Property and Casualty Insurance · Property Insurance · 7 min read

Commercial Causes of Damage

In this lesson you will

Distinguish between named perils coverage under the Basic and Broad Forms and open perils coverage under the Special Form.
Identify the specific perils covered and excluded across the standard ISO Basic, Broad, and Special commercial causes of loss forms.
Recognize standard exclusions and limitations common to all three forms as well as exclusions unique to the Special Form.

Commercial Causes of Loss Forms Overview

In a standard Insurance Services Office (ISO) commercial property policy, a Causes of Loss form identifies which causes of loss are covered and which are excluded. Insurers may also use their own proprietary forms and endorsements. ISO publishes three standard commercial causes of loss forms: the Basic Form, the Broad Form, and the Special Form.

The primary difference among these forms is how coverage is structured. The Basic and Broad Forms are named perils forms, meaning they insure only against the causes of loss specifically listed in the policy. Under the Basic or Broad Form, you must show that a covered named peril caused the loss, though state law governs the precise burden of proof.

In contrast, the Special Form provides open perils coverage. It insures against direct physical loss unless the cause of loss is specifically excluded or limited by the policy. Generally, once you establish a covered direct physical loss under the Special Form, the insurer must show that an exclusion applies, subject to the burden of proof set by state law.

Exam tip. When evaluating exam questions, look closely at whether the policy uses named perils or open perils. On named perils forms (Basic and Broad), unlisted causes of loss are not covered. On the Special Form, you must first establish direct physical loss of or damage to covered property; exclusions, limitations, policy conditions, and state law then affect whether the loss is paid.

Common mistakes

Assuming the Basic Form covers theft because it covers vandalism. Vandalism covers willful and malicious damage to or destruction of covered property; it does not cover theft, but it can cover building damage caused by burglars breaking in or exiting.
Believing that all water damage is excluded by the standard water exclusion. The exclusion applies to floods, surface water, sewer backup, and underground water pressure, but the Broad Form explicitly covers accidental discharge from a plumbing system or appliance.
Thinking that an open perils policy covers every conceivable loss. The Special Form still contains strict exclusions, such as wear and tear, mechanical breakdown, employee dishonesty, and inventory shortages.

Key points

ISO publishes three standard commercial causes of loss forms: Basic (named perils), Broad (named perils), and Special (open perils).
The Basic Form covers basic perils including fire, lightning, explosion, windstorm, smoke, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.
The Broad Form covers all Basic Form perils plus falling objects, weight of snow/ice/sleet, accidental water discharge from appliances or plumbing, and limited abrupt collapse.
The Special Form generally covers direct physical loss of or damage to covered property unless an exclusion or limitation applies; theft may be covered, subject to policy conditions and applicable exclusions and limitations.
Exclusions common to all three forms include ordinance or law, earth movement, governmental action, nuclear hazard, war, utility services, fungus/rot, and specific types of water damage such as flood and sewer backup.
The Special Form adds exclusions for wear and tear, mechanical breakdown, animal infestation, voluntary parting, inventory shortages, and employee dishonesty.

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Original lesson written for Property and Casualty Insurance practice · updated October 29, 2026. Exam names are trademarks of their owners; tests.global is not affiliated with them.