1. Forms
2. FP
3. FP-10-40

What the Form Is

The FP 10 40, Causes of Loss–Earthquake Form, is an endorsement used with farm property insurance policies to add earthquake and volcanic eruption as covered causes of loss. Standard property policies often exclude earthquake damage, so this form provides a way to buy back this coverage. It's important to note that this endorsement contains its own set of definitions, limitations, exclusions, and a specific methodology for calculating the deductible, which may differ from other policy provisions.

Classes of Business It Applies To

This endorsement is designed for agricultural businesses and farming operations that are insured under a Farm Property Coverage Form. Examples include:

• Farms with dwellings, barns, outbuildings, and other farm structures.
• Operations with mobile agricultural machinery and equipment.
• Farms with livestock.
• Commercial farming operations requiring coverage against earthquake perils for their buildings and farm personal property.

Special Considerations

There are several important points to consider when using the FP 10 40:

• Deductible Calculation: A significant aspect of this form is its unique approach to calculating the earthquake deductible. This is often a percentage of the value of the property rather than a flat dollar amount and can be substantial. Agents should clearly explain this to insureds.
• Separate Limitations and Exclusions: The coverage provided by this endorsement is subject to its own specific terms, which might be more restrictive than other parts of the policy.
• Volcanic Eruption: The form typically includes coverage for volcanic eruption, which encompasses airborne shockwaves, ash, dust, particulate matter, and lava flow.
• Earthquake Inception Extension: The related endorsement FP 10 39 (Earthquake Inception Extension) can modify coverage. If an earthquake begins before the policy's inception date, the FP 10 40 might not provide coverage for subsequent damage occurring after inception. The FP 10 39 can provide coverage if the earthquake started within 72 hours of the policy's inception.

Key Information for Agents and Underwriters

Agents and underwriters should be aware of the following:

• Risk Assessment: Underwriters must carefully assess the seismic exposure of the properties being insured. This includes proximity to fault lines, soil conditions, and construction types of farm buildings.
• Pricing: The premium for this endorsement will reflect the earthquake risk of the insured location. Higher risk zones will command higher premiums.
• Coverage Gaps: Agents should ensure clients understand what is and isn't covered, particularly the exclusions and the deductible calculation, to avoid misunderstandings at the time of a loss.
• Market Availability: In areas with high earthquake exposure, capacity for this coverage may be limited, or specific underwriting requirements may apply.
• Interaction with Other Forms: It's crucial to understand how this endorsement interacts with the base Farm Property Coverage Form (e.g., FP 00 12, FP 00 13, FP 00 14) and other endorsements on the policy. For instance, it is used when earthquake coverage is provided in conjunction with the Causes of Loss Form - Farm Property (FP 10 60).