1. Forms
2. CP
3. CP-04-08

What the Form Is

The CP 04 08 endorsement serves a dual purpose within a Commercial Property policy. Primarily, it is used to increase the limits for certain Coverage Extensions or Additional Coverages by scheduling them directly on the endorsement itself. This provides an alternative to, or a more formal way of, noting these increased limits compared to just an entry in the Declarations section of the policy. It's important to note that any limit entered on the CP 04 08 replaces the existing limit found in the coverage form for that specific item; it is not an additional amount stacked on top of the original limit. Secondly, as indicated by its title, this endorsement may also be utilized to provide Spoilage Coverage for perishable stock that is damaged due to mechanical breakdown or contamination of refrigerating, cooling, or humidity control apparatus or equipment.

Classes of Business It Applies To

The applicability of the CP 04 08 depends on which of its functions is being used:

• For Higher Limits: This function can apply to virtually any commercial property policyholder who has a need to increase limits for specific, often ancillary, property coverages or extensions where the base policy form explicitly allows for such an increase through an entry in the Declarations.
  • Real-world example: A graphic design firm might use CP 04 08 to increase its coverage limit for Electronic Data if the standard policy limit is insufficient and the policy allows this increase via the Declarations or a schedule.
• For Spoilage Coverage: This function is relevant for businesses that handle or store "perishable stock" – personal property that is maintained under controlled conditions (like specific temperatures or humidity levels) for its preservation and is susceptible to loss or damage if those conditions change.
  • Real-world examples: Restaurants (refrigerated and frozen foods), grocery stores (produce, dairy, meats, frozen items), florists (temperature-sensitive flowers), medical clinics or pharmacies (vaccines, certain medications requiring refrigeration), food processing plants, and cold storage warehouses.

Special Considerations

There are several important points to consider when using the CP 04 08 endorsement:

• Not a Replacement for All Limit Increases: The CP 04 08 is not designed to replace specific endorsements that increase limits for major coverages like Debris Removal, Newly Acquired or Constructed Property, or Ordinance or Law. It is generally intended for those coverages where the policy form indicates a limit can be increased by an entry in the Declarations.
• Spoilage Coverage Specifics:
  • When used for spoilage, coverage typically applies to loss resulting from a change in temperature or humidity due to the mechanical breakdown or failure of refrigerating, cooling, or humidity control equipment, or contamination by the refrigerant itself. Real-world example: If a supermarket's main refrigeration unit for its dairy section suffers a mechanical breakdown, leading to the spoilage of milk, cheese, and yogurt, the CP 04 08, if providing spoilage coverage for this peril, would respond to the loss up to the scheduled limit, subject to the deductible.
  • Underwriters often require or provide a premium credit if the insured has a refrigeration maintenance agreement in place for the breakdown/contamination coverage. Failure to maintain such an agreement could potentially jeopardize coverage.
  • The valuation of spoiled stock can vary; it might be on an Actual Cash Value basis or, sometimes, at selling price, though the latter option usually results in a higher premium.
  • The endorsement might stipulate its own deductible for spoilage losses, which could differ from the general property deductible.

Key Information for Agents and Underwriters

Agents and underwriters should focus on the following when dealing with the CP 04 08:

• For Higher Limits Function: