In the past few years, increased storm activity across the Midwest and Southeastern regions have caused wide-spread damage to roof surfaces prompting insurance carriers to take action. Carriers are heavily regulated and bound by the three basic rate making principals.
- Rates must be adequate
- Rates must not be excessive
- Rates must not be unfairly discriminatory
Carriers have decided to adopt a limiting form in lieu of seeking rate increases that can take an excessive amount of time as these principals are applied. To expedite the process, ISO developed form CP 1036 “Limitations on Coverage for Roof Surfacing” that limits coverage on roof replacements.
The endorsement contains two options. The first allows the carriers to cover a building at replacement cost, but limit the valuation on “roof surfacing” to ACV. This includes losses from all covered causes of loss including wind and hail. The second option allows carriers to exclude coverage for cosmetic damage defined as any kind of marring, pitting or other superficial damage specifically from wind and hail. This may alter the appearance of the roof; however, it does not prohibit it from functioning as intended.
We intend to use this form based on individual risk characteristics or where underwriting dictates that action be taken due to high loss potential exposures. As always, feel free to contact your underwriter should you have questions or need additional clarification.
June 10, 2016