MARKET SEGMENTS DIVISION—PEST CONTROL SERVICES

(February 2023)

Collapsible Index

Eligibility

MS PE DS–Pest Control Services Supplemental Schedule

MS PE 01–Pest Control Services 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 Pest Control Services 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 specific to the Pest Control Services Program, including the eligibility, supplemental schedule MS PE 01–Pest Control Services underwriting and rating.

Related Article: ISO Market Segment Overview

This program’s first form edition is 10 13, and this is the initial analysis of the program.

ELIGIBILITY

This program is designed for pest control services. The only eligible General Liability classifications are:

If a pest control operation includes exposures that require additional general liability classifications, it continues to be eligible for this program. The only classification that cannot be added is Crop Spraying – By Contractors – 91606 on the policy.

MS PE DS–PEST CONTROL SERVICES SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that needs to be shown on a Supplemental Schedule for the Pest Control Services 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 PE 01 apply. Any limit changes are effective on a per location basis. This allows protection for one or two locations to be increased without affecting the remaining locations.

Twelve specific coverages are listed in this section. Space is also available for entering a coverage to be defined and a limit of insurance for it.

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.

Limited Pollution Liability – On Premises Coverage

When liability coverage for herbicides and/or pesticides stored on the premises of the named insured is desired, limits and premium must be entered in both of the following:

Pest Control Forms Applicable

The final section of the Supplemental Schedule allows for the listing of specific endorsements by premises.

MS PE 01–PEST CONTROL SERVICES ANALYSIS

The opening paragraph of the Pest Control Services endorsement clarifies which of the coverage forms and the property causes of loss form are being modified by this endorsement. They are:

The Pest Control Services endorsement is NOT a complete coverage part, so it must be attached to a package containing all three of the above named forms. If all three forms are not a part of the policy, the Pest Control Services Program endorsement cannot apply.

When the Pest Control Services endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply, with the important exception of the items modified by the Pest Control Services endorsement. Each of the modifications will be reviewed in the following analysis.

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

A. Additional Coverages Changes

The limit for Pollutant Clean Up and Removal is increased to $25,000.

Note: This limit remains a per premises annual aggregate amount.

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 $10,000 applies when the covered property is either in the described premises or at a bank while the $5,000 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 losses 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 the device has a continuous reading instrument that records all amounts that are deposited or stored in the device that 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.

2. Fire Extinguisher Systems Expense

Up to $2,500 is available in any one 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 the 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 that result in 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.

In other words, the policy would not pay $4,000 for information related to a crime that caused a $1,500 loss.

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.

Example: Bugsy Junior’s mascot is a large statue of a bug situated in front of their store. It is stolen, and Bugsy wants it back. He posts a reward for its return. The police hear from the following:

  • Party One - February 6th - Voluntary source.
  • Party Two - February 9th - Voluntary source.
  • Party Three - March 4th - Voluntary source.

All three provide information that leads to the return of the statue. The $1,000 reward goes to Party One, the first one to respond.

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 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 named insured

·         Family members of the named insured

·         Employees

·         Family members of employees

·         Employees of law enforcement agencies

·         Employees of a business engaged in property protection

·         Any person having custody of the covered property at the time the theft was committed

·         Any person involved in the crime

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

4. Computer Fraud

If a fraudulent transfer of the named insured’s property or money and securities occurs by using a computer, there is coverage for up to $25,000. The transfer must move property or money and 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 pays with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $2,500, 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 such instruments that are 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 that are 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 $2,500. This limit can be increased in the declarations.

8. Employee Dishonesty

Coverage of up to $5,000 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The limit of $5,000 can be increased by entering a higher limit in the declarations.

The coverage extends to the theft of client’s property by an identified employee. The client’s property must have been on the client’s premises and must be property that the client owns, leases or that the client is holding for others or is otherwise legally liable for. This coverage is for the benefit of the named insured, not the client, and all loss payments are settled with the named insured.

Example: Bugsy’s provides pest control services to Consolidated Office Park. One morning Bugsy’s received notification that a number of items were missing from multiple clients in the office park. There is no sign of breaking and entering, so Consolidated is positive that one or more of Bugsy’s employees is responsible for the thefts. Bugsy’s questions the two employees on duty that evening, and both deny any involvement. If Bugsy’s can identify the employee (s), there is coverage under this policy, but if not, there will be no insurance compensation.

 

The employee may be working alone in committing the 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.

An inventory computation and/or profit and loss statement cannot be the sole proof that a loss has occurred or be the sole method of establishing the value of the loss. 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.

If the named insured, a partner, officer, trustee, manager, member 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 party. It doesn’t matter whether the incident occurred before or after the insured hired the employee—coverage ceases. The termination takes effect the moment the party'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 or the higher limit on the supplemental schedule is the total amount available to respond to a single occurrence. The maximum is not affected by the loss involving more than one party or by it involving a series of related acts.

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

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 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 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. However, the old loss would have to meet two criteria. First, this 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 policy provision. In addition, any payment made is subject to the current policy term's insurance limit (unless the prior term's limit was lower).

Possible Exclusion Ambiguity

There is an exclusion that 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. However, the exclusion also bars 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.

Related Article: Employee Dishonesty Exclusion Superseded Liability for Negligent Supervision – Illustrates how this issue was treated under another line of coverage.

9. Ordinance or Law – Equipment Coverage

This coverage was inspired by the dynamism surrounding environmental laws. Federal, state and community standards may require changes in equipment when it is damaged or replaced for any reason. If so, this coverage pays for the upgrade but only if the equipment’s valuation is on replacement cost. The total payment cannot exceed the limit of insurance on the declarations.

The policy will replace or repair equipment to comply with the law only when the equipment is damaged or lost by a covered cause of loss.

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

Coverage applies per piece of equipment.

This coverage does not pay for costs related to pollutant enforcement. In addition, 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.

When the equipment is actually repaired or replaced, the payment is the lesser of:

Coinsurance does not apply to this Additional Coverage.

10. Key and Lock Replacement

If a client’s keys that have been entrusted to the named insured or the named insured’s employee are stolen or lost, the insurance company will replace the locks at that client’s premises and the associated keys.

This coverage does not provide coverage for criminal action by the named insured or its managers, directors, trustees, employees, partners or its authorized representatives. Theft by a person to whom the named insured provided the keys is also not covered.

The exclusions apply to actions at any time during the day. The exclusions do not apply to employee acts of destruction that are not considered theft.

The limit is $5,000 per occurrence, and there is no deductible.

 

Example: Patty was having major raccoon problems, so she gave Critter Patrol keys to her house until all the raccoons had vacated the premises. Critter Patrol lost the keys and could not account for their whereabouts. They notified Patty, who immediately contacted a locksmith to replace all of her locks. Critter Patrol paid the costs to replace the locks and keys and then turned in the claim under this coverage. The loss was covered.

 

11. Artificially Generated Electrical Current

This coverage is applicable only to computers. When artificially generated electrical current damages or destroys the named insured's computers, the carrier will pay, but only if either of the following applies:

Any loss payment is subject to the deductibles in the policy and the limit on the Declarations that applies to this computer equipment.

C. Coverage Extensions Changes

1. Personal Effects and Property of Others

The limit is increased from $2,500 to $5,000 and can be further increased on the Supplemental Schedule.

2. 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 an 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

3. Accounts Receivable

The limit of insurance for the 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 $10,000 for on-premises loss or damage and up to $5,000 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.

4. Employees’ Tools and/or Equipment

The named insured’s business personal property coverage is extended to include loss or damage to employees’ tools and also to their equipment. The coverage applies only while the items are on premises, and coverage is limited to $500 for one employee and $2,500 per premises in a single occurrence. Payment is made for the actual owner of the items, which means the named insured is not given the money to pass on to the owner.

 

Example: Critter Patrol permits, but does not require, employees to carry Tasers, firearms, and other personal protection gear to use in situations where they believe they are endangered. A fire occurs in the locker room/storage area of the premises. Jerry (an employee) notifies Critter Patrol that his Taser was damaged. Critter Patrol agrees to extend coverage so its insurance carrier contacts and settles with Jerry under this 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 prevent confusion, this explanation is provided. 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, and 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 are 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 that MS PE 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 lightning loss or damage.

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.

·         Advice

2. When Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation excluded above result in a specified cause of loss or elevator collision, that resultant loss is covered. However, there is no payment to repair, replace, or modify any item listed in exclusion c. above.

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

E. Employee Dishonesty

The only exclusions in CP 10 30–Cause of Loss-Special Form that applies to the Employee Dishonesty Coverage are Governmental Action, Nuclear Hazard, and War and Military Action. All other exclusions are a part of the Employee Dishonesty Additional Coverage.

F. Outdoor Signs

None of the Exclusions or the Limitations applies to Outdoor Signs via the Pest Control Services endorsement except for:

·         Governmental action

·         Nuclear hazard

·         War and military action

·         Wear and tear

·         Rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself

·         Mechanical breakdown, including rupture or bursting caused by centrifugal force except for damage caused by elevator collision

G. Valuable Papers and Records and Accounts Receivable

The only exclusions that apply to Valuable Papers and Records and Accounts Receivable are:

·         Governmental action

·         Nuclear hazard

·         War and military action

·         Computer-related losses

·         Computer advice or consultation

·         Continuous or repeated seepage or leakage of water—14 days or more

·         Water, other liquids, powder or molten material that leak or flow from plumbing, heating, air conditioning or other equipment caused by or resulting from freezing

·         The concurrent causation exclusions that are part of B.3.

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 collapse, 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. 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

·         The following exclusions apply in addition to the exclusions described in G. above: Loss involving alteration, falsification, concealment, or destruction of accounts receivable records if these actions were meant to conceal another action such as giving, taking, or withholding money, securities or other property.

·         Loss due to errors or omission in a covered operation's bookkeeping, accounting or billing functions.

·         Loss that is only found due to an audit or inventory. There must be some other outside evidence.

III. Changes to the Commercial General Liability Coverage Part

A. Limited Pollution Coverage – Off Premises

The wording from the CG 22 64-Pesticides or Herbicide Applicator – Limited Pollution Coverage endorsement is added to the policy. This provides an exception to the off premises portion of the pollution exclusion (f. (1) (d)) but only when pesticides or herbicides are being applied or sprayed in the course of the named insured’s operations. An important condition is that the operation must be in compliance with federal, state, or local requirements.

Note: This coverage is not subject to a sublimit for coverage. This means that the limit of liability on the CGL Declarations is available for a loss covered under this item.

 

Example: Bugsy’s regularly treats Good Dog Hotel for flea infestation. While outside treating the store’s foundation, John is surprised when a Great Dane jumps on him as a welcoming gesture. John drops his chemicals. They roll down a hill and into a creek where they break open and pollute the creek and surrounding land areas. A number of claims are made against Bugsy, but because of this coverage and substantial limit of liability, all are covered.

B. Limited Pollution Liability - On premises

This change applies only if limits have been entered on the supplemental schedule for Limited Pollution coverage.

An exception is made to the on premises portion of the pollution exclusion (f. (1) (a)) but only for the storage of pesticides or herbicides that are to be sprayed or applied. The exception applies only if they are to be used in the course of the named insured’s operations. An important condition is that the operation must be in compliance with federal, state, or local requirements.

The Aggregate limit entered on the Supplemental Schedule is subject to the policy General Aggregate. It is the most paid for bodily injury and property damage under Coverage A and Coverage C from all premises due to covered pollution events.

The Occurrence limit entered on the Supplemental Schedule is the most paid for a single occurrence of a pollution event, regardless of the number of premises. It applies to both Coverage A and Coverage C.

The each occurrence and medical expense limits in CGL declarations do not apply to this coverage.

 

Example: John remains shook up after the pollution drop at Good Dog Hotel. He returns to Bugsy’s and empties his truck, putting all chemicals into the appropriate storage areas. He forgets to lock the storage building as he leaves for the day. A few youths enter the building and start experimenting with the chemicals, but when they get tired of the experimentation, they dump the chemicals throughout the yard. The chemicals travel to neighbors on all three sides of the premises. Bugsy’s is sued because of John’s negligence in securing the chemicals.

There is coverage, but it is limited to only the $25,000 on the Supplemental Schedule.

IV. Definitions

Twelve definitions are added:

Client is anyone who has a written agreement with the named insured to perform services for a particular location and who has been billed for the services performed by the named insured.

Client’s Premises is used only with Employee Dishonesty Coverage. It is the interior of the portion of the building that a client occupies for their business operations. This means that if a client is in a large office complex and occupies only one office, the client’s premises is that office and any allotted storage space. No other area of the complex would qualify as a client's premises.

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

Counterfeit money is an imitation of money that is meant to deceive.

Employee is a defined term only for Money and Securities and Employee Dishonesty coverages.

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

Manager applies to any director in a limited liability company.

Member is one of the owners of a limited liability company.

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

Occurrence, as defined here, applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money, it means either one or more related acts or events by one or more persons or one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses involving one or more instruments caused by any person or in which that person was involved. Under Employee Dishonesty, it means all losses that result from a single act or series of acts caused by one or more employees.

Other property is property that has an intrinsic value other than money and securities, BUT it doesn’t include property that is described under the property not covered part of the policy. This definition is used only in the Employee Dishonesty Coverage under the Client’s property.

Securities are 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. Food stamps and lottery tickets are also considered securities.

Theft is used only in Employee Dishonesty Coverage and is the taking of money, securities or other property in an unlawful manner but only if it deprives the client.

ENDORSEMENTS

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

Only two specific endorsements are available to modify this program's coverage. However, it is important to remember that all of 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 PE 04–Pest Control Services – Off Client Premises Limited Pollution Liability Coverage Extension

The aircraft, auto or watercraft exclusion (g.) in the CGL does not apply when this endorsement is attached but only for pollution-related events. Such an event must be related to the application or spraying of herbicides or pesticides in the named insured’s operations. It applies only to auto and only when it is not at a client’s premises and is not parked longer than 24 hours at a place other than the named insured’s premises.

MS PE 06–Pest Control Services – Client’s Premises Limited Pollution Liability Coverage Extension

The aircraft, auto or watercraft exclusion (g.) in the CGL does not apply when this endorsement is attached but only for the pollution-related event. Such an event must be related to the application or spraying of herbicides or pesticides in the named insured’s operations. It applies only to autos that are on the client’s premises.

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 in the case of ISO’s Market Segments Program, 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 eligibly requirements for the Pest Control Program are for the ISO generic program.

Pest Control Service Operations

Underwriting the Pest Control classification requires careful analysis based on the types of jobs handled. The damage that can be done by a Pest Control service depends on the types of pests being controlled, the methods used to control them, and the chemicals used in the process. Pest Control contractors provide services to commercial, farm, industrial and residential customers. They determine the type of pest and the most effective method of extermination that will cause the least amount of disruption to the customer. They eliminate or control pests by spraying or releasing chemical solutions or toxic fumes or by placing traps or liquid or pellet poisons in the appropriate locations. Monitoring and follow-up services are offered as well. The type of chemicals used and the type of properties treated determine the true exposure.

Any work in or around “sterile” areas is extremely sensitive and requires a high degree of expertise. Working in non-sterile parts of an operation with sterile parts can lead to problems if the work is above the sterile environment or requires access to the sterile environment.

This means that the first part of underwriting any Pest Control service starts with a list of services provided and the current client list. The next part involves a review of contracts to see what assumptions of liability have been made and guarantees offered.

The chemicals used in the operation must be carefully considered in the property, general liability, and workers compensation underwriting. The amount of chemical stored, its toxicity, flammability and the method of storage is vital information. A listing of equipment and where it is stored is important to understand the susceptibility of equipment to loss and to see if the type of equipment matches the type of services being offered.

A final but major part of the underwriting is the screening and supervision of employees. Employees will be off premises with a high potential for interaction with clients. Employees should never work alone, both for their own protection but also for the protection of the client. There should be procedures for check-in and check-out, key handling, and other security measures to protect the client.

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 via the Pest Control Services endorsement. Any increase in exposure presented by the individual risk hazards and covered by the endorsement enhancements should be identified. Once identified, these hazards and exposures should be evaluated to determine if they are those contemplated by the program's coverages and rates. The property enhancements with the most significant underwriting concerns are as follows:

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

Property in Transit is increased to $10,000 and can be increased to higher limits. These types of limits should focus underwriting on the method of transport, types of items being transported, and safety controls in place.

Key and Lock Replacement coverage is limited to $5,000 per occurrence. This coverage should not be used as a substitute for procedures and controls for clients’ keys.

Ordinance or Law – Equipment Coverage is provided, so the age of equipment and laws and regulations that could require equipment to be upgraded beyond the standard replacement must be considered. Limits should be sufficient to cover the necessary upgrade.

Employee tools and equipment coverage is provided, so it is important to determine the actual exposure present.

Crime and Dishonesty Enhancements

The Pest Control Services Program endorsements add coverage for money and securities, 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 avoid and prevent employee dishonesty losses.

Procedures should be implemented and reviewed regularly to minimize the potential for crime and dishonesty losses. The insured's client’s property is protected under the Employee Dishonesty provision, and employees on the clients’ premises should be monitored. Particular care should be paid to establish controls on who has keys to client premises.

Related Article: Crime Underwriting Considerations, for more information

Liability Enhancements

Extremely limited pollution coverage is provided that could actually be eliminating as much, if not more, coverage that is being provided. Insured should be encouraged to purchase pollution coverage elsewhere.

Because of the seriousness of the potential pollution situation, the underwriter should be away of the types of chemicals being used, the method of storage, and the training provided to prevent spills and careless mistakes.

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 basic MS PE 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.