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What is Covered and When to Use the Special Causes of Loss Form

July 30, 2019

Insurance is always changing, so we have updated our post on the Special Causes of Loss form, part of our series on the basics of commercial rating. We've also updated our posts on the Basic and Broad Causes of Loss forms. Since each post builds on the previous one, we encourage you to read the series from the beginning.

The Special Causes of Loss form is just that, special. It provides coverage for risks of direct physical loss unless, of course, they are excluded or limited. Unlike the Basic and Broad forms, which only cover what’s listed, the Special form covers everything except what’s listed in the called-out exclusions, limitations and conditions.

westlake-bldg-01-600x338The Special Causes of Loss form provides different coverage for commercial property than the Basic or Broad form provides.

The Basics on the Basic Causes of Loss


A couple of items to note:

  • Theft coverage is included when using the limit of insurance (LOI) rating method, but it can be excluded.
  • The Watercraft Exclusion modifies coverage under the Special form. It excludes watercraft damage to retaining walls that are not part of a building, such as bulkheads, pilings, piers, wharves or docks.

When rating a policy with the Special form, both class-rated and specifically-rated properties are eligible. The amount of insurance and the coinsurance percentage must be the same for each cause of loss rated.

Property in offices may be written as a separate item under Special Causes of Loss, and Basic or Broad Causes of Loss forms can be used for the remaining property.

Special Causes of Loss eligibility requirements

Like on the Broad Causes of Loss form, the Special Causes of Loss form requires that coinsurance be at least 80% for property damage and 50% for time-element coverages. Be aware that certain risks cannot be covered under the Special form (Rule 72.C.). These include:

  • For buildings and personal property
    • Farm or farming operations
    • Grain elevators, grain tanks and grain warehouses
    • Nuclear reactor plants and installations
    • Neon, automatic or mechanical electric outdoor signs erected or in the course of construction
    • Risks rated using the Rating Plan for Highly Protected Risks or Superior Risks
  • For stock (unless incidental to the principal business):
    • Dealers in live poultry or live animals
    • Dealers in plants or shrubbery, florist greenhouses or nurseries
    • Wholesale fresh fruit and vegetable dealers


When to Use the Broad Causes of Loss Form

To develop the premium for a Special form policy, you will need to rate:

Group I Causes of Loss
Group II Causes of Loss
Special Causes of Loss

Basic Group I (BGI) and Basic Group II (BGII) loss costs are determined in the same way as a Basic form policy, regardless of whether the risk is class or specifically rated.

Here’s what the Special form loss costs might look like using the LOI rating method:

Building coverage

Loss cost: .056 (includes theft coverage).

To exclude theft from building coverage, apply a factor of .88 to the building rate.

Personal Property coverage

Special form loss costs:

Occupancy Category

Loss Cost

Residential Apartments and Condominiums




Mercantile – High


Mercantile – Medium


Mercantile – Low


Motels and Hotels


Institutional – High


Institutional – Low


Industrial and Processing – High


Industrial and Processing – Low


Service – High


Service – Low




Territory (County)

Territorial Multiplier





Balance of State



Factors to exclude theft from Personal Property coverage:

Occupancy Category

Theft Exclusion Factor

Residential apartments and Condominiums


Motel-hotel Risks


Contractors Risks


All Other Risks




WSRB's Essential Guide to Commercial Property Risk Assessment


Applying rate factors

BGI and BGII loss costs: When rating these for a Special form policy, apply the same rate factors in the same order as for a Basic form policy.

Special form loss costs: Apply applicable rate factors in the following order:

  • Company filed loss cost multiplier
  • Territory multiplier
  • Coinsurance adjustment, if applicable
  • Watchman service and/or burglar alarm system modification
  • Theft exclusion factor
  • Limit of Insurance relativity factor, if LOI rating method is used (interpolated)
  • Factors or charges required by individual rules
  • Taxes, unless local requirements dictate otherwise
  • Payment plan factor

Remember to apply additive factors before applying multiplicative factors unless a rule states otherwise.

The “formula” to rate a policy with Special Causes of Loss without factors or charges dictated by individual rules — using (LOI) methodology would look like this:

Group I: Building coverage and Contents coverage
  • Basic Loss Cost X Company Loss Cost Multiplier X Protection Class Multiplier (if class rated) X Territory
  • Multiplier (if class rated) X Coinsurance X Interpolated LOI Relativity Factor = Final Rate.
  • Final Rate X Limit of Insurance per 100 = Group I premium.

Group II:  Building coverage and Contents Coverage

  • Basic Loss Cost X Company Loss Cost Multiplier X Coinsurance X Interpolated LOI Relativity Factor = Final Rate.
  • Final Rate X limit of Insurance per 100 = Group II premium.

It is important to note that Territory and Protection Class multipliers do not apply to Group II.

Special Causes of Loss:  Building coverage and Contents coverage
  • Basic Loss Cost X Company Loss Cost Multiplier X Territory Multiplier X Coinsurance X Theft Exclusion
  • Factor (if applicable) X Interpolated  LOI Relativity Factor = Final Rate.
  • Final Rate X Limit of Insurance per 100 = Special Causes of Loss Premium.

Note that the Protection Class Multiplier does not apply to Special Causes of Loss.

You will find the complete Causes of Loss — Special Form Rule (Rule 72) in Division Five of the Commercial Lines Manual.

This concludes our Commercial Rating Series, which we designed to cover the foundations of this often-complex topic.

Terry Krueger was WSRB's Senior Subscriber Services Analyst until her recent retirement. She joined WSRB in 2005 after many years in the insurance industry, where she worked in both commercial lines rating and underwriting. Terry is a natural problem solver, a lover of bowling and puzzles and the author of some of our most popular educational blog posts.



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