Market Segments Division—Florists Program

(February 2023)

Collapsible Index

Eligibility

MS FL DS–Florists Supplemental Schedule

MS FL 01–Florist Analysis

I. Modifications To CP 00 10–Building And Personal Property Coverage Form

II. Modifications To CP 10 30–Causes Of Loss–Special Form

III. Changes To The Commercial General Liability Coverage Part

IV. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

 

The Florists Program is an enhancement of the Commercial Package Policy. Any package written under the market segment division must be assembled according to the rules for all Market Segment policies.

This article will discuss items that are specific to the Florists Program, including the eligibility, supplemental schedule, MS FL 01–Florists and the special endorsements developed just for this program. In addition, there is a section on Underwriting and Rating.

This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.

Related Article: ISO Market Segment Overview

ELIGIBILITY

The only eligible classification for this coverage is the Florists General Liability Classification 12841. If the florist class is used along with other classes, the operation remains eligible for coverage under this program, even if the florist exposure is not the primary classification. The only exception is that any operation that uses the Nursery–garden code 15699 is ineligible even when the Florists classification is also used.

MS FL DS –FLORISTS SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that needs to be shown on a Supplemental Schedule for the Florists Program.

Changes in Limits

This section's only purpose is to increase insurance limits. If no limit is entered, the limits shown in the MS FL 01 apply. Any limit changes are effective on a per location basis. This allows coverages at one or two locations to be increased without affecting the remaining locations.

Ten specific coverages are listed in this section. An open space is available for entering a coverage and limit of insurance.

·         Money and Securities

·         Computer Fraud

·         Money Orders and Counterfeit Money

·         Forgery or Alteration

·         Outdoor Signs

·         Employee Dishonesty

·         Personal Effects and Property of Others

·         Spoilage

·         Valuable Papers & Records

·         Accounts Receivable

·         Other (Specify)

Note: Any limits entered are replacement limits to those described in the coverage form. This means they are not an addition to the existing limit.

Florists – Fine Arts Coverage

If Fine Arts Coverage is desired, the premises number where the coverage applies must be entered. However, in order for the coverage to be in effect, MS FL 03–Florists-Fine Arts Coverage must also be attached.

Related Articles:

AAIS Fine Arts Coverage Forms

ISO Commercial Fine Arts

Forms Applicable

The final section of the Supplemental Schedule allows entry of endorsements that apply by premises.

MS FL 01–FLORISTS ANALYSIS

The Florists endorsement says that it modifies the following coverages and causes of loss form:

The Florists endorsement is not a complete coverage part, so it must be attached to a package containing all three of the above forms.

This means that if a CPP is issued with commercial property coverage, commercial crime, commercial inland marine and equipment coverage but no CGL, the Florists endorsement cannot be added.

When the Florists endorsement is attached, all of the underlying terms, conditions and provisions of the above three forms apply as they normally would, except those that are modified by the Florists endorsement.

I. Modifications to CP 00 10–Building And Personal Property Coverage Form

A. Additional Coverages Changes

The limit for Fire Department Service Charge is increased to $5,000.

B. Additional Coverages Additions

1. Money and Securities

Coverage is added for direct loss by theft, disappearance or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured. The automatic amount of $5,000 applies when the covered property is either in the described premises or at a bank, while the $2,500 applies when the covered property is anywhere else. Either or both limits can be increased by an entry on the Supplemental Schedule.

The following three types of loss are excluded:

·         Losses that result from errors or omissions in accounting or arithmetic.

·         Losses that occur because the property was voluntarily given out in an exchange or purchase

·         Any loss of covered property that is contained within any money-operated device (such as a vending machine). This exclusion does not apply if there is a continuous reading instrument that records all amounts that are deposited or stored in the device and is covered.

Occurrence is defined under this segment as any loss that involves a single act or a series of related acts by one or more individuals. The named insured is required to keep records of all money and securities to verify any loss.

In order to avoid conflict, the policy states that if there is coverage provided in this section, the Property Not Covered does not apply to this particular coverage.

2. Fire Extinguisher Systems Expense (07 13 change)

Up to $5,000 is available in a single occurrence to pay the cost of recharging or replacing fire extinguishing equipment and systems. Coverage applies only if the discharge is within 100 feet of a described building or within 100 feet of the premises. The greater of the two distances is used to determine if coverage applies. In addition, if covered property is damaged due to an accidental discharge, it is covered but subject to the same $5,000 limit. No deductible applies to this coverage.

There is no coverage if the system is discharged during testing or installation.

3. Reward Payment

Reward payments are available to assist in solving crimes related to covered losses. There are two reward categories. First, up to $5,000 is available for information that leads to the arrest and conviction of any party that commits a crime resulting in a covered property loss. However, the reward payment will be for no more than the least of the actual cash value of the damaged property at the time of the loss, the amount it takes to repair or replace the property, or the settlement value developed based on the policy’s conditions.

Second, rewards up to $5,000 are paid for the return of stolen property. The reward is limited on the same basis as above. Should more than one source provide information or return stolen property, payment is made to the one that acts first.

Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, who voluntarily provides information to the police that leads to a conviction or leads to the stolen property will receive the reward. However, that person cannot be any of the following:

The reward is not paid until there is a conviction or the property is returned.

4. Computer Fraud

If a fraudulent transfer of the insured’s property, money, or securities occurs through the use of a computer, there is coverage for that loss up to $5,000. The transfer must move property, money, or securities from inside an insured premises or bank to a person or place outside the insured premises or bank. This limit can be increased on the Supplemental Schedule.

5. Money Orders and Counterfeit Money

If the named insured, in good faith, provides services or hands over money or merchandise to another party who pay with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $1,500, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank. Counterfeit money is also restricted to only money accepted during the course of business.

6. Forgery or Alteration

Loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.

If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.

The $2,500 limit is the most that will be paid under this coverage for a single loss. The amount may be exhausted by the loss itself, the defense of a suit or a combination. The limit can be increased on the Supplemental Schedule.

7. Outdoor Signs

Direct damage to outdoor signs owned or under the control of the named insured is covered. This coverage supersedes any other coverage provided for signs elsewhere in the policy.

The any one occurrence limit is $5,000. This limit can be increased in the declarations.

The causes of loss are very broad. All direct damage is covered except for the following:

Note: Later in this form, this list of excluded causes of loss is increased to also exclude governmental action, nuclear hazard and war. This could be considered an ambiguity to the insured’s advantage.

8. Employee Dishonesty (07 13 change)

Coverage is provided for employee dishonesty that results in the loss of money, securities or business personal property. The employee may be working alone in committing dishonest act(s), or the employee may collude with other persons. However, if any of those other persons include the named insured or a partner, member or manager of the named insured, there is no coverage.

No protection exists when the only proof a loss occurred or verification of the amount of the loss is a shortage as a result of an inventory computation or a profit and loss statement. In other words, there must be tangible evidence that a dishonest act occurred, and there must be a way to calculate the amount of that loss accurately.

A special exclusion applies to employees who have committed prior acts of dishonesty. If the named insured, any partner, trustee, member, manager, officer, or director of the named insured discovers that an employee was previously involved in a dishonest act, there is no coverage for any acts of that employee. It doesn’t matter whether the incident occurred before or after the named insured hired the employee—coverage ceases. The termination takes effect the moment the employee's prior act is discovered. There are no exceptions to this exclusion unless the insurer is willing to write a manuscript endorsement to document an exception.

The $5,000 limit in the form may be increased on the Supplemental Schedule. This limit is the total amount available to respond to a single occurrence. The limit of insurance is not cumulative from year to year, so the limit shown is the maximum that will be paid for any one occurrence of a dishonest act or event, regardless of how many years the policy has been in force or how much premium has been paid.

The dishonest act or event must happen during the policy period to be covered.

 

Example: Daisy Lane Florist’s bookkeeper takes a vacation, his first in five years. While handling things in his absence, Daisy Lane’s owner reviewed the books and noticed many irregularities. An audit found that the bookkeeper had, over five years, skimmed $30,000. Because Daisy Lane maintained Employee Dishonesty coverage over that entire time, the entire loss is covered. Unfortunately, the limit of coverage was never increased beyond $5,000, so only $5,000 is available to pay for the $30,000 loss.

 

The act or event that causes a loss must have not only occurred during the policy period but must also be discovered no later than one year from the end of the policy period. There is an important exception. If the named insured suffers a loss that would have been eligible under a previous policy but was not discovered until after the one-year limitation expired, there may be coverage under this current policy. The old loss would have to meet two criteria. First, this current policy must be the replacement for the one in force when the loss actually occurred. Second, the loss would have to involve a loss that is eligible under this current policy’s provisions. Also, any payment made is subject to the lesser of either the current policy term's limit or the prior term's limit.

Possible Exclusion Ambiguity - There is one more exclusion and it may be confusing. It states that loss or damage due to a dishonest act performed by the named insured and any partner, member, officer, manager, director or trustee is ineligible for coverage. Up to this point, the exclusion is very similar to exclusions in the Commercial Crime Form. However, the exclusion also excludes loss for dishonest or criminal acts by authorized representatives and by anyone to whom the named insured has entrusted property. This part of the exclusion may be problematic. Doesn’t the named insured entrust items to employees as part of their duties? Aren’t employees authorized representatives? This wording is not used in the Commercial Crime policy and could cause confusion after a loss.

9. Ordinance or Law – Equipment Coverage

Payment under this coverage is available only when the covered property is subject to the replacement cost valuation, and the equipment is actually repaired or replaced.

This coverage was inspired by the dynamism surrounding environmental laws. Federal, state and community standards may require changes in equipment when it is replaced for any reason. If so, this coverage pays for the upgrade but only if provided when the equipment’s valuation is on replacement cost and the item is being replaced due to a covered cause of loss.

If refrigeration equipment is damaged this coverage pays three additional costs:

The ordinance coverage is paid only if the equipment is actually repaired or replaced. The total payment cannot exceed the limit of insurance on the declarations.

This coverage does not pay for costs related to pollutant enforcement. Also, if the named insured had an order to comply with an ordinance or law prior to the loss and failed to comply, there will be no payment for that previously neglected upgrade under this Additional Coverage.

Note: Coinsurance does not apply to this Additional Coverage.

Example: Perky Posies bought its refrigeration equipment from the prior owners. When it stops working, Perky Posies will need to replace it with an entirely different type of unit because the current equipment is no longer approved by the EPA. Perky Posies increases its limits accordingly, and when a fire loss destroys the unit, the policy pays for an upgraded replacement unit.

 

10. Spoilage Coverage

Coverage applies if perishable stock is damaged by any of the following:

The limit of $25,000 can be increased on the Supplemental Schedule.

Any settlement is based on the selling price of the damaged stock minus any discounts or expenses the named insured would have incurred in selling the product but did not incur because the item was damaged.

 

Example: Storms blew power lines down throughout a three-county area. Jeremy’s power was out for four days, causing his stock of refrigerated flowers to wilt and die. He would have sold the flowers for $15,000, but he recovers only $13,500 because he would have incurred $1,500 in labor cost, packaging, and delivery fees had he sold them.

 

If spoilage is a result of any of the following, it is not covered:

Note: The endorsement does not refer to the CP 10 30 exclusions and does not state that the CP 10 30 exclusions do not apply. Earth Movement, Governmental Action, Nuclear Hazard, War and Military Action and Water exclusions are listed but not explained. This could mean that reference should be made to the
CP 10 30 exclusions.

Deductible

There is a statement that the deductible on the Declarations applies but there is no spoilage deductible on the supplemental schedule. This paragraph specifically states that no other deductible on the policy applies to this coverage. If left as is, it would appear that no deductible applies to this coverage even though it is clear that the writers intend for a specific spoilage deductible to apply.

Warranty

The warranty provision states that the named insured must adhere to a refrigeration maintenance or service agreement. If the named insured ends the agreement and fails to notify the insurance company, coverage is suspended at the affected location.

Note: NO suspension is triggered if the agreement's supplier ends the arrangement. Does this mean that if a supplier ends the agreement because of nonpayment, the coverage remains in effect?

11. Artificially Generated Electrical Current

This coverage applies to only computers. When artificially generated electrical current causes loss or damage to the computers, the company will pay, but only if one of the following applies:

This coverage is subject to the deductibles in the policy and the limit on the Declarations that would apply to this computer equipment.

C. Coverage Extensions Changes and Additions

1. Newly Acquired or Constructed Property

The only change is for computers. Coverage at newly acquired or constructed property in the CP 00 01 ends at the earliest of when the policy expires, thirty days after the property is acquired or when the values are reported to the insurance company.

This coverage extension adds one additional time of coverage ending, but it applies only to computers. When ‘specific insurance’ is purchased at the newly acquired premises, coverage ends. The other times also continue to apply to computer.

Note: This extra item is confusing because it doesn’t say that coverage specific to computers is purchased but instead says only ‘specific insurance.’ This confusion could be an ambiguity to the benefit of the insured.

2. Personal Effects and Property of Others

The limit is increased to $5,000 and can be further increased on the Supplemental Schedule.

3. Valuable Papers and Records (Other than Electronic Data)

The valuable papers and records coverage extension is increased from $2,500 to $10,000, for on-premises loss or damage. It also adds coverage when the valuable papers and records are off-premises but only for $5,000. These limits can be increased for additional premium.

Coverage is expanded to include not only the cost to replace or restore the lost information but also any physical loss or damage to the valuable papers and records owned by or in the named insured’s care, custody or control. The coverage extends to the cost of blank material and the labor necessary to transcribe any available records.

The covered cause of loss is more restricted and must be due to a specified cause of loss as defined in the CP 10 30–Causes of Loss - Special Form or due to collapse. Property that is held as samples or that has been sold and is waiting to be delivered is not covered. Any property that is being stored off-premises is also not covered.

Note: If higher limits are needed, consider using one of the following forms because of causes of loss and coverage designed just for this exposure.

Related Articles:

AAIS Valuable Papers and Records Coverage Form

ISO Valuable Papers and Records Coverage Form

4. Property Off-Premises

The Florists Program enhances the property off-premises extension by adding computers while in transit. The computer coverage applies only to off-premises location for a period of 90 days.

5. Outdoor Property

The Florist Program provides coverage for outdoor property for the following causes of loss:

·         Fire

·         Lightning

·         Explosion

·         Riot or civil commotion

·         Aircraft

Limits are based on the type of outdoor property.

Note: No particular limit is mentioned with the expense to remove property of others item although there is reference to the terms and conditions of the rest of extension. There could be an ambiguity as to what limit, if any, applies.

 

Example: Upskale Flowers experience a loss during a thunderstorm. The shop's owner reported lightning damage to a decorative tree and several flowering bushes near the store's entrance. The owner documented a total loss of $1,910, well under the $5,000 limit on the shop's market segment coverage. The insurer paid Upskale's owner only $1,010 for the loss because a maximum of $500 was available for the loss of the tree, which was valued at $1,400.

 

6. Accounts Receivable

The limit of insurance for business personal property may be extended to include direct loss or damage to accounts receivable from a covered cause of loss. Coverage applies to:

The amount available is $5,000 for on-premises loss or damage and up to $2,500 for off-premises loss. The limit can be increased for an additional premium, and the higher limit will be shown in the declarations.

The reference to accounts receivables in the Property Not Covered section is deleted in regard to this supplemental coverage.

Note: If higher limits are needed, consider using one of the following forms because the coverage is designed just for this exposure.

Related Articles:

AAIS Accounts Receivable Coverage

Accounts Receivable Coverage

II. Modification to CP 10 30– Causes of Loss-Special Form

Several exclusions and limitations found in the CP 10 30–Causes of Loss-Special Form are modified for some of the additional coverages and coverage extensions. The modifications are as follows:

A. Ordinance or Law

In order to not confuse coverages, the Ordinance or Law exclusion in the Special Cause of Loss form applies to the entire policy except for the Ordinance or Law – Equipment Coverage Additional Coverage that was added earlier in this endorsement.

B. Mechanical Breakdown

Mechanical breakdown references in the Exclusions section do not apply to computers.

C. Dampness, Dryness, Changes in Temperature, Marring or Scratching

The only change in the dampness, dryness, changes in temperature, marring or scratching exclusion subparts is the dampness or dryness of the atmosphere portion. An exception is added so that when an air conditioning system that is used with the computer is damaged by a covered cause of loss, the resulting damage to a computer because of any dampness or dryness is covered.

D. Additional Exclusions for Computer Coverage Only:

1. Loss or damage caused directly or indirectly by any of the following is excluded. The exclusion applies even if other causes of loss contribute either concurrently or in sequence.

Note: The reason these extra exclusions are needed is because MS FL 01 includes coverage for mechanical breakdown of computers that is not provided by the CP 10 30.

a. Errors or Omission

There is no coverage for damage or loss caused by or resulting from errors or omissions in processing, recording or storing of information on computers. There is an exception. Any resulting fire or explosion is covered if caused by a covered cause of loss.

b. Electrical Disturbance

There is no coverage for damage caused by electronic or magnetic injury, disturbance or erasure of electronic recordings unless it is a result of direct loss or damage caused by lightning.

c. Computer-Related Losses

There is no coverage for any loss or damage that is caused by or results from the failure, malfunction or inadequacy of any of the following (regardless of who owns the property) because they cannot correctly recognize, process, distinguish, interpret or accept dates or times:

d. Computer Advice or Consultation

Any of the following provided by the named insured or for the named insured is not covered when used to determine, test or rectify potential or actual problems described in exclusion c. above.

2. If a condition that is excluded by Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation exclusions above results in a specified cause of loss or elevator collision, that resultant loss is covered. This does not include the cost to correct the excluded deficiencies or to change any features of the property involved.

The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.

E. Employee Dishonesty

The only exclusions in the Special Cause of Loss Form that applies to the Employee Dishonesty Coverage are Governmental Action, Nuclear Hazard, and War and Military Action. All other exclusions are located in Employee Dishonesty Additional Coverage.

Related Article: Basic, Broad and Special Causes Of Loss Forms Analysis

F. Outdoor Signs

The only exclusions that are applicable to Outdoor Signs under the Dry Cleaning and Laundry Facilities endorsement are:

Note: This is a much larger list of exclusions than the one provided in the outdoor sign coverage described earlier. The confusion will result in an ambiguous situation to the named insured’s advantage.

G. Valuable Papers and Records and Accounts Receivable

The only exclusions in Paragraph B. that apply to Valuable Papers and Records and Accounts Receivable are:

Note: This item is ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapses, while accounts receivable coverage is subject to the CP 10 30 causes of loss. Remember that under the Valuable Papers Coverage Extension, only specified causes of loss and collapse are considered covered causes of loss. By combining the two coverages under this same modification would suggest that the two are covered for the same causes of loss when they are not.

H. Accounts Receivable

As noted in G. above, most of the exclusions in the Cause of Loss Form do not apply to Accounts Receivable, but the following ones that are unique to Accounts Receivable are added:

1. Loss involving alteration, falsification, concealment or destruction of accounts receivable records are not covered when those actions were meant to conceal another action such as giving, taking or withholding money, securities or other property.

2. No loss that is a result of errors or omission in any bookkeeping, accounting or billing function is covered.

3. When all evidence that a loss has occurred is due to an audit or inventory, there is no coverage unless there is some other outside evidence.

I. Property in Transit

The Cause of Loss–Special Form Additional Coverage Extension of Property in Transit is increased to $10,000.

III. Changes to the Commercial General Liability Coverage Part

A. One New Coverage is Added for Florists

Delivery Errors and Omissions Coverage

1. Insuring Agreement

This separate Coverage Part has its own Insuring Agreement, Exclusions and Supplementary Payments.

The coverage is for loss related to a failure to deliver items the named insured holds for sale. The failure can be by the named insured, employees of the named insured or by a concessionaire operating on behalf of the named insured. The coverage responds to claims for which the named insured is held legally obligated to pay because of damages arising from failed deliveries. The incidents must occur during the policy period and within the coverage territory. As with other liability insuring agreements, the insurance company has the right and duty to defend and investigate but is under no obligation if the damages or claim is ineligible for coverage. Any duty to defend ends when the limit is exhausted by payments.

 

Example: Perky Posies received a $400 order from the Ace Law Firm to deliver flowers to the funeral of Mrs. Eve Fround. The flowers were delivered to the funeral of Ms. Eva Friend instead. Mrs. Fround’s family was furious that their long-time advisors had callously disregarded their mother’s passing and ceased all contact with the Law Firm. Ace Law Firm sues Perky Posies for the loss of the Fround family account as a result of the misdelivery.

 

A limit of $10,000 per year per premises limit applies. A deductible of $250 per occurrence applies. This means that if a delivery van picks up from multiple premises, there could be a single deductible of $250, but multiple premises limits of insurance.

2. Exclusions

There are only three exclusions under this coverage part:

3. Supplementary Payments

 The supplementary payments section of the CG 00 01 or CG 00 02 applies to this coverage part.

C. Duties in the Event of a Delivery Error or Omission replaces the Duties in the Event of Occurrence, Offense, Claim or Suit condition as follows:

1. The named insured must make an effort to quickly notify the insurer that a potential claim has occurred. The notification should include enough details to identify it, such as name and address of the customers, how, when and where the situation occurred.

2. If a claim or suit is actually presented, the named insured must record all of the information and notify the insurance company as soon as it is practical, including providing the insurer with all relevant written notices and materials.

3. All insureds who may be involved in an occurrence must send the insurance company all legal papers, authorize the insurance company to obtain information, cooperate with the insurance company, and assist in enforcing (the insurer's) rights, particularly the right to subrogate.

4. No insured has the right or authority to make any payment unless it is made voluntarily, with no anticipation that the insurance company will provide reimbursement.

B. Who Is An Insured

In the midst of the section on the new coverage is a provision that changes the Who is An Insured Section of the CGL. This section is NOT just for the new coverage, so we have moved it below the Duties in the Event of Delivery Error or Omission item.

One person may look like the owner and act like the owner of an enterprise but actually may have an investor in the background. When a claim is brought against this behind the scenes person or organization, that entity is covered as an insured but only for liability arising from its financial relationship with the named insured.

 

Example:

Scenario 1: Perky Posies is sued by a customer who was severely injured when she tripped while entering the shop. The lawsuit names the owner of Perky Posies and Urban Marketscapes, a partnership that owns the building that houses Perky Posies under a long-term lease. "Urban" is an insured under the policy for this particular suit.

Scenario 2: Urban Marketscapes, the partnership that owns the building that is leased to Perky Posies, is sued. Knowing that it is an insured under the Perky Posies’ policy, it sends a claim seeking coverage from Perky Posies’ insurer. The insurer reserves its rights and investigates the claim. It finds out that Urban is being sued over an accident involving another of its properties. The insurer denies the claim as it’s unrelated to Perky Posies.

 

This person is an insured only for liability connected to their ownership, maintenance or use of the described part of the premises that is leased to the named insured. The person is not an insured once the named insured is no longer a tenant.

None of the above additional insureds are covered for alterations, new construction, or demolition operations that are handled by them or on their behalf.

IV. Definitions

The following definitions are added to the Commercial Package Policy via the Florists Program endorsement:

Computer

Programmable electronic device used to work with data. While the definition does apply to peripheral equipment related to air conditioning and fire suppression systems, it doesn’t apply to data or media.

Counterfeit money

An imitation of money that is meant to deceive.

Employee (07 13 change)

This term is expanded beyond the full-time employee of a business. There are seven different categories that qualify as employees:

a.     An actual person (not a corporation) who is paid by the named insured and is under the control of the named insured with respect to performing his or her duties. The person remains an employee for 30 days after termination, but only if the termination was not related to dishonest actions.

b.    A person who is a substitute for an employee or is hired for short temporary work is considered an employee while under the control of the named insured except when caring for property off-premises.

c.     A person leased to the named insured that is not a person described in a. or b. above. There must be a contract and a labor-leasing firm involved.

d.    A consultant for the named insured but only if that consultant was formerly an employee, director, partner, member, trustee, or manager.

e.     A guest student or intern but only while acting as a student or providing services for the named insured. There is no coverage for loss of property off premises.

f.      Any employee of an entity that merged with the named insured or was acquired by it prior to the policy effective date.

g.    Managers, directors or trustees when acting as employees or while on a task-oriented board.

An employee does not include independent contractors or similar type individuals unless specifically described in the list above.

Forgery

When one party signs another’s name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.

Manager

Any director in a limited liability company.

Member (07 13 addition)

One of the owners of a limited liability company.

Money

All currency, coins and bank notes with a face value and in current circulation, plus money orders, travelers’ checks and similar items that are held for sale to the public.

Perishable Stock

Personal property that must be kept in a controlled environment in order to be preserved, and that could be damaged if that environment is changed.

Securities

Evidence of debt such as stock certificates, bonds, contracts, tokens, stamps, credit card evidence that can be used to collect from the credit card company, and other items that represent money but are not money.

ENDORSEMENTS

The forms and endorsements developed for the Market Segments series of programs carry the designation “MS.”

Only program specific endorsements are available. However, remember that all the endorsements available under the Property and General Liability Coverage Parts are available under this division.

Related Articles:

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements and Their Uses

MS FL 03—Florists—Fine Arts Coverage

This endorsement provides coverage for the named insured’s fine arts and similar non-owned property in the care, custody, and control of the named insured. It is subject to the terms and conditions of CP 00 10–Building and Personal Property Coverage Form and CP 10 30– Cause of Loss-Special Form except as amended in the endorsement.

Loss or damage to fine arts owned or controlled by the named insured is covered for up to $25,000. This limit cannot be increased on the Supplemental Schedule. If higher limits are needed, a specific fine arts coverage form should be considered.

Items are listed that are considered fine arts, but it is a listing of examples, not a comprehensive listing, which allows for flexibility in covering items of special value.

Note: This is a poorly written form that appears to give coverage that is nonexistent. The coverage and the causes of loss are identical to that which is provided in the CP 00 10 and the CP 10 30. The valuation is slightly different, but because actual cash value is part of the valuation, there is really no change except to the detriment of the insured. The pair and sets provision might provide some coverage, but that would still be subject to the valuation section. The packing requirement condition actually restricts coverage. Consider using a Fine Arts Floater instead.

Related Articles:

AAIS Fine Arts Coverage Forms

ISO Commercial Fine Arts Coverage Form

UNDERWRITING CONSIDERATIONS

Any program offered by an individual insurer will have its own set of eligibility guidelines. If the program is a generic or standard program, as is ISO’s Market Segments Programs, it normally has a set of qualifying criteria. Because there may be differences between the two sources of eligibility criteria, it is important for the insurance professional to be thoroughly familiar with the applicable new business and renewal qualifications. The following review of the underlying and eligible requirements for the Florists Program is for the ISO generic program.

Specific Florists Operations

Florists are unique operations due to the rapid turnover required of their fragile floral inventory, plus the extreme peak seasons. Mother’s Day and Valentine’s Day revenue are vital to their operations. The peak demands require expert handling of floral orders and deliveries. Inventories usually fluctuate, and insurance limits must take this into consideration. Business income and extra expense exposures must also be a special consideration due to the fact that florists need to be open and available or lose clientele. Ordering via the Internet and through FTD or similar services have added additional customers. However, they also create contractual relationships that must be explored. The florist should have backup plans in place in case of a disaster, including a lack of power. Many florists also sell gifts and novelties to reduce their dependence on fresh flowers. Other products typically offered are silk flowers, vases, jewelry and, in some cases, even clothing. All of the elements must be analyzed, especially if higher-value products are being added. The latter property has a higher theft potential, while other types of property are fragile and vulnerable to damage. Greenhouse operations add an entirely different problem, and they are eligible if an operation does not expand to the point that it becomes a nursery.

COVERAGE ISSUES

Commercial Property Coverages

Many of the issues related to the underwriting of commercial property insurance, such as construction, occupancy, physical characteristics, types of rates and so forth, are discussed in detail under the commercial property section.

Related Article: Commercial Property Program Underwriting Considerations

Commercial General Liability Coverages

Many of the issues related to the underwriting of commercial general liability insurance, such as claims-made versus occurrence coverage, limits, deductibles, endorsements, and so forth, are discussed in detail under the commercial general liability section.

Related Article: Commercial General Liability Policy Underwriting Considerations

Property Enhancements

Several property enhancements are added to the commercial property coverages by the Florists endorsement. Any increase in exposure presented by the added hazards covered by the endorsement enhancements should be identified. Once identified, they should be evaluated to determine if they are compatible with the program's coverage and rating structure. The property enhancements with the most significant underwriting concerns are as follows:

Accounts receivables are covered, up to the stated limits and condition. The insured should have adequate back-ups and copies stored off-premises in a safe location. The same is true of valuable papers and records.

Ordinance or Law coverage extension helps with the expense of replacing or updating damaged equipment following a loss if the upgrade is required by law. It is important to be aware of local regulations regarding the type of refrigerants that are permitted since this could have a significant impact on any loss settlement. This could also introduce a moral hazard when old equipment needs to be replaced.

Spoilage is added with a limit of $25,000. The perishable nature of flowers makes this a significant coverage that must be evaluated carefully. Past experience with outages should be considered, along with the contingency plans for dealing with a loss of power. Backup generators and alternative storage locations are two options that an insured should be able to implement. The amount of fresh stock kept on hand should be considered along with peak conditions around Valentine’s Day and Mother’s Day.

Property in Transit underwriting should focus on the method of transport, types of items being transported and safety controls in place. Because fresh flowers are being transported, it is important to be aware of delivery areas. Particular attention should be paid to any evidence of an operation that makes guaranteed deliveries (especially on Valentine’s Day and Mother’s Day). This is an obligation that encourages an operation to trade-off sensible product handling and transport procedures with reckless behavior in order to meet delivery deadlines.

Crime and Dishonesty Enhancements

The Florists Program endorsements add coverage for money and securities, computer fraud, money orders and counterfeit money, forgery and alteration and employee dishonesty.

The insured should be evaluated for crime protection devices, including the type of devices used and how they are maintained. The evaluation should include alarms, locks, lighting, fencing, guards or other security measures.

Sound hiring procedures, background checks, and internal controls are necessary to minimize employee dishonesty losses. Procedures should be implemented and reviewed regularly to monitor and prevent the potential for crime and dishonesty losses. Computer fraud exposure should be investigated if the customer is involved with internet orders using any of the national florist arrangements such as FTD.

Related Article: Commercial Crime Coverages Underwriting Considerations

Liability Enhancements

Although the limit of coverage for misdelivery is $10,000 per occurrence, the potential for loss is very real. There should be discussions regarding any type of delivery guarantees provided, not only for Valentine’s Day and Mother’s Day but also for weddings, special events, and funerals. Wrong deliveries can impact the day and cause emotional distress. There should be a clear method of handling orders and arranging for deliveries. The order handling must all be online or, if placed over the phone or in person, in writing, with signatures required for larger orders to avoid confusion and misinformation. This is particularly important for weddings and special events that are planned in advance.

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated in accordance with the Commercial Lines Manual for the specific coverage part.

The MS FL 01 is rated based on the number of employees and whether Flood and/or Earthquake are provided in the underlying policies. In addition, there are charges made for any increases in limits, plus a charge for the addition of the Fine Arts Coverage Form.