With Apologies to the Eagles… Hell Freezes Over:

The Remarkable New 2012 ISO Commercial Property

Changes

Presented by

Bill Wilson, CPCU, ARM John Eubank, CPCU, ARM Greg Deimling, CPCU, ARM

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Copyrights and Disclaimers COPYRIGHT Copyright 2012 by Independent Insurance Agents & Brokers of America (IIABA). All rights reserved. All information and content included in this material, including but not limited to (i) text, graphics, logos, icons or images; (ii) data and content compilations; and (iii) software, is the property of the copyright holders or their content or software suppliers and is protected by United States and international copyright laws. You may not modify, copy, distribute, transmit, display, publish, sell, or license any information from this material without the express written consent of IIABA. You may not create derivative works, or use any information or content for commercial or public purposes without the express written consent of IIABA. In addition, you may not reproduce, transmit, transcribe, store in a retrieval system, or translate into any human or computer language any part of the material in any form or by any means whatsoever without the express written consent of IIABA. Such consent may be requested by contacting Bill Wilson at bill.wilson@iiaba.net.

TRADEMARKS The trademarks, logos, service marks, graphics, and trade dress displayed are the intellectual property of IIABA, and other applicable parties that have licensed their property and/or material to IIABA. You should assume that any product or service name is a registered mark, trademark, or service mark and the intellectual property of IIABA or a third party. You are prohibited from using any of these trademarks or service marks for any purpose, including but not limited to use as metatags on other pages or sites on the World Wide Web, without the express written permission of IIABA or such third parties. If IIABA grants such written permission, you may not use the trademarks and service marks in any manner that (i) is likely to cause confusion among customers or the public, or (ii) disparages or discredits IIABA. This content “Includes Copyrighted Material of Insurance Services Office, Inc. With Its Permission. Copyright Insurance Services Office. 20__".

DISCLAIMER This material has been designed for use in training programs for insurance industry personnel throughout the United States. It is not intended to be used as a complete reference resource on the programs and coverages outlined herein. Unless indicated otherwise, the coverage discussion herein are based on various editions of "ISO standard" policy forms. Programs, coverages, rules, and coverage interpretations presented in this publication may be different from those used by individual insurance companies writing these programs. Contact individual companies for details about their interpretations of the programs outlined herein and/or their own proprietary programs and contracts. The opinions expressed in this document are just that. No warranties, express or implied, of any kind are made, intended or inferred. The information contained herein is not legal advice, nor should it be taken as such. When such legal issues arise, proper advice should be sought, where applicable and appropriate, from qualified legal counsel.

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Greg Deimling

Greg Deimling, CPCU, ARM is a principal in Malecki Deimling Nielander and Associates, LLC. He

has been in the insurance and risk management industry as an agent and consultant for over 35

years. Mr. Deimling provides Risk Management and General Management services to a diverse

group of both public and private firms and individuals.

Mr. Deimling brings a unique set of skills and abilities to each assignment. He is well versed and

competent in a variety of fields. This unique combination of hands on learning, formal training,

volunteer and civic involvement coupled with life experiences provides the client a solid return for

their consulting investment.

He has been in the insurance and risk management industry as an agent and consultant for over

35 years. Mr. Deimling provides Risk Management and General Management services to a diverse

group of both public and private firms and individuals covering a wide range of subject matter and

assignments. He provides litigation support and assistance as an expert witness regarding

insurance coverage interpretation, policy formation, technical analysis of insurance contracts and

agent, broker and insurer standards of conduct. Many of his assignments involve his negotiation

and problem resolution skills and techniques, whether in a business setting or in the support of

pending or actual litigation.

Mr. Deimling began his insurance career in 1970, upon his discharge from active duty with United

States Air Force. He spent the next twenty three years associated with a family owned

independent insurance agency, Globe Insurance Agency, Inc. eventually serving as president until

1993. As an insurance agent, he sold and serviced accounts from the smallest to large, both

individual and commercial enterprises. He is a licensed insurance agent in the State of Ohio and a

licensed Insurance Consultant in the Commonwealth of Kentucky. Currently, he maintains an

affiliation with agency as a principal and a member of the management team.

In 1989 he founded Globe Business Services, Inc. a risk, insurance and management firm to

provide consultative services to wealthy individuals, public and private concerns on a wide variety

of insurance and management topics. This firm became the predecessor to Gregory G. Deimling

and Associates.

Mr. Deimling received his CPCU Chartered Property and Casualty Underwriter designation in 1976

and has a history of twenty years volunteer involvement at the national level. A member and past

president of the Society's Cincinnati Chapter, and a member of the CLEW Consultants, Legal, and

Expert Witness Section, he has also served nationally as Secretary-Treasurer, regional vice

president, East Central Region, national governor, member of the Strategic Planning Committee,

and chairman of the Interest Sections Governing Committee and Budget and Finance Committee.

In addition to earning the CPCU designation, Deimling also holds the AMIM Associate in Marine

Management and ARM Associate in Risk Management designations from the Insurance Institute of

America and is a graduate of the National Leadership Institute and an instructor for the Institute.

He also maintains qualification in the Continuing Professional Development Program.

Mr. Deimling is a graduate of the University of Cincinnati with a undergraduate degree in Business

Administration with an insurance major. He received his Masters of Business Administration,

majoring in Finance from Xavier University in 1980.

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John Eubank

John O. Eubank, CPCU, ARM is CEO and President of Professional Insurance Education, Inc. in

Nashville, Tennessee. He was previously employed by the Insurance Services Office, Inc. and ISO

Commercial Risk Services, Inc. as the Regional Operations Manager for the Southern Region. He

left ISO in 1987 to form PIE, Inc. and since has logged 14.72 gazillion miles in his insurance-

manual-laden Cadillac.

John's professional affiliations include past Regional Vice President of the Society of Chartered

Property & Casualty Underwriters (CPCU), PMLG of the Honorable Order of Blue Goose,

International (HOBGI), member of the National Fire Protection Association (NFPA), and member of

the Society of Fire Protection Engineers (SFPE).

John is recognized as one of the nation's premier insurance education instructors, having served

as a National Faculty member of the Society of Certified Insurance Counselors since 1976, and is

a recipient of the Professional Leadership Scroll from the American Institute for Property & Liability

Underwriters and the Insurance Institute of America.

Since forming Professional Insurance Education, Inc. in 1987, he has served as a speaker and

instructor for a wide variety of educational seminars for insurance associations in Alabama,

California, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Ohio, North & South Carolina,

and Tennessee; Hoosier Ins. Co.; Society of CIC and the CPCU Society; National Association of

Insurance Women (NAIW); and the North American Retail Dealers Association.

John is available for association-sponsored and in-house training programs, though he is usually

booked over a year in advance. He can be contacted at 408 Page Road, Nashville, TN 37205,

615-383-5443, insspeak1@bellsouth.net.

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Bill Wilson

William C. Wilson, Jr., CPCU, ARM is director of the Virtual University of the Independent Insurance Agents & Brokers of America (IIABA). He was the Director of Education & Technical Affairs for the Insurors of Tennessee from 1988-1999. Prior to 1988, he was employed by Insurance Services Office, Inc. as the manager of their field operations in Tennessee and Kentucky. Before that time, he was a bag boy at H.G. Hill food store #25. Bill is a graduate of the Illinois Institute of Technology with a B.S. degree in Fire Protection & Safety Engineering. He was a licensed insurance and surplus lines agent, and his professional affiliations have included past president of the Middle Tennessee Chapter of CPCU, board member of the national CPCU Society, PMLG of the Honorable Order of Blue Goose, International, member of the Independent Insurance Agents of America (IIABA) National Education Committee, member of the Certified Insurance Service Representative (CISR) National Advisory Committee, member of the Society of Insurance Trainers and Educators (SITE) and its SITE Journal editorial committee, member of the National Writers Association, chairman of the Tennessee Insurance Commissioner's Education Advisory Committee, member of the Middle Tennessee State University Insurance Liaison Committee, member of the Nashville State Technical Institute’s Financial Services Advisory Committee, member of the National Underwriter's FC&S Editorial Advisory Board, and an instructor for insurance and risk management programs for Tennessee State University and Nashville State Technical Institute. He is listed in the International Who's Who of Professionals™. He has served as a trainer and speaker for various organizations, including the Independent Insurance Agents of America (IIABA national conventions and state convention programs and seminars), the CPCU Society national convention, National Leadership Conference and chapter programs, the National Association of Insurance Women (NAIW), the Southern Agents Conference, and the Risk & Insurance Managers Society (RIMS). Bill has conducted hundreds of technical seminars, workshops and convention presentations—from Hawaii to Rhode Island—as well as programs on time management, presentation and public speaking skills, seminar development, and many others. He was the recipient of the 1996 L.P. McCord National Education Award for having the #1 ranked IIABA insurance education program in America. Bill was the 2010 recipient of the George M. Gottheimer Memorial Award which is presented annually to a CPCU Society member who has made an outstanding contribution to the field of insurance education, risk management or insurance consulting. He has researched, developed, written, and published dozens of technical articles and manuals, and has authored articles in business and industry trade periodicals such as Presentations magazine, American Agent & Broker magazine, Independent Agent magazine, Tennessee Insuror magazine, Tennessee Business magazine, the CPCU Journal, and the SITE Journal. He has been cited as an expert resource/interviewee for local television and radio media, and has served as an expert witness in litigation. According to Nashville NBC television affiliate WSMV, "Bill Wilson is an expert when it comes to insurance." Dr. William T. Hold, president of the Society of Certified Insurance Counselors in Austin, Texas has said that, "Bill Wilson is recognized by his peers as one of the premier insurance educators in America." Finally, not that it has anything whatsoever to do with this program, Bill is also an avid (notice we didn’t say ‘good’) electric blues guitar player. He can be emailed at bill.wilson@iiaba.net. You can visit IIABA's Virtual University by going to http://www.bigivu.com.

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The Big “I” Virtual University The Big “I” Virtual University (VU) is an online education, reference, and research facility that is available for free to members of the Independent Insurance Agents & Brokers of America and on a subscription basis to others. This 4,000+ page resource includes a research library with articles, white papers, charts, checklists, policy form analysis, and other documents on insurance coverages, agency management, sales, customer service, and technology. Big “I” members can also access an “Ask an Expert” service to submit questions about insurance coverages or claims or agency management and technology issues to over 50 subject matter experts from across America. The service as responded to somewhere near 30,000 questions since its inception. The Virtual University (VU) also includes a selection of online courses, approved for CE in many states, as well as periodically offering national webinars by top industry educators. For information on online courses, go to www.bigivu.com and for information on webinars, visit the “Education” section at www.independentagent.com. The VU publishes a bi-weekly award-winning email newsletter that typically includes six or more articles on personal lines, commercial lines, agency management, sales, customer service, and technology. This newsletter is free – you do not have to be a Big “I” member agency to subscribe – and is distributed to more than 16,000 recipients in 70 countries around the world. For more information, go to www.bigivu.com or email bill.wilson@iiaba.net.

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With Apologies to the Eagles…Hell Freezes Over: The Remarkable New 2012 ISO Commercial Property Changes

Presenters:

• Bill Wilson, CPCU, ARM• John Eubank, CPCU, ARM• Greg Deimling, CPCU, ARM

Why ISO makes policy changes

• Events and emerging issues• Case law• Insurer panels• ISO staff• Liaison committee• Big “I” National Technical Affairs Committee• Mid-America Insurance Conference

(www.matcinsurance.com)

How do I know it’s ISO?

• “© ISO Properties, Inc., 20__” or“© Insurance Services Office, Inc., 20__”

vs

• “Includes Copyrighted material of Insurance Services Office, Inc. with its permission”

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2012 Filing Changes

• 16 major policy form changes• 27 endorsement changes

Policy Form Changes

1. Earth Movement

2. Debris Removal

3. FD Service Charge

4. BPP in Structures

5. Extended BI

6. Coverage Radius

7. Water Exclusion

8. Property in Storage

9. Entrusted Property

10.Vegetated Roofs

11.Electronic Data

12.Newly Acquired Ppty

13.Ordinance or Law

14.Wear and Tear

15.CP 10 30 “All Risks”

16.Specified Limits

Earth Movement Exclusion

• “This exclusion applies regardless of whether any of the above, in paragraphs (1) through (5), is caused by an act of nature or is otherwise caused.”

• Applies to all Causes of Loss forms• Similar to the earth movement change

made to the HO 2000 forms and theHO 2011 water damage exclusion

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Debris Removal and Plants

• Debris Removal– Additional limit increased from $10,000 to $25,000– Now covers removal of debris of the property of others

(limited to $5,000 if no direct physical loss to Covered Property)

• Outdoor Property Coverage Extension now includes debris removal of trees, shrubs and plants not owned by the insured

Fire Dept. Service Charge

• Clarifies that the limit applies to each premises described in the Declarations

• Clarifies that only that limit applies, regardless of the number of fire departments that respond

• The limit can be increased by a Declarations page entry

BPP in Described Structures

• Clarifies that Business Personal Property is covered while in/on described structures as well as in/on described buildings

• Note that, although BPP is also covered while in the open or a vehicle within 100 feet of the premises, if it is in/on a building or structure that building or structure must be described

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Extended BI Coverage

• The current business income forms extend coverage for 30 days beyond the end of the period of restoration

• The new forms broaden this to 60 days with an option to go to 2 years

Coverage Radius

• ISO property forms currently cover BPP within 100 feet of the described premises

• This gives greater coverage to tenants on the lower floors of a high rise building than those on the upper floors

• The revised forms provide coverage within 100 feet of the described premises or the building, whichever is greater

Water Exclusion

• ISO introduced the CP 10 32 08 08 –Water Exclusion Endorsement following Hurricane Katrina

• The language of this form is being incorporated into the Causes of Loss forms and the endorsement is being withdrawn

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Property in Storage Units

• New Coverage Extension provides $10,000 coverage for BPP in portable storage units within 100 feet of the premises for up to 90 days

• These limitations apply regardless of the number of storage units

• Still subject to the policy limit, though the $10,000 can be increased

Entrusted Property

• Current CP 10 30 exclusion:“Dishonest or criminal acts by…anyone to whom you entrust the property for any purpose….”

• This exclusion is not in the CP 10 10 or CP 10 20 Causes of Loss forms

• The new CP 10 30 exclusion for entrusted property only applies to theft

Vegetated Roofs

• Property and Causes of Loss forms are revised to cover lawns, trees, shrubs, and plants that are part of a vegetated “green” roof without regard to a special limit or perils

• However, such roofs are not covered for dampness/ dryness of atmosphere, temperature changes, mold, frost, hail, rain, snow, ice, sleet, etc.

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Electronic Data

• Property forms currently limit coverage for electronic data to $2,500 on an annual aggregate basis

• This limit will no longer apply to electronic data “which is integrated in and operates or controls the building’s elevator, lighting, heating, ventilation, air conditioning or security system”

Newly Acquired Property

• Current property forms provide up to $100K for newly acquired BPP for a limited period of time at:– The described premises– New buildings at the described location– Newly acquired locations

• Coverage for newly acquired BPP at the described premises is being removed so that increases in values at the premises must be covered by increasing the limit manually or via peak season or reporting forms

Ordinance or Law Exclusion

• This exclusion is clarified so that it applies to “The enforcement of or compliance withany ordinance or law”

• The “compliance” language is also added to the Increased Cost of Construction Additional Coverage, Loss Conditions, and other policy provisions related to the ordinance or law exclusion

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Wear and Tear Exclusion

• The CP 10 30 is revised to cover damage that results from accidental discharge or leakage from a municipal water or sewer pipe off the described premises if breakage or cracking is caused by wear and tear

• This is similar to the coverage afforded by ISO’s HO-3 and HO-5 policy forms

CP 10 30 “All Risks”

• Editions prior to October 1983:“All Risks of Direct Physical Loss”

• Editions since October 1983:“Risks of Direct Physical Loss”

• New form:“direct physical loss”

Specified Limits Options

• Certain specified limits on the listed forms may be increased by a Declarations entry:– Electronic Data

CP 00 10, CP 00 17, CP 00 18, CP 00 99

– Newly Acquired LocationsCP 00 30, CP 00 32, CP 00 50

– Interruption of Computer OperationsCP 00 30, CP 00 32, CP 00 50

– Limitations for TheftCP 10 30

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Endorsement Changes

1. Debris Removal and Plants

2. Business Income Worksheet

3. Processing Exclusion

4. Property Away from Premises

5. Radio or TV Antennas

6. Overhead Transmission Lines

7. Ordinance or Law Coverage

8. Commercial Condo Changes

9. Higher Limits

10. Equipment Breakdown

11. Building Glass

12. Deductibles by Location

13. Roof Surfacing Limitations

14. Theft Exclusion

15. Increased Disaster Rebuilding Expenses

16. Dependent Properties

17. Flood Coverage Endorsement

18. Sewer Backup

19. Theft of Building Materials – Not B/R

20. Payroll Limitation or Exclusion

21. Commercial Condo Loss Assessment

22. Wastewater Removal

23. EQ Sprinkler Leakage Deductible

24. Protective Safeguards

25. Theft of Building Materials – Bldrs Risk

26. Food Contamination

27. Green Upgrades Endorsement

Debris / Outdoor Plants

• CP 04 15 – Debris Removal Additional Insurance is revised to reflect the new $25K base limit for excess debris removal coverage

• CP 14 30 – Outdoor Trees, Shrubs and Plants is broadened to include debris removal expense

BI Worksheet

• CP 15 15 Business Income Report/Work Sheet is revised to change the Extended Business Income period from 30 to 60 days to track with the change in the BI forms

• Another change is made to reflect a change in the CP 15 10 – Ordinary Payroll Limitation or Exclusion endorsement discussed later

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Processing Operations

• New endorsement CP 10 34 – Exclusion Of Loss Due To By-Products Of Production Or Processing Operations (Rental Properties)

• Mandatory for owners and tenants of rental premises

• In response to Graff v. Allstate Ins. Co., Wash. Ct. App. 2002

Property Away from Premises

• New endorsement CP 04 04 – Specified Business Personal Property Temporarily Away From Premises

• Designed to cover business property (e.g., a laptop computer) other than sales samples and stock temporarily away from premises in the CCC of an employee or other insured for a specified limit of insurance

Radio or TV Antennas

• The CP 15 50 – Radio Or Television Antennas –Business Income Or Extra Expense endorsement says it applies to the EQ Causes of Loss Form

• This reference is being removed based on an explanation provided by ISO in their filing that would require drug use to understand…in other words, this change really doesn’t do anything.

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Overhead Transmission Lines

• The CP 04 17 – Utility Services – Direct Damage and CP 15 45 – Utility Services – Time Element include coverage for off premises power failure with an option for including or not including “overhead transmission lines”

• The revised endorsements clarify that “overhead transmission lines” include “distribution lines”

Ordinance or Law

• The CP 04 05 – Ordinance Or Law Coverage endorsement (along with 8 other endorsements that involve some form of this coverage) is being modified to track with the change discussed earlier to the property forms: “The enforcement of or compliance with any ordinance or law”

Commercial Condos – Part 1

• The CP 17 98 Condominium Commercial Unit-Owners Changes – Standard Property Policy endorsement has been revised for the changes to Coverage Radius, BPP in Described Structures, and Newly Acquired Property discussed earlier

• This endorsement is only used with the Standard Property Policy, a rarely used form

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Higher Limits

• As discussed earlier, some property form sublimits may be increased by Declarations page entry…a new endorsement, CP 04 08 – Higher Limits, has been introduced as an alternative to using the Dec page

Equipment Breakdown

• New endorsement CP 10 46 – Equipment Breakdown Cause of Loss– Only used with Special Causes of Loss form– Not an additional amount of insurance– Triggers business income coverage if that coverage is

provided– Ammonia Contamination and Hazardous Substance

coverage limited to the lesser of 10% of the limit or $25,000…higher limits can be scheduled

• New CP 10 47 allows CP 10 46 coverage to be suspended and reinstated

Building Glass

• CP 14 70 – Building Glass – Tenant’s Policy was introduced in 2007, subject to the deductible shown in the Declarations

• A deductible amount is now being shown on the endorsement…if left blank, there is no deductible

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Deductibles by Location

• Commercial property form deductibles are usually per occurrence, regardless of how many buildings or locations

• Existing CP 03 20 – Multiple Deductible Form allows different deductibles by location and peril…if multiple locations are involved in a single occurrence, only the highest deductible applies

• New CP 03 29 – Deductibles By Location endorsement allows separate deductibles per building or location

Roof Surfacing Limitations

• New CP 10 36 – Limitation On Coverage For Roof Surfacing endorsement

• ACV option for roof when building is insured on a RC basis

• Valuation applies to loss by any covered peril

• Cosmetic damage exclusion for wind and hail losses

Theft Exclusion

• Existing CP 10 33 – Theft Exclusion endorsement modified to provide a schedule so it can be written to apply only to certain locations

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Disaster Rebuilding Expense

• CP 04 09 – Increase In Rebuilding Expenses Following Disaster

• Applies to scheduled buildings• Must involve a declared disaster• Applies a percentage to the limit as additional

insurance• A portion of the additional coverage may be

applied to debris removal or Ordinance Or Law Coverage

• Annual aggregate basis

Dependent Properties

• New coverage available in 5 dependent property business income endorsements: Dependent Properties In The Supply Chain (Business Interruption)

• Can provide coverage for BI losses from “secondary contributing locations” and “secondary recipient locations”

Flood Coverage

• The CP 10 65 – Flood Coverage Endorsement and CP DS 65 – Flood Coverage Schedule are revised to allow the requirement for primary NFIP coverage to be waived by specific location

• The 72-hour waiting period for coverage to attach does not apply to renewal policies

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Sewer Discharge

• New CP 10 38 – Discharge From Sewer, Drain Or Sump (Not Flood-Related)– Can cover direct or indirect loss– Sublimit(s) of coverage are provided– Annual aggregate may apply– Policy deductible applies to all losses– No coverage if loss induced by “flood or flood-related

conditions”– No coverage if sump pump failure is due to power

failure unless the policy is endorsed to cover power failure

Building Materials – Part 1

• New CP 10 44 – Theft Of Building Materials And Supplies (Other Than Builders Risk) covers theft of materials and supplies located on or within 100 ft. of premises

• Requires Special Causes of Loss form without a theft exclusion

• Use current CP 11 21 endorsement for builders risk policy (CP 00 20)

Payroll Limitation/Exclusion

• CP 15 10 – “Ordinary Payroll Limitation Or Exclusion” title changed to “Payroll Limitation Or Exclusion”

• No longer applicable only to non-managerial employees

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Commercial Condos – Part 2

• CP 04 18 – Condominium Commercial Unit-Owners Optional Coverages revised to track with a similar endorsement in ISO’s homeowners program

• The $1,000 limitation on an assessment resulting from a master policy deductible can now be increased

Wastewater Removal

• CP 15 45 – Utility Services – Time Element has been revised to include wastewater removal systems

• Includes sewer mains, pumping stations, and similar equipment

• Does not apply to interruptions due to heavy rainfall or flooding

EQ Sprinkler Leakage

• Endorsements CP 10 40 – Earthquake And Volcanic Eruption and CP 10 45 – Earthquake And Volcanic Eruption are revised so that the percentage EQ deductible does not apply to the EQSL-Only coverage

• Instead, the flat Fire deductible applies to the EQSL-Only coverage

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Protective Safeguards

• CP 04 11 – Protective Safeguards replaces the IL 04 15 – Protective Safeguards endorsement

• The new endorsement applies only to commercial property insurance

Building Materials – Part 2

• The CP 11 21 – Builders Risk – Theft Of Building Materials, Fixtures, Machinery, Equipment endorsement is revised to reflect the previously discussed “entrusted property” exclusion changes

Food Contamination

• New CP 15 05 – Food Contamination (Business Interruption And Extra Expense)

• Covers extra expenses and BI losses arising out of food contamination, including cost of cleaning equipment, cost of replacing food, medical testing and vaccination, advertising expense

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Green Upgrades

• CP 04 02 – Increased Cost Of Loss And Related Expenses For Green Upgrades

• The changes are largely editorial with no intended change in coverage

Questions?

• During the webinar…– Use the GoToWebinar interface and type in

your questions in the Question Pane on the right side of your screen.

• After the webinar…– Email Bill.Wilson@iiaba.net