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ISO Simplified Commercial Property Program

Summary: Leasehold interest insurance protects against financial loss suffered by a building tenant, when a favorable lease is cancelled before expiration because of loss or damage to the building by an insured cause of loss. To provide this coverage, the Insurance Services Office (ISO) simplified commercial property program uses Leasehold Interest Coverage Form CP 00 60 06 95 , along with Leasehold Interest Coverage Schedule Form, CP 19 60 11 85 , and one of forms CP 60 05 11 85 to CP 60 15 11 85 , which are tables of leasehold interest factors. As with other ISO simplified commercial forms, these forms are combined with others. These include a declarations page, Common Policy Conditions Form, IL 00 17 11 98 , Commercial Property Conditions Form, CP 00 90 07 88 , and a causes of loss form, CP 10 10 06 07 , CP 10 20 06 07 , or CP 10 30 06 07 . The coverage may be provided via a monoline policy or a package policy, by being combined with other forms. The declarations page provides basic coverage information; Schedule Form, CP 19 60 11 85 , provides information regarding details of the lease for which the insurance is provided and derivation of the values used to establish the amounts of insurable leasehold interest. When reference is made to rules, these rules are located in the Insurance Services Office Commercial Lines Manual (CLM).

Topics covered: Coverage agreement Exclusions Limits of insurance Loss conditions Additional conditioncancellation Definitions Schedule form CP 19 60 Leasehold interest factors

Coverage Agreement

We will pay for loss of Covered Leasehold Interest you sustain due to the cancellation of your lease. The cancellation must result from direct physical loss of or damage to property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.

1.Covered Leasehold Interest

Covered Leasehold Interest means the following for which an amount of “net leasehold interest” at inception is shown in the Leasehold Interest Coverage Schedule:

a.Tenants’ Lease Interest, meaning the difference between the:

(1)Rent you pay at the described premises; and

(2)Rental value of the described premises that you lease.

b.Bonus Payments, meaning the unamortized portion of a cash bonus that will not be refunded to you. A cash bonus is money you paid to acquire your lease. It does not include:

(1)Rent, whether or not prepaid; or

(2)Security.

c.Improvements and Betterments, meaning the unamortized portion of payments made by you for improvements and betterments. It does not include the value of improvements and betterments recoverable under any other insurance, but only to the extent of such other insurance.

Improvements and betterments are fixtures, alterations, installations or additions:

(1)Made a part of the building or structure you occupy but do not own; and

(2)You acquired or made at your expense but cannot legally remove.

d.Prepaid Rent, meaning the unamortized portion of any amount of advance rent you paid that will not be refunded to you. This does not include the customary rent due at:

(1)The beginning of each month; or

(2)Any other rental period.

Analysis

Section A of form CP 00 60 covers the insured in case of loss of “covered leasehold interest.” Such a loss must be due to the cancellation of the lease at the premises described in the declarations. Lease cancellation must result from direct physical loss or damage by a covered cause of loss.

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