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3. CP-13-10

Form CP 13 10: Value Reporting Form

The CP 13 10 Value Reporting Form is an endorsement to a commercial property policy, most commonly used with the CP 00 10 Building and Personal Property Coverage Form. Its primary purpose is to provide a mechanism for businesses with fluctuating inventory or personal property values to maintain adequate insurance coverage while paying a premium that reflects those changing values. Instead of insuring for a fixed amount throughout the policy term, the insured reports the actual values of their covered property periodically (e.g., daily, weekly, monthly, quarterly, or annually per policy terms). This allows the premium to be adjusted based on the average reported values, helping to avoid over or underinsurance.

Classes of Business It Applies To

This form is particularly beneficial for businesses whose inventory levels or other business personal property values experience significant variations due to seasonality, market demand, or other factors. Real-world examples include:

• Retailers: Businesses like toy stores, florists, or clothing boutiques often see substantial inventory increases during peak seasons (e.g., holidays).
• Manufacturers: Companies that stockpile raw materials or finished goods based on production cycles or large orders can have fluctuating inventory values.
• Wholesalers and Distributors: Businesses that hold large, varied inventories that change frequently.
• Agricultural Businesses: Operations dealing with seasonal harvests or livestock.
• Builders Risk: While a specific Builders Risk Reporting Form (CP 11 65) exists, the value reporting concept is similar for fluctuating construction project values.

Essentially, any business that can accurately and promptly report its changing property values can benefit from this form. It is often used for merchandise, stock, and other personal property of the insured, as well as personal property of others in the insured's care.

Special Considerations

There are several important considerations when using the CP 13 10:

• Reporting Accuracy and Timeliness: Failure to submit accurate and timely reports can lead to significant penalties in the event of a loss. If values are underreported, the insurer may only pay a proportion of the loss. If reports are late, coverage for a loss occurring after the due date but before the report is received might be limited to the last reported value, or if it's the first report, a penalty (e.g., 75% of the loss) might apply.
• Establishing the Limit of Insurance: The insured must select a limit of insurance high enough to cover the maximum anticipated value during the policy period. While the premium is based on average reported values, the policy will not pay more than the stated limit of insurance, even if reported values exceed it. It's crucial to monitor reported values and request an increase in the policy limit if they consistently approach or exceed it.
• Full Value Reporting: Reports must reflect the full value of all covered property at each location as of the reporting date, including improvements and betterments if applicable.
• Authorized Signature: Reports must be signed by an authorized officer or designated employee of the insured.
• Administrative Burden: While offering premium flexibility, this form requires diligent record-keeping and consistent reporting, which can be an administrative burden for some businesses, particularly smaller ones where the premium savings may not outweigh the extra work.
• Alternatives: For predictable fluctuations, a Peak Season Endorsement (CP 12 30) might be a simpler alternative, allowing for increased limits during specified periods. However, the Value Reporting Form offers more flexibility for unpredictable changes.

Key Information for Agents and Underwriters

• Pricing: A deposit premium is typically charged at the beginning of the policy year, often based on 75% of the policy limit. The final premium is determined at the end of the policy year (or expiration) after all reports have been submitted and the average values are calculated. If the actual average values result in a lower premium than the deposit, the insured receives a refund; if higher, additional premium is due. The rates used are often the 100% coinsurance rates, which are typically lower.
• Risk Assessment: Underwriters need to assess the insured's ability to provide accurate and timely reports. The nature of the business and its inventory management systems are key. They also need to ensure the initial limit of insurance is adequate for the insured's potential peak values.
• Coverage Gaps/Penalties: Agents must thoroughly explain the reporting provisions and the severe penalties for non-compliance (under-reporting, late reporting, or failure to report). This includes the "Full Reporting" clause, which can limit loss payment if values are understated, and the consequences of late or missing reports. For example, if a report shows less than the full value, the insurer will only pay a proportion of the loss. If no reports have been filed after the first required report, the payout might be limited to the values last reported for that location. If the very first report is missing, the payout might be restricted to 75% of what would otherwise have been paid.
• Underwriting Guidelines:
  • Verify that the insured has systems in place for accurate value tracking and reporting.
  • Clearly define the "reporting period" (e.g., daily, weekly, monthly, quarterly) in the Declarations.
  • Determine if all business personal property will be subject to reporting or only specific categories like inventory. Other, more static property might be better covered under standard specific limits.
  • The form can cover personal property at reported locations, newly acquired locations, and incidental locations, as defined in the endorsement.
  • Be aware that property at fairs or exhibitions is typically excluded under this form.
• Relationship to CP 00 10: The CP 13 10 modifies the underlying Building and Personal Property Coverage Form (CP 00 10) or other applicable coverage forms. The definitions and general conditions of the CP 00 10 still apply unless specifically modified by the CP 13 10.

The Value Reporting Form (CP 13 10) is a valuable tool for managing commercial property risks with fluctuating values, but it demands careful attention to its requirements by both the insured and the insurance professionals involved.