage for years responding to environmental upgrades.

There are several reasons that the endorsement is in place and that the prior forms changed language responding to buildings that currently exist with green upgrades such as roofing surfaces for those individuals/companies who would choose to repair/replace their buildings following a loss with more resource efficient construction.  This is still a fairly new concept to some and the endorsement will appear to be complex and confusing from both understanding the contract language; setting limit; and proving a loss.

When determining Replacement Cost for Green Upgrades the form will pay the additional costs to repair or replace damage property based on the materials and procedures set by the Green standard setter.  The form states the following as relates the standard:

2) Green standards-setter means an organization or governmental agency which produces and maintains guideline related to Green products and practices.  Green standards-setters include but are not limited to:

  1. The Leadership in Energy and Environment Design (LEED®) program of the U. S. Green Building Council
  2. ENERG STAR, a joint program of the U. S. Environmental Protection Agency and the U. S. Departement of Energy, and
  3. Green Globes ™, a program of the Green Building Initiative

3)  Green means enhanced energy efficiency or use of environmentally preferable sustainable materials, products or methods in design, construction, manufacture or operation, as recognized by a Green standard-setter.

The endorsement deals with green upgrades solely required for the purpose of satisfying the minimum requirements or recommended actions or standards of an ordinance or law by stating it will not disallow the cost of the Green Upgrade on the sole basis that such upgrade also falls under the provisions of the ordinance or law.  The endorsement will not pay, as respects green upgrades, if that cost is paid under another form.  I would caution anyone reading this language that it does appear more ambiguous then other sections of the new endorsement.

The first page of the form has a Schedule with seven columns:

  Green Upgrades Maximum Amount      
Premises Bldg # Building Your Business Personal Property Increased Cost of Loss % Related Expenses Number of Days for Extended Period of Restoration
  1. Schedule indicates maximum amount available for Building and Personal Property
  2. In the event of a loss the company will determine the amount payable by
    1. Determine amount of direct physical loss prior to deductible
    2. Multiply the amount determined by the appropriate increased cost of loss percentage shown in the schedule
    3. Unless the loss is less than the deductible, the company will pay the least of the amounts for the total of all costs attributable to Green Upgrades
      1.                                                   i.      The actual cost of covered Green Upgrades
      2.                                                 ii.      The amount determined by applying the percentage
      3.                                               iii.      The applicable amount show in the green upgrades in the schedule

Based on the aforementioned there are several steps the insured must take in first setting a limit which are difficult to quantify, at best.

  1. Determine a “maximum” limit remembering that settlement will go back to the Green standards-setter.  This limit must be determined for each building and building amount/personal property amount
  2. Select percentage under the increased cost of loss column for each item.  The percentages do not appear in the form; however, other reference material refers to the percentages available as 10; 20; 30; 40; or 50%.
  3. The next column is “Related Expenses” which the form lists as:
    1. Waste Reduction and Recycling
    2. Design and Engineering Professionals Fees
    3. Certification Fees and Related Equipment Testing
    4. Building Air-out and Related Air Testing
    5. The last column, for which a limit could be selected, is titled “Number of Days for Extended Period of Indemnity”.  This column relates back to Business Income with or without Extra Expense and Extra Expense.  This extends the “period of restoration” to include the increased period of time to bring the building up to the green standard.

In conclusion, the issue of “green” is a major driver in the new form series.  It is important to talk with your clients about the desire to modify construction following a loss in compliance with green standards BEFORE the loss occurs.

A complete review of the Commercial Property Forms was presented on 1/29/13 and the archived webinar is available to all university members.

Written By:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center,
Insight Insurance Consulting


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SB 863: The New California Workers Compensation Reform Laws are like “Sausages”

California Statehouse

California Statehouse (Photo credit: queenkv)

There is a saying that has been loosely attributed to Otto von Bismarck that says:  “laws are like sausages; it is better not to see them being made”.  This saying is probably insulting to the sausage industry but spot on when it comes to insurance reform laws.  The point of this saying, regardless of who came up with it, is that while the legislative process can be messy, lengthy and involve many different parties and their opinions, the result should be a well-written law that benefits society.  SB 863 certainly took a long time to come to fruition and is certainly lengthy.  California residents, including the insurance industry, can only hope that the result is beneficial.  The question is for whom:  to the injured worker; the employer; the insurance company or the attorney?  It is unlikely that it will be beneficial for all parties concerned, but perhaps that is too pessimistic. While this is a California law, it will be important not only to California broker/agents but for everyone who writes Workers’ Compensation for risks in California.

Now, before getting into the specifics of this new law, I need to tell you that I have spent the past several weeks reading this law (a nice bottle of Zinfandel may have helped) as well as countless articles, opinion letters, and blogs.  Most of the articles provided an overview with very few specifics about the reform.  So, here’s my warning before you read further:  This is a serious article and one I have tried to include all the necessary detail we will need to work with the reform as it stands at this point. We are also conducting a seminar on the topic through the community on February 13th.  Space will be limited for this very important topic. Here are the facts:

  1. SB 863 was signed into law by Governor Brown on September 18, 2012 to take effect January 1, 2013.
  2. This law was finalized after months of negotiations among representatives of labor unions and several large self-insured employers to create significant reform desperately needed in the California Workers’ Compensation system.
  3. This is the first workers’ compensation regulatory reform in California since the passage of SB 899 in 2004.
  4. Oversight and implementation of the revisions will be handled by the California Department of Industrial Relations and the Division of Worker’s Compensation.

At the core of this new law are two specific goals:

  1. Increase permanent disability benefits
  2. Cost containment for medical treatment, benefits and administration of workers compensation claims

Because the costs of the foregoing have been significantly increasing, employees and employers agreed that in order for benefits to be increased costs would have to be decreased and the process involved with the workers compensation system must be streamlined. In the past two years, the costs of workers’ compensation insurance have raised from $14.8 billion to $19 billion with a projected 12.6% increase above that in the coming months, prior this reform being enacted. Some of the changes that this law requires are fairly straightforward and involve specific dollar amounts for benefits as well as calculations for disability ratings.  Some of the other changes are not as black-and-white so we will discuss the intent along with the specifics in those areas.


  1. Minimum and maximum weekly benefit amounts will be phased in over the next two years.  At the end of that time, the maximum benefit will be $290 / week.
  2. The permanent disability rating calculations have also been changed.  Prior to January 1, 2013, the rating formula used modifiers that range between 1.1 and one 1.4 depending on the injury.  The modifier is used to take into account the injured workers diminished future earning capacity as a result of the injury.  The rating formula will no longer include the future earning capacity modifier.  All injuries that occur on or after January 1, 2013 will be adjusted by a factor of 1.4.  The rating system also uses the injured workers age and occupation as modifiers.  Those modifiers will continue to be used. Injuries that took place prior to January 1, 2013 will continue to be calculated at the same modifier that was initially used.
  3. Section 4662 of the Labor Code provides specific circumstances under which the injury is soon to be total disability:  (1) loss of both eyes or site (2) loss of both hands or use (3) effective total paralysis (4) brain injury resulting in incurable mental incapacity or insanity.  All other cases are decided in accordance with the facts of the injury.  This section of the Labor Code has not been changed.
  4. Previously, permanent disability awards were available due to sleep disorders or sexual dysfunction resulting from physical injuries.  These circumstances will no longer qualify for permanent disability awards.  Psychiatric injuries resulting from physical injuries will no longer qualify for permanent disability unless the injured worker with either the victim of a violent crime or witnessed a violent crime.
  5. Psychiatric claims involving treatment for sleep problems, sexual dysfunction and or psychological consequences of their injuries will still be compensable under the new law.
  6. The combination of the increase in benefits and the methods used to calculate permanent disability ratings results in approximately $850 million in additional benefits for permanently disabled workers.


  1. An injured worker has been eligible to receive this job displacement voucher that could be used to pay for job retraining.  The amount of this voucher was based upon the permanent disability rating and was on a sliding scale that ranged between $4,000 and $ 10,000.  In order to be eligible for this retraining voucher the permanent disability rating had to be fully determined either by a ruling by the Workers’ Compensation Appeals Board or by a settlement agreement between the injured worker and the employer.
  2. The voucher amount is now fixed at $6,000 when the injured worker reaches permanent and stationary status and the treating physician reports on the injured workers abilities and limitations resulting from the injury.


  1. The Department Of Industrial Relations is responsible for establishing and administering a $120 million asked per year Return to Work Fund.  The reason that this new fund is being established is to take care of the worker when their disability is disproportionately low compared to their earnings.  The new Labor Code Section 139.48 says:

139.48. There shall be in the department a return-to-work program administered by the director, funded by one hundred twenty million dollars ($120,000,000) annually derived from non-General Funds of the Workers’ Compensation Administration Revolving Fund, Eligibility for payments and the amount of payments shall be determined by regulations adopted by the director, based on findings from studies conducted by the director in consultation with the Commission on Health and Safety and Workers’ Compensation. Determinations of the director shall be subject to review at the trial level of the appeals board upon the same grounds as prescribed for petitions for reconsideration.

  1. The term director in this law refers to the director of the DIR.  Where will the money come from?  It will be 100% funded by surcharges on the Workers’ Compensation policies purchased by California employers.  The payment of benefits will not be paid by the insurance companies, but will be determined and administered by the DIR.  Any appeal from a determination of benefit will be made to the Workers’ Compensation Appeals Board.  A number of attorneys have opined that since the law specifically allows review at trial level, that it is implied their fees will be paid from the fund.  There are no current regulations that expressly provide for those payments.  The regulations to comply with this requirement have not yet been written, or at least published.


  1. This portion of the new law is designed to create a significant change in resolving medical treatment disputes.  As of January 1, 2013 for injuries occurring on or after that date and as of July 1, 2013 for all injury dates, an Independent Medical Review will be used to decide these types of disputes.
  2. Currently it can often take 12 months to resolve a dispute and requires specific steps that must be taken.  The process involves (1) negotiating the selection of a medical evaluator (2) obtaining a listing of state-certified medical evaluators (if an agreement is not reached) (3) negotiating over the selection of the state-certified medical evaluator (4) making the appointment (5) examination (6) obtaining the evaluator’s report (7) obtaining a hearing date with the judge if there is a disagreement on the evaluation (8) waiting for the judge’s decision.  In addition, the treating physician can rebut a request clarity from the medical evaluator and the evaluator may be required to submit supplemental reports.
  3. The law does proscribe the process for an injured worker to appeal an IMR determination and again, that will go to the trial level of the WCAB.  The basis for the appeal is either fraud, conflict of interest or a mistake of fact.  The IMR is only available if there is a dispute over the requested medical treatment.  It is not available to resolve other types of dispute, such as the injury itself.


Due to the prevalence of complaints involving MPNs, such as including doctors who do not accept workers compensation patients and the lack of availability of care and specialty areas the bill includes several modifications of the MPN system.

  1. Removal of the current requirement that 25 percent of doctors within the Network practice in areas other than occupational medicine.
  2. Physicians must affirmatively confirm participation in a network.
  3. Each Network will have to provide medical access assistants who will help the injured worker find an appropriate doctor for treatment.
  4. The Division of Workers’ Compensation must perform continuous and random reviews.  The DWC has been provided the authority to impose penalties if the Network fails to properly address and correct access problems.
  5. Disputes regarding whether or not an injured worker is subject to utilizing a Network will now be resolved at the time of the dispute, rather than holding resolution over until the end of a claim.
  6. Treatment from a non-Network provider without authorization from the insurance company or a judge’s order will no longer be paid by the insurance company or the employer.
  7. If the injured worker obtains treatment from an unauthorized provider that is either unsuccessful or worsens the injury, those medical costs will not be paid by the insurance company or the employer.
  8. Medical reports submitted by a non-Network provider can no longer be the sole basis for a compensation award.  These types of reports must be reviewed by the authorized physician and a qualified or agreed medical evaluator.


  1. This is a new process that is being established to resolved medical billing disputes.  This portion of the law also contains new requirements for submitting a bill and how insurance companies or employers must communicate their payment decisions to the medical providers.


This is one of the most significant modifications to the workers’ compensation system in California.  A lien is a direct claim against the defendant typically submitted by medical providers or other service providers that the employer was required to provide.  The medical provider uses a lien to contest the employer’s determination of the amount payable for the medical services.

This legal tool is relatively unique to California and has resulted in a significant number of liens to be filed through the court system.  In 2010 there were approximately 350,000 liens filed and in 2011 approximately 450,000.  The result of this is an expense incurred by insurance companies and employers alike of approximately $200,000,000 a year.  Because of the sheer volume of filed liens the courts encouraged settlement of these liens and as a result many unjustifiable claims were paid.

  1. The bill requires that a lien filing contain certain declarations made under penalty of perjury.  The filer will also have to pay a filing fee of $150.00.  All fees collected will be deposited into the Workers’ Compensation Administration Revolving Fund.    There are also provisions for dismissal of liens after January 1, 2014 as well as a statute of limitations (18 months) for filing liens for services rendered after July 1, 2013.  Another statute of limitations (3 years) applies for services provided prior to that date.
  2. The bill also requires the employer to pay for interpreter services.
  3. The specific language in the bill relative to the subject of liens is contained in many, many pages of the bill.  Undoubtedly the wording and intent will be clarified over the course of the next several years as to the legislative intent and the various loopholes will be found by the courts, whether favorable to the employer, the injured worker or the service provider.
  4. A schedule of maximum service provider fees are to be developed and implemented.  The Official Medical Fee Schedule will be updated and will incorporate Medicare’s Resource Based Relative Value Scale.


  1. Required to pay deposits to ensure that their responsibilities to pay losses will be to be issued by December 31stannually.
  2. The bill also precludes Professional Employer Organizations (PEOs), temporary employment agencies and employee leasing organizations from being a self-insured employer.  The bill also tightens the restrictions that could allow an illegally uninsured employer from claiming self-insured status.  The employer must receive approval from the Self-Insurers’ Security Fund.
  3. Self-insured public entities’ annual reporting requirements have also been strengthened and a required study of the self-insured public entity programs must be performed by the Commission on Health and Safety and Workers’ Compensation and a report completed with preliminary recommendation for improvement of the program by October 1, 2013.

As a conclusion to this lengthy article, this law has been touted by many different groups as a streamlining, cost-saving reform that will also include significant increase in benefits, particularly for those persons deemed permanently disabled.  The funding of the increase in benefits is supposed to be funded by the streamlining of the compensation claim process and the other procedures identified above.  Well, there is no doubt that the scope of this reform bill will have significant impact on the entire workers’ compensation system in California for years to come.  One can hope that the employers will actually see cost-savings relief and that those seriously injured workers get the help they deserve.  There is little doubt that the legal jousting will begin and continue for some time.  Thanks to all of you who have actually reached the end of this article and hope to see you in class on February 13th.Sign up on site at

Written by:

Director of Education, Insurance Community Center & President, Segale Consulting Services, LLC

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Stranger Things Have Possibly Happened

An Australia government employee was injured in a motel room while on a business trip and she wasn’t playing canasta.  While the lower court there ruled that this was not arising out of employment, that decision was overruled by the Australian Federal Court.  Now, if you think that type of claim could never happen here, consider the following:

  • Housekeeper files for benefits under domestic Workers’ Compensation claiming carpal tunnel syndrome from regularly, shall we say, servicing the “master” of the house.  The Workers’ Compensation insurance company paid loss of wages, medical and rehabilitation expenses.  Retraining was apparently not required.  As a side note, this claim was reported by the wife.

On to some other strange and just weird claims:

  • A woman working out of her house, tripped over the family dog, breaking her wrist.  The Appeals Board asserted that since the home was her work environment and she was injured while working, the claim would be covered under the Workers’ Compensation policy.
  • This claim occurred in a monopolistic state.  A number of employees were roughhousing during a mandatory team building event.  A group of them were in a canoe, saw a coworker standing on the riverbank and tried to pull him into the river.  One of the male employees grabbed him, threw him to the ground and caused a neck injury.  The Court of Appeals upheld the lower court’s decision since this was a mandatory business event.  Horseplay doesn’t necessarily remove a claim from the Workers’ Compensation system.
  •  Apparently in at least one state, smoking a little weed doesn’t mean that an injury can’t be covered under Workers’ Compensation.  A man mauled by a wild animal at a tourist park claimed employee status.  The employer argued that he was a volunteer and he had smoked marijuana that day.  The state’s Supreme Court states that he received compensation for his duties and that his habit was not the major cause of his injury and ruled in favor of the employee.
  • A group of employees were sent to a two-day training conference.  At the end of the first day, a group of the employees first attended a company
    dinner, then visited three bars over a four hour period.  After going back to their hotel, three of the employees decided they should climb out of a bathroom window onto the roof of their second-story hotel.  One of them leaned against a rail which gave way and the employee sustained injuries due to the fall.  The appellate court ruled that benefits should be denied stating that the employee’s conduct was unreasonable under the circumstances.
  • A man, working as a maintenance worker at a trailer park was asked to go into a trailer to investigate a very bad smell.  He found the decomposing body of an opossum and suffered a heart attack.  Although he had a pre-existing heart condition, the jury ruled that the injury was work related and, therefore, covered under the Workers’ Compensation policy.
  • Then there was the injury of a 21-year old man who gave a vending machine at his employer’s place of business a push to dislodge a bag of chips for a female coworker.  He suffered a displaced fracture in his neck and was awarded benefits by the state Appellate Court.
  • A co-worker’s perfume was found to have aggravated an employee’s pre-existing COPD.  The Appellate Court found that was a compensable injury as it arose out of employment.
  • An employee was off the job due to an employment-related injury when he was arrested and incarcerated for solicitation of murder (of his wife).  This was deemed to be involuntary removal from employment.  His benefits were to be continued.
  • An employee was injured while working at a fast-food establishment.  Part of the insulation of an electrical wire to a microwave oven had been removed and the employee sustained electrical burns.  The act of removal did not rise to the level of intentional tort liability, although clearly injuries arising out of and in the course of employment.

So, what is the moral of this collection?  Sometimes the employer is held responsible, even when, at first glance, it sounds absurd.  But then, humans can act in absurd and strange ways and cause themselves or others harm in the process.

Although I cannot confirm the veracity of the following, I couldn’t resist including these  claimant statements that I found at (no – everything found on the internet is not true!).  Sometimes, it is all how you phrase it!

  • My head injuries have created a permanent increase in libido which has led to two affairs and has ruined my marriage.
  • I got my right hand first finger in the saw while helping Mike and staying out of his way. My finger bled and it affected my mind.
  • I chipped my tooth on a cookie while visiting a customer.
  • While on duty, I was hit in the face by a hand. My glasses were broke and something hit my eye. No one believes I was hit but it hurt!
  • Hot grease splashed on me and fried my thumb.
  • I was working on my job and got a pain at the end of the week.
  • Accident unnecessarily occurred on account of a misjudgment.
  • I ran down the steps and when I got to the end, my feet wouldn’t stop.
  • I had my hand in the machine while the air was off. Someone turned on switches and folded my hand.
  • I was assaulted and attacked by a vicious employee because he didn’t like me and I know it.
  • The patient was going to fall for me. I could not let this happen. In so preventing this, I caused myself damage to my knee.
  • This is for the cut on my hand, but I took the stitches out myself. However, I am filing on account of the watchdog biting me and on account of a hurt I got in a fall in the paint shop.
  • In performing the job of which I am capable, I didn’t know the machine was on and was showing my new helper what not to do and did.
  • I was proving that I could carry an air compressor and I strained my back.
  • I looked into the hose to see why the water did not come out. It came.
  • I sprained my ankle the same way I sprained my ankle before.
  • I hit my arm against the hopper, and got flea bites.
  • That night I done something I shouldn’t-a done and now my back hurts.
  • A gate hit my foot while my back was turned, closing the other side.
  • Customer thought she needed the brakes adjusted. She drove the car into the station, could not stop the car, came through the door and pinned claimant against the cash register.
  • I was removing a blouse for a customer and which time I injured my back.
  • I inherited this occupational disease.
  • Acting on behalf of my employer, I hit another automobile.
  • In order to avoid a person, Betty lost her balance and fell down. In one hand she had a ketchup bottle which broke on impact, cutting her hand. In the other hand she had her thumb.
  • I over asserted myself and got a hernia.
  • The doctor gave me a disease for my occupation and said I must change jobs.
  • Gears smashed thumb while holding air cleaner, while putting nipple on with right hand, while balancing air cleaner with left hand, while holding end with left hand away from right hand. Gears were not covered.
  • I didn’t know water was where I fell.
  • I fell down in the Fotomat booth while dislocating my knee.
  • Sustained back injury due to car accident which is part of his job.
  • Falling off the truck, I dislocated my pelvis and other male organs.
  • I slipped and fell and hurt everything in me.
  • I dropped my head on my foot when someone pushed their guts across the table without calling out (from a slaughterhouse employee).
  • The fumes were so bad I was taken by them and went to bed with the doctor.
  • The guy I work with went ape s4%t. He hauled off and punched me in the jaw and then tried to rip my throat out.
  • Carrying roll roofing, I caught my toe on a piece of tin that was froze in the ground. The tin flipped against me causing me to trip, letting the roofing fall into the bucket of tar. Tar splashed out, burning my arm, and causing me to jump back into the ladder which fell against me, knocking me into the building, breaking my tooth. Thus I burned, bumped, and broke me.


  • Written by:
  • Marjorie Segale AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR
    Director of Education, Insurance Community Center
    & President, Segale Consulting Services, LLC

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