1. Forms
2. CP
3. CP-03-21

What the Form Is

The CP 03 21 Windstorm or Hail Percentage Deductible endorsement is an addition to a commercial property policy that changes how the deductible is applied for losses specifically caused by windstorm or hail. Instead of a fixed dollar amount, this endorsement establishes a deductible that is a percentage (commonly 1%, 2%, or 5%) of the value of the covered property at the time of the loss. This deductible applies to each occurrence of windstorm or hail and is calculated separately for each building, for personal property at each building, and for personal property in the open. It is important to note that this endorsement does not broaden coverage or negate exclusions like the water exclusion found in the main policy.

Classes of Business It Applies To

This endorsement is typically used for businesses whose properties are exposed to significant windstorm or hail risks. This often includes, but is not limited to:

• Properties in coastal regions prone to hurricanes or tropical storms.
• Properties in areas with frequent hailstorms or other severe wind events (e.g., Tornado Alley).
• Buildings with large roof areas or susceptible exterior finishes.
• Businesses with significant outdoor property.

Real-world examples: A resort hotel on the Florida coast, a car dealership with a large outdoor inventory in Oklahoma, a manufacturing facility with a large, flat roof in the Midwest, or an agricultural operation with outbuildings and equipment stored outdoors.

Special Considerations

• Separate Deductible: This percentage deductible applies only to windstorm or hail losses and replaces the standard policy deductible for these perils. Other perils will still be subject to the policy's regular deductible.
• Calculation Basis: The percentage is applied to the value of the covered property at the time of loss for each building, personal property at each building, or personal property in the open that sustains damage. This can result in a substantial deductible amount, especially for high-value properties.
• Per Occurrence: The deductible applies to each occurrence of windstorm or hail.
• Distinction from Hurricane Deductibles: While often used in hurricane-prone areas, this form applies to any windstorm or hail, not just named hurricanes, unless specifically stated or amended by other endorsements. Some insurers may have separate, specific hurricane deductible endorsements with different triggers.
• State Variations: Availability and specific wording can vary by state. For instance, South Carolina has had specific regulations and its own form (CP 03 39) for windstorm or hail deductibles, and at one point, the standard CP 03 21 was withdrawn for use there.
• Water Exclusion: It's reaffirmed that this endorsement does not override the policy's water damage exclusion, meaning damage from flood or storm surge accompanying a windstorm might still be excluded unless covered elsewhere.

Key Information for Agents and Underwriters

• Risk Assessment: Thoroughly evaluate the property's geographic location, construction type, age, roof condition, and local building codes to determine appropriate use and percentage for this deductible.
• Client Education: It is crucial for agents to clearly explain to insureds how the percentage deductible is calculated and the potential for a large out-of-pocket expense. Provide examples based on their property values.
• Pricing Impact: Applying a percentage deductible for wind/hail typically results in a premium credit for the insured, as they are retaining a larger portion of the risk for this specific peril.
• Underwriting Guidelines: Insurers will have specific guidelines on when this endorsement is mandatory (especially in catastrophe-prone areas) and the minimum/maximum percentage deductibles allowed. Ensure the declarations page accurately reflects the scheduled premises and the chosen percentage.
• Interaction with Other Forms: This endorsement modifies standard commercial property coverage forms such as the CP 00 10 (Building and Personal Property), CP 00 17 (Condominium Association), CP 00 18 (Condominium Commercial Unit-Owners), and CP 00 20 (Builders Risk). It may also interact with Loss Payable Provisions (CP 12 18).
• Market Conditions: In hard markets or for high-risk properties, insurers may mandate higher percentage deductibles for wind and hail.