ISO FILED INLAND MARINE COVERAGE FORMS ARCHIVE

(August 2024)

This document is a repository of articles and analyses that relate to earlier editions of the Insurance Services Office (ISO) filed Commercial Inland Marine Coverage Forms.

Related Article: ISO Filed Inland Marine Coverage Forms Overview

Collapsible Archive Index
Analysis	ISO Accounts Receivable Coverage Form (09 04 edition)
Analysis	ISO Accounts Receivable Coverage Form (03 10 edition)
Analysis	ISO Camera and Musical Instrument Dealers Coverage Form (09 04 edition)
Analysis	ISO Camera and Musical Instrument Dealers Coverage Form (03 10 edition)
Analysis	ISO Commercial Articles Coverage Form (09 04 edition)
Analysis	ISO Commercial Articles Coverage Form (03 10 edition)
Analysis	ISO Equipment Dealers Coverage Form (09 04 edition)
Analysis	ISO Equipment Dealers Coverage Form (03 10 edition)
Analysis	ISO Film Coverage Form (09 04 edition)
Analysis	ISO Film Coverage Form (03 10 edition)
Analysis	ISO Floor Plan Coverage Form (09 04 edition)
Analysis	ISO Floor Plan Coverage Form (03 10 edition)
Analysis	ISO Jewelers Block Coverage Form (09 04 edition)
Analysis	ISO Jewelers Block Coverage Form (03 10 edition)
Analysis	ISO Mail Coverage Form (09 04 edition)
Analysis	ISO Physicians and Surgeons Equipment Coverage Form (09 04 edition)
Analysis	ISO Physicians and Surgeons Equipment Coverage Form (03 10 edition)
Analysis	ISO Signs Coverage Form (09 04 Edition)
Analysis	ISO Signs Coverage Form (03 10 Edition)
Analysis	ISO Theatrical Property Coverage Form (09 04 edition)
Analysis	ISO Theatrical Property Coverage Form (03 10 edition)
Analysis	ISO Valuable Papers and Records Coverage Form (09 04 edition)
Analysis	ISO Valuable Papers and Records Coverage Form (03 10 edition)

ISO ACCOUNTS RECEIVABLE COVERAGE FORM (09 04 edition)

The ISO Accounts Receivable Coverage Form provides coverage for risks of direct physical loss or damage unless either the loss or the property is excluded or limited. It covers losses incurred because amounts or receivables owed the insured cannot be collected because of insured loss or damage to records of accounts receivable. It also includes the proper and reasonable costs to reconstruct the records, additional expenses for collection that result from the loss and interest on loans required to be taken to offset the loss of funds until the claim is paid. Loss caused by building collapse is included as an additional coverage for designated causes of loss and coverage also applies when records are removed to another location because of imminent danger of loss or damage at the business location.

This form is not used as often or as extensively as in the past. This is because accounts receivable coverage is an additional coverage or an extension of coverage in many commercial insurance policies. Businessowners and Capital Assets policies have significant sub-limits for accounts receivable coverage and many independently filed company commercial property coverage forms and policies also include substantial accounts receivable coverage sub-limits as an extension of coverage.

In any case, accounts receivable coverage should not be dismissed or treated as unnecessary before thoroughly and carefully reviewing it. In most cases, the coverage provided is broader than the coverage offered as an additional coverage or an extension of coverage in commercial property coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory for accounts receivable policies:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions Form IL 00 17

· Commercial Inland Marine Conditions Form CM 00 01

· Accounts Receivable Declarations Form CM DS 03

· Accounts Receivable Coverage Form CM 00 66

Accounts receivable coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any commercial account is eligible for accounts receivable coverage. Businesses or other operations that regularly extend credit terms on purchases to their customers are the primary purchasers of this coverage.

DECLARATIONS

The Advisory Accounts Receivable Declarations does not have a place for the name, mailing address and other named insured identifying information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or a coverage change and the premium charge for the coverage.

Limits of Insurance

The address of each covered location or premises must be listed and a limit of insurance shown. Coverage at locations away from the insured premises requires showing a limit of insurance but not an address or designated location. Off-premises coverage similarly requires only a limit of insurance and not an address. Finally, an aggregate or catastrophe limit in any one occurrence for coverage applicable at all locations must be shown in the space provided.

Description of Receptacles

Significant rate and premium credits are available if the insured keeps the accounts receivable in a fire-rated and labeled receptacle, vault or safe. This part of the declarations has spaces to list the address of the premises, the safe or vault manufacturer and the class, label and issuer information about the receptacle. This information is required for each location having accounts receivable stored in a rated and qualifying receptacle.

Coinsurance

The coinsurance clause and percentage in the policy is 80% unless a different percentage is shown in the space provided.

Rates and Premium

Accounts receivable coverage can be written as non-reporting or reporting. If coverage is non-reporting, the only required entries are for the rate and premium. When coverage is reporting, a number of additional entries are required. These include the deposit premium, the minimum annual premium, the reporting period frequency, expressed in terms of monthly, quarterly or annual, the premium adjustment period, also expressed in terms of monthly, quarterly or annual, and the rate or rates that apply.

Duplicate Records

Significant rate and premium credits are available if the insured keeps and maintains duplicate accounts receivable records at a physically separate or different location for at least the amount of time required by the insurance company. This is usually dictated by the insured's accounting cycle. The location where the duplicate records are kept is not required but the percentage of records duplicated must be shown in the space provided and that percentage is the basis for calculation of the rate credit that applies.

FORM ANALYSIS–CM 00 66

A. Coverage

1. The insurance company pays:

a. The actual amounts owed to the insured by customers that cannot be collected.

Example: Jim's Wholesale Clown Supplies sustained a covered loss and many of the records of accounts receivable were lost. His accounts receivable limit was adequate and he was not subject to any coinsurance penalty. If he cannot determine the amounts owed him by his many customers by any other means, this coverage will reimburse him based on the Determination of Benefits section of the coverage form.

b. Interest on loans that must be taken to offset the loss of funds until the claim is paid.

Example: Jim's own accounts payable were coming due and, even though his accounts receivable carrier was working feverishly on adjusting his loss, Jim's creditors were not very understanding of his situation. Jim had to take out a sizeable loan to pay his creditors until the accounts receivable loss was resolved and he was reimbursed. This coverage pays the interest charges on the loan Jim must pay as a result of taking out the loan.

c. Additional expenses for collections that result from and are made necessary as a result of the loss.

Example: Jim had to hire a collection agency to track down some of his delinquent accounts that knew about his loss and thought they could avoid paying their balances due him. Since a few of these were located in different parts of the country, the expenses for this service got real large real fast. Fortunately, this provision of the accounts receivable form reimbursed Jim for these additional collection expenses.

d. Reasonable costs and expenses necessary to reconstruct the accounts receivable records. The term "reasonable" is not defined and may become a point of dispute between the insured and the insurance company in a loss settlement.

Example: Jim's situation was very peculiar and the records reconstruction effort was extreme. Fortunately, they did not go so far that the insurance company simply gave up and offered the policy limits instead of continuing with the adjustment. This coverage provision enabled the records to be completely reconstructed and gave Jim a "fresh start" on re-establishing and maintaining all his accounts receivable records.

2. Property Not Covered

a. Accounts receivable records at locations not listed on the declarations or away from the listed premises.

b. Contraband or any property illegally transported is also not covered.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage Extension–Removal

Accounts receivable records removed from an insured premises because of imminent danger of loss or damage to them are covered at the new location to which they are removed. They are also protected while in transit to and from that location as long as the insured informs the insurance company of the removal within ten days of the removal date. The form does not refer to any coverage restriction or time limitation that applies to the records removed.

Example: Linda's Finer Fashions had a small but wealthy clientele and she cheerfully extended credit terms because her well-heeled customers always eventually paid up, although not always on time. Because of this, she never paid much attention to her accounts receivable or automated the process but she always had enough information to know who owed what. Her coastal Florida store was threatened by the imminent landfall of a category four hurricane she was sure would level her establishment. Linda packed up as much of her stock as possible and all her paper accounts receivable records into a box truck, drove 80 miles inland and parked the truck in a storage facility owned by one of her customers. She called her insurance company after the truck was parked and let them know what she did just before the cell phone towers blew down and the conversation was cut short. Because of this coverage extension and Linda's quick action, coverage applied on her accounts receivable at the temporary storage location for as long as it took her to rebuild her store and get back into business, much to the chagrin of some of her clients.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

c. Alteration, falsification, concealment or destruction of accounts receivable records in order to conceal other wrongful acts involving giving, taking or withholding of money, securities and other property.

Example: A fire breaks out at Acme Financial Temporaries. The insurance company determines the value of lost accounts receivable records to be $57,000. However, a small file cabinet in the middle of the damaged accounts receivable area looks out of place and puzzles the adjuster. He asks an employee about it and finds it should have been next to the Controller's office on the other side of building. After questioning the Controller, she admits pushing the cabinet into the records area before joining the other employees evacuating the premises. She had been embezzling money and hoped the fire would destroy evidence of her theft. The adjuster later determines a cost of $6,000 to replace the records intentionally destroyed and reduces the $57,000 claim by this amount to a revised loss estimate of $51,000.

d. Bookkeeping, accounting or billing errors or omissions that lead or contribute to a loss.

Example: As the adjuster dug further into the Acme loss, he found a number of ledger entries that did not add up to the totals claimed and a number of accounts that were over-billed. The math errors and excessive billings amounted to another $8,500 that had to be deducted from the total amount of loss. Doing so further reduced the loss amount to $42,500.

e. Electrical or magnetic injury, disturbance or erasure of electronic recordings caused by or resulting from programming errors, faulty machine instructions or faulty installation or maintenance of data processing equipment or components. An occurrence that takes place over 100 feet from the insured's premises is also excluded, as is any interruption or fluctuation in electrical power supply that takes place over 100 feet from the insured's premises. However, direct loss or damage caused by lightning is covered.

Example: Fred's Fine Spirits received its supply of wine from only a few growers and he similarly distributed to only a few select retail operations. Fred wasn't real thorough, diligent or timely on posting and backing up his accounting records. This worked to his advantage, though, when his computer system crashed because he tried to save a few dollars by installing a new program himself instead of having a professional do it. Some of Fred's records were lost and this exclusion applied to them. Fortunately, his unprocessed paper records allowed him to reestablish the records when the system was brought up to speed and his procrastination kept his loss to a much smaller amount than if he had been more timely in posting his records.

f. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

g. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

h. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. There is no coverage for loss or damage when the only proof that a loss occurred is a physical inventory or records audit. This information can be used to supplement and assist a loss adjustment but cannot be used as the only proof.

4. Tier 4 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Additional Conditions

The following conditions modify or are in addition to the Common Policy Conditions Form IL 00 17 and the Commercial Inland Marine Conditions Form CM 00 01 attached to and forming part of this policy.

1. Determination of Receivables replaces the valuation condition in the Commercial Inland Marine Conditions. This unique formula is used when the amount of accounts receivable outstanding at the time of a covered loss cannot be accurately determined. The first part of the formula determines the average monthly amount of accounts receivable for each of the 12 months before the loss. That amount is adjusted for any normal fluctuations or demonstrated variances that historically occur in the month when the loss occurred. The second part makes deductions from the amount determined in the first part. These include the amount of accounts not affected by the loss and the amount of accounts the insured is able to either collect or re-establish. It also takes into account normal allowances for bad debts and any unearned interest or service charges.

Example: Going back to Jim's Wholesale Clown Supplies earlier in this analysis, Jim did not have current backup or duplicate records of his accounts receivable and coming up with a true estimate of his loss was like looking for a needle in a haystack. Fortunately, the records he did have, although somewhat dated, were fairly complete and the insurance company was able to use the provisions in this condition to come up with a total amount of receivables that was very close to Jim's estimate of what was actually owed him by his customers.

2. Recoveries change the Commercial Inland Marine Conditions, Loss Condition H Recovered Property. This revised condition requires the insured to pay the insurance company the amount of all subsequent recoveries if the company already paid a covered loss. However, if recoveries made by the insured exceed the amount paid by the company, the excess belongs to the insured.

3. Additional Conditions that apply to this coverage form in addition to those in the Commercial Inland Marine Conditions and the Common Policy Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes accounts receivable inside the insured's premises and away from those premises while in transit or within premises of others in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the following condition applies:

The insurance company does not pay the full amount of any loss if the value of all accounts receivable at the time of loss multiplied by the coinsurance percentage shown on the declarations exceeds the limit of insurance at all locations. This does not include the value of accounts receivable in transit.

The insurance company determines the amount paid by the following steps:

(1) Multiply the value of all accounts receivable at the time of loss, other than those in transit, by the coinsurance percentage that applies.

(2) Divide the limit of insurance for coverage applicable at all locations by the figure determined in step (1) above.

(3) Multiply the total amount of loss by the figure determined in step (2) above.

The insurance company pays the amount arrived at in step (3) above or the limit of insurance, whichever is less. The insured is responsible for absorbing the loss of any amounts not payable by use of this formula. This condition and calculation procedure does not apply to accounts receivable in transit, interest charges, excess collection expenses or expenses to re-establish records of accounts receivable.

c. Protection of Records

The insured must keep all records of accounts receivable in the receptacles described on the declarations at all times when the premises are not open for business.

E. Definitions

"Premises" is the only defined term in this coverage form. It means the interior portion of the building occupied by the insured at the address or location shown on the declarations.

ENDORSEMENTS

Three specific endorsements are available for exclusive use with this coverage form.

CM 66 01–Exclusion of Named Customers

This endorsement provides a means for the insured to list specific customers whose accounts are not to be included in the policy limits in the event of a loss. This approach lets the insured eliminate potentially large limits in cases of customers with records easily located through other means or because of the way they transact business.

CM 66 04–Duplicate Records

This endorsement requires the insured to duplicate at least the percentage of accounts receivable indicated on the declarations and to maintain those duplicate records for at least six months. It also amends paragraph 2.e. in the Exclusions section of the coverage form by removing the exclusions for incidents that occur over 100 feet from the insured premises.

CM 66 06–Reporting

If the insured chooses to have accounts receivable written on a reporting form basis, this endorsement entirely deletes the Coinsurance Additional condition. It replaces the Determination of Receivables condition with an entirely different one suitable to a reporting coverage arrangement. It introduces a Reports and Premium section. This section includes details on how often reports are to be submitted to the insurance company and how premium is calculated using the reports. It also details how the deposit premium is adjusted based on the reports and other premium adjustments. It specifies the minimum annual premium that applies, regardless of the premium developed by the reports and adjustments, and outlines the penalties for failure to submit reports on time. It states that only the policy limits apply to a loss even in cases where higher values are reported but are not endorsed to the policy. Finally, it provides for annual re-rating of the policy at each anniversary date.

UNDERWRITING CONSIDERATIONS

The key element in accounts receivable coverage is duplication. The insured should create at least partial duplicate records and maintain them for the usual amount of time suggested by normal practices in the line of business involved. Another important element is storage arrangements. Approved and rated storage receptacles provide greater protection against loss. Both duplication and use of acceptable receptacles translate into rate credits that can reduce the premium costs to the insured for this coverage. Underwriting issues that are important in personal property coverage are also important considerations for this coverage. These include issues such as construction of the building the insured occupies, the degree and extent of private and public protection, the nature of other occupancies in the building and the nature of outside exposures.

ISO ACCOUNTS RECEIVABLE COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 03–Accounts Receivable Declarations

Form Analysis–CM 00 66–Accounts Receivable Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Additional Conditions

E. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Accounts Receivable Coverage Form insures against direct physical loss or damage to the named insured's records of accounts receivable except for causes of loss indicated in Exclusions. It covers the costs to re-establish records of accounts receivable and the actual loss because the named insured cannot collect amounts due resulting from insured loss or damage to the records. This also includes reasonable and proper costs to reconstruct the records, additional expenses for collection that result from the loss, and interest on loans that must be taken out to offset the loss of funds until the claim is paid.

This coverage form is not used as much as in the past because accounts receivable coverage is an additional coverage or an extension of coverage with significant sub-limits in many filed commercial property coverage forms and policies. Businessowners and Capital Assets policies have significant sub-limits for accounts receivable coverage and many independently filed company commercial property coverage forms and policies also include significant sub-limits as an extension of coverage. However, accounts receivable coverage should not be dismissed or treated as unnecessary before thoroughly and carefully reviewing it because the coverage provided is usually broader than that offered as an additional coverage or an extension of coverage in most commercial property coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 03–Accounts Receivable Declarations
• CM 00 66–Accounts Receivable Coverage Form

Note: Accounts receivable coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any commercial account is eligible for accounts receivable coverage. Businesses or other operations that regularly extend credit terms to their customers for purchases are the primary entities that buy this coverage.

CM DS 03–ACCOUNTS RECEIVABLE DECLARATIONS

CM DS 04–Accounts Receivable Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 04–Accounts Receivable Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Premium For This Coverage Form

The premium for Accounts Receivable Coverage is entered in the space provided.

Limits Of Insurance

The address of each of the named insured's covered premises and their limit of insurance must be entered in the spaces provided. Separate limits of insurance must be entered for coverage away from the named insured's premises and for coverage at all locations in any one occurrence.

Description Of Receptacles

The address, receptacle manufacturer, class, label and the label issuer's name must be entered in the spaces provided for every receptacle at each covered premises.

Coinsurance

The coinsurance percentage is 80% unless a different percentage is entered in the space provided.

Rates And Premiums

Accounts Receivable Coverage is usually written on a non-reporting basis. This section has spaces to enter the annual premium and the non-reporting rate per $100 that applies. If coverage is written on a reporting basis, the deposit premium, the minimum annual premium, the reporting period, the premium adjustment period and the rate or rates that apply must be entered in the spaces provided.

Duplicate Records

If duplicate records are maintained and CM 66 04–Duplicate Records endorsement is attached, the percentage of records duplicated must be entered in the space provided.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 66–ACCOUNTS RECEIVABLE COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 66 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage. It also directs attention to Section E–Definitions because understanding their special meanings is critical to understanding the coverage and exclusions that apply.

A. COVERAGE

1. The insurance company pays the following resulting from a covered cause of loss to the named insured's records of accounts receivable:

• Amounts due from customers that cannot be collected

Example: Jim's Wholesale Clown Supplies sustained a covered loss and many of the records of accounts receivable were lost. His accounts receivable limit was adequate and he was not subject to any coinsurance penalty. If he cannot determine the amounts owed him by his many customers by any other means, this coverage reimburses him based on D. Additional Conditions, 1. Determination Of Receivables.

• Interest charges on loans that must be taken to offset the loss of funds until the claim is paid

Example: Jim's own accounts payable were coming due and, even though his accounts receivable carrier was working hard to adjust his loss, Jim's creditors were not very understanding of his situation. He had to take out a sizeable loan to pay his creditors until the accounts receivable loss was resolved and he was reimbursed. This coverage pays the interest charges on the loan Jim took out.

• Additional expenses for collections resulting from and necessitated by the loss

Example: Jim had to hire a collection agency to track down some of his delinquent accounts who knew about his loss and who thought they could avoid paying their balances. Since a few were found in different parts of the country, the expenses for this service were quite high. Fortunately, this provision reimbursed Jim for these additional collection expenses.

• Reasonable expenses incurred to reconstruct accounts receivable records

Note: The term "reasonable" is not defined and may be a point of contention between the insured and the insurance company in a loss settlement.

Example: Jim's situation was unique and reconstructing the records was difficult but not to the extent that the insurance company simply gave up and offered the limits instead of continuing with the adjustment. This coverage provision enabled Jim's records to be completely reconstructed and gave him a "fresh start" on re-establishing and maintaining all his accounts receivable records.

2. Property Not Covered

There is no coverage for:

• Accounts receivable records stored at locations not indicated on the declarations
• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extension–Removal

Records of accounts receivable removed to a different location from an insured premises because of imminent danger of loss or damage are covered. They are also covered while in transit to and from that location. The named insured must inform the insurance company of the removal within ten days of the removal date.

Note: The limit of insurance at the location from which the records were removed applies to this coverage extension.

Example: Linda's Finer Fashions had a small but wealthy clientele and she cheerfully extended credit terms because her customers always eventually paid up, although not always on time. Because of this, she never paid much attention to her accounts receivable or automated the process but she always knew who owed what. Her coastal Florida store was threatened by a Category Four hurricane she was sure would level her establishment. Linda packed up much of her stock and all her paper accounts receivable records into a box truck, drove 80 miles inland and parked in a storage facility one of her customers owned. Because of this coverage extension and Linda's quick action, coverage applied at the temporary storage location for as long as it took her to rebuild her store and get back into business.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

c. Alteration, Falsification, Concealment Or Destruction

Loss or damage caused by or resulting from acts done to records of accounts receivable in order to conceal other wrongful acts involving giving, taking or withholding of money, securities and other property is excluded. This is limited to only the extent of the wrongful acts.

Example: A fire breaks out at Acme Financial Temporaries resulting in lost records of accounts receivable in the amount of $57,000. However, a small file cabinet in the damaged accounts receivable area looks out of place and puzzles the adjuster. After making a few inquiries, he learns that it should have been next to the Controller's office on the other side of building. After questioning the Controller, she admits pushing the cabinet into the records area before joining the other employees evacuating the premises. She had been embezzling money and hoped the fire would destroy evidence of her theft. The adjuster later determines a cost of $6,000 to replace the records intentionally destroyed and reduces the $57,000 claim by this amount to a revised loss estimate of $51,000.

d. Bookkeeping, Accounting Or Billing Errors Or Omissions

The insurance company does not pay for loss or damage caused by or resulting from errors or omissions in bookkeeping, accounting or billing that cause or contribute to a loss.

Example: Digging further into the Acme loss, the adjuster found some ledger entries that did not add up to the totals claimed and a number of accounts that were over-billed, amounting to another $8,500 that was deducted from the total amount of loss. This reduced the loss amount to $42,500.

e. Electrical Or Magnetic Injury, Disturbance Or Erasure Of Electronic Recordings

There is no coverage for loss or damage to electronic recordings caused by or resulting from programming errors, faulty machine instructions or faulty installation or maintenance of data processing equipment or components. An occurrence that takes place over 100 feet from the insured's premises or any interruption or fluctuation in electrical power supply that takes place over 100 feet from the insured's premises are also excluded but direct loss or damage caused by lightning is covered.

Example: Fred's Fine Spirits received its wine from only a few wineries and he similarly distributed to only a few select retail operations. Fred wasn't real thorough, diligent or timely in posting and backing up his accounting records. His procrastination worked in his favor when his computer system crashed because he tried to save a few dollars by installing a new program himself instead of having a professional do it. This exclusion applied to the records that Fred lost but his unprocessed paper records allowed him to reestablish the records when the system was brought up to speed and his loss was much smaller than if he had posted his records on a more timely basis.

f. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

g. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

h. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage that requires an inventory or records audit to prove that the loss occurred.

Note: This information can be used to substantiate a loss adjustment but cannot be the only proof.

4. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

C. LIMITS OF INSURANCE

The limit indicated on the declarations is the most paid for loss or damage in any one occurrence.

D. ADDITIONAL CONDITIONS

1. Determination Of Receivables

This replaces the valuation condition in CM 00 01–Commercial Inland Marine Conditions. If the outstanding amount of accounts receivable at the time of loss cannot be established, the total of the average monthly amounts for the 12 months leading up to the month in which the loss occurred is determined. The total is then adjusted for any normal fluctuations or other demonstrated variances in amounts of accounts receivable in the month in which the loss occurred.

Regardless of the method used to determine the total amount of accounts receivable, the following are deducted:

• Amounts that did not sustain loss or damage
• Amounts that the named insured re-established or collected
• Amounts allowed for probable bad debts that the named insured usually cannot collect
• All unearned interest and service charges

Example: Going back to Jim's Wholesale Clown Supplies, Jim did not have current backup or duplicate records of his accounts receivable and coming up with a true estimate of his loss was like looking for a needle in a haystack. Fortunately, the records he did have, although somewhat dated, were fairly complete and the insurance company was able to use the provisions in this condition to come up with a total amount of receivables that was very close to Jim's estimate of what his customers actually owed him.

2. Recoveries

This condition is added to Loss Condition H., Recovered Property in CM 00 01–Commercial Inland Marine Conditions. The named insured pays the insurance company all amounts it recovers for loss or damage it paid. The named insured keeps any recoveries it receives that exceed amounts the company paid.

3. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company covers records of accounts receivable inside the named insured's premises, away from those premises while in transit, or inside premises of others if the transit takes place and the premises are within the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance

This condition applies if a coinsurance percentage is entered on the declarations.

The insurance company does not pay the full amount of any loss if the value of all accounts receivable at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance at all locations. This does not include the value of accounts receivable in transit. The steps the insurance company takes to determine the amount it pays are as follows:

(1) Multiply the value of all accounts receivable at the time of loss by the coinsurance percentage that applies, excluding values in transit.

(2) Divide the limit of insurance for coverage that applies at all locations by (1) above.

(3) Multiply the total amount of loss by (2) above.

The insurance company pays the lesser of the amount in (3) above, or the limit of insurance. The named insured is responsible for any amounts not paid. This condition does not apply to accounts receivable in transit, interest charges, excess collection expenses, or expenses to re-establish records of accounts receivable.

c. Protection Of Records

The named insured must keep all records of accounts receivable in the receptacles indicated on the declarations at all times when the premises are closed for business.

E. DEFINITIONS

Premises means the interior portion of the building that the named insured occupies at the address or location indicated on the declarations.

ENDORSEMENTS

Three endorsements are available for use with the Accounts Receivable Coverage Form.

CM 66 01–Exclusion of Named Customers

When this endorsement is used, the insurance company does not pay for any loss or damage to records of accounts receivable for customers indicated on the endorsement schedule. This allows the named insured to insure for lower limits because the records of these customers can be easily determined or are available using other means.

CM 66 04–Duplicate Records

This endorsement requires that the named insured duplicate at least the percentage of accounts receivable indicated on the declarations and maintain them for at least six months. It also amends paragraph 2.e. in Exclusions by removing the exclusions for incidents that occur over 100 feet from the insured premises.

CM 66 06–Reporting

This endorsement deletes D. Additional Conditions 3.b. Coinsurance if the named insured writes accounts receivable coverage on a reporting form basis. It replaces D. Additional Conditions 1. Determination Of Receivables with conditions related to reporting. It adds Reports And Premium that explains how often reports must be submitted to the insurance company, how premium is calculated, minimum premiums, consequences of failing to submit reports, and reports that exceed the limits of insurance. It also adds a provision for annual re-rating.

UNDERWRITING CONSIDERATIONS

The key element in accounts receivable coverage is duplication. The insured should create at least partial duplicate records and maintain them for the usual amount of time suggested by normal practices in the line of business involved. Another important element is storage arrangements. Approved and rated storage receptacles provide greater protection against loss. Both duplication and use of acceptable receptacles translate into rate credits that can reduce the premium costs to the insured for this coverage. Underwriting issues that are important in personal property coverage are also important considerations for this coverage. These include issues such as construction of the building the insured occupies, the degree and extent of private and public protection, the nature of other occupancies in the building and the nature of outside exposures.

ISO CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE FORM
(09 04 edition)

The ISO Camera and Musical Instrument Dealers Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers losses incurred involving stocks of merchandise held for sale by camera and musical instrument dealers. Coverage applies to all camera and musical instrument property and related stock, as well as similar non-owned property in the dealer’s care, custody and control. Coverage applies on property at specific scheduled locations, while in transit and at other unscheduled locations. This coverage form is not intended for commercial camera and musical instrument owners. The commercial articles floater is used to provide coverage for that situation.

POLICY CONSTRUCTION

The following forms are mandatory for camera and musical instrument dealers policies:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions Form IL 00 17

· Commercial Inland Marine Conditions Form CM 00 01

· Camera and Musical Instrument Dealers Declarations Form CM DS 04

· Camera and Musical Instrument Dealers Coverage Form CM 00 21

Camera and musical instrument dealers coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Camera dealers and musical instrument dealers are eligible. It is important to distinguish the property eligible for musical instrument coverage. Radios, television and sound-recording devices do not qualify and are not treated as musical instruments. If a retail discount or department store purchases this coverage, it only applies to merchandise and equipment in the camera department or the musical instrument department. This form does not cover any other merchandise held for sale.

Note: This coverage form does not apply to the property exposure of primary manufacturers of cameras or musical instruments.

DECLARATIONS

The Advisory Camera and Musical Instrument Dealers Declarations does not have a place for the name, mailing address and other named insured identifying information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number and the coverage effective date or the effective date of an endorsement or coverage change. It also contains boxes to check to indicate if coverage is for cameras or musical instruments and to indicate the premium charge or charges for the coverage or coverages selected.

Limits of Insurance

The address for each covered location or premises must be listed and a limit of insurance shown. Separate limits of insurance must be shown for property away from designated premises when in the care, custody or control of the insured or the insured's employees, as well as for property in transit and for property not at the insured premises and not otherwise included in any of these limits. Finally, an aggregate or catastrophe limit in any one occurrence for coverage applicable at all locations must be shown.

Rates and Premium

Camera and musical instrument dealers coverage can be written as non-reporting or reporting. If coverage is non-reporting, the only required entries are for the rate and the premium. When coverage is reporting, a number of additional entries are required. These include the deposit premium, the minimum annual premium, the reporting period frequency, expressed in terms of monthly, quarterly or annual, the premium adjustment period, also expressed in terms of monthly, quarterly or annual, the premium basis and the rate or rates that apply.

Deductible

The standard $500 deductible is shown on the declarations. Different deductibles are available and may be selected. If so, they must be shown on the form in the space provided.

Coinsurance

The coinsurance clause and percentage in the policy is 80% unless a different percentage is shown in the space provided. Coinsurance can be eliminated by entering a statement on the declarations that coinsurance does not apply.

Additionally Covered Property

This form can provide coverage for four additional categories of property. The categories are:

• Furniture, fixtures and office supplies;
• Machinery, tools and fittings;
• Patterns, dies, molds and models; and
• Improvements and betterments.

A limit for any coverage selected must be shown and the location address where coverage applies indicated in the spaces provided. Additionally Covered Property, Form CM 99 01, must also be attached to the policy when any of these coverages is selected.

Special Provisions (if any)

If any coverage or policy provision applies that is not otherwise addressed on the declarations, the coverage form, separate endorsement or provision must be listed in the space provided.

FORM ANALYSIS–CM 00 21

A. Coverage. The insurance company pays for direct physical loss of or damage to covered property by a covered cause of loss.

1. Covered property

a. Cameras, musical instruments and related equipment and accessories making up the insured's principal stock in trade; and

b. Related and similar property of others in the insured's care, custody and control.

2. Property Not Covered

Five categories of property are not eligible for coverage:

a. Property sold and delivered in which the insured no longer has an ownership interest. This also includes property sold under any sales arrangement involving deferred payments.

Example: Gene's Guitars Sales and Service sold Eric a vintage Gibson guitar with payments to be made over a period of 36 months. Eric faithfully made payments for almost two years until the guitar was stolen from a gig in Los Angeles. Eric did not see fit to insure it, a decision he regretted for the rest of his life. Gene also regretted it, because his sales contract to Eric afforded him no relief for the unpaid amounts and he could not recover the remaining balance from this coverage because this category of property was not covered.

b. Money or other currency, securities, evidence of debt, notes, accounts, bills, currency and deeds.

c. Furniture, fixtures and office supplies, tools, fittings, patterns, dies, molds and models, improvements, betterments and machinery. However, these items can be included for coverage by completing the applicable portion of the declarations as outlined above and by adding Additionally Covered Property Endorsement, Form CM 99 01.

d. Property sent by mail. However, property sent by Registered Mail or Government Insured Mail is covered.

Example: Gene figured his luck had to change soon and it did…for the worse! He found a collector who would pay any price for a Fender Stratoliner guitar Gene had advertised on the Internet. Gene had intentionally inflated the price to test the waters and see what would happen and the collector was glad to pay the inflated price. Gene had the guitar professionally packaged and mailed by First Class Mail, obviously casting caution to the winds and forgetting all about insuring it. The collector never received it, Gene was out both the actual value and the inflated value of it and the world will have to wait for the next guitar prodigy to find out where the guitar actually might have gone.

e. Illegal property or contraband or any property in the course of illegal transportation or trade.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods in construction, remodeling or renovation used if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage extension–Theft damage to buildings

If the insured owns or is legally responsible for damage to the building it occupies, and the building is damaged during a theft or attempted theft, the insurance company pays for the damage to the part of the building occupied by the insured or to building service equipment inside the building. Coverage does not apply for loss or damage caused by fire or to glass or any lettering on glass. This coverage extension is included in the limit of insurance for property at the covered location where the damage occurs and is not an additional amount of insurance.

Example: The building owned and occupied by Clyde's Cameras was badly damaged when a would-be thief decided the best way to break in and steal merchandise would be by crashing his beat-up car into it when the store was closed and making off with a lot of camera equipment in the process. The thief failed to recognize the possibility of other parts of the structure collapsing on the vehicle and pinning him in the wreckage. That is exactly what happened. The thief was apprehended, no merchandise was taken and Clyde recovered the full cost of repairs needed to the building to get him back into business.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Earthquake of all kinds is excluded, unless the earthquake causes a fire. In that case, coverage applies only for the loss or damage caused by the fire, if this form covers fire.

b. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

c. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

d. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

e. Water includes flood, surface water, waves, tides, tidal waves, overflow of any body of water or their spray, all whether driven by wind or not. An exception applies if the action of the water results in a fire, explosion or theft. In that case, this form covers those causes of loss. This exclusion only applies to property situated on the insured's premises.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Theft of covered property from an unattended vehicle is excluded. However, coverage does apply if the windows, doors and compartments of the vehicle were closed and locked at the time of the theft and visible signs are present that the theft resulted from forced entry. This exclusion does not apply to property in the custody of a carrier for hire.

Example: Gene's bad luck continued. He picked up a number of musical instruments for a really good price at an auction. They were all serviceable and Gene figured he could clean up and refurbish them and sell them for a tidy profit. Gene decided to stop for lunch and celebrate his good fortune at a little diner with great food in a bad part of town. Unfortunately, Gene forgot to lock his van and all the instruments were gone when he came out after lunch. Since there was no forced entry into the vehicle, there was no coverage for this theft loss.

b. Marring, scratching, exposure to light, breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses is not covered. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft or attempted theft, or accident to vehicles carrying such property is covered, if this form covers those causes of loss.

Example: Clyde's store was one of many vandalized during urban riots that broke out after a particular police action enraged the local citizenry. Clyde had most of his equipment locked up and secured and virtually nothing was taken. Apparently the rioters were unhappy that their efforts were largely fruitless and they torched Clyde's store in addition to quite a few others. The fire was extinguished in short order but a brief period of intense heat caused many camera lenses to discolor or shatter, functionally rendering the cameras worthless. In this case, Clyde's luck continued, because the loss to the lenses and other related glass items was completely covered by the exception to this exclusion.

c. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

d. Unexplained disappearance of property is excluded. This is where covered property is simply gone and there is no obvious cause or explanation of what happened to it.

e. Shortage discovered after taking inventory is similar to unexplained disappearance and is similarly not covered. In this case, the loss of the property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

f. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

g. Processing activities or work on the covered property resulting in loss or damage to the property is not covered. However, if the activity or work results in fire or explosion, the direct loss or damage caused by that fire or explosion is covered, if this form covers fire or explosion.

Example: Gene's luck finally changed for the better. He was using a highly flammable solvent to clean the bodies of some vintage accordions. Unfortunately, he was doing this during a severe cold snap and the space heater at his feet overheated, igniting the fumes from the solvent. Gene didn't notice that the solvent was the wrong kind and was severely etching the surface of the accordions but he sure noticed the fire as he fled the premises and called the fire department. The adjuster had to sort through the mess but determined that the damage to the accordions from the solvent was nominal and a lot less than the fire that consumed nearly all the stock he had for repair and most of his loss was covered by the exception to this exclusion.

h. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

i. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

j. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

k. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional Conditions

The following conditions modify or are in addition to the Common Policy Conditions, Form IL 00 17 and the Commercial Inland Marine Conditions, Form CM 00 01 attached to and forming part of this policy.

1.Valuation

The valuation clause in the Commercial Inland Marine Conditions is replaced by the following valuation clause that applies different valuation conditions to four categories of property. In all cases, the value of property is determined at the time that the loss or damage occurs.

a. Unsold property is valued at its actual cash value, the cost to restore it to the condition it was in before the loss occurred or the cost to replace it with approximately similar property. The insurance company has the option of selecting the least expensive option in settling a loss.

b. Sold property not yet delivered is valued at its net selling price after making adjustments for allowances and discounts.

c. Property of others in the care, custody or control of the insured is valued for the legal liability of the insured plus the value of labor and materials added or the actual cash value including labor and material added. The insurance company has the option of selecting the least expensive option in settling a loss.

d. Negatives, positives and prints are valued differently than outlined above. The value on this property is the cost of unexposed film or developing paper and the cost of labor and materials added to them in being developed.

2. The following conditions also apply to this coverage form:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

(1) Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

(2) Divide the limit of insurance that applies to the property by the figure determined in step (1) above.

(3) Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step (2) above.

(4) Then subtract the amount of deductible from the figure determined in step (3) above.

c. Records and inventory requires the insured to not only maintain accurate business records at all times but to keep them for at least three years after the policy expires. As a minimum, the records must consist of an itemized inventory of stock in trade and records of all purchases, regardless of whether they were made by cash or credit. In addition, records of property of others held in the insured's care, custody and control and records of the insured's property sent to others for any purpose must also be retained. Finally, the insured must conduct a physical inventory of all stock in trade at least annually.

d. Protective safeguards in place at designated locations at policy inception must be maintained in proper working order. If they are not so maintained and are not operational during times when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

Example: After Gene's luck improved, Clyde's ran out. The lines from Clyde's burglar alarm system to the central station were cut during a failed break-in. Clyde was so wrapped up in cleaning up the mess from the botched attempt that he forgot about the cut lines and the fact that his premises was now functionally without an operating alarm system. The burglars figured they would have better luck the second time around and struck the next evening, shortly after Clyde closed up and went home for the day. This time the burglars removed a lot of merchandise at their leisure because they were not constrained by an alarm sounding and the police arriving. Clyde found the error of his ways the next morning, much to his chagrin, and he was even more remorseful when he learned that the loss was not covered because the protective safequard to protect against the loss that occurred was not operational at the time of the loss.

ENDORSEMENTS

Two specific endorsements are available for exclusive use with this coverage form.

CM 99 01–Additionally Covered Property

This endorsement is used to extend coverage under the camera and musical instrument coverage form to other property. The additional property that can be covered includes furniture, fixtures and office supplies; machinery, tools and fittings; patterns, dies, molds and models; and improvements and betterments. Because of the number and types of additional property that can be covered, this endorsement contains its own valuation and coinsurance provisions.

CM 99 02–Reporting

If the insured selects coverage on a value-reporting basis, this endorsement provides details on when reports are to be submitted, how premium is to be calculated and adjusted and the minimum policy premium that applies. It also includes details on final premium adjustment if the policy is canceled, how coinsurance terms are re-introduced if reports are not provided at all and how losses are adjusted if reports are late. Finally it provides for annual re-rating if coverage is written for a policy period greater than one year.

UNDERWRITING CONSIDERATIONS

The main exposure of camera and musical instrument dealers involves theft. The security measures provided and the adequacy of the security measures must be evaluated. Access to stock should be limited and controlled. If the insured removes or takes property from the premises, the security arrangements available for that property should also be evaluated. For property transported by motor vehicle, the vehicles should be locked at all times when unattended and alarms activated when covered property is inside the vehicle. If the insured provides repair and service, the loss potential increases. The types of merchandise carried and their value determines in large part the extent and nature of security and protection against theft required.

ISO CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE FORM
(03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 04–Camera And Musical Instrument Dealers Declarations

Form Analysis–CM 00 21–Camera And Musical Instrument Dealers Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Camera And Musical Instrument Dealers Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to dealers' stocks of merchandise consisting of cameras and related equipment or musical instruments and their accessories and supplies, including property of others in the dealers' care, custody or control. It may be written on a reporting or a non-reporting basis and covers on the named insured's premises, in transit, at other locations and in the custody of employees. This coverage form is not intended for commercial camera and musical instrument owners. Coverage for that property is available under the Commercial Articles Coverage Form.

Related Article: ISO Commercial Articles Coverage Form

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 04–Camera And Musical Instrument Dealers Declarations
• CM 00 21–Camera And Musical Instrument Dealers Coverage Form

Note: Camera and musical instrument dealers coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Camera dealers and musical instrument dealers are eligible. Cameras, musical instruments and their related equipment and accessories as well as similar property of others in the named insured's care, custody or control are eligible. If retail, discount or department stores purchase this coverage, it applies only to merchandise and equipment in the camera department or the musical instrument department. Other merchandise held for sale is not covered. Radios, television and sound recording and playing devices are not considered musical instruments.

Note: This coverage form does not apply to the property exposure of camera or musical instrument manufacturers.

CM DS 04–CAMERA AND MUSICAL INSTRUMENT DEALERS DECLARATIONS

CM DS 04–Camera And Musical Instrument Dealers Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 04–Camera And Musical Instrument Dealers Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Note: An entry is required to indicate if coverage applies to a camera dealer or a musical instrument dealer.

Premium For This Coverage Form

The premium for Camera And Musical Instrument Dealers Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Your Premises (including description or address)
• Property Away From Your Premises In The Care, Custody Or Control Of You Or Your Employees
• Property In Transit
• Property Not At Your Premises And Not Included Above
• All Covered Property At All Locations

Rates And Premiums

Camera And Musical Instrument Dealers Coverage is usually written on a non-reporting basis. This section has spaces to enter the annual premium and the non-reporting rate per $100 that applies. If coverage is written on a reporting basis, the deposit premium, the minimum annual premium, the reporting period, the premium adjustment period, the premium base and the rate or rates that apply must be entered in the spaces provided.

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Coinsurance

The standard 80% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Additionally Covered Property

Four additional categories of property can be covered by entering the address and limit of insurance that applies for each in the spaces provided. They are:

• Furniture, Fixtures And Office Supplies
• Machinery, Tools And Fittings
• Patterns, Dies, Molds And Models
• Improvements And Betterments

Note: CM 99 01–Additionally Covered Property must be attached when any of these coverages is selected.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 21–CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE FORM

Note: This analysis is of the 03 10 edition and includes changes made in the 08 08 edition. Changes from the 09 04 edition are in bold print.

CM 00 21 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Cameras, musical instruments and related equipment and accessories forming the named insured's principal stock in trade
• Related and similar property of others in the named insured's care, custody and control

Related Articles: Camera Insurance

Musical Instruments Insurance

2. Property Not Covered

There is no coverage for:

• Property sold and delivered to customers where the named insured no longer has an ownership interest. This includes property sold under sales arrangements involving deferred payments.

Example: Gene's Guitars Sales and Service sold Eric a vintage Gibson guitar with payments to be made over a period of 36 months. Eric faithfully made payments for almost two years until the guitar was stolen from a gig in Los Angeles. Eric did not see fit to insure it, a decision he regretted for the rest of his life. Gene also regretted it, because his sales contract to Eric provided no relief for the unpaid amounts and he could not recover the remaining balance from this coverage because this category of property was not covered.

• Money or other currency, securities, evidence of debt, notes, accounts, bills and deeds
• Furniture, fixtures and office supplies, tools, fittings, patterns, dies, molds and models, improvements, betterments and machinery. However, this property can be covered by providing the information needed on the declarations and attaching CM 99 01–Additionally Covered Property.
• Property sent by mail. However, coverage applies to property sent by Registered Mail or Government Insured Mail.

Example: Gene figured his luck had to change soon and it did…for the worse! He found a collector who would pay any price for a Fender Stratoliner guitar he had advertised on the Internet. Gene had intentionally inflated the price to test the waters and see what would happen and the collector was glad to pay the inflated price. Gene had the guitar professionally packaged and mailed by First Class Mail and forgot all about insuring it. The collector never received it, Gene was out both its actual value and the inflated value, and the world will have to wait for the next guitar prodigy to find out where the guitar actually went.

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's covered property by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extension–Theft Damage To Buildings

If the named insured owns or is legally responsible for damage to the building it occupies that is damaged during a theft or attempted theft, the insurance company pays for the damage to the part of the building it occupies or to building service equipment inside the building. Coverage does not apply to loss or damage caused by fire or to glass or any lettering on glass.

Note: This coverage extension is included in the limit of insurance for property at the covered location where the damage occurs and is not in addition to it.

Example: The building Clyde's Cameras owned and occupied was badly damaged when a would-be thief decided the best way to break in and steal merchandise was by crashing into it with his beat-up car when the store was closed and making off with the camera equipment. The thief did not consider the possibility of other parts of the structure collapsing on the vehicle and pinning him in the wreckage, which is exactly what happened. The thief was apprehended, no merchandise was taken and Clyde recovered the full cost of repairs to the building up to the limit of coverage.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Earthquake

Loss or damage caused by earthquake is excluded. This exclusion has an exception for loss or damage caused by fire resulting from the earthquake if the insurance provided by this coverage form covers the fire.

Note: This exclusion applies only to property at the named insured's premises.

b. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

c. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

d. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

e. Water (08 08 change)

Loss or damage caused by water is excluded. Water includes flood, surface water, waves, tides, tidal waves, tsunamis or overflow of any body of water or their spray, all whether driven by wind or not. It also includes storm surge and material that is waterborne, moved or carried by water in any way. Whether the damage is due to an act of nature or is due to another situation, coverage is excluded.

This exclusion has an exception for loss or damage caused by fire, explosion or theft provided they are otherwise covered by this coverage form.

Note: This exclusion applies only to property at the named insured's premises.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Theft From Any Unattended Vehicle

Theft of covered property from any unattended vehicle is excluded unless its windows, doors and compartments were closed and locked at the time of the theft and visible signs of forced entry are present.

Note: This exclusion does not apply to property in the custody of carriers for hire.

Example: Gene's bad luck continued. He purchased a number of musical instruments for really good prices at an auction. They were all serviceable and Gene figured he could clean up, refurbish and sell them for a tidy profit. He decided to stop for lunch and celebrate his good fortune at a little diner with great food in a bad part of town. Gene forgot to lock his van and all the instruments were gone when he returned from lunch. Coverage did not apply because there was no evidence of forced entry into the vehicle.

b. Marring, Scratching, Exposure To Light

Loss or damage by these causes of loss is excluded, as well as by breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or accident to vehicles carrying such property is covered, if the insurance provided by this coverage form covers those causes of loss.

c. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

d. Unexplained Disappearance

Covered property that disappears is excluded. This is where it is simply gone and there is no obvious cause or explanation of what happened to it.

e. Shortage Found Upon Taking Inventory

This is similar to unexplained disappearance and is also not covered. In this case, loss of covered property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

f. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

g. Processing Or Work Upon The Property

Loss or damage to covered property caused by or resulting from processing or other work performed on it is excluded.

Note: This exclusion has an exception if the activity or work results in fire or explosion. The loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

Example: Gene's luck finally got better. He was using a highly flammable solvent to clean the bodies of some vintage accordions but did not notice that it was the wrong kind and was severely etching their surfaces. While doing this during a severe cold snap, the space heater at his feet overheated and ignited the fumes from the solvent. Gene fled the premises and called the fire department. The adjuster had a mess to sort through but determined that the damage to the accordions from the solvent was nominal and far less than the fire that consumed nearly all the stock he had for repair. Most of his loss was covered by the exception to this exclusion.

h. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance within covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage within the object in which the disturbance occurs.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

i. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

j. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

k. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1.Valuation

This valuation clause replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. In all cases, the value of property is determined when the loss or damage occurs.

a. Unsold Property

This property is valued at the lesser of its actual cash value, the cost to restore it to the condition it was in before the loss occurred, or the cost to replace it with approximately similar property.

b. Sold Property

Property sold but not yet delivered is valued at its net selling price after adjustments for allowances and discounts.

c. Property Of Others

Property of others in the named insured's care, custody or control is valued at the lesser of the amount for which it is liable, including the value of labor and materials added, or the actual cash value including labor and material the named insured added.

d. Negatives, Positives And Prints

This property is valued differently than outlined above. Its value is the total cost of unexposed film or developing paper and the cost of labor and materials for developing that the named insured incurs.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. The steps the insurance company takes to determine the amount it pays are as follows:

(1) Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

(2) Divide the limit of insurance of the covered property by (1) above.

(3) Multiply the total amount of loss by (2) above.

(4) Subtract the amount of deductible from (3) above.

The insurance company pays the amount in (4) above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

c. Records And Inventory

The named insured must keep accurate records of its business and maintain them for at least three years after policy expiration or cancellation. As a minimum, records must include itemized inventories of stock in trade and records of all purchases, however made. In addition, records of property of others held in the named insured's care, custody and control and records of the named insured's property sent to others for any reason must also be retained.

Note: The named insured must also conduct a physical inventory of its stock in trade at least once a year.

d. Protective Safeguards

The named insured must maintain protective safeguards at designated locations when coverage took effect in proper working order. If they are not properly maintained and in working order when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

Example: The lines from Clyde's burglar alarm system to the central station were cut during a failed break-in. Clyde focused on cleaning up the mess and completely forgot about the cut lines and the fact that he no longer had an operating alarm system. The burglars hit again the next evening, right after Clyde closed up and left for the day. This time they removed a lot of merchandise because they did not have to worry about an alarm sounding and the police arriving. Clyde discovered his mistake the next morning and was even more disappointed upon learning that the loss was not covered because the protective safeguard was not operating at the time of the loss.

ENDORSEMENTS

Two endorsements are available for use with the Camera And Musical Instrument Dealers Coverage Form.

CM 99 01–Additionally Covered Property

This endorsement extends coverage to other property consisting of furniture, fixtures and office supplies, machinery, tools and fittings, patterns, dies, molds and models, and improvements and betterments. Because of the number and types of additional property that can be covered, it has its own coinsurance provisions.

Note: The previous edition of this endorsement had a valuation clause that was removed with this edition.

CM 99 02–Reporting

This endorsement provides details on when reports are submitted, how premium is calculated and adjusted, and the minimum premium that applies if the named insured selects coverage on a value-reporting basis. It also includes details on final premium adjustment if the policy is canceled, how coinsurance terms are re-introduced if reports are not submitted at all, and how losses are adjusted if reports are late. It provides for annual re-rating if coverage is written for more than a one-year term.

UNDERWRITING CONSIDERATIONS

The main exposure of camera and musical instrument dealers is theft. The security measures provided and their adequacy must be evaluated. Access to stock should be limited and controlled. If the named insured removes or takes property from the premises, security arrangements that apply to that property should also be evaluated. For property transported by motor vehicle, the vehicles should be locked at all times when unattended and alarm systems activated when covered property is inside the vehicle. Loss potential increases if the named insured provides repair and service. The types of merchandise carried and their value in large part determines the extent and nature of security and protection against theft required.

ISO COMMERCIAL ARTICLES COVERAGE FORM (09 04 edition)

The ISO Commercial Articles Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers losses incurred by commercial enterprises using cameras, musical instruments and related equipment and accessories. It also covers similar property of others in the insured's care, custody and control. Covered property is insured wherever it is located and locations and property do not need to be scheduled.

POLICY CONSTRUCTION

The following forms are mandatory for the commercial articles policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions Form IL 00 17

· Commercial Inland Marine Conditions Form CM 00 01

· Advisory Commercial Articles Declarations Form CM DS 05

· Commercial Articles Coverage Form CM 00 20

Commercial articles coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Professional photographers and musicians are usually the first types of commercial enterprises that come to mind as needing this coverage but it is not limited to just them. Many other operations own and use such equipment. Schools especially need the coverage, especially considering the liberal definition of territory. Government entities, some kinds of contractors, newspapers and other businesses with extensive audio and video equipment transported and used in a variety of settings are also candidates for this coverage. Eligible property has expanded so substantially that the only property not covered is contraband or any property in the course of illegal transportation or trade.

DECLARATIONS

The Advisory Commercial Articles Declarations does not have a place for name, mailing address and other named insured identification information, since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

Limits of insurance

A. This section of the declarations is used to list cameras, projection machines, films and related equipment and accessories. If coverage on this property is needed, a limit of insurance must be shown and the covered property must be listed and described. However, blanket coverage is available and can be provided when necessary.

B. This section of the declarations is used to list musical instruments and related equipment and accessories. If coverage on this property is needed, a limit of insurance must be shown and the covered property must be listed and described. However, blanket coverage is available and can be provided when necessary.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Coinsurance

100% coinsurance applies to all covered property not specifically listed and for which a separate limit is not indicated. Coinsurance does not apply to specifically listed items. The coinsurance percentage is negotiable and can be changed.

Rate and Premium

The rate that applies and the premium charged for cameras and related equipment is shown separately from the rate and premium charge for musical instruments and related equipment.

FORM ANALYSIS–CM 00 20

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Cameras, projection machines, films and related equipment, supplies and accessories;

b. Musical instruments and related equipment, supplies and accessories; and

c. Similar property of others in the insured's care, custody or control or for which the insured is legally liable.

2. Property Not Covered consists of only illegal property, contraband or any property transported or traded illegally.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

Example: Phil's Photography at Hollywood and Vine sustained a serious fire loss that damaged or destroyed much of his equipment. Unfortunately, this occurred just before he embarked on an extensive shoot of a high profile married actor and actress in conjunction with an authorized biography of their lives. Phil could not get replacement equipment and had to back out of the lucrative contract. The income he had counted on did not materialize as one of his competitors took advantage of the opportunity and landed the contract in his place. Phil's not covered "consequential" loss in this case was the loss of revenue from the aborted shoot.

b. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

c. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

Example: Phil got a phone call he thought was a partial reprieve. The caller identified himself as the competitor who landed the job after Phil's unfortunate loss. He said he needed a few additional pieces of equipment and wondered if Phil could help. He offered to cut Phil in on a piece of the action. Phil happened to have serviceable equipment of the kind needed and the caller offered to come over to pick it up. Phil had to leave because of a family emergency and instructed his assistant to give the equipment to the photographer when he came by. The equipment was picked up but not by the party Phil thought had called and it was never seen again. Phil's misfortune continued because he was the eternal optimist who got hoodwinked by a con artist on top of having been previously partially burned out.

d. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

e. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

Example: Phil was devastated and decided to simply fold up shop and get out of the business. He placed the few items of equipment he still had in the trunk of his car, drove home and decided to just stay put for a few days. Unfortunately, Southern California was in the midst of a streak of the hottest temperatures anyone could remember. Phil forgot to remove the equipment in his trunk and it basically baked in the heat and was rendered functionally destroyed. Since the heat destroyed the equipment and there was no covered loss that occurred because of the heat that damaged the property, the damage to Phil's equipment in the trunk was not covered.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional conditions

1. Coverage territory is the geographical location where insurance on covered property applies. Coverage under this form applies wherever the property is located.

Note: The coverage territory in this form is unique because coverage applies anywhere in the world. In theory, coverage under this form could apply to cameras in a satellite or a shuttlecraft launched into outer space.

2. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

a. Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance that applies to the property by the figure determined in step a. above.

c. Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step b. above.

d. Then subtract the amount of deductible from the figure determined in step c. above.

3. Additional acquired property applies to additional property acquired during the policy period similar to that covered by the form. The insurance company covers such property for up to 30 days but this coverage does not extend beyond the policy expiration date. The most the carrier pays is the lesser of 25% of the total limit shown on the declarations, $10,000 or the cost of replacing the damaged or destroyed property with similar or identical property.

Example: Phil's brother Pete was also a photographer and offered to purchase Phil's few remaining items of equipment to improve his own business as well as to help his brother. The transaction and transfer of property happened late Friday and Pete could not contact his insurance agent to report the transaction until the following Monday. Phil's bad luck carried over to Pete and all the equipment was stolen on Saturday night, when Phil and Pete were celebrating Phil's departure from the business. Fortunately for Pete, the amount and value of the equipment acquired was not extensive, this condition applied and the loss was covered.

ENDORSEMENT

One specific endorsement is available for exclusive use with this coverage form.

CM 20 02–List Of Property On File

This endorsement lets the insured provide a list and values of all covered property and keep it at the insured's premises and in his files instead of listing and scheduling it on the policy. Coverage applies only to property on that list and it must be dated and signed by the insurance company. The insurer also usually keeps a copy of this list in its files for rating and underwriting purposes and for reference if a claim arises.

UNDERWRITING CONSIDERATIONS

Since the covered property is not restricted to specific locations and literally applies on a worldwide basis, the biggest issue is developing a profile and description of how the equipment is normally used and where it is usually kept. Where is the equipment? Is it normally kept at one location or is it subject to regular movement and being kept at a number of locations? Are records maintained that identify who normally has and is responsible for certain cameras or musical instruments? How is equipment stored and secured when not in use? Who has access to the locked storage area and who has keys to get into it? When the equipment must be away at other sites, how is it secured and safeguarded from damage or theft?

ISO COMMERCIAL ARTICLES COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 05–Commercial Articles Declarations

Form Analysis–CM 00 20–Commercial Articles Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office Commercial Articles Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to cameras, projection machines, films and related equipment and accessories and musical instruments and related equipment and accessories as well as similar property of others in the named insured's care, custody or control.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 05–Commercial Articles Declarations
• CM 00 20–Commercial Articles Coverage Form

Note: Commercial articles coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Eligible property includes cameras, projection machines and photographic equipment used for commercial purposes and musical instruments and equipment, including stationary organs used in public performances for remuneration. Professional photographers and musicians are usually the first types of commercial enterprises that come to mind as needing this coverage but it is not limited to just them. Many other operations own and use such equipment. Schools especially need the coverage and government entities, some kinds of contractors, newspapers and other businesses with extensive audio and video equipment transported and used in a variety of settings are also candidates for this coverage.

However, some types of cameras are not eligible. Examples are television cameras and their equipment, coin operated devices, cameras insured in the names of dealers or their manufacturers and aerial or radar cameras.

CM DS 05–COMMERCIAL ARTICLES DECLARATIONS

CM DS 05–Commercial Articles Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 05–Commercial Articles Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Premium For This Coverage Form

The premium for Commercial Articles Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired on separately scheduled and described property:

• Cameras, projection machines, films and related equipment and accessories
• Musical instruments and related equipment and accessories

Note: Each item of property must be specifically listed with a limit. However, coverage can be written on a blanket or “per schedule on file with the company” basis.

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Coinsurance

The standard 100% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Rates And Premiums

Commercial Articles Coverage is written on a non-reporting basis. This section has spaces to enter the annual premium and the non-reporting rate per $100 that applies for:

• Cameras, projection machines, films and related equipment and accessories
• Musical instruments and related equipment and accessories

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 20–COMMERCIAL ARTICLES COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 20 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Cameras, projection machines, films, related equipment and accessories
• Musical instruments, related equipment and accessories
• Related and similar property of others in the named insured's care, custody and control

2. Property Not Covered

There is no coverage for contraband or illegal property, or legal property in the course of illegal transportation or trade.

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

Example: Phil's Photography at Hollywood and Vine sustained a serious fire loss that damaged or destroyed much of his equipment. Unfortunately, this occurred just before his leaving for a shoot of a high profile married actor and actress. Phil could not get replacement equipment and had to give up the lucrative contract. The income he had counted on did not materialize as one of his competitors took advantage of the opportunity and landed the contract in his place. Phil's not covered "consequential" loss in this case was the loss of revenue from the aborted shoot.

b. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

c. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

Example: Phil got a phone call he thought was a partial reprieve. The caller said he was the competitor who landed the job after Phil's loss. He said he needed a few additional pieces of equipment and wondered if Phil could help, offering to cut Phil in on a piece of the action. Phil happened to have serviceable equipment of the kind needed and the caller offered to come over to pick it up. Phil left to attend to another business matter and instructed his assistant to give the equipment to the photographer when he came by. The equipment was picked up but not by the party Phil thought had called and it was never seen again. Because of this exclusion, Phil's loss was not covered.

d. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

e. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Coverage Territory

The insurance company insures covered property wherever it is located.

Note: This coverage territory is unique because coverage applies anywhere in the world. In theory, coverage could apply to cameras in a satellite or spacecraft launched into outer space.

2. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations but only to covered property not individually scheduled and described.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. This does not apply to or include property in transit. The steps the insurance company takes to determine the amount it pays are as follows:

a. Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance of the covered property by a. above.

c. Multiply the total amount of loss by b. above.

d. Subtract the amount of deductible from c. above.

The insurance company pays the amount in d. above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

3. Additional Acquired Property

This is really more of an extension of coverage than a condition because coverage is expanded. If the named insured acquires additional property similar to covered property, it is covered for up to 30 days but not past the expiration date. Coverage is limited to $10,000, or 25% of the total limit of scheduled property of the same kind, whichever is less.

Note: The named insured must report newly acquired covered property to the insurance company within 30 days of the acquisition date and pay additional premium on it.

Example: Phil's brother Pete was also a photographer and offered to purchase a few of Phil's remaining items of equipment to improve his own business as well as to help his brother. The transaction and transfer of property happened late Friday. When the equipment was stolen from Pete’s that night, his commercial articles coverage form insured the newly acquired equipment even though he had not yet reported it.

ENDORSEMENTS

One endorsement is available for use with the Commercial Articles Coverage Form.

CM 20 02–List Of Property On File

This endorsement lets the named insured develop and keep a list and values of all covered property at its premises in its files instead of listing and scheduling them. Coverage applies only to property listed and the insurance company must sign and date the list.

Note: The insurance company usually retains a copy of this list for rating and underwriting purposes and to refer to if a claim occurs.

UNDERWRITING CONSIDERATIONS

Since the covered property is not restricted to specific locations and is literally covered anywhere in the world, the biggest issue is developing a profile and description of how the equipment is normally used and where it is usually kept. Where is the equipment? Is it normally kept at one location or is it subject to regular movement and being kept at a number of locations? Are records maintained that identify who normally has and is responsible for certain cameras or musical instruments? How is equipment stored and secured when not in use? Who has access to the locked storage area and who has keys to get into it? When the equipment must be away at other sites, how is it secured and safeguarded from damage or theft?

ISO EQUIPMENT DEALERS COVERAGE FORM (09 04 edition)

The ISO Equipment Dealers Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers losses incurred by equipment dealers engaged in retail or wholesale sales of stocks of mobile agricultural and construction machinery, equipment and similar related property and accessories. It also applies to similar property of others in the insured's care, custody or control or for which the insured is legally liable. This form is intended for primary use by these types of business but other businesses, such as department and discount stores, can also use it. Coverage provided by this form is very broad and this makes it much more attractive to use where it applies than standard property coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory for the equipment dealers policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions Form IL 00 17

· Commercial Inland Marine Conditions Form CM 00 01

· Advisory Equipment Dealers Declarations Form CM DS 06

· Equipment Dealers Coverage Form CM 00 22

Equipment dealers coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any business enterprise that sells mobile agricultural and construction machinery, equipment and similar related property and accessories is eligible for coverage. As indicated above, other businesses, such as department and discount stores are also eligible for coverage under this form but all other stock held for sale, other than mobile agricultural and construction machinery and equipment, is not covered.

DECLARATIONS

The Advisory Equipment Dealers Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

Limits of Insurance

This portion of the declarations consists of five different sections:

Section A applies to covered property at the insured's premises. The address of each location to be covered must be listed. Limits of insurance for both property inside the building and property outside the building, if any, must be shown in the spaces provided.

Section B applies to property at other premises the insured acquires. The limit selected and placed in the space provided applies at newly acquired locations for up to 30 days after acquisition or until the policy expires, whichever occurs first. The limit selected should reflect the insured's best estimate of the amount necessary in case a new location or an operation at another premises is acquired.

Section C applies to property in transit and the limit selected and placed in the space provided should reflect the insured's best estimate of the amount necessary to cover owned property that may be exposed during transit to, from and between locations.

Section D applies to property not at the insured's premises or included under any other coverage. The limit selected and placed in the space provided should reflect the insured's best estimate of the amount needed to cover owned property that may be temporarily at unnamed locations or at locations belonging to others.

Section E is used to declare a total aggregate or catastrophe limit in any one occurrence for all coverages and at all locations.

Rates and Premium

The policy can be written on a non-reporting or a reporting basis. If written on a non-reporting basis, the only entries needed are for the annual rate and premium. If written on a reporting basis, entries are required for the deposit premium, the minimum annual premium, the reporting period frequency, such as monthly, quarterly, or annual, the premium adjustment period, also in terms of monthly, quarterly, or annual, the premium basis, such as values or receipts, and the rate or rates that apply.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Coinsurance

80% coinsurance applies to all covered property unless a different percentage is shown in the space provided.

Additionally Covered Property

This form can provide coverage for four additional categories of property. The categories are:

• Furniture, fixtures and office supplies;
• Machinery, tools and fittings;
• Patterns, dies, molds and models; and
• Improvements and betterments.

A limit for any of these coverages selected must be shown in the spaces provided. Additionally Covered Property, Form CM 99 01, must also be attached to the policy when any of these coverages is selected. The limit selected on this form must apply to one of the locations listed on the declarations.

FORM ANALYSIS–CM 00 22

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Stock usual to the trade held for sale and consisting of mobile agricultural and construction machinery, construction equipment and similar related property and accessories; and

b. Similar property of others in the insured's care, custody and control and for which the insured is legally liable.

2. Property Not Covered

Seven different classes of property are specifically excluded and do not qualify as covered property.

a. Motor vehicles licensed for highway use, including automobiles, trucks and motorcycles, aircraft and watercraft.

Example: Ed's Equipment and Extras occupied several large buildings and a larger enclosed storage yard for the vast amount of equipment he had for sale. Ed had two old "yard dogs," trucks used exclusively on the premises to load and haul equipment around the yard or to the front of the premises to be picked up by purchasers. While the trucks were licensed, they never left the yard…until the day one needed some radiator work at the shop just down the street. In the space of one block, the truck collided with an oncoming vehicle as it was attempting to make a left turn into the radiator shop and was badly damaged. Ed did not have automobile insurance on this unit, because it "never" left the yard, and he tried to submit the claim under his equipment dealers coverage. The adjuster understood the situation and sympathized with Ed but still denied the claim because the vehicle, however it was normally used, was still licensed for road use and not covered under the equipment dealers coverage.

b. Various evidences of debt, including accounts, bills, currency, deeds, money, notes and securities.

c. Property while being manufactured.

Example: Ed liked to tinker. He had an engineering degree, a vivid imagination and a lot of odds and ends and spare parts lying around the yard. He came up with a plan to build a hybrid piece of equipment that could perform a number of jobs. Ed figured he could patent it if it worked and make a lot of money. While he was doing some welding on it in a large enclosed shed, a spark from the torch ignited some combustible material nearby and the entire shed and the machine Ed was working on were destroyed. Ed escaped with his life and again tried to submit the claim for the equipment under his Equipment Dealers Coverage Form. The adjuster was getting to know Ed real well and investigated the claim carefully. When he learned that Ed's invention was a piece of machinery being built, he denied the claim for it on the basis of this exclusion.

d. Any property leased, rented, sold or sold under a deferred sales agreement. This applies after the property is no longer in the custody of the insured or in the custody of carriers for hire in cases where the insured is responsible for the delivery of the property.

Example: Ed sold a front-end loader to one of his long time customers under a deferred sales contract. The customer put down 50% of the sales price and agreed to pay the balance over 36 equal monthly installments. A year later, the customer was convicted of bid rigging, jailed and his equipment auctioned off. Ed was not able to recover the balance of his financial interest in the loader because the payments ended and this exclusion applied to property sold under a deferred sales agreement that was no longer in Ed's possession.

e. Furniture, fixtures and office supplies; machinery, tools and fittings, patterns, dies, molds and models; and improvements and betterments. However, coverage for this property is available if the insured chooses coverage for it under Additionally Covered Property, Form CM 99 01.

f. Any property of others listed and described on the declarations.

g. Illegal property, contraband or any property transported or traded illegally.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage Extensions

a. Debris Removal

The insurance company pays to remove the debris of a covered loss. Coverage is limited to 25% of the physical loss amount paid plus $10,000. The expenses must be reported within 180 days after the date of loss. The 25% amount is not an additional amount of insurance but the $10,000 is an additional amount. This coverage does not apply to costs to extract pollutants from land or water or to remove, restore or replace polluted land or water. The total of actual debris removal expense plus the amount paid for the direct physical loss or damage does not exceed the applicable limit of insurance.

Note: The form contains two detailed examples of how this coverage extension applies, both of which assume no coinsurance penalty.

b. Pollutant Clean-Up and Removal

The insurance company pays up to $10,000 in any 12-month period to clean up pollutants caused by or resulting from a covered loss. The expenses are paid only if they are reported to the insurer within 180 days after the date of loss. It does not apply to testing for the existence or extent of pollutants but it does apply to testing required in conjunction with extracting pollutants from land or water. This limit is in addition to the limit of insurance shown on the declarations.

Example: One of Ed's older bulldozer’s brakes failed during testing, ran through the fence at the back of the property, down an incline and landed upside down near a creek at the bottom of the hill. The crankcase ruptured and the oil ran down the short incline into the creek. This coverage will respond to the necessary cleanup, subject to the limit, as long as the insured reports it to the insurance company in the prescribed time frame.

c. Theft Damage to Buildings

The insurance company pays for damage caused directly by a theft or attempted theft to any part of a building containing covered property or to equipment in the building used to maintain or service it. This extension does not apply to damage caused by fire or to glass or any lettering or artwork on glass. This extension is included in the limit of insurance that applies to the covered property at the location where the damage occurs.

Example: The building Ed owned was badly damaged when a would-be thief decided the best way to break in and steal spare parts would be by crashing his beat-up pickup truck into it when the business was closed and then making off with the parts in the truck bed. The thief failed to recognize the possibility that other parts of the structure might collapse on the vehicle and pin him in the wreckage. That is exactly what happened. The thief was apprehended, no parts were taken and Ed recovered the full cost of repairs needed to the building to get him back into business.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

d. Water includes flood, surface water, waves, tides, tidal waves, overflow of any body of water or their spray, all whether driven by wind or not. An exception applies if the action of the water results in a fire, explosion or theft. In that case, this form covers those causes of loss. This exclusion only applies to property situated on the insured's premises.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Unexplained disappearance of property is excluded. This is where covered property is simply gone and there is no obvious cause or explanation of what happened to it.

Example: Ed came to work on Monday after the business was closed over the weekend and one of his most expensive excavators was gone. There was no damage to the fence, no tire tracks or anything to suggest that anything had happened. It was like it simply disappeared. Ed had the purchase invoice and other paperwork to prove that he owned it but that alone was insufficient to prove the loss to which this exclusion applied. Ed reported the loss to the police and hoped the excavator would turn up some time in the future.

c. Shortage discovered after taking inventory is similar to unexplained disappearance and is similarly not covered. In this case, the loss of the property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

d. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

e. Processing activities or work on the covered property resulting in loss or damage to the property is not covered. However, if the activity or work results in fire or explosion, the direct loss or damage caused by that fire or explosion is covered, if this form covers fire or explosion.

f. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

Example: One of Ed's old office computers was inadvertently left on overnight. It shorted out and started a fire. The fire fed on the combustibles nearby and got going pretty well until the sprinkler system activated and controlled it and the fire department arrived and finished the job of extinguishing it. The loss to the computer was not covered but Ed didn't much mind because the rest of the damage was covered by the exception to this exclusion for loss or damage caused by a subsequent fire.

g. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

h. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

i. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional conditions

1. Valuation as found in General Condition F. in the Commercial Inland Marine Conditions is replaced by the following:

a. Unsold property is based on the lesser of the actual cash value of the property, the cost to restore the property to the condition that existed immediately before the loss or damage or the cost of replacing the property with nearly identical property.

b. Sold property on the premises but not yet delivered is the insured's net selling price after all discounts and allowances.

c. Property of others and the value of that property in the insured's care, custody or control is the lesser of the amount for which the insured is legally liable, including the value of labor and materials the insured has added, or the actual cash value of the property, again including the value of labor and materials added by the insured. The value so determined is based on the time and date of the loss or damage.

2. The following conditions apply in addition to the Common Policy Conditions and the Commercial Inland Marine Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

(1). Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

(2). Divide the limit of insurance that applies to the property by the figure determined in step (1). above.

(3). Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step (2). above.

(4). Then subtract the amount of deductible from the figure determined in step (3). above.

c. Records and inventory requires the insured to not only maintain accurate business records at all times but to keep them for at least three years after the policy expires. As a minimum, the records must consist of an itemized inventory of stock in trade and records of all purchases, regardless of whether they were made by cash or credit. In addition, records of property of others held in the insured's care, custody and control and records of the insured's property sent to others for any purpose must also be retained. Finally, the insured must conduct a physical inventory of all stock in trade at least annually.

d. Protective safeguards in place at designated locations at policy inception must be maintained in proper working order. If they are not so maintained and are not operational during times when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

F. Definition

The only additionally defined term in this policy is "pollutants." The definition is the same one used in all ISO policies. It means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes any materials to be recycled, reconditioned or reclaimed.

ENDORSEMENTS

Three specific endorsements are available for use with this coverage form.

CM 99 01–Additionally Covered Property

This endorsement is used to extend coverage under the Equipment Dealers Coverage Form to other property. The additional property that can be covered includes furniture, fixtures and office supplies; machinery, tools and fittings; patterns, dies, molds and models; and improvements and betterments. Because of the number and types of additional property that can be covered, this endorsement contains its own valuation and coinsurance provisions.

CM 99 02–Reporting

If the insured selects coverage on a value-reporting basis, this endorsement provides details on when reports are to be submitted, how premium is to be calculated and adjusted and the minimum policy premium that applies. It also includes details on final premium adjustment if the policy is canceled, how coinsurance terms are re-introduced if reports are not provided at all and how losses are adjusted if reports are late. Finally, it provides for annual re-rating if coverage is written for a policy period greater than one year.

CM 99 03–New Business–Premium Adjustment

When this endorsement is used, the policy is issued conditionally and the insured must submit a new application or proposal after the policy has been in effect for six months. This is because the information in the initial application did not give the insurance company all the information it needed. As a result, the premium charged is provisional only. This new application or proposal is then used to price and underwrite the policy for the remainder of the policy period, using the rates in effect at the inception date of the policy.

UNDERWRITING CONSIDERATIONS

To the extent that covered property is contained inside a building, the construction, private and public protection and exposures to the building must be evaluated. Equipment dealers must further be evaluated based on the types of equipment kept inside versus the equipment kept outside. If covered property is kept outside, the extent of fencing and other protection to restrict access to the premises must also be considered. The type and extent of repair work must be determined and thoroughly evaluated, especially if flammable liquids and welding activities are present.

ISO EQUIPMENT DEALERS COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 06–Equipment Dealers Declarations

Form Analysis–CM 00 22–Equipment Dealers Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

F. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Equipment Dealers Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to the named insured's stock of merchandise consisting primarily of mobile agricultural and construction equipment as well as similar property of others in the named insured's care, custody or control. It may be written on a reporting or a non-reporting basis and covers on the named insured's premises inside and outside buildings, in transit and at other locations.

This coverage form was developed for equipment dealers but it can be used by other businesses, such as department and discount stores. The coverage provided is very broad and is more practical to use where it applies than standard property coverage forms and policies.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 06–Equipment Dealers Declarations
• CM 00 22–Equipment Dealers Coverage Form

Note: Equipment dealers coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any business enterprise that sells mobile agricultural and construction machinery, equipment and similar related property and accessories is eligible. Other businesses, such as department and discount stores, are also eligible but other property must be excluded.

CM DS 06–EQUIPMENT DEALERS DECLARATIONS

CM DS 06–Equipment Dealers Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 06–Equipment Dealers Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Premium For This Coverage Form

The premium for Equipment Dealers Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Your Premises Inside Buildings And Outside Buildings (including description or address)
• Property At Unspecified Locations
• Property At Other Locations You Acquire

Note: This limit applies at each premises acquired and coverage applies for only 30 days after the premises is acquired or until the policy expires, whichever comes first.

• Property In Transit

• All Covered Property At All Locations

Note: The limits selected should reflect the named insured's best estimate of the amount of insurance needed in each situation. This is especially important in selecting a catastrophe limit applying to all covered property at all locations.

Rates And Premiums

Equipment Dealers Coverage may be written on a non-reporting or reporting basis. Spaces are available to enter the annual premium and the non-reporting rate per $100 that applies. If coverage is written on a reporting basis, the deposit premium, the minimum annual premium, the reporting period, the premium adjustment period, the premium base and the rate or rates that apply must be entered in the spaces provided.

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Coinsurance

The standard 80% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Additionally Covered Property

Four additional categories of property can be covered by entering the limit of insurance that applies for each in the spaces provided. They are:

• Furniture, Fixtures And Office Supplies
• Machinery, Tools And Fittings
• Patterns, Dies, Molds And Models
• Improvements And Betterments

Note: CM 99 01–Additionally Covered Property must be attached when any of these coverages is selected.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 22–EQUIPMENT DEALERS COVERAGE FORM

Note: This analysis is of the 03 10 edition and includes changes made in the 08 08 edition. Changes from the 09 04 edition are in bold print.

CM 00 22 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage. It also directs attention to Section F–Definitions because understanding their special meanings is critical to understanding the coverage and exclusions that apply.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Mobile agricultural and construction equipment and related equipment and accessories forming the named insured's principal stock in trade
• Similar types of property belonging to others in the named insured's care, custody and control

2. Property Not Covered

There is no coverage for:

• Motor vehicles, including automobiles, trucks and motorcycles, aircraft and watercraft

• Money or other currency, securities, evidence of debt, notes, accounts, bills and deeds

· Property being manufactured

Example: Ed of Ed's Equipment liked to tinker. He had an engineering degree, an active imagination and lots of spare parts lying around the yard. He planned to build a machine that could perform a specific job. Ed figured he could patent it if it worked and make a lot of money. While doing some welding in a large enclosed shed, a spark from the torch ignited the machine Ed was working on and destroyed it. Ed escaped with his life and tried to submit a claim under this coverage form. The adjuster was getting to know Ed real well and investigated the claim carefully. When he learned that Ed's invention was a piece of machinery being built, he denied the claim based on this exclusion.

· Any property leased, rented, sold or sold under a deferred payment sales agreement after the named insured or carriers for hire responsible for delivery no longer have custody of it

Example: Ed sold a front-end loader to one of his long time customers under a deferred sales contract. The customer paid 50% of the sales price and agreed to pay the balance over 36 equal monthly installments. When a fire occurred at the customer’s yard and destroyed the front-end loader before all payments were made, the insurance under this coverage form did not cover Ed’s financial interest in the equipment.

• Furniture, fixtures and office supplies, tools, fittings, patterns, dies, molds and models, improvements, betterments and machinery. However, this property can be covered by providing the information needed on the declarations and attaching CM 99 01–Additionally Covered Property.
• Property of others indicated on the declarations

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extensions

a. Debris Removal

The insurance company pays to remove the debris of a covered loss. Coverage is limited to 25% of the physical loss amount paid plus $10,000. The expenses must be reported within 180 days after the date of loss. The 25% amount is not an additional amount of insurance but the $10,000 is an additional amount. This coverage does not apply to costs to extract pollutants from land or water or to remove, restore or replace polluted land or water. The total of actual debris removal expense plus the amount paid for the direct physical loss or damage does not exceed the applicable limit of insurance. If it does, an additional limit of $10,000 is available.

Note: CM 00 22 has two detailed examples of how this coverage extension applies.

b. Pollutant Cleanup And Removal

The insurance company pays up to $10,000 in any 12-month period to clean up pollutants caused by or resulting from a covered loss. The expenses are paid only if reported to the insurance company within 180 days after the date of loss. It does not apply to testing for the existence or extent of pollutants but it does apply to testing required in conjunction with extracting pollutants from land or water. This limit is in addition to the limit of insurance indicated on the declarations.

Example: The brakes on one of Ed's older bulldozers failed during testing, causing it to run through the fence at the back of the property and down an incline until it came to a stop near a creek at the bottom of the hill. The crankcase ruptured and oil ran into the creek. This coverage responded to the necessary cleanup, subject to the limit, as long as Ed incurred the expenses and reported the loss to the insurance company within 180 days.

c. Theft Damage To Buildings

If the named insured owns or is legally responsible for damage to the building it occupies that is damaged during a theft or attempted theft, the insurance company pays for the damage to the part of the building it occupies or to building service equipment inside the building. Coverage does not apply to loss or damage caused by fire or to glass or any lettering on glass.

Note: This coverage extension is included in the limit of insurance for property at the covered location where the damage occurs and is not in addition to it.

Example: Ed's building was badly damaged when a would-be thief decided to break in and steal spare parts by kicking his way into the building. He kicked through the garage door as well as through every door leading into the sales area. When he kicked the door into the parts department, he lost his balance, fell and broke both his leg and his arm. He was apprehended, nothing was taken and Ed recovered the cost of repairing the doors.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

d. Water (08 08 change)

Loss or damage caused by water is excluded. Water includes flood, surface water, waves, tides, tidal waves, tsunamis or overflow of any body of water or their spray, all whether driven by wind or not. It also includes storm surge and material that is waterborne, moved or carried by water in any way. Whether the damage is due to an act of nature or is due to another situation, coverage is excluded.

This exclusion has an exception for loss or damage caused by fire, explosion or theft provided they are otherwise covered by this coverage form.

Note: This exclusion applies only to property at the named insured's premises.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Unexplained Disappearance

Covered property that disappears is excluded. This is where it is simply gone and there is no obvious cause or explanation of what happened to it.

Example: Ed came to work on Monday after the business was closed over the weekend and one of his most expensive excavators was gone. There was no damage to the fence, no tire tracks or anything to suggest what had happened. It was like it simply disappeared. Ed had the purchase invoice and other paperwork to prove that he owned it but that was not enough to prove the loss to which this exclusion applied. Ed reported the loss to the police and hoped the excavator would turn up some day.

c. Shortage Found Upon Taking Inventory

This is similar to unexplained disappearance and is also not covered. In this case, loss of covered property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

d. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

e. Processing Or Work Upon The Property

Loss or damage to covered property caused by or resulting from processing or other work performed on it is excluded.

Note: This exclusion has an exception if the activity or work results in fire or explosion. The loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

f. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance within covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage within the object in which the disturbance occurs.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

g. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

h. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from directives to transfer property to another person or place that results in loss of the property transferred.

i. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation

This valuation clause replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. In all cases, the value of property is determined when the loss or damage occurs.

a. Unsold Property

This property is valued at the lesser of its actual cash value, the cost to restore it to the condition it was in before the loss occurred, or the cost to replace it with approximately similar property.

b. Sold Property

Property sold but not yet delivered is valued at its net selling price after adjustments for allowances and discounts.

c. Property Of Others

Property of others in the named insured's care, custody or control is valued at the lesser of the amount for which it is liable, including the value of labor and materials added, or the actual cash value including labor and material the named insured added.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations but only to covered property not individually scheduled and described.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. This does not apply to or include property in transit. The steps the insurance company takes to determine the amount it pays are as follows:

(1) Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

(2) Divide the limit of insurance of the covered property by (1) above.

(3) Multiply the total amount of loss by (2) above.

(4) Subtract the amount of deductible from (3) above.

The insurance company pays the amount in (4) above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

c. Records And Inventory

The named insured must keep accurate records of its business and maintain them for at least three years after policy expiration or cancellation. As a minimum, records include itemized inventories of stock in trade and records of all purchases, however made. In addition, records of property of others held in the named insured's care, custody and control and records of the named insured's property sent to others for any reason must also be retained.

Note: The named insured must also conduct a physical inventory of its stock in trade at least once a year.

d. Protective Safeguards

The named insured must maintain protective safeguards at designated locations when coverage took effect in proper working order. If they are not properly maintained and in working order when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

F. DEFINITIONS

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes any materials to be recycled, reconditioned or reclaimed.

ENDORSEMENTS

Three endorsements are available for use with the Equipment Dealers Coverage Form.

CM 99 01–Additionally Covered Property

This endorsement extends coverage to other property consisting of furniture, fixtures and office supplies, machinery, tools and fittings, patterns, dies, molds and models, and improvements and betterments. Because of the number and types of additional property that can be covered, it has its own coinsurance provisions.

Note: The previous edition of this endorsement had a valuation clause that was removed with this edition.

CM 99 02–Reporting

This endorsement provides details on when reports are submitted, how premium is calculated and adjusted, and the minimum premium that applies if the named insured selects coverage on a value-reporting basis. It also includes details on final premium adjustment if the policy is canceled, how coinsurance terms are re-introduced if reports are not submitted at all, and how losses are adjusted if reports are late. It provides for annual re-rating if coverage is written for more than a one-year term.

CM 99 03–New Business–Premium Adjustment

When this endorsement is used, the policy is issued conditionally. The named insured must submit a new application after the policy has been in effect for six months because the information in the initial application did not give the insurance company all the information it needed. As a result, the premium charged is provisional. This new application is then used to price and underwrite the policy for the remainder of the policy period, using the rates in effect on the coverage inception date.

UNDERWRITING CONSIDERATIONS

To the extent that covered property is kept inside a building, construction, private and public protection and surrounding exposures must be evaluated. Equipment dealers must be further evaluated based on the types of equipment kept inside versus the kinds kept outside. If covered property is kept outside, the extent of fencing and other protection to restrict access to the premises must also be considered. The type and extent of repair work must be determined and thoroughly evaluated, especially if flammable liquids and welding activities are present.

ISO FILM COVERAGE FORM (09 04 edition)

The ISO Film Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers loss incurred by operations that produce motion pictures or videos. It covers the cost of re-recording exposed film or tape destroyed by a covered cause of loss.

POLICY CONSTRUCTION

The following forms are mandatory for the film policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Film Declarations Form CM DS 07

· Film Coverage Form CM 00 45

Film coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any operation that produces motion pictures or videotapes on a commercial basis is eligible for coverage using this form.

DECLARATIONS

The Advisory Film Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

Limits of Insurance

The name of the motion picture or other production is shown in the space provided, along with the limit of insurance for that particular production. If two or more productions are involved, each can be listed separately, as long as a separate limit of insurance is provided for each.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Coinsurance

If coverage is written on a non-reporting basis, 80% coinsurance applies to all covered property, unless a different percentage is shown in the space provided. No entry is required in this area if coverage is written on a reporting basis.

Rates and Premium

The Film Coverage Form can be written on a reporting or a non-reporting basis. If written on a reporting basis, the estimated premium and the reporting rate that applies for each production must be listed. If written on a non-reporting basis, the only entries required are of the rate and the premium for each production.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 45

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property means the following, when used in the production or productions shown on the declarations and owned by the insured or in the insured's care, custody or control.

a. Exposed motion picture film and its sound track or other sound record. Note that this does not include unexposed or unused film.

b. Magnetic or videotape recorded properly and its sound track or other sound record. This means that the tape has been replayed and checked after recording.

Note: Coverage provided by this form is very narrow, as close examination of the covered property listed above reveals. Motion picture film production includes a great deal of peripheral and related parts and equipment and that property is better covered under other policies, such as the Commercial Articles Coverage Form that applies to coverage for cameras and related equipment and accessories.

2. Property Not Covered consists of:

a. Cut-outs;

b. Unused footage;

c. Positive prints or films;

d. Library stock; or

e. Illegal property, contraband or any property transported or traded illegally.

Note: The excluded property listed above, other than illegal property or contraband, has little or no remaining value once the final version of the film is completed. It does have value while the film is being produced but that value varies tremendously from one day to another and as the film progresses. Since it is difficult to establish a proper value on this property because its value varies so much, it is not covered.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods in construction, remodeling or renovation used if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Changes in temperature, dampness of atmosphere or deterioration.

c. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

d. Negative film damaged by exposure to light.

Example: Fred's Filmworks was shooting a documentary about caves and much of the filming was done in actual wild caves. At the end of a day of shooting, the equipment was lifted out of the cave but was mishandled by one of the "roadies" and inadvertently exposed to the bright sunlight. As you can probably guess, the exposed film was completely ruined and had to be completely re-done the next day. It was also unfortunate because all the work, labor and expense wasted by that exposure was not insured and the loss not recoverable because of the application of this exclusion.

e. Loss or damage due to use of developing chemicals.

Example: Fred had better luck the next day, at least for a while, and got the film back to the lab safely. However, the technician mixed and used the wrong solution of developing chemicals and the film, while not completely ruined, could not be used in its inferior state for the project as envisioned. This was another uncovered loss and Fred prepared himself for another day of filming in the cave as he tallied up his uninsured losses.

f. Loss or damage due to laboratory work such as developing, cutting or printing film.

Example: Day three went very well. The film was shot quickly, after all the practice from the previous two days, reached the lab safely and was developed properly. The editors pored over the tape and selected and marked the portions they wanted. Once again, misfortune struck. The cutting room technician misunderstood the intent of the editors and kept the part they wanted to discard. In the process, he discarded the part they actually wanted to keep. Once again, an exclusion eliminated coverage for a cutting room mistake and the uninsured and uncompensated production costs were really starting to spiral out of control.

g. Other than loss or damage caused by lightning, electric or magnetic injury, disturbance or erasure of electronic recordings or videotape.

Example: Finally! Success!! The cave documentary video tape was complete, developed, processed, edited, cut and "in the can!" Fred left the finished product locked up in the lab and went out with the crew to celebrate. While they were gone, a powerful spring storm moved in and lightning struck an electric transformer on the premises. The power surge shorted out an ultraviolet lamp in the lab that was left on. The short created a spark that ignited the volatile chemicals kept there and quickly burned the facility to the ground. While Fred and the crew had to go out and do it all over again, he was able to recover the full cost of the production lost because of the exception to this exclusion.

h. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

i. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

j. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional Conditions

1. Valuation

This condition replaces General Condition F in the Commercial Inland Marine Conditions. Covered property is valued at the cost of production including the costs covered by this coverage form that apply to the production. If loss or damage occurs, the value of covered property is the total of the costs or reproducing the lost or damaged property and the reduction in value of any undamaged parts of the applicable production. It does not include the cost of the story, scenario, music rights, continuity, permanent sets, owned wardrobes and props.

Example: Referring to Fred's series of misadventures above, his final recovery was based on this valuation condition. The items not included probably had little, if any, effect on the amount recovered versus the amounts not covered in this case. However, if Fred had been filming a more conventional type of documentary, the items above not included and for which there is no compensation could still represent a serious loss and financial setback. The permanent sets, owned wardrobes and props could be covered under the Theatrical Property Coverage Form.

The insurance company does not pay more than the value of the covered production as reflected in the insured's books and records at the time the loss or damage occurs. The insured must use any available property or other methods of reproduction to reduce the amount of loss or damage.

2. Policy period

This condition is added to General Condition E. Policy Period, Coverage Territory in the Commercial Inland Marine Conditions. Insurance coverage applies to covered property until the full quota of positive prints or films is made, the insured's interest in the property ends, expiration of the policy or policy cancellation, whichever occurs first.

3. Conditions that apply in addition to those in the Commercial Inland Marine Conditions and the Common Policy Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada and within 50 miles of these.

b. Records. The insured must keep accurate records relating to all business activities for the period of the policy and for at least three years after policy expiration.

c. Reports and premiums must be handled in a specific way. The insured sends the insurance company a written report for each production when the coverage provided by this form no longer applies to that production. The report must include information concerning the actual cost, related overhead and other expenses of the completed production for all items covered by this form. The report must also list each studio, laboratory, vault and cutting room used, as well as the period of time this form covered the property at each of these locations. The insured must also provide any other information required by the insurance company.

The premium charged for each production is based on the information in the report for it, based on the rates that apply at the time coverage began. If the earned premium exceeds the provisional deposit premium charged, the insured must pay the difference but if the earned premium is less than the deposit, the insurance company refunds the difference to the insured. Any additional premium is due on the date shown on the billing invoice.

ENDORSEMENTS

One specific endorsement is available for use with this coverage form.

CM 45 01–Non-Reporting

This endorsement changes the coverage form from reporting to non-reporting. A major part of the endorsement is the introduction of the coinsurance clause, as follows:

Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

a. Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance that applies to the property by the figure determined in step a. above.

c. Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step b. above.

d. Then subtract the amount of deductible from the figure determined in step c. above.

The insurance company pays the amount determined in the last step, or the limit of insurance, whichever is less. The insured is responsible for the remainder, if there is no other insurance coverage that applies.

UNDERWRITING CONSIDERATIONS

The biggest issue, which leads to the greatest concern, is…where is the film? Who is in charge and taking care of it? How and how often is it transported and by what means? Where is it stored when not in use? Films and videos are extremely susceptible to loss or damage by fire, smoke and water. In addition, certain films may be highly attractive and subject to theft. Every film is unique and many considerations and issues must be evaluated and taken into account.

ISO FILM COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 07–Film Declarations

Form Analysis–CM 00 45–Film Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Film Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to the named insured's exposed motion picture film, properly recorded magnetic and videotapes and their sound tracks or other sound records, as well as similar property of others in the named insured's care, custody or control.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 07–Film Declarations
• CM 00 45–Film Coverage Form

Note: Film coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any operation that commercially produces motion pictures, including sound recordings, or records magnetic or videotapes is eligible.

CM DS 07–FILM DECLARATIONS

CM DS 07–Film Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 07–Film Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Premium For This Coverage Form

The premium for Film Coverage is entered in the space provided.

Limits Of Insurance

The name of each production and its limit of insurance must be entered in the spaces provided.

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Coinsurance

The standard 80% coinsurance clause applies if coverage is written on a non-reporting basis unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply. Coverage can also be provided on a monthly reporting basis. If it is, an entry in this area is not required.

Rates And Premiums

Coverage can be written on a reporting basis or a non-reporting basis.

• If coverage is written on a reporting basis, the estimated premium and reporting rate are entered in the spaces provided. The named insured reports the estimated cost of production.
• If coverage is written on a non-reporting basis, the premium charged for the production and the rate that applies are entered in the spaces provided.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 45–FILM COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 45 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Exposed motion picture film and its sound record or sound track
• Magnetic or videotape including its sound record or sound track.

Note: Tape is not covered until it has been replayed and checked after being recorded.

Note: Coverage provided by this form is very narrow. Motion picture film production requires peripheral and related parts and equipment better insured under other coverage forms and policies, such as the Commercial Articles Coverage Form that insures cameras and related equipment and accessories.

Related Article: ISO Commercial Articles Coverage Form

2. Property Not Covered

There is no coverage for:

• Cut-outs

This term is not defined. As a result, it is interpreted based on its common meaning, usage or understanding. A common definition is that these are things removed, cut out, or to be cut out, and eliminated from something else. It could also mean the parts of the film removed in editing.

• Unused footage

This is waste or discarded film.

• Positive prints or films

This term is not defined. As a result, it is interpreted based on its common meaning, usage or understanding. A common definition is that these are prints in which the light and the dark areas appear as in the original. This could mean a “daily“ made from a negative so that a director can view the day's shooting.

• Library stock

This term is not defined. As a result, it is interpreted based on its common meaning, usage or understanding. A common definition is that these are stored collections of property. Questions could arise concerning when negative film moves from active stock to library stock.

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's covered property by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Deterioration, Atmospheric Dampness Or Changes In Temperature

There is no coverage for loss or damage caused by or resulting from any of these conditions. Deterioration is inevitable and includes qualities in covered property that cause it to damage or destroy itself. Dampness and temperature issues are within the named insured's control.

c. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

d. Exposure Of Negative Film To Light

Coverage does not apply to loss or damage caused by or resulting from negative film being exposed to light.

Example: Fred's Filmworks was shooting a documentary about caves and much of the filming was done in actual wild caves. After a day of shooting, the equipment was removed from the cave but was mishandled and inadvertently exposed to the bright sunlight. The exposed film was completely ruined and had to be re-shot. It was also unfortunate because all the work, labor and expense wasted by that exposure was not insured and the loss not covered because of this exclusion.

e. Use Of Developing Chemicals

The insurance company does not pay for loss or damage caused by or resulting from use or misuse of chemicals to develop film.

Example: Fred had better luck the next day, at least for a while, and got the film back to the lab safely. However, the technician mixed and used the wrong solution of developing chemicals and, while not completely ruined, the film quality was such that it could not be used. This was another loss that was not covered and Fred prepared himself for another day of filming in the cave as he tallied up his uninsured losses.

f. Developing, Cutting Or Printing Of Film Or Other Laboratory Work

Loss or damage caused by or resulting from developing, cutting or printing of film or other laboratory work is excluded.

Example: Day three went very well. The film was shot quickly, reached the lab safely and was developed properly. The editors pored over the tape and selected and marked the portions they wanted. Once again, misfortune struck. The cutting room technician misunderstood the intent of the editors and kept the part they wanted to discard. In the process, he discarded the part they actually wanted to keep. Once again, the loss caused by a cutting room mistake was excluded and the uninsured and uncompensated production costs were really starting to spiral out of control.

g. Electric Or Magnetic Injury

Coverage does not apply to loss or damage caused by or resulting from electric or magnetic injury, disturbance or erasure of electronic recordings or videotape.

Note: Coverage applies to loss or damage caused by or resulting from lightning.

Example: Success at last! The cave documentary video tape was complete, developed, processed, edited, cut and "in the can!" Fred left the finished product locked up in the lab and went out with the crew to celebrate. While they were gone, a powerful spring storm moved in and lightning struck an electric transformer on the premises. The power surge shorted out an ultraviolet lamp in the lab that was left on. The short created a spark that ignited the volatile chemicals kept there and burned the facility to the ground. While Fred and the crew had to go out and do it all over again, he was able to recover the full cost of the production lost because of the exception to this exclusion.

h. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

i. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from directives to transfer property to another person or place that results in loss of the property transferred.

j. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation

This condition replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions.

Covered property is valued at the cost of production including the costs that apply to the production insured. If loss or damage occurs, the value of covered property is the total of the costs of reproducing the lost or damaged property and the reduction in value of any undamaged parts of the applicable production. It does not include the cost of the story, scenario, music rights, continuity, permanent sets, owned wardrobes or props.

The insurance company does not pay more than the value of the covered production as reflected in the named insured's books and records at the time the loss or damage occurs. The named insured must use any available property or other methods of reproduction to reduce the amount of loss or damage.

2. Policy Period

This condition is added to General Condition E. Policy Period, Coverage Territory in CM 00 01–Commercial Inland Marine Conditions. Insurance applies to covered property until the full quota of positive prints or films is made, the named insured's interest in the property ends, policy expiration or cancellation, whichever occurs first.

3. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada and within 50 miles of these.

b. Records

The named insured must keep accurate records of its business and maintain them for at least three years after policy expiration or cancellation.

c. Reports And Premium

These must be handled in a specific way. The named insured must send the insurance company a written report for each production when the coverage provided by this form no longer applies to that production. The report must include information concerning the actual cost, related overhead and other expenses of the completed production for all property insured by this coverage form. The report must also list each studio, laboratory, vault and cutting room used, as well as the period of time this coverage form insured the property at each of these locations. The named insured must also provide any other information the insurance company requires.

The premium charged for each production is based on the information in the report for it, based on the rates that applied when coverage began. If the earned premium exceeds the provisional deposit premium charged, the named insured pays the difference. If the earned premium is less than the deposit, the insurance company refunds the difference. Any additional premium is due on the date indicated on the billing invoice.

ENDORSEMENTS

One endorsement is available for use with the Film Coverage Form.

CM 45 01–Non-Reporting

This endorsement changes coverage from reporting to non-reporting by deleting the reports and premium condition and introducing the coinsurance clause, as follows:

Coinsurance applies and affects the amount of loss the insurance company pays if a coinsurance percentage is indicated on the declarations.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. The steps the insurance company takes to determine the amount it pays are as follows:

1. Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

2. Divide the limit of insurance of the covered property by 1. above.

3. Multiply the total amount of loss by 2. above.

4. Subtract the amount of deductible from 3. above.

The insurance company pays the amount in 4. above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

UNDERWRITING CONSIDERATIONS

The biggest issue, which leads to the greatest concern, is…where is the film? Who is in charge and taking care of it? How and how often is it transported and by what means? Where is it stored when not in use? Films and videos are extremely susceptible to loss or damage by fire, smoke and water. In addition, certain films may be highly attractive and subject to theft. Every film is unique and many considerations and issues must be evaluated and taken into account.

ISO FLOOR PLAN COVERAGE FORM (09 04 edition)

The ISO Floor Plan Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. Floor plan insurance coverage protects a lender who has accepted property on the sales floor of a merchant as security for a loan. If the merchandise is damaged or destroyed by an insured cause of loss, the lender is indemnified. The lender or financier can be a bank or a finance company and protection can be for the single interest of the lender or in a joint interest with the merchant, for which a different coverage form is available. Merchants involved with high value merchandise, such as automobiles, and expensive household objects like refrigerators and other high value appliances, often borrow money from finance companies or banks on the collateral of their stock or specifically identified property "on the floor" for sale.

POLICY CONSTRUCTION

The following forms are mandatory for the floor plan policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Floor Plan Declarations Form CM DS 08

· Floor Plan Coverage Form CM 00 52

Floor plan coverage may be issued as a stand alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Eligibility is broad but at the same time conditional. If coverage is written as a single interest policy, either the dealer having the stock or the financial institution providing the financing for the stock can be covered. If coverage is written as a dual interest policy, the dealer having the stock must be the insured and the financial institution is the secured lender. In order to be eligible, the relationship between the dealer and the secured lender must be such that both retain a financial interest in the stock until it is sold. However, the dealer may not be a manufacturer or a processor.

DECLARATIONS

The Advisory Floor Plan Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

This section also requires that a selection be made as to whether coverage is written on a single interest or a dual interest basis. If coverage is on a single interest basis, only the named insured is covered. The insured can be either the dealership or the lending institution. If coverage is on a dual interest basis, the insured is the dealer but the secured lender listed in the policy is also covered and included for its insurable interest in the property. If dual interest is indicated, the secured lender must also be listed on the declarations.

Limits of Insurance

This part of the declarations consists of four different sections.

Section A. The location address for each covered premises must be listed and a limit of insurance shown in the space provided.

Section B. Property at unnamed locations can be covered if a limit of insurance is shown in the space provided.

Section C. Property in transit can be covered if a limit of insurance is shown in the space provided.

Section D. This section is used to declare a total aggregate or catastrophe limit for all covered property in any one occurrence for all coverages and at all locations.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Rates and Premium

Coverage is provided on a reporting basis. The provisional or deposit premium, minimum annual premium and monthly reporting rate must be entered in the spaces provided.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 52

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Property at the insured's risk, as outlined in the declarations; and

b. Property at the insured's risk with a specific lien to a secured lender named in the declarations.

Note: This form is unique and unusual because it does not specify the property covered. Because of the very "open end" nature of this arrangement, any property not excluded involving a lender with a financial interest in the property can be covered. This consideration can create interesting selling opportunities as well as complicated and perplexing underwriting situations.

2. Property Not Covered

Three types of property are not considered covered property:

a. Property in which the insured no longer has an interest;

b. Property sold, delivered or disposed of; and

c. Illegal property, contraband or any property transported or traded illegally.

Note: The Nationwide Inland Marine Definition specifies that these policies are not to cover automobiles or motor vehicles or merchandise for which the dealer's collateral is the stock or inventory versus merchandise specifically identified as encumbered to the lending institution. So, while the language in the coverage form might suggest that anything might be covered, the Nationwide Inland Marine Definition draws a line and defines specific property that cannot be covered by it.

Note: Once the insured has disposed of the property or no longer has an interest in it, the lender's interest is also eliminated and this insurance coverage is no longer needed. This coverage form is effective until the sale is made and the property is delivered to the purchaser. After that, coverage ends.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

d. Water includes flood, surface water, waves, tides, tidal waves, overflow of any body of water or their spray, all whether driven by wind or not. An exception applies if the action of the water results in a fire, explosion or theft. In that case, this form covers those causes of loss. This exclusion only applies to property situated on the insured's premises.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Unexplained disappearance of property is excluded. This is where covered property is simply gone and there is no obvious cause or explanation of what happened to it.

b. Bankruptcy, foreclosure or similar proceedings.

Example: Arnie's Lawn & Garden Equipment financed its stock of outdoor lawn, yard and garden equipment for sale through a floor plan arrangement with a major equipment manufacturer. Unfortunately, Arnie represented a manufacturer whose equipment had problems and defects that made the equipment generally unpopular with consumers. As a result, sales were flat and the merchandise simply didn't move! Arnie didn't look into any options and simply declared bankruptcy when he had no other choice. The creditors swooped in and took the inventory as collateral against unpaid debts and coverage did not apply to the financial loss as a result of this action.

c. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

d. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

e. Glass breakage or breakage of fragile property. However, the insurance company pays for loss or damage caused directly by fire, lightning, explosion windstorm, vandalism, falling aircraft, rioters, strikers, collapse of buildings, theft or accident involving the vehicle carrying the property if these causes of loss are covered under this form.

Example: Arnie's was one of many businesses vandalized during urban riots that broke out after a particular police action enraged the local citizenry. The rioters broke out nearly every windshield on some of the equipment on his lot. Not satisfied that they had done enough damage, they proceeded to torch other equipment they had not yet vandalized. The fires were quickly extinguished but the brief period of intense heat caused the glass in that equipment to discolor or shatter. In this case, Arnie's luck was good because the loss to the windshields was completely covered by the exception to this exclusion.

f. Property in the open damaged by rain, hail, sleet, snow or freezing. However, this exclusion does not apply to property in transit.

Example: One of Arnie's greatest fears was that a hailstorm or other storm related incident would wreak havoc on the large amount of equipment on his lot. However, he was in a part of the country where natural phenomena like that were rare and he didn't give it a lot of thought. One day, an intense cold front moved in over the stiflingly hot and humid conditions that had persisted for a week and resulted in a storm with golf ball size hail that badly damaged nearly every piece of equipment on the lot. Arnie's greatest fears were realized as he realized he had no coverage for the losses and damage caused by the storm. He gained little consolation from the fact that the few items of equipment he had in transit by a contract transport firm that were also damaged by the storm were covered for the hail damage they sustained.

g. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

h. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

Example: Arnie took a call from a person who described himself as a dealer in damaged merchandise. He heard of Arnie's plight after the hailstorm and offered to buy a several dozen items of equipment at a discounted price and take them off Arnie's hands. He said he would give Arnie his cut after the equipment was sold. Arnie was thrilled and, in his rush to get the equipment loaded on the transporter sent to his premises, did not check with the Better Business Bureau as to the reputation and character of the business. Arnie never received his money, never saw the equipment he sent and never heard from the "dealer" again. When he did check with the Better Business Bureau, he was informed that there were no records indicating that such a business existed. On top of all that bad news, Arnie also learned that his loss was not covered because of this exclusion. Arnie learned a very expensive lesson from this experience.

i. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional conditions

1. Valuation as found in General Condition F. in the Commercial Inland Marine Conditions is replaced by the following:

a. Unsold property is valued at the cost to restore it to its condition before the loss or damage occurred, the cost to replace it with similar property or the purchase price to the dealer, including any transportation costs. The insurer will use the least of these amounts in settling the loss.

b. Sold property not yet delivered is valued at its net selling price, minus any allowances and discounts.

c. Loss limitation–single interest coverage pays only the proportion of loss or damage that the amount of the insured's interest in the property bears to the total value of the property.

Note: Refer to the note under dual interest below. In a single interest policy, the coverage that applies is only for the benefit and financial interest in the covered property of the dealer and does not apply to the other party, who is usually the lender.

Note: The valuation conditions in this form are different than in most Inland Marine forms because of the unique nature of the property insured and the number of parties having complicated financial interests in that property. This section and the one that follows, particularly the parts on dual interest and reports and premium, should be examined carefully to fully understand the differences in this form with respect to this coverage compared to most other commercial property coverage forms.

2. The following conditions apply in addition to the Common Policy Conditions and the Commercial Inland Marine Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Transit coverage in the event of cancellation applies to property in transit when the policy is cancelled. Even if the policy is cancelled, the property in transit is covered until it reaches its final destination.

Example: Humble Pie Home Furnishing’s Floor Plan Coverage is cancelled on May 6^th. At the time of cancellation, a truckload of product is on its way from a supplier located at the far west end of the state. When the truck is ten miles from its destination, it is involved in a major collision. The property is destroyed when the overturned truck catches fire. Even though the policy was cancelled the previous day, the goods in the truck are still covered according to this policy provision.

c. Dual interest provisions are binding on all interested parties. If coverage applies on a dual interest basis, the interest of the secured lender is not impaired by the failure of the dealer or any other party to comply with the policy provisions, as long as the lender tries to secure compliance with the provision.

Note: This is a very important condition. The interest of the secured lender is protected in much the same way as a mortgagee under commercial property coverage forms. If the dealer does not comply with one or more policy conditions affecting a loss, the interest of the lender in the property is not adversely affected, as long as the lender was not aware of the dealer not complying with a policy condition.

d. Records and inventory requires the insured to not only maintain accurate business records at all times but to keep them for at least three years after the policy expires. As a minimum, the records must consist of an itemized inventory of stock in trade at all locations, property in transit, the purchase price of property to dealers and transportation charges.

e. Reports and premium

(1) Reporting requirements require the insured to submit reports not later than 30 days after the end of each month. If coverage is written on a dual interest basis, the total values are reported. If coverage is written on a single interest basis, the values of the property on the last day of the month are reported. If the single interest insured is a lender, the total amount of outstanding balances is reported. If the single interest insured is a dealer, the total amount of the insured's payments is reported.

(2) Rates and premium.

Premium is calculated by multiplying the total applicable amounts at all locations by the monthly rate shown on the declarations. These premiums are applied to the deposit premium until it is fully earned. Subsequent premiums are due and payable each month at the time the report is submitted to the insurance company, unless the company issues a bill. In that event, the additional premium is due on the date indicated on the bill.

(3) Minimum premium as shown on the declarations is the minimum annual premium the insured must pay, even if the reports submitted produce a lower actual premium.

(4) Failure to submit reports at the time of loss or damage means that the liability of the insurance company is no greater than the amounts shown in the latest report. In cases where no reports are submitted at all, the insurance company is not liable for more than 90% of the amount for which they are otherwise liable.

(5) Reports in excess of limits of insurance means the insurance company is not liable for more than the limit of insurance shown on the declarations, even though the higher total amount reported is used in determining earned premium.

(6) Reporting less than the total amount required. If the values reported before a covered loss or damage are less than the amount that should be reported, the insurance company pays only the proportion of the loss or damage that the amounts reported bear to the total actual amount as of the last report. The penalty to the insured is similar to a coinsurance penalty on coverages written on a non-reporting basis.

(7) Annual re-rating means that the coverage is re-rated at each policy anniversary date. The premium charged reflects the rates that apply at that time. The insured must furnish the information needed by the insurance company to perform the re-rating within 30 days after each anniversary date.

(8) Cancellation. In case of policy cancellation, the insured must report the total amount required up to and including the cancellation date. If the cancellation occurs other than at the end of a month, premiums for part of a month are calculated on a pro rata basis.

ENDORSEMENTS

No specific endorsements are available for use with this coverage form.

UNDERWRITING CONSIDERATIONS

This coverage should be underwritten in the same manner as business personal property. The primary concern is the construction, operations and common and special hazards of the particular occupancy and public and private fire protection exposures presented by and affecting the insured by neighboring occupancies. Theft and vandalism may be other major considerations, depending on the particular commodity, and security measures to protect against theft and vandalism must be carefully evaluated.

ISO FLOOR PLAN COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 08–Floor Plan Declarations

Form Analysis–CM 00 52–Floor Plan Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Floor Plan Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to merchandise that has been financed held for sale, consisting of property at the named insured's risk indicated on the declarations and property at its risk specifically encumbered to the secured lender also indicated on the declarations. It is written on a monthly reporting and monthly payment basis and covers either the single interest of the dealer, the single interest of the lender, or the interests of both. Coverage does not apply after the property is sold or disposed of and the named insured's interest ends. Loss caused by building collapse is included as an additional coverage for designated causes of loss.

Note: The Nationwide Inland Marine Definition specifically states that these policies are not used to cover automobiles, motor vehicles or merchandise for which the dealer's collateral is the stock or inventory versus merchandise specifically identified as encumbered to the lending institution. While the language in the coverage form might suggest that anything can be covered, the Nationwide Inland Marine Definition draws a line and defines specific property that cannot be covered.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 08–Floor Plan Declarations
• CM 00 52–Floor Plan Coverage Form

Note: Floor plan coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Eligibility is broad but at the same time conditional. Dealers that have borrowed funds from a lending institution to pay for covered property or lending institutions that finance covered property are eligible. It is conditional in that covered property must be readily identifiable as encumbered to the lending institution. In addition, the dealer's right to sell covered property is based on its release from encumbrance by the lending institution.

If coverage is written on a single interest basis, either the dealer having the stock or the financial institution providing the financing for the stock can be covered. If coverage is written on a dual interest basis, the dealer having the stock is the insured and the financial institution is the secured lender. In order to be eligible, the relationship between the dealer and the secured lender must be such that both retain a financial interest in the stock until it is sold.

Note: Manufacturing or processing risks are not eligible.

CM DS 08–FLOOR PLAN DECLARATIONS

CM DS 08–Floor Plan Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 08–Floor Plan Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Note: An entry is required to indicate if coverage applies to a single interest or to dual interests.

Premium For This Coverage Form

The premium for Floor Plan Coverage is entered in the space provided.

Description Of Covered Property

A description of covered property is entered in the space provided.

Name Of Secured Lender

The name of the secured lender is indicated in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Named Premises (including description or address)
• Property At Any Unnamed Premises
• Property In Transit
• All Covered Property In Any One Occurrence

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Rates And Premium

Coverage is on a reporting basis. The provisional or deposit premium, minimum annual premium and monthly reporting rate must be entered in the spaces provided.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 52–FLOOR PLAN COVERAGE FORM

Note: This analysis is of the 03 10 edition and includes changes made in the 98 08 edition. Changes from the 09 04 edition are in bold print.

CM 00 52 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Property considered at the named insured's risk indicated on the declarations
• Specific property at the named insured's risk encumbered to the secured lender indicated on the declarations

Note: This coverage form is unique and unusual because it does not specify the property covered. Because of the very "open end" nature of this arrangement, it can cover any property not excluded involving a lender with a financial interest in it. This consideration can create interesting selling opportunities as well as complicated and perplexing underwriting situations.

2. Property Not Covered

There is no coverage for:

• Property the named insured no longer has an interest in
• Property after being sold, delivered or disposed of

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

Note: Once the named insured has disposed of the property or no longer has an interest in it, the lender's interest also ends and this coverage is no longer needed. This coverage form is effective until the sale is made and the property is delivered to the purchaser. After that, coverage ends.

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's covered property by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

d. Water (08 08 change)

Loss or damage caused by water is excluded. Water includes flood, surface water, waves, tides, tidal waves, tsunamis or overflow of any body of water or their spray, all whether driven by wind or not. It also includes storm surge and material that is waterborne, moved or carried by water in any way. Whether the damage is due to an act of nature or is due to another situation, coverage is excluded.

This exclusion has an exception for loss or damage caused by fire, explosion or theft provided they are otherwise covered by this coverage form.

Note: This exclusion applies only to property at the named insured's premises.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Bankruptcy, Foreclosure Or Similar Proceedings

Coverage does not apply to loss or damage caused by or resulting from the named insured's or any other party's bankruptcy, foreclosure or similar proceedings.

Example: Arnie's Lawn & Garden Equipment financed its stock of a major equipment manufacturer's outdoor lawn, yard and garden equipment he held for sale through a floor plan arrangement. However, that manufacturer's equipment had problems and defects that made it generally unpopular with consumers, resulting in it bankruptcy. The creditors swooped in and took the inventory as collateral against unpaid debts and coverage did not apply to the financial loss as a result of this action.

c. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

d. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance within covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage within the object in which the disturbance occurs.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

e. Breakage Of Glass Or Similar Fragile Property

Loss or damage caused by or resulting from breakage of glass or other similarly fragile property is excluded. However, the insurance company pays for such loss or damage caused directly by fire, lightning, explosion windstorm, vandalism, falling aircraft, rioters, strikers, collapse of buildings, theft or accident involving the vehicle carrying the property if the insurance provided by this coverage form covers these losses.

f. Property In The Open

The insurance company does not pay for loss or damage caused by or resulting from rain, hail, sleet, snow or freezing to property in the open.

Note: This exclusion does not apply to property in transit.

Example: Arnie feared that a hailstorm would seriously damage the large amount of equipment on his lot, even though he was in a part of the country where hail was uncommon. An intense cold front moved in one day over the past week's stiflingly hot and humid conditions, resulting in a storm with golf ball size hail that badly damaged nearly everything on the lot. Arnie's fears were realized when informed that coverage did not apply to this property for the damage caused by the storm. He was consoled to some extent when he learned that the equipment he had in transit by a contract carrier was covered for the hail damage it sustained.

g. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

Example: Arnie took a call from a person stating that he was a dealer in damaged merchandise, offering to buy some of his damaged equipment at a discounted price and giving Arnie his cut after it was sold. Arnie was thrilled and, in his rush to get the equipment loaded on the transporter sent to his premises, did not check out the reputation and character of the business. Arnie never received any money, saw the equipment he sent, or heard from the "dealer" again. When he later checked on the business, he learned that there were no records that such a business ever existed. On top of all that bad news, Arnie also learned that his loss was not covered because of this exclusion.

h. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

i. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation

This valuation clause replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. In all cases, the value of property is determined when the loss or damage occurs.

a. Unsold Property

This property is valued at the lesser of the cost to reasonably restore it to the condition it was in before the loss occurred, the cost to replace it with approximately similar property or the purchase price to the dealer, including transportation charges.

b. Sold Property

Property sold but not yet delivered is valued at its net selling price after adjustments for allowances and discounts.

c. Loss Limitation–Single Interest

The value as determined above is limited to only the proportion of loss or damage that the amount of the insured's interest in the property bears to the total value of the property.

Note: Refer to the note under dual interest below. In single interest coverage, the coverage that applies is only for the benefit and financial interest of either the dealer or the lender, whichever is the named insured.

Note: These valuation conditions are different than in most inland marine coverage forms because of the unique nature of the property insured and the number of parties having complicated financial interests in it. This section and the one that follows, particularly the parts on dual interest and reports and premium, should be examined carefully to fully understand the differences in this form with respect to this coverage compared to most other commercial property coverage forms.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Transit Coverage In The Event Of Cancellation

Covered property in transit is insured until it reaches its final destination, even when coverage is cancelled.

Example: Humble Home Furnishing’s Floor Plan Coverage was cancelled on May 6^th. At the time of cancellation, a truckload of product was on its way from a supplier located at the far west end of the state. The truck was involved in a major collision when it was ten miles from its destination and the property destroyed when it caught fire. Even though the policy was cancelled the previous day, the goods in the truck were still covered based on this condition.

c. Dual Interest

All provisions are binding on all interested parties. If coverage applies on a dual interest basis, the interest of the secured lender is not impaired by failure of the dealer or any other party to comply with coverage provisions as long as the lender tries to comply with them.

Note: This is a very important condition. The interest of the secured lender is protected much like mortgagees under commercial property coverage forms. If the dealer does not comply with one or more policy conditions affecting a loss, the lender's interest in the property is not adversely affected, as long as it was not aware of the dealer not complying with a policy condition.

d. Records And Inventory

The named insured must keep accurate records of its business and maintain them for at least three years after policy expiration or cancellation. As a minimum, records include:

• Itemized inventories of its stock in trade including actual locations, property in transit, transportation charges and the price the dealer paid for the property
• Records of outstanding balances, payments or values at risk as required under Reports And Premium below
• Records of all purchases, however made
• Records of property of others held in its care, custody and control
• Records of property sent to others for any reason

Note: The named insured must also conduct a physical inventory of its stock in trade at least once a year.

e. Reports And Premium

(1) Reporting Requirements

The named insured must submit reports not later than 30 days after the end of each month as indicated under Records And Inventory above. If coverage is written on a dual interest basis, total values are reported. If coverage is written on a single interest basis, the values of the property on the last day of the month are reported. If the single interest insured is a lender, the total amount of outstanding balances is reported. If the single interest insured is a dealer, the total amount of the insured's payments is reported.

(2) Rates And Premium

Premium is calculated by multiplying the total applicable amounts at all locations by the monthly rate indicated on the declarations. These premiums are applied to the deposit premium until it is fully earned. Subsequent premiums are due and payable each month when the report is sent to the insurance company, unless it issues a bill. In that case, the additional premium is due on the date indicated on the bill.

(3) Minimum Premium

The minimum premium indicated on the declarations is the minimum annual premium the named insured must pay, even if the reports submitted produce a lower actual premium.

(4) Failure To Submit Reports

If the named insured failed to submit the required reports at the time of loss or damage, the insurance company's liability does not exceed the amounts included in the latest report. In cases where no reports are submitted at all, the insurance company's liability is limited to not more than 90% of the amount it is otherwise liable for.

(5) Reports In Excess Of Limits Of Insurance

The insurance company is not liable for more than the limit of insurance indicated on the declarations, even though the higher total amount reported is used to determine the earned premium.

(6) Reporting Less Than The Total Amount Required

If the values reported before a covered loss or damage are less than the amount that should be reported, the insurance company pays only the proportion of the loss or damage that the amounts reported bear to the total actual amount as of the last report.

Note: The penalty to the named insured is similar to a coinsurance penalty on coverages written on a non-reporting basis.

(7) Annual Re-rating

This coverage is re-rated at each anniversary date and the premium charged reflects the rates that apply at that time. The named insured must furnish the information the insurance company needs for re-rating within 30 days after each anniversary date.

(8) Cancellation

In case of cancellation, the named insured must report the total amount required up to and including the cancellation date. If the cancellation occurs other than at the end of a month, premiums for part of a month are calculated on a pro rata basis.

ENDORSEMENTS

There are no specific endorsements available for use with the Floor Plan Coverage Form.

UNDERWRITING CONSIDERATIONS

This coverage should be underwritten the same way as business personal property. The primary concern is the construction, operations and common and special hazards of the particular occupancy, public and private fire protection and exposures presented by neighboring occupancies. Theft and vandalism may be other major considerations, depending on the particular commodity, and security measures to protect against these causes of loss must be evaluated carefully.

ISO JEWELERS BLOCK COVERAGE FORM (09 04 edition)

The ISO Jewelers Block Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers items normally excluded or limited in most property insurance forms. It covers property consisting of both owned and non-owned stock of the insured jeweler, at the named premises, in the course of transit and while at other scheduled locations. In addition to the stock of jewelry property, other store personal property can also be included. This particular coverage form is limited to retailers with less than $250,000 in stock values. Larger retailers and wholesalers and jewelry manufacturers must purchase coverage from an insurance carrier that specializes in writing coverage for those businesses.

POLICY CONSTRUCTION

The following forms are mandatory for the jewelers block policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Jewelers Block Declarations Form CM DS 09

· Jewelers Block Coverage Form CM 00 59

Jewelers block coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

A jewelers block policy is needed by any retail jewelry operation but this particular form is limited to smaller retail jewelry stores. Any commercial jeweler is eligible if the average inventory does not exceed $250,000 in average inventory values. Retail department and discount stores are eligible but the coverage provided by this form applies only to the stock of jewelry, watches or silverware. All other property must have separate coverage arranged because it cannot be insured under this form.

A number of businesses and operations are specifically not eligible for coverage under this form and must arrange for coverage through a specialty market. These include auction dealers, bullion and precious metals dealers, exhibition risks, fine arts and antiques dealers, industrial diamond risks, jewelry manufacturers and wholesalers, loose diamond risks, pawnbrokers and watch repair businesses.

DECLARATIONS

The Advisory Jewelers Block Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

Limits of Insurance: This part of the declarations consists of five different sections.

A. Property at your premises requires listing the address of each location to be covered and entering a limit of insurance for each such location in the space provided.

B. Property in the safe deposit vault of any bank, trust or safe deposit company coverage requires entry of a limit of insurance in the space provided, if the insured has this exposure and wants coverage for it.

C. Property at the premises of any dealer, processor or similar bailee in the jewelry trade coverage requires entry of a limit of insurance in the space provided, if the insured has this exposure and wants coverage for it.

D. Property in transit exposures can be covered if the insured has this exposure and wants coverage for it. Coverage is available under four different modes of conveyance and a limit of insurance must be shown in the space provided for each form of transportation used. The four modes are by registered mail, armored car, merchant's parcel delivery service and by railroads, passenger bus lines, waterborne carriers or air carriers.

E. Property away from your premises and not included above is used to provide coverage for all other exposures not included in any of the categories listed by showing a limit of insurance in the space provided.

Coverage Options

This section has two different coverage options.

A. Show windows coverage is available when the premises are open for business and separately when the premises are closed. Both options make coverage available for both protected and unprotected display windows. The three coverages available are for property in any one window, property in any one outside showcase and an aggregate limit for property in all windows and outside showcases.

B. Money coverage is available. If the insured has this exposure and wants coverage for it, a limit of insurance must be shown in the space provided.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Additionally Covered Property

This form can provide coverage for four additional categories of property. The categories are:

• Furniture, fixtures and office supplies;
• Machinery, tools and fittings;
• Patterns, dies, molds and models; and
• Improvements and betterments.

A limit for any of these coverages selected must be shown in the spaces provided. Additionally Acquired Property, Form CM 99 01, must also be attached to the policy when any one of these coverages is selected. The limit selected on the form must apply to one of the locations listed on the declarations.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

Special note: If a limit of insurance is not shown for any coverage option listed on the declarations, coverage does not apply to that option.

FORM ANALYSIS–CM 00 59

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Jewelry, precious stones, semi-precious stones, precious metals and alloys and other property representing the stock in trade of the insured;

b. The same property after it is sold but is still on the premises and not yet delivered;

c. Similar or related property of others not in the jewelry business and in the insured's care, custody and control; and

d. Similar or related property of others in the jewelry business in the insured's care, custody or control. However, coverage applies only to the extent of money the insured has advanced on it or for the legal liability of the insured for that property.

Note: The property covered in this form is significantly different than property covered in virtually all other commercial property forms. In fact, the property covered is excluded in virtually all other forms. A few of those forms do provide some limited coverage, small limits or restricted extensions of coverage. Most businesses that qualify for and need the coverage provided by this form still need many of the coverages provided by those other standard commercial property forms.

2. Property Not Covered

Six specific types of property are listed and treated as not covered:

a. Property sold, but no longer on the premises, under a deferred payment sales arrangement;

b. Property at exhibitions promoted or financially supported by a trade association or a public authority;

c. Property exhibited in showcases or show windows at premises not owned by the insured or not at the insured's premises;

d. Property of the insured when worn;

· By the insured, an officer, director, employee, agent, member or messenger of the insured or any other jewelry business;

· By any member of the family, relative or friend of any of these; or

· While in the insured's care, custody or control solely for the purpose of being worn.

However, coverage does apply to watches when worn only for the purpose of adjusting them.

e. Property in transit by;

· Mail, other than United States Postal Service Registered Mail;

· Express Carriers; and

· Railroads, waterborne carriers and air carriers.

However, coverage does apply to shipments made under passenger parcel transportation or baggage services receipts. Passenger baggage service by air carriers subject to freight tariffs that deliver to the passenger at the final destination is treated as accompanied baggage. Because of this treatment as accompanied baggage, it is subject to the limit of insurance on the declarations for "Property away from your premises and not included above."

· Motor carriers.

However, coverage does apply to shipments by merchant's parcel delivery service carriers, armored car services and passenger bus service baggage services or parcel transportation.

f. Illegal property, contraband or any property transported or traded illegally.

Note: While the "covered property" section immediately above appears to be broad and comprehensive, careful review of this "property not covered" section reveals a number of restrictions, limitations and details that must be carefully reviewed in a combined effort of the agent and the insured. In most cases, the insured is the only one that knows the details of his or her business well enough to address these issues and communicate them in a way that can be captured in a risk assessment and the Proposal for Jewelers Block Coverage Form discussed at some length later in this analysis.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage extension–Theft damage to buildings

The insurance company pays for damage caused directly by a theft or attempted theft to any part of a building containing covered property or to equipment in the building used to maintain or service it. This extension does not apply to damage caused by fire or to glass or any lettering or artwork on glass. This extension is included in the limit of insurance that applies to the covered property at the location where the damage occurs.

Example: The building owned and occupied by Jean's Jewelers was badly damaged when a would-be thief decided the best way to break in and steal some jewelry and precious stones to later fence would be by crashing his beat-up car into it when the store was closed and making off with the merchandise in the process. The thief failed to recognize the possibility of other parts of the structure collapsing on the vehicle and pinning him in the wreckage and that is exactly what happened. The thief was apprehended, no merchandise was taken and Jean recovered the full cost of repairs needed to the building to get her back into business.

6. Coverage Options

a. Show windows coverage applies if a limit for it is shown on the declarations. The insurance company pays for loss or damage to covered property in show windows at the listed premises caused by theft or attempted theft that is the result of either smashing or cutting the windows.

Example: Jean had a single outside show window insured that was stocked from inside the store. Unfortunately, access to that window from inside was not well restricted and was fairly accessible to customers as well as employees. A "Bonnie and Clyde" duo entered the store and "Bonnie" drew the attention of the store staff, inquiring about and trying on several pieces of jewelry. In the meantime, "Clyde" got near the show window and found it had not been locked. He proceeded to clean out the window display without anyone in the store noticing. He signaled "Bonnie" and they both quickly exited. Jean did not notice the theft until closing time and by then the duo were long gone. She filed a claim but it was denied because this coverage option only applied to theft resulting from cutting or smashing the show window.

b. Money coverage applies if a limit for it is shown on the declarations. The insurance company pays for loss of or damage to money kept in locked safes or vaults on the insured's premises. The loss must be due to theft or attempted theft when the receptacles are broken into and opened.

Example: Jean usually kept small sums of money in the cash register drawers to make change for cash purchases. Most of the cash was kept in a burglar-resistant safe that was locked during business hours as well as when the premises was closed. The "Bonnie and Clyde" duo struck again. "Clyde" came in the store and lingered until he saw a large cash deposit being taken to the safe. As soon as the safe was opened, he signaled "Bonnie," who was standing by outside the store, to pull the manual fire alarm. As soon as the alarm sounded, everyone exited the store…everyone, that is, except "Clyde." He went to the safe and removed all the cash from it and then disappeared into the crowd standing outside the store. Jean discovered the loss after returning to the store after the "false alarm" and also discovered the loss was not covered because the safe was not locked and had not been broken into.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Earthquake of all kinds is excluded, unless the earthquake causes a fire. In that case, coverage applies only for the loss or damage caused by the fire, if this form covers fire.

b. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

c. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

d. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

e. Water includes flood, surface water, waves, tides, tidal waves, overflow of any body of water or their spray, all whether driven by wind or not. An exception applies if the action of the water results in a fire, explosion or theft. In that case, this form covers those causes of loss. This exclusion only applies to property situated on the insured's premises.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Theft from any vehicle unless an insured, an employee or a person charged with attending to the vehicle is in or on the vehicle at the time of a theft. However, this exclusion does not apply to covered property shipped by and in the custody of the United States Postal Service or other public carriers.

Example: Jean customarily delivered merchandise in town using her own vehicle when requested by the customer. During one of her deliveries, when she was stopped at a traffic signal, a man selling flowers approached her vehicle. When she rolled down her window to purchase a bunch, the man opened her car door, grabbed her and threw her out of the vehicle, got into the vehicle and sped off. The car was recovered a few blocks away but the merchandise was gone. Quite a few witnesses came forward to explain what happened to the police and, as a result, Jean's merchandise loss was covered.

c. Unexplained disappearance of property is excluded. This is where covered property is simply gone and there is no obvious cause or explanation of what happened to it.

d. Shortage discovered after taking inventory is similar to unexplained disappearance and is similarly not covered. In this case, the loss of the property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

e. Property shortage of property allegedly shipped when the package containing the property is in good condition and shows no evidence of tampering or disturbance and the shipping seals are intact.

f. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives. It also applies to anyone to whom the property is entrusted, except:

· When the insured, officers, members or salespersons deposit the property for safe custody while traveling;

· Covered property being shipped and in the custody of the United States Postal Service or other carriers; or

· Porters or helpers not on the insured's payroll having custody of the property.

This exclusion applies whether or not persons act alone or in collusion with others or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

Note: This exclusion differs from the same exclusion in all other ISO controlled inland marine coverage forms because of the three exceptions to the exclusion listed. These exceptions are relevant to the normal conduct of the jewelry business and appear because of the way the jewelry business is transacted.

g. Theft or attempted theft of covered property from show windows due to cutting or smashing the windows is not covered. However, coverage does apply if limits for show window optional coverage are shown on the declarations.

Note: Refer to paragraph 6., Coverage Options a., Show windows and the example above. This exclusion applies unless this optional coverage is selected and an entry is made on the declarations. In that case, the optional coverage applies and this exclusion is void.

h. Processing activities or work on the covered property resulting in loss or damage to the property is not covered. However, if the activity or work results in fire or explosion, the direct loss or damage caused by that fire or explosion is covered, if this form covers fire or explosion.

i. Defective or insufficient packing that causes loss or damage is not covered.

Example: Jean usually had out of town purchases packaged and mailed from a professional mailing service. However, she encountered a situation where a bracelet had to be express mailed overnight and the mailing service was closed. She made a valiant effort to wrap the article to protect it before slipping it into the mailing envelope. As luck would have it, the envelope fell on the floor in the express mail handling facility and was run over by a forklift truck. The precious stones survived the impact but the mountings and the rest of the parts of the bracelet were crushed and destroyed. Since inadequate packaging aggravated the loss, the cost to replace the bracelet mountings was not covered. Fortunately, the precious stones were not harmed, none of them were lost and they represented most of the value of the bracelet.

j. Breakage of fragile property is not covered. However, losses or damage due to fire, lightning, explosion windstorm, vandalism, aircraft, rioters, strikers, theft or attempted theft or accident involving the vehicle carrying the property are covered if this form covers those losses.

k. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

l. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

m. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional Conditions

1. Valuation General Condition F. in the Commercial Inland Marine Conditions is replaced. The value of property is determined at the time of the loss or damage, does not include any antique or historical value and is limited to the least of the following amounts:

a. Actual cash value of the property;

b. Costs needed to restore the property to approximately the same condition that existed prior to the loss;

c. Costs to replace the property with identical or substantially similar property; or

d. The lowest figure for the property recorded by the insured in inventories, stock books, stock papers or lists that existed at the time of loss or damage.

2. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes property wherever located within or between the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Protective safeguards in place at designated locations at policy inception must be maintained in proper working order. If they are not so maintained and are not operational during times when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

Example: The lines from Jean's burglar alarm system to the central station were cut during a failed break-in. Jean was so wrapped up in cleaning up the mess from the botched attempt that she forgot about the cut lines and the fact that her premises was now without an operating alarm system. The burglars figured they would have better luck the second time around and struck the next evening, shortly after Jean closed up and went home for the day. This time the burglars removed a lot of merchandise at their leisure because they were not constrained by an alarm sounding and the police arriving. Jean found the error of her ways the next morning, much to her chagrin, and she was even more remorseful when she learned that the loss was not covered because the protective device to protect against the loss that occurred was not operational at the time of the loss.

c. Records and inventory requires the insured to not only maintain accurate business records at all times but to keep them for at least three years after the policy expires. As a minimum, the records must consist of an itemized inventory of stock in trade and records of all purchases, regardless of whether they were made by cash or credit. In addition, records of property of others held in the insured's care, custody and control and records of the insured's property sent to others for any purpose must also be retained. Finally, the insured must conduct a physical inventory of all stock in trade at least annually.

d. Changes to premises are not covered where the risk of loss or damage is materially increased by changes in the premises or where the premises are expanded. However, coverage does apply in these cases where the insurance company agrees to accept the changes in writing.

e. Attachment of proposal for jewelers block coverage must be signed by the insured and attached to the form in order for coverage to be effective and apply.

Note: This is the only coverage in standard insurance lines of coverage that requires that the application for coverage, referred to here as the “Proposal for Jewelers Block Coverage Form,” must be attached to and become part of the policy in order for coverage to apply. Refer to the discussion of this form and its contents in the Endorsements section of this analysis immediately below.

ENDORSEMENTS

One proposal form and four specific endorsements are available for use with this coverage form.

CM 59 90–Proposal for Jewelers Block Coverage Form

This is the application for jewelers block coverage. All its parts must be completed in full and signed by the insured. This form and the jewelers block policy are unique in the insurance industry because this proposal is attached to and becomes part of the policy. Without it, the policy is void and no coverage applies. A separate proposal is required for each location covered under the policy.

The proposal is extremely detailed and contains 18 sections that address virtually all aspects of the business. The insured is the only one with the knowledge and information to complete it but the agent must be available to guide the insured through it. A brief summary of these 18 sections follows.

1. General information. This includes the insured's name, names of officers or members, the location of the premises, the number of entrances, normal operating business hours, names of other locations and business entities under the same ownership, if any, and descriptions of other occupancies sharing the same premises, if any.

2. Sales. The insured must disclose the percentage of annual sales other than retail.

3. Employees. The insured must disclose the number and types of employees during business hours or when opening and closing the business.

4. Latest three years experience. The insured must disclose all loss activity, both insured and uninsured, and whether paid in full or only partly, during the latest three years for all property covered by the form.

5. Name of prior carrier. The insured must disclose the name of the insurance company now providing coverage.

6. Bookkeeping. The insured must provide certain information about inventory control and purchases and sales records retention.

7. Jewelers' Security Alliance. The insured must disclose whether he is or is not a member of this organization.

8. Limits of insurance needed. The insured must list the limits needed for all coverages available in the form or state "none" or "nil" if a particular coverage is not desired. Coverages include stock, the various forms of transit and shipments, at premises of sales agents, dealers, processors or other custodians, property in a safe deposit vault and other off-premises coverage, including travel and messenger. A special note highlights that the limit cannot be less than 80% of average inventory values for each location insured.

9. Optional additional coverages at proposer's premises. The insured must show limits desired for other coverages available or state "none" or "nil" if a particular coverage is not desired. Coverages include money in locked safes for the peril of burglary; furniture, fixtures and office supplies; improvements and betterments; machinery, tools and fittings; patterns, dies, molds and models; flood and earthquake. A special note highlights that the limit for furniture, fixtures and office supplies and improvements and betterments cannot be less than 100% of the actual value of those items.

10. Optional deductible. The insured chooses the higher deductibles indicated in this area if desired.

11. Inventories of all property wherever located. The insured provides exact monthly inventories for each of the last 12 months and the dates of the inventories. The average daily amount of property of others is also indicated in this area.

12. Property on display in show windows at premises occupied by proposer, including outside showplace display on premises. The insured must provide exhaustive detail on each show window and showcase, including maximum values and limits desired for each.

13. Showcase and show window displays of proposer not at premises occupied by proposer. The insured must provide details of each showcase and show window in building lobbies or at other premises not occupied by the insured.

14. Travel and messenger. The insured must provide the daily average and maximum values off premises with employees separate from those same values with others during the previous 12 months.

15. Shipments. The insured must disclose the total value of all property shipped during the previous policy period by registered mail, armored car, merchants parcel delivery services and all other modes covered by the form.

16. Burglary protection of premises, safes, vaults or stockroom. The insured must indicate the type of protection provided, the name of the alarm company, the type of installation, the connection and the grade certification, if any, for each of these. Copies of Underwriters' Laboratories (UL) certificates must be provided, along with statements of values kept in these areas, watchperson services, if any, and any other loss control or security measures in place.

17. Description and performance of stock enclosures. The insured must provide the manufacturer's name and complete details of each safe or vault on the premises, including ratings on the classification, walls and doors.

18. Property insured when premises are closed. The insured must disclose the percentage of property secured in safes, vaults and other locked enclosures when the premises are closed for business.

CM 59 03–Registered Mail Deductible

This optional endorsement applies to property sent by registered mail, other than to Canada, and replaces Section D, Deductible in the coverage form. The insurance company does not pay for covered loss or damage to any one package sent via registered mail until and unless the value of that package is greater than $25,000. The company then pays the amount of the adjusted loss over $25,000 up to the limit of insurance that applies.

CM 59 07–Limitation on Property Away From Premises

Covered property off premises and in the care, custody and control of the insured and select others is limited to $5,000. However, the company pays up to the limit shown on the declarations for any person listed and named on this form.

CM 99 01–Additionally Covered Property

This endorsement is used to extend coverage under the Jewelers Block Coverage Form to apply to other property. The additional property that can be covered includes furniture, fixtures and office supplies; machinery, tools and fittings; patterns, dies, molds and models; and improvements and betterments. Because of the number and types of additional property that can be covered, this endorsement contains its own valuation and coinsurance provisions.

CM 99 03–New Business Premium Adjustment

The policy is issued conditionally and the insured must submit a new proposal within 30 days of the first six months of the policy. This new proposal submitted is then used to revise the premium for the remainder of the policy period, using the rates in effect as of the inception date of the policy.

UNDERWRITING CONSIDERATIONS

Underwriting jewelry and the other exposures covered under this form focuses on theft, burglary and holdup issues. Alarm systems, vaults and the location of the store must all be considered. Does the insured remove property from the premises and if so, what precautions are taken? How are precious stones and metals handled in the store? How are the showcases and show windows locked and who controls the keys? Show room windows and smash and grab hazards are always key underwriting areas to consider.

ISO JEWELERS BLOCK COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 09–Jewelers Block Declarations

Form Analysis–CM 00 59–Jewelers Block Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Jewelers Block Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to stocks of merchandise for retail businesses with average inventory of $250,000 or less and is written on a non-reporting basis. It covers property on the named insured's premises, in transit, at other locations and in the custody of employees and may include the named insured's interest in and legal liability for property of others in its care, custody or control to the extent of money advanced. Covered property includes stock in trade consisting of jewelry, precious and semi-precious stones, precious metals and alloys and other stock used in the business, including property sold but not delivered.

This form is unique because the application, "Proposal For Jewelers Block Coverage Form," must be prepared by and be signed by the named insured and be attached to the policy.

Note: Larger retail and wholesale operations and jewelry manufacturers must purchase this coverage from an insurance carrier that specializes in writing coverage for those types of businesses.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 09–Jewelers Block Declarations
• CM 00 59–Jewelers Block Coverage Form

Note: Jewelers block coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Every kind of jewelry operation needs this type of coverage but this coverage form is used only for smaller retail jewelry stores. Any commercial jeweler with average inventory of $250,000 or less is eligible. Retail department and discount stores are also eligible but the coverage provided by this form applies only to their stock of jewelry, watches or silverware. All other property must be covered elsewhere.

Certain businesses and operations are not eligible and must arrange coverage through specialty markets. They include retail operations with average inventories exceeding $250,000, auction dealers, bullion and precious metals dealers, exhibition risks, fine arts and antiques dealers, industrial diamond risks, jewelry manufacturers and wholesalers, loose diamond risks, pawnbrokers and watch repair businesses.

CM DS 09–JEWELERS BLOCK DECLARATIONS

CM DS 09–Jewelers Block Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 09–Jewelers Block Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is indicated in the space provided.

Premium For This Coverage Form

The premium for Jewelers Block Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Your Premises
• Property In Safe Deposit Vault Of Any Bank, Trust Or Safe Deposit Company
• Property At Premises Of Any Dealer, Processor Or Similar Bailee In The Jewelry Trade
• Property In Transit
• By Registered Mail
• By Armored Car
• By Merchants Parcel Delivery Service
• By Railroads, Passenger Bus Lines, Waterborne Or Air Carriers As Covered By This Form
• Property Away From Your Premises And Not Included Above

Coverage Options

Two coverage options are available.

• Show Windows

Coverage for property in show windows can be provided with one set of limits when the premises is open for business and another when the premises is closed. Coverage is available for both protected and unprotected show windows. The limits indicated are property in any one window, property in any one outside showcase, and an aggregate limit for property in all windows and outside showcases.

• Money

If coverage on money is desired, a limit of insurance must be entered in the space provided.

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Additionally Covered Property

Four additional categories of property can be covered by entering the limit of insurance that applies for each in the spaces provided. They are:

• Furniture, Fixtures And Office Supplies
• Machinery, Tools And Fittings
• Patterns, Dies, Molds And Models
• Improvements And Betterments

Note: CM 99 01–Additionally Covered Property must be attached when any of these coverages is selected.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 59–JEWELERS BLOCK COVERAGE FORM

Note: This analysis is of the 03 10 edition and includes changes made in the 08 08 edition. Changes from the 09 04 edition are in bold print.

CM 00 59 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Jewelry, precious stones, semi-precious stones, precious metals and alloys and other property making up the named insured's stock in trade
• The same property indicated above that has been sold but is not yet been delivered
• Similar property of others not in the jewelry business in the named insured's care, custody and control
• Similar property of others in the jewelry business in the named insured's care, custody or control only to the extent of money the named insured advanced on it or for its legal liability for that property

Note: Property covered is significantly different than property covered in virtually all other commercial property forms and is excluded in virtually all other forms. A few of them provide some limited coverage, small limits or restricted extensions of coverage. Most businesses eligible for the coverage provided by this form still need many of the coverages provided by those other standard commercial property forms.

2. Property Not Covered

There is no coverage for:

• Property sold subject to a deferred payment sales arrangement after it is no longer on the premises
• Property at exhibitions promoted or financially supported by trade associations or a public authorities
• Property away from the named insured's premises while exhibited in showcases or show windows
• The named insured's property when worn by the named insured or:
• By the named insured's (or any other organization in the jewelry business) officers, directors, employees, agents, members or messengers
• By any member of the family, relative or friend of any of these

All while in the named insured's or their care, custody or control for the purpose of being worn

Note: Coverage does apply to watches when worn only for the purpose of adjusting them.

• Property in transit by:
• Mail, other than United States Postal Service Registered Mail
• Express Carriers
• Railroads, waterborne carriers and air carriers

Note: Coverage does apply to shipments made under passenger parcel transportation or baggage services receipts. Passenger baggage service by air carriers subject to freight tariffs that deliver to the passenger at the final destination is treated as accompanied baggage. Because of this treatment, it is subject to the limit of insurance on the declarations for "Property Away From Your Premises And Not Included Above."

• Motor carriers

Note: Coverage does apply to shipments by merchant's parcel delivery service carriers, armored car services and passenger bus service baggage services or parcel transportation.

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

Note: While "Covered Property" appears to be broad and comprehensive, careful review of "Property Not Covered" reveals a number of restrictions, limitations and details that must be reviewed carefully by both the named insured and its insurance agent. In most cases, only the named insured knows the details of the business well enough to address these issues and communicate them in a way that can be captured in a risk assessment and the Proposal For Jewelers Block Coverage Form examined in some detail elsewhere in this analysis.

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's covered property by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extension–Theft Damage To Buildings

If the named insured owns or is legally responsible for damage to the building it occupies that is damaged during a theft or attempted theft, the insurance company pays for the damage to the part of the building it occupies or to building service equipment inside the building. Coverage does not apply to loss or damage caused by fire or to glass or any lettering on glass.

Note: This coverage extension is included in the limit of insurance for property at the covered location where the damage occurs and is not in addition to it.

Example: The building Jean's Jewelers owned and occupied was badly damaged by a would-be thief who decided to crash his old pickup truck into it after closing time and make off with some of the merchandise. The thief didn't consider that the building might collapse on the truck and pin him inside it and that is exactly what happened. The thief was apprehended, no merchandise was taken and Jean recovered the full cost of repairs to the building.

6. Coverage Options

a. Show Windows

The insurance company pays for loss or damage to covered property in show windows at the premises from theft or attempted theft resulting from smashing or cutting show windows if a limit of insurance for property in show windows is indicated on the declarations.

Example: Jean had an outside show window insured that she stocked from inside the store. However, access to it from inside was fairly accessible to customers as well as employees. A "Bonnie and Clyde" duo entered the store. "Bonnie" drew the attention of the store staff, inquiring about and trying on several pieces of jewelry. "Clyde" got near the show window, found it unlocked and cleaned it out without anyone noticing. He signaled "Bonnie" and they left. Jean did not notice the theft until closing time and by then the duo were long gone. She filed a claim that was denied because this coverage option only applied to theft resulting from cutting or smashing the show window.

b. Money

The insurance company pays for loss of or damage to money in locked safes or vaults on the named insured's premises from theft or attempted theft when they are broken into and opened if a limit of insurance for money is indicated on the declarations.

Example: Jean usually kept small amounts of money in the cash register drawers to make change for cash purchases. Most of the cash was kept in a burglar-resistant safe that was locked during business hours as well as when the premises was closed. "Bonnie and Clyde" struck again. "Clyde" wandered around the store until he saw a large amount of cash being taken to the safe. As soon as the safe was opened, he signaled "Bonnie" to pull the manual fire alarm. As soon as the alarm sounded, everyone exited the store…except "Clyde." He went to the safe, removed all the cash and disappeared into the crowd standing outside the store. Jean discovered the loss after returning to the store and found that it was not covered because the safe was unlocked and was not broken into.

Note: These coverage options are included in the limit of insurance that applies to covered property at the premises where the loss or damage occurs.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Earthquake

Loss or damage caused by earthquake is excluded. This exclusion has an exception for loss or damage caused by fire resulting from the earthquake if the insurance provided by this coverage form covers the fire.

Note: This exclusion applies only to property at the named insured's premises.

b. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

c. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

d. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

e. Water (08 08 change)

Loss or damage caused by water is excluded. Water includes flood, surface water, waves, tides, tidal waves, tsunamis or overflow of any body of water or their spray, all whether driven by wind or not. It also includes storm surge and material that is waterborne, moved or carried by water in any way. Whether the damage is due to an act of nature or is due to another situation, coverage is excluded.

This exclusion has an exception for loss or damage caused by fire, explosion or theft provided they are otherwise covered by this coverage form.

Note: This exclusion applies only to property at the named insured's premises.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Theft From Any Vehicle

Coverage does not apply to loss caused by or resulting from theft from a vehicle unless the named insured, its employee or a person whose duty is to attend the vehicle are in or on the vehicle when the theft takes place.

Note: This exclusion does not apply to covered property in the custody of the United States Postal Service or other carriers.

Example: Jean frequently delivered merchandise in town using her own vehicle at her customer's request. A man selling flowers approached her vehicle while stopped at a traffic signal during one of her deliveries. When she rolled down her window to make a purchase, the man opened her car door, grabbed her, threw her out of the vehicle, got into it and sped off. The car was recovered a few blocks away but the merchandise was gone. A number of witnesses told the police what happened, resulting in Jean's merchandise loss being covered.

c. Unexplained Disappearance

Covered property that disappears is excluded. This is where it is simply gone and there is no obvious cause or explanation of what happened to it.

d. Shortage Found Upon Taking Inventory

This is similar to unexplained disappearance and is also not covered. In this case, loss of covered property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

e. Shortage Of Property

The insurance company does not pay for loss or damage due to shortage of property allegedly shipped when the package the consignee receives is in apparent good condition with its seals intact.

f. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property except:

• When the named insured, its officers, members or employees deposits the property for safe custody while traveling
• When covered property shipments are in the custody of the Unites States Postal Service or other carriers
• When the property is in the custody of a porter or helper who is not on the named insured's payroll

This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

Note: This exclusion is different than the same exclusion in all other ISO controlled inland marine coverage forms because of the three exceptions listed. These exceptions relate to the normal conduct of the jewelry business and appear because of the way the jewelry business is transacted.

g. Theft Or Attempted Theft From Show Windows

The insurance company does not pay for loss or damage caused by or resulting from theft or attempted theft of covered property from show windows due to cutting or smashing the windows.

Note: Coverage applies if limits of insurance for show window optional coverage are indicated on the declarations.

h. Processing Or Work Upon The Property

Loss or damage to covered property caused by or resulting from processing or other work performed on it is excluded.

Note: This exclusion has an exception if the activity or work results in fire or explosion. The loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

i. Insufficient Or Defective Packing

There is no coverage for loss or damage caused by or resulting from insufficient or defective packing.

Example: Jean usually had a professional mailing service package and mail her out of town purchases but a situation came up where a bracelet had to be express mailed overnight and the mailing service was closed. She tried to wrap the bracelet properly to protect it before slipping it into the mailing envelope. Unfortunately, the envelope fell on the floor in the express mail handling facility and a forklift truck ran over it. The precious stones survived but the mountings were crushed and destroyed. Since inadequate packaging aggravated the loss, the cost to replace the mountings was not covered. Fortunately, the precious stones were not damaged, none were lost and they represented most of the bracelet's value.

j. Breakage Of Fragile Articles

Coverage does not apply to loss or damage caused by or resulting from breakage of fragile articles.

Note: This exclusion has an exception. Coverage applies to such loss or damage caused directly by fire, lightning, explosion windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or by accident involving the vehicle carrying the property if this coverage form insures these causes of loss.

k. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

l. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

m. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Gradual Deterioration

Loss or damage caused by gradual deterioration is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as hidden or latent defect, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation

This condition replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. The value of property lost or damaged is limited to the lesser of:

• The covered property's actual cash value
• The costs needed to restore the property to approximately the same condition that existed prior to the loss
• The costs to replace the property with identical or substantially similar property
• The lowest figure for the property the named insured recorded in inventories, stock books, stock papers or lists that existed at the time of loss or damage

Note: In all cases, the value of property is determined when the loss or damage occurs and does not include any antique or historical value.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Protective Safeguards

The named insured must maintain protective safeguards at designated locations when coverage took effect in proper working order. If they are not properly maintained and in working order when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

Example: Burglars cut the lines from Jean's burglar alarm system to the central station during a failed break-in. Jean cleaned up the mess but forgot that the lines were cut and that her premises no longer had an operating alarm system. The burglars tried again the next evening after Jean closed up and went home for the day and succeeded in removing much of the merchandise without having an alarm sounding and the police arriving. Jean discovered the second break-in the next morning and was understandably upset upon learning that the loss was not covered because the protective device to protect against the loss that occurred was not operating at the time of the loss.

c. Records And Inventory

The named insured must keep accurate records of its business and maintain them for at least three years after policy expiration or cancellation. As a minimum, records include itemized inventories of stock in trade and records of all purchases, however made. In addition, records of property of others held in the named insured's care, custody and control, detailed listings of travelers stock and records of the named insured's property sent to others for any reason must also be retained.

Note: In addition, the named insured must conduct a physical inventory of its stock in trade at least once a year.

d. Changes To Premises

The insurance company does not cover property where the risk of loss or damage increases materially by changes in the named insured's premises or property situated in expansions of the named insured's premises indicated on the declarations.

Note: Coverage does apply in these cases if the insurance company agrees in writing to accept the changes.

e. Attachment Of Proposal

The named insured must prepare and sign the Proposal For Jewelers Block Coverage Form and it must be attached to the Jewelers Block Coverage Form in order for coverage to apply.

Note: This is the only standard coverage form that requires attaching the application for coverage, or Proposal For Jewelers Block Coverage Form to the Jewelers Block Coverage Form in order for coverage to apply. Refer to the brief analysis of this form and its contents in the Endorsements section below.

ENDORSEMENTS

One proposal form and four endorsements are available for use with the Jewelers Block Coverage Form.

CM 59 90–Proposal For Jewelers Block Coverage Form

This is the application for jewelers block coverage. The named insured must complete every section and sign it.
CM 59 90 and the jewelers block coverage form are unique in the insurance industry because it must be attached to and become part of the coverage form or there is no coverage. A separate proposal is required for each location.

CM 59 90 is extremely detailed and consists of 18 sections that address virtually every aspect of the business. Only the named insured usually has the knowledge and information to complete it but the insurance agent must be available to offer guidance and assistance. The following is a brief summary of these 18 sections.

1. General Information

This includes the insured's name, names of officers or members, the location of the premises, the number of entrances, normal operating business hours, names of other locations and business entities under the same ownership, if any, and descriptions of other occupancies sharing the same premises, if any.

2. Sales

The named insured must disclose the percentage of annual sales other than retail.

3. Employees

The named insured must disclose the number and types of employees during business hours or when opening and closing the business.

4. Latest Three Years Experience

The named insured must disclose all loss activity, both insured and uninsured, and whether paid in full or only partly, during the latest three years for all property insured by the Jewelers Block Coverage Form.

5. Name Of Prior Carrier

The named insured must disclose the name of the insurance company now providing coverage.

6. Bookkeeping

The insured must provide certain information about inventory control and purchases and sales records retention.

7. Jewelers' Security Alliance

The named insured must disclose whether it is a member of this organization.

8. Limits Of Insurance Needed

The named insured must indicate the limits needed for all coverages available in the form or state "none" or "nil" if a particular coverage is not desired. Coverages include stock, the various forms of transit and shipments, at premises of sales agents, dealers, processors or other custodians, property in a safe deposit vault and other off-premises coverage, including travel and messenger. A special note highlights that the limit cannot be less than 80% of average inventory values for each location insured.

9. Optional Additional Coverages At Proposer's Premises

The named insured must indicate the limits desired for other coverages available or state "none" or "nil" if a particular coverage is not desired. Coverages include money in locked safes for the peril of burglary; furniture, fixtures and office supplies, improvements and betterments, machinery, tools and fittings, patterns, dies, molds and models, flood and earthquake. A special note highlights that the limit for furniture, fixtures and office supplies and improvements and betterments cannot be less than 100% of the actual value of that property.

10. Optional Deductible

The named insured chooses the higher deductibles indicated in this area if desired.

11. Inventories Of All Property Wherever Located

The named insured provides exact monthly inventories for each of the last 12 months and their dates. The average daily amount of property of others is also indicated in this area.

12. Property On Display In Show Windows At Premises Occupied By Proposer, Including Outside Showplace Display On Premises

The named insured must provide exhaustive detail on each show window and showcase, including maximum values and limits desired for each.

13. Showcase And Show Window Displays Of Proposer Not At Premises Occupied By Proposer

The named insured must provide details of each showcase and show window in building lobbies or at other premises it does not occupy.

14. Travel And Messenger

The named insured must provide the daily average and maximum values off premises with employees separate from those same values with others during the previous 12 months.

15. Shipments

The named insured must disclose the total value of all property shipped during the previous policy period by registered mail, armored car, merchants parcel delivery services and all other modes covered by the form.

16. Burglary Protection Of Premises, Safes, Vaults Or Stockroom

The named insured must indicate the type of protection provided, the name of the alarm company, the type of installation, the connection and the grade certification, if any, for each of these. Copies of Underwriters' Laboratories (UL) certificates must be provided, along with statements of values kept in these areas, watchperson services, if any, and any other loss control or security measures in place.

17. Description And Performance Of Stock Enclosures

The named insured must provide the manufacturer's name and complete details of each safe or vault on the premises, including ratings on the classification, walls and doors.

18. Property Insured When Premises Are Closed

The named insured must disclose the percentage of property secured in safes, vaults and other locked enclosures when the premises are closed for business.

CM 59 03–Registered Mail Deductible

This endorsement applies to property sent by registered mail, other than to Canada, and replaces Section D. Deductible in the coverage form. The insurance company does not pay for covered loss or damage to any one package sent via registered mail until and unless the value of that package is greater than $25,000. The company then pays the amount of the adjusted loss over $25,000 up to the limit of insurance that applies.

CM 59 07–Limitation On Property Away From Premises

Covered property off premises and in the named insured's and select others care, custody and control is limited to $5,000. However, the insurance company pays up to the limit indicated on the declarations for any person named.

CM 99 01–Additionally Covered Property

This endorsement extends coverage to other property consisting of furniture, fixtures and office supplies, machinery, tools and fittings, patterns, dies, molds and models, and improvements and betterments. Because of the number and types of additional property that can be covered, it has its own valuation and coinsurance provisions.

CM 99 03–New Business–Premium Adjustment

When this endorsement is used, the policy is issued conditionally. The named insured must submit a new proposal after coverage has been in effect for six months because the information in the initial proposal did not give the insurance company all the information it needed. As a result, the premium charged is provisional. This new proposal is then used to price and underwrite the policy for the remainder of the policy period, using the rates in effect on the coverage inception date.

UNDERWRITING CONSIDERATIONS

Underwriting jewelry and other exposures insured by this coverage form concerns itself with theft, burglary and holdup issues. Alarm systems, vaults and the store's location must all be considered. Does the insured remove property from the premises and if so, what precautions are taken? How are precious stones and metals handled in the store? How are the showcases and show windows locked and who controls the keys? Show room windows and smash and grab hazards are always key underwriting areas to consider.

ISO MAIL COVERAGE FORM (09 04 edition)

The ISO Mail Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It provides coverage for valuable items sent through the mail and covers securities, currency, checks and similar types of property when in route to their final destinations in the possession of the United States Postal Service. Coverage is available on a number of bases and is discussed thoroughly in each of the advisory declarations forms outlined below. Coverage is only available on a reporting basis and eligibility for use of this form is very limited.

POLICY CONSTRUCTION

The following forms are mandatory for the mail policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Mail Coverage Declarations Form CM DS 10

· Advisory Mail Coverage–Reporting Declarations Form CM DS 11

· Mail Coverage Form CM 00 60

Mail coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

The eligibility for use of this form is limited. It is designed for use by only banks, bankers, trust companies, insurance companies, securities brokers, fiduciary-oriented investment corporations and securities transfer agents.

DECLARATIONS

The Advisory Mail Coverage Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number and the coverage effective date or the effective date of an endorsement or coverage change. Two different declarations pages are actually available and used with this coverage. The first describes the coverage provided and the second provides the reporting information that applies.

ADVISORY MAIL COVERAGE DECLARATIONS FORM CM DS 10

Limits of Insurance

This form provides coverage for three different mail categories. Each category has two different descriptions of covered property as well as two separate limits to be completed for each mail category. The first limit is “in any one shipping package” and the second is “to any one addressee on any one day.”

A. First Class Mail and Certified Mail is the first mail category. The two types of covered property are:

1. Property sent between offices of the insured or sent from the insured's offices to banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations or corporations acting as transfer agents or registrars for their own securities issues.

2. Property sent from the insured's office to others not listed in paragraph 1 above. In this case, covered property does not include negotiable securities.

B. United States Postal Service Express Mail is the second mail category. The two types of covered property are:

1. Property sent between offices of the insured or sent from the insured's offices to banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations or corporations acting as transfer agents or registrars for their own securities issues. This section includes spaces to show limits for each of the following:

a. Non-negotiable securities

b. Detached coupons

c. All other covered property

This section also has a space to show the most the insurance company pays for all covered property sent.

2. Property sent from the insured's office to others not listed in paragraph 1 above. In this case, covered property does not include negotiable securities. This section includes spaces to show limits for each of the following:

a. Non-negotiable securities

b. Detached coupons

c. All other covered property

This section also has a space to show the most the insurance company pays for all covered property sent.

C. Registered Mail is the third mail category. The two types of covered property are:

1. All covered property except bullion, currency and other property described in paragraphs A. 1. d. and A. I. e. of the coverage form.

2. Bullion, currency and other property described in paragraphs A. 1. d. and A. 1. e. of the coverage form.

Reports and Premium–See Mail Coverage–Reporting Declarations Form CM DS 11

Negotiable Securities Sent Under Air Bill

If the Negotiable Securities Sent Under Air Bill endorsement is attached to the policy, the name of the air carrier or carriers used must be shown in the space provided.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

ADVISORY MAIL COVERAGE–REPORTING DECLARATIONS FORM CM DS 11

This supplemental declarations form is used to show the reporting conditions that apply to this coverage. The upper portion of the form has spaces to show the coverage effective date, the deposit premium, the minimum annual premium and the reporting period. The reporting period can be monthly, annually or any other mutually agreeable basis between the insured and the insurance company.

The first section outlines rates per $1,000 for three classes of mail. They are:

1. First Class Mail, Certified Mail and U. S. Postal Service Express Mail.

a. Rates are shown in the spaces provided for each of the three types of mail listed above sent within and between places in the United States, with the exception of to and from Alaska and Hawaii, for the following property:

(1). Property sent between offices of the insured or sent from the insured's offices to banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations or corporations acting as transfer agents or registrars for their own securities issues. This section includes spaces to show limits for each of the following:

(a). Non-negotiable securities

(b). Detached coupons

(c). All other covered property

(2). Property sent from the insured's office to others not listed in paragraph 1 above. This section includes spaces to show limits for each of the following:

(a). Non-negotiable securities

(b). Detached coupons

(c). All other covered property. Coverage applies only for shipments made for this property by U.S. Postal Service Express Mail and not for shipments made by First Class Mail or Certified Mail.

b. This section is available to show rates for property sent by other methods.

2. Registered Mail

a. Rates shown in the spaces provided apply to property sent within and between places in the United States with the exception of to and from Hawaii. Covered property consists of non-negotiable securities, bullion and other property described in paragraph d. under covered property, currency and other property described in paragraph e. under covered property, and all other covered property. The rates shown are annual or monthly or other and are separate for all except within Alaska and within Alaska.

b. This section is available to show rates for property sent by other methods.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 60

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property consists of the property described below, if the insured recorded it for insurance under this coverage form before any loss or damage occurred. Coverage applies only if a limit for the type of mail used is shown on the declarations. The types of mail are First Class Mail, Certified Mail, United States Postal Service Express Mail or Registered Mail.

a. Securities, including bonds, stock certificates and certificates of deposit;

b. Coupons but only when detached from bonds;

c. Postage and revenue stamps, money orders, including postal and express types, checks, drafts, notes, bills of lading, warehouse receipts and other commercial paper, including other documents and valuable papers. It does not include food stamps, unsold travelers checks and currency;

d. Bullion, platinum and other precious metals only when sent by Registered Mail:

e. Currency, unsold travelers checks, food stamps, jewelry, watches, precious and semi-precious stones and similar valuable property only when sent by Registered Mail.

Note: The property covered in this form is significantly different than property covered in virtually all other commercial property forms. The property covered is narrowly defined and, as stated earlier, is eligible for only a handful of equally narrowly defined classes of business. As a result, eligibility and use of this form is limited and is not intended for use by the majority of commercial businesses.

2. When coverage applies.

Property is covered only when in the possession of a government postal service and when in transit by common carrier or messenger to and from the government postal service but not when on the premises of any mail receiving agency. Property is covered until:

a. Delivered to the addressee at the address shown on the package;

b. Delivered at the proper address in case of non-delivery because of an error in the address or if the address was removed altogether; or

c. Returned to the sender in case it could not be delivered.

3. Property Not Covered includes illegal property, contraband or any property transported or traded illegally.

4. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

5. Coverage Extension–Errors And Oversight. The insurance company pays for loss or damage that occurs due to an error or oversight in two circumstances:

a. In cases where the value of a mailing was incorrectly recorded, the actual value of that property. The insured must notify the insurance company promptly after the error or oversight is discovered and then record the correct value. However, loss payment is not for more than the limit on the declarations that applies to the property and form of mailing used.

Example: Homestead Bank sent some stock certificates by registered mail but used an older, lower value and not their market value as of the date of sending. The error was discovered and reported to the insurance company two days later. Doing so that promptly proved wise, because the certificates were never delivered and all efforts to track them down failed. Despite the fact that the wrong value was declared, because the oversight was discovered and reported promptly, the loss was valued on the higher, correct figure.

b. In cases where the value of the covered property in one shipping package is higher than the limit shown on the declarations for that form of mail, the insurance company pays only the part of any loss or damage that the insurance limit bears to the actual value of the property on the date it was mailed.

Example: Homestead Bank was having a bad week. They sent another batch of stock certificates in a single package to save mailing costs but failed to calculate the aggregate value of the certificates versus the limit per shipping package on the mail policy. Needless to say, the shipment was lost and never found. Regardless of its good intentions, Homestead received only the limit on the policy for the form of mail used and had to cover the difference from its own resources.

B. Exclusions

Tier 1 exclusions are the only exclusions that apply to this coverage form. They are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

1. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

2. Weapons that use atomic fission or fusion or mines and torpedoes are excluded.

3. War and military action apply to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

Note: As opposed to all other inland marine and commercial property coverage forms and policies, these are the only exclusions on the policy. This means that the coverage provided is probably the broadest that can be found on any insurance policy in the world. As a result, most legitimate losses are covered, subject to following proper mailing procedures, record keeping and loss reporting.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Additional Conditions

1. Valuation. Commercial Inland Marine Conditions, General Condition F is deleted and replaced by one tailored specifically for mail coverage. Since covered property lost may not be replaceable, this valuation clause also details what happens if a loss occurs.

a. Property is valued at its actual value on the date of mailing. The value cannot be less than its market value.

b. If loss or damage occurs:

(1) The insurance company provides information necessary to reissue or duplicate the covered property. However, if the property is later recovered, it must be returned for cancellation. If not done, the insurer obtains rights of recovery against the owner of the property.

(2) If the insured must deliver the covered property and can’t wait for the reissue, the insurer pays the cost of the similar property purchased, including postage and mailing costs, and any loss of interest earned between the date of mailing and the date of purchase of the similar property.

(3) If the property cannot be reissued or duplicated, and no similar property exists, the insurer pays the value of the property on the date of loss, the postage and insurance charge for the mailing and loss of interest as of the date of mailing.

(4) Any payment made does not exceed 125% of the recorded value for all other covered property. The payment is made where directed and all rights, title and interest in the property are transferred to the insurer.

Note: The valuation conditions, steps and procedures followed after a covered loss occurs are unique to this specific and narrow coverage form. The agent and the insured should review these carefully together to avoid any misunderstanding or misconceptions concerning this area when or if a loss occurs.

2. Cancellation has the following condition added to the Common Policy Condition for cancellation. If the policy is cancelled, this form applies to all mailings of covered property made up to the date and time of the cancellation.

Example: Homestead Bank sent out a number of mailings the day before their coverage was cancelled. Many of these took three or four days to arrive at their destinations. Despite the fact that coverage ended as of a certain date, any property in the mail past that date was still covered until it reached its final destination. Coverage did not end on those shipments until they arrived at that destination.

3. Duties in the event of loss has the following added to the Loss Condition C., Duties In The Event Of Loss in the Commercial Inland Marine Conditions. The proof of loss submitted by the insured must include proof of interest in the property, an affidavit of mailing, an affidavit of non-receipt by the addressee and, optionally, by the property owner and the receipt of a government postal service, if applicable.

Note: These duties and the proof of loss are unique and specific to this class of business and the nature of the property insured.

4. Loss Payment in the Commercial Inland Marine Conditions Loss Condition Paragraph 5 is replaced. The insurance company must pay for a covered loss or damage within seven days after receiving the sworn proof of loss, if the insured has complied with all the terms of the coverage form. It also requires that all parties agree on the amount of the loss and an appraisal award has been made.

Note: The insurance company usually has up to 30 days to pay covered losses after receiving a properly executed proof of loss in most other property and inland marine coverage forms. The unique nature of this form and the circumstances surrounding losses makes the time requirement in this form much shorter.

5. Other Insurance Loss Condition F. in the Commercial Inland Marine Conditions is replaced. If other insurance covering the same loss or damage is available, the insurance company pays only the pro rata share of the loss or damage. However, this condition has two exceptions:

a. If the loss or damage is due to theft by employees of senders or addressees, the insurance company pays only for the excess of the amount covered by any other insurance. The insurer pays the excess whether the other insurance is collectible or not.

b. For losses or damage other than by theft by employees of senders or addressees covered by any bond or employee dishonesty coverage, the insurer is directly liable for the loss or damage and has no recourse against any bond or dishonesty coverage.

6. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:

a. Coverage territory for First Class Mail, Certified Mail and United States Postal Service Express Mail is within and between places in the United States of America, Puerto Rico, Canada, the United States Virgin Islands and other United States territories and possessions. For Registered Mail, the territory is anywhere in the world.

Note: This territory is slightly larger for most types of mail than other inland marine forms and vastly larger with respect to registered mail.

b. Records of all mailings made by the insured must be kept. Each mailing must be recorded before any loss or damage occurs. The information recorded must include a description of the property and its final destination and the type of mail used. It must also include the value of the property in each shipping package to which coverage under this form applies.

c. Reports and premium

(1) Reports must be submitted within 30 days after the end of the reporting period shown on the declarations. The report must include the total values of all covered property sent during the report period. The values for each different type of property and type of mail for which a rate appears on the declarations must also be listed.

(2) Rates and premium

(a) Premium computation is determined using the rates shown on the declarations for each reporting period.

(b) Premium adjustment is based on either an annual reporting period or some other period. If the period shown on the declarations is annual, the insurance company applies the total earned premium due against the deposit premium. If the earned premium exceeds the deposit, the insured must pay the difference but if the earned premium is less than the deposit, the insurer pays the difference to the insured. If any other reporting period is used, the insurer applies the earned premium to the deposit until the deposit is used up. After that, the insured pays all additional premium earned. These premium adjustments are made for each reporting period and the due date for them is the due date shown on the bill or invoice. However, all earned premium is subject to the minimum premium shown on the declarations.

(3) If coverage is cancelled:

(a) The insured must promptly report the total values of all covered property sent up to the date and time of cancellation to the insurance company and they will calculate the premium in accordance with policy terms.

(b) The insured must pay a minimum premium equal to at least 1/12^th of the minimum annual premium shown on the declarations for each month, or part of a month, that coverage was in force.

E. Definition

“Non-negotiable securities” means securities that cannot be negotiated or converted to cash by unauthorized persons unless they resort to forgery to do it.

ENDORSEMENTS

Four endorsements are available for use with this Coverage Form. The first two are typical and are described immediately below. The other two have their own declarations when they are attached to the Mail Coverage Form and are described separately on the following two pages.

CM 60 09–Negotiable Securities Sent Under Air Bill

This endorsement modifies the coverage provided under the mail coverage form. In it, the insurance company pays for loss or damage to negotiable securities sent under the air bill of any carrier listed on the declarations. Coverage applies only to property sent between places in the United States, excluding property sent to or from Alaska or Hawaii. The actual value of the property, but not less than its market value on the sending date, must be declared to the air carrier.

CM 60 10–Securities Sent By The United States Treasury Department–Registered Mail

This endorsement modifies the coverage provided under the mail coverage form. In it, the insurance company pays for loss or damage to securities sent by the United States Treasury Department or any other agency or corporation of the United States government to either the insured or customers of the insured, if directed to do so by the insured. However, no coverage applies if the customer insured the mailing. Only property sent by Registered Mail is covered. In addition, the insured must record all property covered by this endorsement before any loss or damage occurs. In case property is sent without the insured's knowledge, the insured must record the mailing as soon as possible after learning of the sending.

ADVISORY MAIL COVERAGE–REPORTING DECLARATIONS FORM CM DS 11

This declarations page is used when Form CM 60 02–Flat Premium Per Shipping Package–First Class Mail Or Certified Mail Endorsement is attached to the policy.

Limits of insurance provides for coverage by First Class Mail, Certified Mail or both. The limit of insurance in any one shipping package is shown in the spaces provided. This section contains a specific notice that the limits of insurance selected include the $150 limit on property in any one shipping package that applies to warrants, rights and similar negotiable certificates covered by the endorsement.

Reporting period is the same as in the mail coverage reporting declarations.

Rates shown in this section apply to property sent within and between places in the United States with the exception of shipments to and from Alaska or Hawaii. Rates per shipping package must be shown for First Class Mail or Certified Mail or both. This section also contains a provision for separate rates to apply to property sent by other methods as described.

Special Provisions (if any)

If this coverage form is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

CM 60 02–Flat Premium Per Shipping Package–First Class Mail Or Certified Mail

This endorsement modifies the coverage provided under the mail coverage form in three areas.

A. Covered property means only non-negotiable securities sent to the owner or his designee. It includes stock certificates, voting trust certificates, deposit receipts and similar evidence of ownership or interest. It includes bonds and similar obligations issued by corporations in the United States or Canada or by federal, state or local government entities authorized to do so when registered as to principal and interest. It also includes fractional share or scrip certificates, subscription warrants, rights and similar certificates in negotiable form but only for its actual value if it is not more than $150 in any one shipping package on the date mailed. However, this coverage applies only if the insured records the property before a loss or damage occurs and sends it by first class or certified mail for which a limit is shown on the declarations for this endorsement.

B. Valuation Additional Condition 1. of the Mail Coverage Form is deleted and replaced. The value of covered property is its actual value, subject to not less than its market value, on the date mailed.

If loss or damage occurs:

1. The insurance company furnishes the bond or indemnity necessary to reissue or duplicate the covered property after it receives the proof of loss from the insured. This is done on behalf of the registered owner. If that owner finds or recovers the property after the reissue or duplication is done, it must be returned for cancellation. If it is not returned, the insurance company acquires the rights of recovery against the owner.

2. If the insured is required to deliver but is not able to borrow equivalent property before the covered property can be reissued or duplicated, the insurance company pays the cost of equivalent property purchased by the insured in the market, postage and insurance charges for the mailing and loss of interest earned on the covered property between the date of mailing and the date of purchase of the equivalent property. Any payment for loss or damage made by the insurer entitles it to the title and interest in the covered property.

C. Reports Paragraph (1) of Additional Condition 6. c. Reports and Premium in the Mail Coverage form is deleted and replaced. The insured must report within 30 days after the end of the applicable reporting period shown on the declarations the total number of shipping packages containing property covered by this endorsement sent in the preceding reporting period. The report must list the number of packages separately for each type of mail having a rate shown on the declarations.

As referenced above, this endorsement has its own declarations form.

ADVISORY TRANSFER AGENTS MAIL DECLARATIONS FORM CM DS 13

This declarations page is used when Form CM 60 08–Transfer Agents Mail Endorsement is attached to the policy.

Limits of insurance provide coverage for any or all of four different forms of mail. They are First Class Mail, Certified Mail, United States Postal Service Express Mail and Registered Mail. The limit of insurance in any one shipping package is shown in the spaces provided. This section contains a specific notice that the limits of insurance selected include the $150 limit on property in any one shipping package that applies to warrants, rights and similar negotiable certificates covered by the endorsement.

Reporting period is the same as in the mail coverage reporting declarations.

Rates shown in this section apply to property sent within and between places in the United States with the exception of shipments to and from Alaska or Hawaii. Rates per shipping package must be shown for First Class Mail, Certified Mail, United States Postal Service Express Mail and Registered Mail. In addition, Registered Mail breaks down into three subclasses based on value of the shipping package. The values are up to $100,000, from $100,000 to $500,000 and from $500,000 to $1,000,000. This section also contains a provision for separate rates to apply to property sent by other methods as described.

Special Provisions (if any)

If this coverage form is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

CM 60 08–Transfer Agents Mail

This endorsement modifies the coverage provided under the mail coverage form in five areas.

A. Application of this endorsement is if the insured is acting as a transfer agent, registrar, trustee under indentures that apply to debt securities or in any other agency capacity for the party issuing covered property.

B. Covered property means only non-negotiable securities sent to the owner or his designee. It includes stock certificates, voting trust certificates, deposit receipts and similar evidence of ownership or interest. It includes bonds and similar obligations issued by corporations in the United States or Canada or by federal, state or local government entities authorized to do so when registered as to principal and interest. It also includes fractional share or scrip certificates, subscription warrants, rights and similar certificates in negotiable form but only for its actual value if it is not more than $150 in any one shipping package on the date mailed. However, this coverage applies only if the insured records the property before a loss or damage occurs and sends it by a type of mail for which a limit is shown on the declarations for this endorsement.

C. Covered causes of loss means only risk of non-delivery of covered property by any cause except for those causes of loss listed in the exclusions section of the policy.

D. Valuation Additional Condition 1. in the Mail Coverage Form is deleted and replaced. The value of covered property is its actual value, but not less than its market value, on the date mailed. If a covered loss or damage occurs, the insurance company furnishes the bond or indemnity needed to reissue or duplicate the covered property after receiving the proof of loss from the insured. If this is done on behalf of the registered owner, and the owner finds or recovers the property after the reissue or duplication is done, the owner must return it to the insurer for cancellation. If this is not done, the rights of recovery against that owner are transferred to the insurer.

E. Reports Paragraph (1) of Additional Condition 6. c. Reports and Premium in the Mail Coverage form is deleted and replaced. The insured must report within 30 days after the end of the applicable reporting period shown on the declarations the total number of shipping packages containing property covered by this endorsement sent in the preceding reporting period. The report must list the number of packages separately for each type of mail having a rate shown on the declarations.

As referenced above, this endorsement has its own declarations form.

UNDERWRITING CONSIDERATIONS

Operational controls over mail shipments and the methods used are the main underwriting considerations. The insured's record keeping must be disciplined and rigorous in order to facilitate accurate rating and loss reporting. Tracking lost packages depends on the accuracy of record keeping.

ISO PHYSICIANS AND SURGEONS EQUIPMENT COVERAGE FORM (09 04 edition)

The ISO Physicians and Surgeons Equipment Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It covers losses incurred by professionals who provide medical or dental care for medical equipment they normally carry from location to location. It also covers equipment, supplies and scientific books used in the practice of medicine. There are no premises restrictions with respect to this equipment. In addition, this form can also cover related office property and other location-oriented items at a described location.

POLICY CONSTRUCTION

The following forms are mandatory for the physicians and surgeons equipment policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Physicians and Surgeons Equipment Declarations Form CM DS 12

· Physicians and Surgeons Equipment Coverage Form CM 00 26

Physicians and Surgeons Equipment Coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

This policy is intended for individuals engaged in the medical or dental profession. Because of this restriction of coverage to individuals, hospitals, clinics, dealers, medical schools and related or similar operations do not qualify for coverage under this form.

DECLARATIONS

The Advisory Physicians and Surgeons Equipment Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change and the premium charge for this coverage form.

Limits of Insurance

This part of the declarations consists of two different sections.

Section A. The insured can list the location addresses for each fixed location and show the limit of insurance that applies to it in the spaces provided.

Section B. The insured can select a limit of insurance to apply to all other covered property at all locations and show it in the space provided.

Deductible

This part of the declarations contains two separate provisions for deductibles.

A. The first applies to all coverages except for losses or damage due to artificially generated current. The standard deductible for this section is $500 but other deductibles are available and, if selected, that deductible is shown in the space provided.

B. The second deductible applies only to the Artificially Generated Current Coverage option. If that optional coverage is selected, the standard deductible is $1,000. However, other higher deductible options are available and, if selected, that deductible is shown in the space provided.

Coinsurance

80% coinsurance applies to all covered property unless a different percentage is shown in the space provided. A statement can also be entered indicating that no coinsurance applies.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 26

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Medical or dental materials, equipment, supplies and books normally used by a dental or medical professional. This can also include property of others in the care, custody and control of the insured. This property is covered anywhere, subject to the territorial limits of the policy.

Example: Doctor Dan always had his "'old' little black bag" with him any time he was away from the office. Although he had long since ended making house calls, he had encountered numerous situations over the years where he was called on to assist and his bag always seemed to have just what he needed to render the assistance required. Imagine how he felt one day when he found the side window of his vehicle smashed in and his bag missing. Fortunately, he kept up with his insurance coverage as much as with his patients, was quickly reimbursed for his loss and soon had a fully stocked "'new' little black bag."

b. Office equipment, including furniture and fixtures, owned by the insured but only at described premises.

c. The insured's interest in improvements and betterments made at the insured's expense to premises leased or rented to the insured. It includes fixtures, alterations, installations and additions made to such premises but that cannot be legally removed by the insured.

Note: The fact that items b. and c. above can be included on the same policy is an advantage to the insured. This way, all personal property of any kind in which the insured has an insurable interest can be covered under one policy. This helps the insured avoid potential problems when two or more policies, possibly with different insurers, are involved and a dispute breaks out over which property is covered under which policy when a loss occurs. This way, a single carrier responds to the loss and later figures how to allocate the costs in its internal records.

2. Property not covered

a. Radium; or

b. Illegal property, contraband or any property transported or traded illegally.

Note: The presence of radium in a number of forms is very common. For example, blood is frequently drawn to extract white blood cells. These cells are irradiated (exposed to radiation) and re-injected back into the body, where the flow and pooling of the irradiated cells can be detected by a body or bone scan to locate infection or bone deformities after surgery. Other similar procedures involving radiation include the common x-ray. Coverage for radium is available through what used to be called radium floaters, now commonly referred to as radioactive contamination insurance.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage Extension–Theft-Related Building Damage

The insurance company pays for damage caused directly by a theft or attempted theft to any part of a building containing covered property or to equipment in the building used to maintain or service it. This extension does not apply to damage caused by fire or to glass or to any lettering or artwork on glass. This extension is included in the limit of insurance that applies to the covered property at the location where the damage occurs. Any payment made for building damage related to a theft reduces the amount of insurance that applies to medical or dental instruments.

Example: Doctor Dan was unusual in that he read his insurance policies thoroughly and tried to understand them. He didn't think much of this coverage extension because he was only a tenant in the building he occupied. He discovered the value of it when burglars looking for controlled narcotics broke into his office overnight. Dan settled up with his insurer on the value of his loss in short order but was surprised when his landlord made a demand for reimbursement for the damage to the building as a result of the burglary. The lease contained some fine print that obligated the tenant to reimburse the landlord for certain damage to the building that would not have occurred except for the tenant occupying the premises. Even though the amount demanded was not terribly large, Dan was happy he had misunderstood the intent of this coverage extension when it responded to and completely paid the building owner's demand. Dan was last seen carefully reading his lease.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Marring, scratching, exposure to light, breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses is not covered. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft or attempted theft, or accident to vehicles carrying such property is covered, if this form covers those causes of loss.

Example: A 7.4 magnitude earthquake struck the area where Doctor Dan's office was located. The frame building survived the shake fairly well but most of Dan's office furnishings were "rearranged" by the force of the quake. Unfortunately, a number of glass objects wound up on the floor and broken. While Dan was reimbursed for much of the damage to his other property, the damage to the broken glass objects was not covered because of this exclusion.

b. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

c. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

d. Processing activities or work on the covered property resulting in loss or damage to the property is not covered. However, if the activity or work results in fire or explosion, the direct loss or damage caused by that fire or explosion is covered, if this form covers fire or explosion.

e. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

f. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

g. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

h. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional conditions

1. Valuation as found in General Condition F. in the Commercial Inland Marine Conditions is replaced by the following:

a. Improvements and betterments are valued at their actual cash value at the time of loss or damage if repaired or replaced at the expense of the insured within a reasonable amount of time after the loss or damage. If not repaired or replaced, the value is based on the percentage of the original cost of that property and the proportion of time left on the lease multiplied by the amount of loss. If another party repairs or replaces the property at their expense, no payment is made under this policy.

b. All property other than improvements and betterments is valued on the least of the actual cash value of the property, the reasonable costs to restore the property to the condition it was in immediately before the loss or damage or the cost of replacing the property with other substantially similar property.

Note: The valuation clause is particularly important with personal property insured under this form because of the potential range of the property involved. Sophisticated medical equipment can be right next to simple pencils and pens. Because of this broad range of property and valuation issues at the time of loss, this condition should be examined carefully and thoroughly understood.

2. The following conditions apply in addition to the Common Policy Conditions and the Commercial Inland Marine Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

a. Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance that applies to the property by the figure determined in step a. above.

c. Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step b. above.

d. Then subtract the amount of deductible from the figure determined in step c. above.

c. Protective safeguards in place at designated locations at policy inception must be maintained in proper working order. If they are not so maintained and are not operational during times when the business is closed, coverage to which the safeguards apply is suspended until the equipment or the service is restored to proper working order.

Example: In the situation above involving burglars breaking into Doctor Dan's office, he had a properly operating premises burglar alarm system. Unfortunately, it only rang to an outside alarm at the premises and not to a central station. Because there was no immediate notification to the police offered by central station arrangements, the police were delayed in reaching the premises and the burglars had more time to do damage. However, this was the alarm system and arrangement warranted by the policy to be in place and it operated properly when the burglars broke into the premises. As a result, the loss was paid in full.

F. Definitions

The only term defined in this form is "premises." "Premises" means the part of the building at the address shown on the declarations occupied by the insured in his or her professional medical or dental practice.

ENDORSEMENTS

Three specific endorsements are available for use with this coverage form.

CM 26 01–Property Usually Carried By You

This endorsement deletes Paragraph A.1. Covered Property, and replaces it with language that includes covered property consisting of medical and dental equipment, materials, supplies and books usual to the particular profession involved and normally carried by the insured. It also deletes the theft damage to buildings extension of coverage and the coinsurance additional condition.

Note: This endorsement should be examined carefully because it both adds and removes coverage and conditions. It should only be used in situations where the deletion of coverage is not to the insured's disadvantage.

CM 26 02–Additionally Covered Property

This endorsement adds a number of property items to Paragraph a.5. coverage extension.

1. Office equipment temporarily away from designated premises for up to 30 days for a $2,500 limit in any one occurrence.

2. Reasonable and necessary extra expense to continue normal office operations interrupted by a covered loss or damage but only for the amount of time needed to restore normal operations. The limit is $2,500 in any one occurrence.

3. Personal effects and property of others consisting of personal effects owned by the insured, officers, partners, members, managers and employees but excluding loss or damage due to theft. It also includes personal property of others in the insured's care, custody or control. The limit is $2,500 in any one occurrence and has a condition that payment for loss or damage to personal property of others is only for the account of the owner of the property.

4. Books of account, manuscripts, drawings and other records are covered for loss or damage up to $2,500 in any one occurrence, including extra expense necessary to reproduce the records.

CM 26 03–Artificially Generated Current Coverage

A. This endorsement deletes the artificially generated current exclusion in the policy. It provides coverage for loss or damage to covered property caused by or resulting from artificially generated current if the loss or damage occurs on or within 100 feet of the insured's premises. It also provides coverage due to an interruption of electrical power supply, power surge, blackout or brownout that occurs within 100 feet of the insured's premises.

B. This coverage is subject to all the provisions of the coverage form except that electronic computer or data processing equipment is not covered unless it is used exclusively to govern or control covered medical and dental equipment under this form. It amends the deductible to show that the insurance company does not pay for any loss or damage in any one occurrence until the amount of the adjusted loss or damage exceeds the deductible shown on the declarations. The insurer then pays the amount of adjusted loss or damage above the deductible amount up to the limit of insurance that applies.

UNDERWRITING CONSIDERATIONS

The coverages provided by this form are underwritten as a primary office exposure unless the off-premises exposure is significant or unusual. The location of the equipment when not at the main location is the most important issue. Does the insured keep an office at the hospital? Does the insured periodically leave items at various locations other than the listed office location? What is the nature of the equipment subject to regular movement off premises, the value of it and the security arrangements that apply to it?

ISO PHYSICIANS AND SURGEONS EQUIPMENT COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 12–Physicians And Surgeons Equipment Declarations

Form Analysis–CM 00 26–Physicians And Surgeons Equipment Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

F. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The insurance Services Office (ISO) Physicians And Surgeons Equipment Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to medical, surgical and dental equipment and instruments, business furniture and fixtures, and tenant's improvements and betterments. Theft Damage To Buildings is an extension of coverage.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 12–Physicians And Surgeons Equipment Declarations
• CM 00 26–Physicians And Surgeons Equipment Coverage Form

Note: Physicians and surgeons equipment coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Professionals engaged in the medical and dental professions are eligible. This includes doctors that share offices, equipment and general facilities while engaging in their individual practices and not operating as a unit.

Note: Dealers, clinics, hospitals, medical schools and similar or related risks are not eligible.

CM DS 12–PHYSICIANS AND SURGEONS EQUIPMENT DECLARATIONS

CM DS 12–Physicians And Surgeons Equipment Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 12–Physicians And Surgeons Equipment Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Premium For This Coverage Form

The premium for Physicians And Surgeons Equipment Coverage is entered in the space provided.

Rates

The rate or rates that apply are entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Your Premises (including description or address)
• All Covered Property At All Locations

Deductible

• The standard $500 deductible the named insured retains for each covered loss other than Artificially Generated Current Coverage applies unless a different amount is entered in the space provided.
• If Artificially Generated Current Coverage is provided, the deductible that applies to it is $1,000, unless a different amount is entered in the space provided.

Coinsurance

The standard 80% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 26–PHYSICIANS AND SURGEONS EQUIPMENT COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 26 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage. It also directs attention to Section F–Definitions because understanding their special meanings is critical to understanding the coverage and exclusions that apply.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• Medical or dental equipment, supplies, materials and books dental or medical professionals normally use as well a property of others the named insured uses in his or her profession

Note: This property is covered anywhere, subject to the territorial limits of the coverage form.

Example: Doctor Roberts always had his "little black bag" with him when he was away from the office. Despite no longer making house calls, he periodically encountered situations where his assistance was needed and his bag always seemed to have just what he needed to do the job. He was understandably upset when he found the side window of his vehicle broken and his bag missing. Fortunately, he kept up with his insurance coverage as much as with his patients, was quickly reimbursed for his loss, and soon had a new, fully stocked "little black bag."

• Office equipment the named insured owns at the described premises, including furniture and fixtures
• The named insured's interest in improvements and betterments made at his or her expense to premises it leases or rents, including fixtures, alterations, installations and additions made to the premises that cannot legally be removed

Note: The fact that office equipment, improvements and betterments can be included is to the named insured's advantage. This way, virtually all personal property in which it has an insurable interest can be covered in one coverage form. This helps the named insured avoid potential problems when two or more coverage forms or policies, possibly with different insurance companies, are involved and a dispute arises over which covers what when a loss occurs. This way, one company responds to the loss and later figures out how to allocate the costs in its internal records.

2. Property Not Covered

• Radium

Note: Radium is common and present in many forms. For example, blood is frequently drawn to extract white blood cells. These cells are irradiated (exposed to radiation) and re-injected back into the body, where the flow and pooling of the irradiated cells can be detected by a body or bone scan to locate infection or bone deformities after surgery. An example involving radiation is the common x-ray. Coverage for radium is available through radioactive contamination insurance coverage forms or policies.

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's covered property by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extension–Theft Damage To Buildings

If the named insured owns or is legally responsible for damage to the building it occupies that is damaged during a theft or attempted theft, the insurance company pays for the damage to the part of the building it occupies or to building service equipment inside the building. Coverage does not apply to loss or damage caused by fire or to glass or any lettering on glass.

Note: This coverage extension is included in the limit of insurance for property at the covered location where the damage occurs and is not in addition to it.

Example: Doctor Roberts read his insurance policies thoroughly and tried to understand them. He didn't initially pay any attention to this coverage extension because he was only a tenant in the building he occupied but he did after burglars looking for controlled narcotics broke into his office overnight. His claim was resolved quickly but his landlord unexpectedly demanded reimbursement for the damage the burglars did to the building. The lease contained some fine print that obligated him to reimburse the landlord for certain damage to the building that would not have occurred except for his occupying the premises. Even though the amount demanded was not terribly large, Doctor Roberts was happy he had misunderstood the intent of this coverage extension when it responded to and completely paid the building owner's demand.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Marring, Scratching, Exposure To Light

Loss or damage by these causes of loss is excluded, as well as by breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or accident to vehicles carrying such property is covered, if the insurance provided by this coverage form covers those causes of loss.

Example: A 7.4 magnitude earthquake struck the area where Doctor Robert's office was located. The frame building survived the shake fairly well but most of his office furnishings were "rearranged" by the force of the quake. Unfortunately, a number of glass objects were broken when the shake knocked them to the floor. He was reimbursed for the damage to his other property but the loss and damage to the broken glass objects was excluded.

b. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

c. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

d. Processing Or Work Upon The Property

Loss or damage to covered property caused by or resulting from processing or other work performed on it is excluded.

Note: This exclusion has an exception if the activity or work results in fire or explosion. The loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

e. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance within covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage within the object in which the disturbance occurs.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

f. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

g. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

h. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation

This valuation clause replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions.

a. Improvements And Betterments

This property is valued at its actual cash value at the time of loss or damage if the named insured repairs or replaces it at its expense within a reasonable amount of time after the loss or damage occurs. If it is not repaired or replaced, the value is based on the percentage of the original cost of that property and the proportion of time left on the lease multiplied by the amount of loss.

Note: No payment is made if another party repairs or replaces the property at its expense.

b. All Property Other Than Improvements And Betterments

This property is valued at the least of its actual cash value, the reasonable costs to restore it to the condition it was in immediately before the loss or damage, or the cost of replacing it with other substantially similar property.

Note: This valuation clause is particularly important because of the potential range of the property involved.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. The steps the insurance company takes to determine the amount it pays are as follows:

(1) Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

(2) Divide the limit of insurance of the covered property by (1) above.

(3) Multiply the total amount of loss by (2) above.

(4) Subtract the amount of deductible from (3) above.

The insurance company pays the amount in (4) above or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

c. Protective Safeguards

The named insured must maintain protective safeguards at designated locations when coverage took effect in proper working order. If they are not properly maintained and in working order when the business is closed, coverage to which the safeguards apply is suspended until the equipment or service is restored to proper working order.

Example: In the case involving burglars breaking into Doctor Robert's office, he had a properly operating premises burglar alarm system that unfortunately only rang to an outside alarm at the premises and not to a central station. Because the police did not receive the immediate notice offered by central station arrangements, they were delayed in reaching the premises and the burglars had more time to do damage. However, this was the alarm system and arrangement warranted to be in place and it operated properly when the burglars broke into the premises. As a result, the loss was paid in full.

F. DEFINITIONS

Premises means the part of the building at the address indicated on the declarations that the named insured occupies for the professional medical or dental practice.

ENDORSEMENTS

Three endorsements are available for use with the Physicians And Surgeons Coverage Form.

CM 26 01–Property Usually Carried By You

This endorsement deletes Paragraph A.1. Covered Property and replaces it with language that includes covered property consisting of medical and dental equipment, materials, supplies and books usual to the particular profession involved that the named insured normally carries. It also deletes the Theft Damage To Buildings extension of coverage and the Coinsurance Additional Condition.

Note: This endorsement should be examined carefully because it both adds and deletes coverage and conditions. It should only be used in situations where deleting coverage is not to the named insured's disadvantage.

CM 26 02–Additionally Covered Property

This endorsement adds limits and coverage for several types of property to Paragraph a.5. Coverage Extension.

• $2,500 in any one occurrence on office equipment temporarily away from designated premises for up to 30 days
• $2,500 in any one occurrence for reasonable and necessary extra expense to continue normal office operations interrupted by loss or damage from a covered cause of loss but only for the length of time needed to restore normal operations
• $2,500 in any one occurrence on personal effects owned by the named insured, its officers, partners, members, managers and employees or personal property of others in the named insured's care, custody or control. Personal effects are not covered for theft. Personal property of others is covered only for the account of the property's owner.
• $2,500 in any one occurrence for extra expenses to reproduce books of account, manuscripts, drawings and other records damaged by a covered cause of loss

CM 26 03–Artificially Generated Electric, Magnetic Or Electromagnetic Energy Coverage

A. This endorsement adds the following to Paragraph A.5. Coverage Extension in CM 00 26–Physicians And Surgeons Equipment Coverage Form.

Artificially Generated Electric, Magnetic Or Electromagnetic Energy

This endorsement eliminates exclusion B.2.e. Artificially Generated Current. Coverage does not extend to computers except for those used to control medical and dental equipment. It is subject to a separate deductible.

UNDERWRITING CONSIDERATIONS

The coverages provided by this form are underwritten as a primary office exposure unless the off-premises exposure is significant or unusual. The location of the equipment when not at the main location is the most important issue. Does the named insured keep an office at the hospital or periodically leave items at various locations other than the designated office location? What is the nature of the equipment subject to regular movement off premises, its value, and the security arrangements that apply to it?

ISO SIGNS COVERAGE FORM (09 04 edition)

The ISO Signs Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. Coverage applies to lighted neon, fluorescent, automatic or mechanical signs. Coverage can even apply to lamps. According to the Nationwide Inland Marine Definition, this form can also be used to cover street clocks.

POLICY CONSTRUCTION

The following forms are mandatory for the sign policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Signs Declarations Form CM DS 15

· Sign Coverage Form CM 00 28

Signs coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any business or commercial entity that owns signs, other eligible property or has similar property of others in their care, custody and control is eligible for coverage under this form.

DECLARATIONS

The Advisory Signs Declarations does not have a place for name, mailing address and other named insured identifying information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change, the rate that applies and the premium charge for this coverage form.

Limits of Insurance

This part of the declarations consists of two different sections.

Section A. is used to list the sign or signs to be covered. This includes the type of sign, lettering, location and the limit of insurance that applies.

Section B. is used to declare a total aggregate or catastrophe limit in any one occurrence for this coverage at all locations.

Deductible

The standard deductible is 5% of the limit of insurance for each sign. However, the deductible is optional and may or may not apply. Spaces are provided to indicate if the deductible applies or does not apply.

Coinsurance

100% coinsurance applies unless a different percentage is shown in the space provided. In the event that no coinsurance is to apply, a statement to that effect must be made in the same space.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 28

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property

a. Signs owned by the insured; and

b. Similar property of others in the insured's care, custody or control.

2. Property not covered consists of illegal, contraband or any other property transported or traded illegally.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Breakage of any kind that occurs during transportation, installation, repair or dismantling operations. However, coverage does apply if the breakage is caused by fire, lightning or an accident involving the vehicle carrying the sign or related property.

Example: Stan's Fine Food Emporium was having a new illuminated neon and mechanical sign installed. It would be attached to his building and hang above the sidewalk. During the installation, Stan was admiring the sign when the masonry bolts fastening it to the building suddenly tore loose, the heavy sign fell twelve feet and crashed on the pavement. Stan narrowly avoided injury but the sign was badly damaged and every glass part of it was completely shattered. All the breakage damage to the sign was excluded by the application of this exclusion.

c. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

d. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

Example: Stan maintained his office on the second floor above his Food Emporium. He inadvertently left an old computer on overnight and it shorted out and caused a fire. The fire caused quite a bit of damage before the fire department arrived and extinguished it. The loss to the computer itself was not covered but the remaining damage caused by the fire was. Stan was pleased with the outcome and not at all unhappy with the unpaid loss of the computer. However, the Board of Health shut down his operation for a week until the fire damage was cleaned up and his operation was given a "clean bill of health." His loss of business income during that time was not covered by virtue of exclusion a. above.

e. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

f. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

g. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

Example: The insured’s sign policy had a limit of $10,000 and a 5% deductible. When a covered loss occurred, the insured filed a claim and the insurer determined total damages of $1,329. Because of the limit and the way the deductible works, the insured received a payment of $829. This was based on the $1,329 amount of loss reduced by the $500 deductible. The deductible was based on the $10,000 limit multiplied by 5%.

E. Additional conditions

1. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

2. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

a. Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance that applies to the property by the figure determined in step a. above.

c. Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step b. above.

d. Then subtract the amount of deductible from the figure determined in step c. above.

ENDORSEMENTS

No specific endorsements are available for use with this coverage form.

UNDERWRITING CONSIDERATIONS

The size of the sign or signs, the general geographic location and the specific location are all component parts of the underwriting approach to sign exposures. Larger signs are obviously subject to a greater amount of damage than smaller signs. Signs located away from the main premises and not subject to daily or regular observation are more subject to vandalism and theft losses. Signs are easily damaged by windstorm and hail and geographic issues are different from one part of the country to another. Interior signs should be underwritten as business personal property.

ISO SIGNS COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 15–Signs Declarations

Form Analysis–CM 00 28–Signs Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Signs Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to neon, fluorescent, automatic or mechanical electric signs, lamps, street clocks and similar property of others in the named insured's care, custody or control.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 15–Signs Declarations
• CM 00 28–Signs Coverage Form

Note: Signs coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Owned neon, fluorescent, automatic or mechanical electrical signs, lamps or street clocks or similar property of others in the insured's care, custody and control are eligible. Billboards and ordinary fixed signs are not eligible, whether directly illuminated by electric lights or not.

CM DS 15–SIGNS DECLARATIONS

CM DS 15–Signs Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 15–Signs Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Premium For This Coverage Form

The premium for Signs Coverage is entered in the space provided.

Rate

The rate or rates that apply are entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following:

• The type of sign, lettering and the sign's location for each sign insured
• All Covered Property At All Locations

Deductible

The standard deductible amount of 5% of the value of each sign the named insured retains for covered loss to each sign applies unless an entry is made indicating that it does not apply.

Coinsurance

The standard 100% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 28–SIGNS COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 28 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• The named insured's signs
• Similar property of others in the named insured's care, custody or control

2. Property Not Covered

There is no coverage for contraband or illegal property, or legal property in the course of illegal transportation or trade.

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Breakage

Any kind of breakage that occurs during transportation, installation, repair or dismantling is excluded. However, coverage does apply to breakage caused by fire, lightning or an accident to the vehicle transporting the sign or related property if this coverage form covers those causes of loss.

Example: Stan's Fine Food Emporium was having a new illuminated neon and mechanical sign installed on the side of the building and hanging over the sidewalk. Stan was admiring the sign as it was being installed when the masonry bolts fastening it to the building suddenly failed and the sign fell twelve feet to the pavement below. Stan narrowly avoided injury but the sign was badly damaged and all the glass in it was shattered. The breakage damage to the sign was excluded.

c. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

d. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance inside covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage to the specific covered property item that has the disturbance.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

Example: The sign outside Stan’s shop started to sputter and spark due to a short circuit. If the loss had stopped there, coverage would not have applied. However, the sparks ignited some embedded nesting material causing the sign to catch on fire. Because of the fire, the sign was covered even though the short circuit was the proximate cause of the loss.

e. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

f. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

g. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

2. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. The steps the insurance company takes to determine the amount it pays are as follows:

a. Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance of the covered property by a. above.

c. Multiply the total amount of loss by b. above.

d. Subtract the amount of deductible from c. above.

The insurance company pays the amount in d. above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

ENDORSEMENTS

There are no specific endorsements available for use with the Signs Coverage Form.

UNDERWRITING CONSIDERATIONS

The size of the sign or signs, the general geographic location and the specific location are all component parts of the underwriting approach to sign exposures. Larger signs are obviously subject to a greater amount of damage than smaller signs. Signs located away from the main premises and not subject to daily or regular observation are more subject to vandalism and theft losses. Signs are easily damaged by windstorm and hail and geographic issues are different from one part of the country to another. Interior signs should be underwritten as business personal property.

ISO THEATRICAL PROPERTY COVERAGE FORM (09 04 edition)

The ISO Theatrical Property Coverage Form covers risks of direct physical loss or damage unless the loss or the property is excluded or limited. It provides insurance coverage and protection for all the property needed to put on a stage play or production. This consists of costumes, scenery, props and similar and related property. This coverage form is based on the play or the production and, as a result, does not restrict coverage to a specific location. This means that coverage applies wherever the traveling company and the production may be. Coverage does not apply to buildings, improvements and betterments or furniture and fixtures that do not accompany the theatrical troupe in its travels.

POLICY CONSTRUCTION

The following forms are mandatory for the theatrical property policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Theatrical Property Declarations Form CM DS 16

· Theatrical Property Coverage Form CM 00 29

Theatrical property coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any theatrical production or play performed on a stage is eligible. However, coverage under this form is not available for carnivals, circuses, rodeos, costume rental companies or theatrical supply houses.

DECLARATIONS

The Advisory Theatrical Property Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change, the rate and the premium charge for this coverage form.

Limit of Insurance

This part of the declarations consists of two different sections.

Section A. is where the name of the production or productions is entered in the spaces provided along with the limit for that particular production. More than one production may be listed as long as a limit is provided for each.

Section B. is used to declare a total aggregate or catastrophe limit in any one occurrence for all coverages and at all locations.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Coinsurance

80% coinsurance applies to all covered property unless a different percentage is shown in the space provided.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 29

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property is property used or intended for use in the production or productions shown on the declarations. It includes:

a. Scenery, costumes and other theatrical property owned by the insured; and

b. Similar or related property of others in the care, custody or control of the insured or on which the insured has made partial payments.

Note: The important point in this area is that everything must be in or part of the current play or production, going to be used in the play or production or has been used in the production in the past. Another important point to consider with this form is the nature and types of property not covered, as outlined and discussed immediately below.

2. Property Not Covered includes six types or classes of property:

a. Buildings or improvements and betterments made to buildings;

b. Vehicles, except those actually used on stage as part of the production;

c. Jewelry made up of precious or semi-precious stones, gold, silver, platinum and other precious metals or alloys. This does not include costume jewelry that does not include precious stones or metals;

d. Money, securities, bills, deeds, transportation or admission tickets, notes, evidences of debt, accounts and other similar or related documents;

e. Animals; and

f. Illegal property, contraband or any property transported or traded illegally.

Note: The property excluded is noteworthy and unique relative to the class of business and other property covered. For example, most property policies exclude motor vehicles but an exception here permits narrow coverage for them in cases where they are part of the production. Similarly, costume jewelry that does not include precious stones or metals is specifically illustrated as covered, in order to differentiate between the two. Even though circuses and rodeos are excluded, the form still excludes animals under all circumstances, just in case the production happens to have animals as part of it. Live animal floater policies are available to cover this exposure if it arises. Along the same line, transportation and admission tickets, while unique to this class of business, are also specifically excluded and included with other similar excluded items.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Theft of covered property from an unattended vehicle is excluded. However, coverage does apply if the windows, doors and compartments of the vehicle were closed and locked at the time of the theft and visible signs are present that the theft resulted from forced entry. This exclusion does not apply to property in the custody of a carrier for hire.

Example: The Traveling Troupe used two large furniture moving vans they owned to haul their props, scenery and costumes to cities where they put on their plays. They usually removed the property needed for a particular production as soon as they reached the theater where the show would be done and secured it inside the theater building. The day after arriving and unloading, they discovered that burglars had gained access to the vans and removed some other props that had not been unloaded. Unfortunately, they also discovered that the van had been left unlocked after the property for the current production had been removed and the burglars only needed to open the doors. Because of this oversight and this exclusion, there was no coverage for the stolen props.

b. Marring, scratching, exposure to light, breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses is not covered. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft or attempted theft, or accident to vehicles carrying such property is covered, if this form covers those causes of loss.

Example: The Traveling Troupe had several extensive tableware settings of china and stemware for use with their various productions, including the present one. This property remained in the van until it was needed and the van was securely locked. Burglars pried open one of the doors of the van but apparently found little to their liking. Disappointed with their "take," and apparently having little appreciation for fine tableware, the burglars took out their frustration at their wasted efforts by smashing every piece of the collection on the pavement outside the van before departing. In this case, the van was locked and the damage was covered.

c. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

d. Unexplained disappearance of property is excluded. This is where covered property is simply gone and there is no obvious cause or explanation of what happened to it.

Example: The Traveling Troupe returned to the theater the next morning and began to unpack and arrange the property they brought in the night before. They searched high and low but the costumes were gone. Everybody remembered bringing them and where they were put but now they were simply gone and could not be found. There was no evidence that the building had been broken into or that anybody else had been in the building overnight. In this case, there was no coverage for the property that simply "disappeared."

e. Shortage discovered after taking inventory is similar to unexplained disappearance and is similarly not covered. In this case, the loss of the property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

f. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

g. Processing activities or work on the covered property resulting in loss or damage to the property is not covered. However, if the activity or work results in fire or explosion, the direct loss or damage caused by that fire or explosion is covered, if this form covers fire or explosion.

h. Artificially generated current that creates a short circuit or other electrical disturbance within property covered by this form is excluded. However, if the artificially generated current causes a fire or explosion, the direct loss or damage caused by that fire or explosion is covered if this form covers fire or explosion. The net effect is that this exclusion applies only to the loss or damage within the article of property in which the short circuit or electrical disturbance occurs.

i. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

Example: The Traveling Troupe had to scramble to get replacement costumes. Fortunately, they were performing in a large city and they were able to obtain what they needed with little trouble. Some of the costumes had not been used in some time and needed cleaning. A "patron" of the theater represented himself as the owner of a chain of dry cleaning establishments and offered to clean the costumes gratis, as a gesture of gratitude for the arts. The Troupe was more than willing to accept this gracious gesture after everything else they had been through. Whether the costumes ever got cleaned up will never be known but The Traveling Troupe was certainly cleaned out, because both the patron and the costumes disappeared without a trace. Of course, this exclusion applied and there was no coverage for the costumes that had been willingly given away under false pretenses.

j. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

k. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

E. Additional conditions

1. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

2. Coinsurance applies and affects the amount of loss the insurance company pays. When a coinsurance percentage is shown on the policy declarations, the insurer does not pay the full amount of any loss or damage if the value of the covered property at the time of loss, multiplied by the coinsurance percentage that applies, exceeds the limit of insurance for the property. This provision does not apply to property in transit. The insurance company determines the amount they pay by the following steps:

a. Multiply the value of the covered property at the time of loss, other than the value of property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance that applies to the property by the figure determined in step a. above.

c. Multiply the total amount of loss, before application of any deductible amount that applies, by the figure determined in step b. above.

d. Then subtract the amount of deductible from the figure determined in step c. above.

ENDORSEMENTS

No specific endorsements are available for use with this coverage form.

UNDERWRITING CONSIDERATIONS

Since coverage applies to property not usually at a single, fixed location, a number of other issues must be considered and addressed. In those cases, where is the property kept? What is the nature of the traveling production or troupe, if there is no permanent home? If a defined storage location is involved, it is helpful in the overall exposure analysis. Having one person in charge of the property is also important because that person must maintain the records needed by the insurance company for rating as well as for claims and loss adjustments.

Other questions include where is damaged property repaired? Are costumes, scenery and props stored separately in order to prevent smoke damage and reduce the spread of fire?

ISO THEATRICAL PROPERTY COVERAGE FORM (03 10 edition)

Index

Introduction

Policy Construction

Eligibility

CM DS 16–Theatrical Property Declarations

Form Analysis–CM 00 29–Theatrical Property Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Theatrical Property Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to scenery, costumes and theatrical property and similar property of others in the named insured's care, custody or control or that it has made partial payments on, all intended to be or having been used in a production indicated on the declarations. Coverage can be written on a specific production or on a blanket basis covering all productions. Coverage applies wherever the traveling company and the production may be.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 16–Theatrical Property Declarations
• CM 00 29–Theatrical Property Coverage Form

Note: Theatrical property coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any theatrical production or play performed on a stage is eligible. However, since coverage is intended for actual productions, carnivals, circuses, rodeos, costume rental companies or theatrical supply houses are not eligible.

CM DS 16–THEATRICAL PROPERTY DECLARATIONS

CM DS 16–Theatrical Property Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 16–Theatrical Property Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Premium For This Coverage Form

The premium for Theatrical Property Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following coverages desired:

• Scheduled Limits apply to separate limits of insurance for specific productions.
• Blanket Limit is a single limit of insurance that applies to all productions.
• All Covered Property At All Locations

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Coinsurance

The standard 80% coinsurance clause applies unless a different coinsurance percentage is entered in the space provided. Coinsurance can be deleted by indicating that it does not apply.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 29–THEATRICAL PROPERTY COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 29 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

• The named insured's scenery, costumes and other theatrical property
• Similar or related property of others in the named insured's care, custody or control or on which it has made partial payments

Note: All property must be in or part of the current play or production, to be used in the play or production, or have been previously used in the production.

2. Property Not Covered

There is no coverage for:

• Buildings, or improvements and betterments made to them
• Vehicles, except for vehicles used on stage as part of the production
• Jewelry consisting of precious or semi-precious stones, gold, silver, platinum and other precious metals or alloys

Note: This does not include costume jewelry not having precious stones or metals.

• Money, securities, bills, deeds, transportation or admission tickets, notes, accounts and evidences of debt
• Animals
• Contraband or illegal property, or legal property in the course of illegal transportation or trade

Note: Property excluded is noteworthy and unique relative to the class of business and other property covered. For example, most property coverage forms and policies exclude motor vehicles but this coverage form has an exception that covers vehicles that are part of the production. Similarly, costume jewelry that does not include precious stones or metals is specifically covered in order to differentiate it from jewelry that does. Even though circuses and rodeos are not eligible, animals are still excluded without exception because other coverage forms and policies are available to provide coverage. Along the same line, transportation and admission tickets, while unique to this class of business, are also specifically excluded along with other similar property.

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Theft From Any Unattended Vehicle

Theft of covered property from any unattended vehicle is excluded unless its windows, doors and compartments were closed and locked at the time of the theft and visible signs of forced entry are present.

Note: This exclusion does not apply to property in the custody of carriers for hire.

Example: The Traveling Troupe owned two large furniture moving vans to haul its props, scenery and costumes to cities where it put on plays. Normal procedure called for all items to be moved and secured inside the theater building immediately. However, procedures were not followed and some items were left on the van. The next day, the Troupe discovered that burglars got into the vans and removed the remaining items. This loss would have been covered except that the van had been left unlocked and the burglars only needed to open the doors. Because of this oversight and this exclusion, coverage did not apply.

b. Marring, Scratching, Exposure To Light

Loss or damage by these causes of loss is excluded, as well as by breakage of tubes, bulbs, lamps or articles made mostly of glass, but excluding lenses. However, loss or damage to this property caused by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or accident to vehicles carrying such property is covered, if the insurance provided by this coverage form covers those causes of loss.

Example: The Traveling Troupe had several extensive tableware settings of china and stemware it used with its various productions, including the present one. The moving van took a curve too fast and overturned. When the damage was sorted out, it was discovered that several pieces of china and stemware were damaged. Because coverage applies when a vehicle has an accident, the loss to the damaged items was covered.

c. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

d. Unexplained Disappearance

Covered property that disappears is excluded. This is where it is simply gone and there is no obvious cause or explanation of what happened to it.

Example: The Traveling Troupe unloaded its vans one night, retired for the evening, returned to the theater the next morning and began to unpack and arrange the property brought in the night before. They suddenly realized that all of the costumes were gone. Everybody remembered bringing them and where they placed them but now they were simply gone. There was no evidence that the building had been broken into or that others had been in the building overnight. In this case, the property that simply "disappeared" was not covered.

e. Shortage Found Upon Taking Inventory

This is similar to unexplained disappearance and is also not covered. In this case, loss of covered property is discovered only after taking a physical count and finding the quantity on hand is not what it should be. This is sometimes referred to as "inventory shrinkage."

f. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

g. Processing Or Work Upon The Property

Loss or damage to covered property caused by or resulting from processing or other work performed on it is excluded.

Note: This exclusion has an exception if the activity or work results in fire or explosion. The loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

h. Artificially Generated Current

The insurance company does not pay for loss or damage to covered property caused by or resulting from artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs or interferes in any way to create a short circuit or other electrical disturbance inside covered property consisting of:

• Electrical or electronic wires, devices, appliances, systems or networks
• Devices, appliances, systems or networks utilizing cellular or satellite technology

Such energy includes electrical current and related arcing, electrical charges from a magnetic or electromagnetic field, pulses of electromagnetic energy, electromagnetic waves or microwaves but is not limited to just these. However, this exclusion applies only to loss or damage to the specific covered property item that has the disturbance.

Note: This exclusion has an exception if the energy indicated above results in fire or explosion. The direct loss or damage caused by the fire or explosion is covered if the insurance provided by this coverage form covers the fire or explosion.

i. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

Example: The Traveling Troupe scrambled to get replacement costumes. Since it was performing in a large city, it easily got what was needed but some costumes needed cleaning. A "patron" of the theater, stating that he owned a dry cleaning establishment, offered to clean the costumes without charge. The Troupe eagerly and willingly accepted this gracious gesture after everything else it had been through. Whether the costumes ever got cleaned was not known because both the patron and the costumes disappeared without a trace. Of course, this exclusion applied and there was no coverage for the costumes that had been willingly given away under false pretenses.

j. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

k. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

2. Coinsurance

This condition applies if a coinsurance percentage is indicated on the declarations.

The insurance company does not pay the full amount of any loss if the value of covered property at the time of loss multiplied by the coinsurance percentage indicated on the declarations exceeds the limit of insurance. The steps the insurance company takes to determine the amount it pays are as follows:

a. Multiply the value of covered property at the time of loss, excluding covered property in transit, by the coinsurance percentage that applies.

b. Divide the limit of insurance of the covered property by a. above.

c. Multiply the total amount of loss by b. above.

d. Subtract the amount of deductible from c. above.

The insurance company pays the amount in d. above, or the limit of insurance, whichever is less. The named insured is responsible for any amounts not paid if other insurance is not available.

ENDORSEMENTS

There are no specific endorsements available for use with the Theatrical Property Coverage Form.

UNDERWRITING CONSIDERATIONS

Since coverage applies to property not usually at a single, fixed location, a number of other issues must be considered and addressed, such as where is the property kept? What is the nature of the traveling production or troupe, if it does not have a permanent home? A defined storage location is helpful in the overall exposure analysis. Having one person in charge of the property is also important because that person must maintain the records the insurance company needs for rating as well as for claims and loss adjustments.

Other questions include where is damaged property repaired? Are costumes, scenery and props stored separately in order to prevent smoke damage and reduce the spread of fire?

ISO VALUABLE PAPERS AND RECORDS COVERAGE FORM (09 04 edition)

The ISO Valuable Papers and Records Coverage Form covers direct physical loss or damage unless the loss or the property is excluded or limited. It provides insurance protection for the business papers of a commercial enterprise. The types of papers covered range from the deed to the property to the original copyright and/or patent rights to key products and many similar or related papers in-between. Few businesses can operate without acquiring a number of valuable papers and, if those papers are lost or damaged, the operation of the business could be seriously affected.

This form is being used less and less. This is because the coverage it provides is being included to an increasing degree as a regular additional coverage or coverage extension in many package policies, including the ISO Businessowners and Capital Assets Policies, as well as in a number of independently filed package policies.

Before discarding this coverage form and treating it as unnecessary, the covered causes of loss and other coverage features should be reviewed carefully. The coverage provided in the inland marine version of this form is usually broader than that available in most other property-coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory for the valuable papers and records policy:

· Commercial Inland Marine Declarations Form CM DS 02

· Common Policy Conditions IL 00 17

· Commercial Inland Marine Conditions CM 00 01

· Advisory Valuable Papers and Records Declarations Form CM DS 17

· Valuable Papers Coverage Form CM 00 67

Valuable Papers and Records Coverage may be issued as a stand-alone, mono-line inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Any commercial account that owns valuable papers or keeps valuable papers for others is eligible for this coverage.

DECLARATIONS

The Advisory Valuable Papers and Records Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change, the rate and the premium charge for this coverage form.

Limits of Insurance

This part of the declarations consists of two separate sections.

Section A., property at the insured's premises, has spaces for the insured to list up to two location addresses. Spaces are provided to list and describe specific types of valuable papers or records and to show a limit of insurance that applies specifically to them. Spaces are also provided for the insured to show an aggregate limit that applies to all other property at the location not specifically listed and described.

Section B., property away from the insured's premises, does not have the separate listings found in Section A. This section allows the insured to select a limit of insurance to apply to all valuable papers and records when they are removed and away from the insured's regular premises.

Deductible

The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.

Description of Receptacles

The insured is eligible for, and receives a significant rate or premium credit, if the valuable papers and records are kept in a rated receptacle, such as a safe or a vault. This section of the declarations requires the insured to provide the address of the premises containing the receptacle or receptacles. Other information that must be shown is the name of the manufacturer, the class, label and name of the entity issuing the rating for each receptacle.

Special Provisions (if any)

If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.

FORM ANALYSIS–CM 00 67

A. Coverage. The insurance company pays for direct physical loss or damage to covered property by a covered cause of loss.

1. Covered property means the insured's valuable papers and records, as defined in the form, or similar property of others in the insured's care, custody or control.

Note: This includes any documents inscribed, printed or written. It also includes manuscripts or records consisting of abstracts, deeds, drawings, films, maps, mortgages or maps.

2. Property not covered includes four types or classes of property:

a. Property not described or declared if it cannot be replaced with related property of similar kind or quality;

b. Property held by the insured as samples or for delivery after it has been sold;

c. Property kept in storage at other locations away from the insured's premises; and

d. Illegal property, contraband or other property transported or traded illegally.

Note: The definition of valuable papers does not include money and securities or any data, programs and instructions used for electronic data processing operations. This includes the materials on which the data is stored. Other coverage forms are available that specifically cover these types of property.

3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.

4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:

a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.

b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.

c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.

d. Excessive weight of property or persons.

e. Excessive weight of water that accumulates on a roof.

f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.

5. Coverage Extensions

a. Removal

Property removed from the insured's premises because of the threat of imminent danger of loss is covered at the new location and during its movement to and from the new location, if the insured tells the insurance company of the removal within ten days after the removal occurs. There is no restriction on the amount of time the covered property can be kept at that location and no stipulation as to the threatened cause of loss creating the imminent danger. Finally, this extension is included in the limits of insurance that apply to the premises from which the papers or records were removed.

Example: Errol's Engineering and Architects had a large number of wealthy commercial clients for whom he had worked on numerous projects over the years. As a result, Errol had a substantial number of documents that qualified for coverage treatment as valuable papers and records. His coastal Florida office was threatened by the imminent landfall of a category four hurricane he was sure would level his establishment. Errol packed up as much of his stock as he could, put them and all his valuable papers and records into a box truck, drove 80 miles inland and parked the truck in a storage facility owned by one of his clients. He called his insurance company after the truck was parked and let them know what he did just before the cell phone towers blew down and the conversation was cut short. Because of this coverage extension and Errol's quick action, coverage applied on his valuable papers and records at the temporary storage location for as long as it took him to rebuild his office and get back into business, much to the relief of his clients whose documents he held.

b. Away From Your Premises

The insurance company pays up to $5,000 for loss or damage to covered property away from the insured's premises, unless a higher limit is shown on the declarations. If a higher limit is shown, that limit applies instead. This coverage extension limit is an additional amount of insurance.

Example: Due to the nature of his business, Errol must constantly take engineering studies and architectural drawings and plans out of the office to clients' offices and building sites. When he or one of his associates does so, this coverage extension applies and those papers and records are fully insured when away from the designated premises.

B. Exclusions

1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.

a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.

b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.

c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.

a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.

b. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.

c. Errors or omissions in processing or copying but if those errors or omissions result in a fire or explosion, the insurance company pays for the direct loss or damage caused by that fire or explosion, if this form covers fire or explosion.

Example: Errol had a customer who was constantly changing his mind about certain features of the building he was having constructed for his business. He was finally satisfied and settled on the final plan Errol had drawn. Unfortunately, the many revisions left a few electrical issues in question and one of those led to a fire that caused a considerable amount of damage to the building shortly after it was built. Because of the exception to this exclusion, Errol had coverage that applied to that fire damage and was able to avoid a potentially devastating errors and omissions claim.

d. Electronic records injured, disturbed or erased by electrical or magnetic injury are not covered but the insurance company pays for direct loss or damage for injury caused by lightning.

Example: Many of the plans and drawings Errol was involved with lent themselves to electronic technology, especially as that technology evolved and improved to the level of sophistication needed for the work he did. Errol always made sure he backed up these documents on other media but there were always times when any given plan "in the works" might not be completely duplicated. This became more of a problem as his business grew, staff was added and the number of projects in various stages of production "on the drawing board" increased. This situation reached a crisis point when a violent electrical storm accompanied by vivid displays of lightning made multiple strikes on Errol's premises, fried a number of his computers and ruined a number of projects in production to the extent of the part of the work that had not been backed up or duplicated. Errol's losses were completely covered by his electronic data processing policy and the lightning exception to this exclusion but he took the additional step of installing extensive power surge protection to minimize damage from any similar occurrences in the future.

e. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.

f. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.

g. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.

3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.

a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.

b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.

c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.

e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.

C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.

D. Deductible is the amount of every covered loss retained by the insured. The insurance company does not pay for any covered loss or damage until the adjusted amount of loss or damage exceeds the deductible amount shown on the policy declarations. The insurer then pays the adjusted amount of loss or damage that exceeds the deductible amount, subject to and up to the applicable limit of insurance.

The limits on the declarations are the most available to respond to loss or damage related to any single occurrence.

E. Additional Conditions

1. Valuation–specifically declared items declared and described on the declarations is the limit shown on the declarations. This condition is in addition to General Condition F. Valuation in the Commercial Inland Marine Conditions.

Note: This is a critically important provision that must be given close attention. Many documents eligible for coverage under this form are dynamic and their value is subject to change. Others are unique or "one of a kind" and cannot be valued by normal valuation methods and techniques. Any time an insured has unique and unusual papers or records with unusually high or changing value, those records should be earmarked and specifically scheduled with their own value and not lumped in with other common documents where their value might be overlooked and the total value found inadequate at the time of loss or damage.

2. Recoveries made either by the insured or the insurance company after a loss that occurred and has been settled must be reported to the other party promptly. The insured has the option to have the property returned. If that option is exercised, the insurance company readjusts the loss or damage based on the amount the insured received for the recovered property, subject to an allowance for any recovery expenses incurred. This condition is in addition to Loss Condition H. Recovered Property in the Commercial Inland Marine Conditions.

Note: This is an important issue with respect to this coverage. A lot of time, effort and expense must be expended in duplicating and replacing lost valuable papers and records. It should not be done unless the document absolutely must be replaced. If there is any chance that the document might be recovered, and if duplication can wait for a period of time, the insured and the insurance company are well advised to wait and not hurry into duplication efforts that may later be found unnecessary because the lost document was recovered.

3. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:

a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Protection of records means all property covered by this form must be kept in the receptacles, if any, described on the declarations at all times when the premises is not open for business and at all other times except when the insured is actually using the property.

F. Definitions

This form contains four specific definitions that apply to it:

1. Valuable Papers and Records are any documents inscribed, printed or written, manuscripts or records that can include abstracts, deeds, drawings, films, maps, mortgages and books. The definition does not include money and securities or any data, programs and instructions used for electronic processing operations, including materials on which the data is stored.

2. Premises means the interior part of the building occupied by the insured at the address shown on the declarations.

3. Money includes traveler’s checks, register checks and money orders held for sale to the public and currency, coins and bank notes either in current circulation or not.

4. Securities are negotiable instruments or nonnegotiable instruments and contracts that represent money. It also includes tokens, tickets and various stamps, either in current use or not, and various forms of evidence of debt issued in connection with charge or credit cards not issued by the insured. The definition does not include money.

ENDORSEMENT

One specific endorsement is available for use with this coverage form.

CM 67 02–Libraries

This endorsement is required when coverage is issued for libraries. It adds property away from the premises in the care, custody or control of a borrower or renter to Property Not Covered. It restricts coverage by adding two specific exclusions:

• The insurance company does not pay for loss or damage caused by or resulting from failure of a borrower or renter of property to return it, vandalism or mutilation of covered property by anyone using it on the insured's premises or unexplained disappearance.
• The insurance company does not pay for loss or damage that depends exclusively on a records audit or physical inventory to prove that a loss occurred. However, these procedures can be used to support a determination of a covered loss or damage that the insurer does pay.

UNDERWRITING CONSIDERATIONS

Other than determining the location to be insured, the limits to be provided and the types of receptacles used, the most important issue in underwriting this coverage is in actually identifying the valuable papers to be insured. Is the insured aware of the types of papers and records that can and should be covered and are they listed or otherwise accounted for? The only way full recovery can be made for a unique document or record is to list it and provide a value for it. If the papers or records can be duplicated, are duplicates made and kept? If so, where are they kept?

ISO VALUABLE PAPERS AND RECORDS COVERAGE FORM (03 10 edition)

Collapsible Index

Introduction

Policy Construction

Eligibility

CM DS 17–Valuable Papers And Records Declarations

Form Analysis–CM 00 67–Valuable Papers And Records Coverage Form

A. Coverage

B. Exclusions

C. Limits Of Insurance

D. Deductible

E. Additional Conditions

F. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Valuable Papers And Records Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to inscribed, printed or written documents, manuscripts or records and abstracts, books, deeds, drawings, films, maps and mortgages.

This coverage form is not used as much as in the past because valuable papers and records coverage is an additional coverage or an extension of coverage with significant sub-limits in many filed commercial property coverage forms and policies. Businessowners and Capital Assets policies have significant sub-limits for valuable papers and records coverage and many independently filed company commercial property coverage forms and policies also include significant valuable papers and records coverage sub-limits as an extension of coverage. However, valuable papers and records coverage should not be dismissed or treated as unnecessary before thoroughly and carefully reviewing it. The coverage provided is usually broader than that offered as an additional coverage or an extension of coverage in most commercial property coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory:

• CM DS 02–Commercial Inland Marine Declarations
• IL 00 17–Common Policy Conditions
• CM 00 01–Commercial Inland Marine Conditions
• CM DS 17–Valuable Papers And Records Declarations
• CM 00 67–Valuable Papers And Records Coverage Form

Note: Valuable papers and records coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Valuable papers and records are broadly defined. They include documents that are inscribed, printed or written as well as manuscripts. Records covered include, but are not limited to, books, abstracts, deeds, drawing, films, maps and mortgages. Any party that owns valuable papers or has valuable papers of others in its care, custody or control is eligible.

CM DS 17–VALUABLE PAPERS AND RECORDS DECLARATIONS

CM DS 17–Valuable Papers And Records Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 17–Valuable Papers And Records Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Premium For This Coverage Form

The premium for Valuable Papers And Records Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

• Property At Your Premises includes the address or description of the insured premises, separate limits for Specifically Described Property and a blanket limit for All Other Covered Property for each covered location.
• Property Away From Your Premises

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Description Of Receptacles

The address, receptacle manufacturer, class, label and the label issuer's name must be entered in the spaces provided for every receptacle at each covered premises.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

FORM ANALYSIS–CM 00 67–VALUABLE PAPERS AND RECORDS COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 67 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage. It also directs attention to Section F–Definitions because understanding their special meanings is critical to understanding the coverage and exclusions that apply.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

This is the named insured's valuable papers and records and similar property of others in its care, custody or control.

Note: Valuable papers and records are any documents inscribed, printed or written, manuscripts or records, including abstracts, deeds, drawings, films, maps, mortgages and books but not money and securities or any data, converted data, programs and instructions used in electronic data processing operations, including materials that store the data.

2. Property Not Covered

There is no coverage for:

• Property not specifically described on the declarations or declared that cannot be replaced with property of similar kind or quality
• Property the named insured holds as samples or for delivery after it is sold
• Property stored at locations other than those indicated on the declarations

• Contraband or illegal property, or legal property in the course of illegal transportation or trade

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

• Hidden decay, unless an insured knew about the decay before the collapse occurred
• Hidden insect or vermin damage, unless an insured knew about the damage before the collapse occurred
• Using defective materials or construction methods in building, remodeling or renovating if the sudden collapse occurred after the building, remodeling or renovation is complete and if the collapse is partly caused by:
• Hidden decay or hidden insect or vermin damage as described above
• One or more specified causes of loss consisting of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage and earthquake to the extent that they are insured by this coverage form
• Weight of people or personal property on or in the building or structure
• Weight of rain collecting, pooling or accumulating on a roof

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extensions

a. Removal

Valuable papers and records removed to a different location from the named insured's premises because of imminent danger of loss or damage are covered. They are also covered while in transit to and from that location. The named insured must inform the insurance company of the removal within ten days of the date they are removed.

Note: The limit of insurance at the location from which the records were removed applies to this coverage extension.

Example: Errol of Errol's Engineering and Architects had numerous wealthy commercial clients whose projects he had worked on over the years, resulting in many documents that qualified as valuable papers and records. Because his coastal Alabama office was about to be hammered by a Category Four hurricane, Errol packed up as many of his computers as he could, put them and all his valuable papers and records into a box truck and drove inland. On the way his vehicle become stuck on a railroad crossing. Errol leaped from the truck just before the train hit it. All of his valuable papers and records were covered based on the premises limits and not the property away from premises limit.

b. Away From Your Premises

The insurance company pays up to $5,000 for loss or damage to covered property away from the named insured's premises, unless a higher limit is indicated on the declarations.

Note: This coverage extension limit is an additional amount of insurance.

Example: Due to the nature of his business, Errol must constantly take engineering studies and architectural drawings and plans out of the office to his clients' offices and building sites. When he or one of his associates does so, this coverage extension applies and those papers are covered when away from the designated premises.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

c. Errors Or Omissions In Processing Or Copying

Coverage does not apply to loss or damage caused by or resulting from errors or omission in processing or copying. However, if they result in a fire or explosion, the insurance company pays for the direct loss or damage caused by that fire or explosion, if the insurance provided by this coverage form applies to fire or explosion.

Example: Errol decided to have some of his oldest architectural drawings bound to put in his library. The individual doing the binding made several errors that damaged the drawing that would not have been covered but the final error was when the individual applied a highly flammable glue and then lit a cigarette. The ensuing fire destroyed the drawings. Because of the fire exception, payment was made for the drawings.

d. Electrical Or Magnetic Injury, Disturbance Or Erasure Of Electronic Recordings

Direct loss or damage to electronic recordings due to electrical or magnetic injury, disturbance or erasure is excluded if caused by programming errors, faulty machine instructions or faulty installation, maintenance of data processing equipment or components. However, direct loss or damage caused by lightning is covered.

Example: Many of Errol's plans and drawings lent themselves to electronic technology, especially as it evolved and improved to the level of sophistication needed for the work he did. While Errol always backed up these documents on other media, there were always times when any given plan "in the works" might not be completely duplicated. This became more of a problem as his business grew, staff was added and the number of projects "on the drawing board" increased. This situation reached a crisis point when a violent electrical storm accompanied by vivid displays of lightning made multiple strikes on Errol's premises, fried a number of his computers and ruined a number of projects in production that had not been completely backed up or duplicated. Errol's electronic data processing policy and the lightning exception to this exclusion covered these losses but he decided to install extensive power surge protection to minimize damage from similar occurrences in the future.

e. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

f. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

g. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

• Sudden falling down or caving in
• Diminished structural integrity including parts of the property separating from one another or the property being in danger of falling down or caving in
• Any degree of cracking, bulging, sagging, bending, leaning, settling, shrinking or expanding that relates to the sudden falling down, caving in or diminished structural integrity

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation–Specifically Declared Items

This valuation clause is added to General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. The value of specific property described on the declarations is the limit of insurance indicated for it.

Note: This is an extremely important condition. Many documents insured under this coverage form are dynamic and their values are subject to change. Others are unique or "one of a kind" and cannot be valued by normal valuation methods and techniques. Any time the named insured has unique and unusual papers or records with high values or values that may change, they should be earmarked and specifically scheduled with their own values and not lumped in with the values of other common documents, resulting in an inadequate overall value at the time of loss or damage.

2. Recoveries

This condition is added to Loss Condition H. Recovered Property in CM 00 01–Commercial Inland Marine Conditions.

Any recovery the named insured or the insurance company makes after a loss occurs and is paid must be reported to the other party promptly. The named insured has the option of having the property returned to it. In that case, the insurance company readjusts the loss or damage based on the amount the named insured received for the recovered property, subject to an allowance for any recovery expenses incurred.

Note: This is an important condition with respect to this coverage. Much time, effort and expense is expended to duplicate and replace lost valuable papers and records and doing so should be done only if replacing the document is absolutely necessary. If there is any chance that the document might be recovered, and if duplication can wait for a period of time, the named insured and the insurance company are well advised to wait and not rush into duplicating something that may be recovered at a later date.

3. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property within the named insured's premises, away from such premises while in transit within, or within premises of others located anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Protection Of Records

The named insured must keep all records of property insured by this coverage form in the receptacles indicated on the declarations at all times when the premises are closed for business or while it is actually using them.

F. DEFINITIONS

1. Valuable Papers And Records are any documents inscribed, printed or written, manuscripts or records, including abstracts, deeds, drawings, films, maps, mortgages and books but not money and securities or any data, converted data, programs and instructions used in electronic data processing operations, including materials that store the data.

2. Premises means the interior part of the building the named insured occupies at the address indicated on the declarations.

3. Money means traveler’s checks, register checks and money orders held for sale to the public and currency, coins and bank notes in or not in current circulation.

4. Securities are negotiable and nonnegotiable instruments and contracts that represent money or other property. It also includes tokens, tickets and various stamps currently in use or not in use and evidence of debt issued in connection with charge or credit cards that the named insured does not issue. It does not include money.

ENDORSEMENTS

One endorsement is available for use with the Valuable Papers And Records Coverage Form.

CM 67 02–Libraries

This restrictive endorsement is required when coverage is issued to a library. An important feature is that property off premises with a borrower or renter is considered Property Not Covered. These two exclusions further restrict coverage:

• The insurance company does not pay for loss or damage caused by or resulting from failure of a borrower or renter of property to return it, vandalism or mutilation of covered property by anyone using it within the named insured's premises, or unexplained disappearance.
• The insurance company does not pay for loss or damage that depends exclusively on a records audit or physical inventory to prove that a loss occurred. However, these procedures can be used to support a determination of a covered loss or damage that the insurer does pay.

UNDERWRITING CONSIDERATIONS

Other than determining the location to be insured, the limits to be provided and the types of receptacles used, the most important issue in underwriting this coverage is in actually identifying the valuable papers to be insured. Is the insured aware of the types of papers and records that can and should be covered and are they listed or otherwise accounted for? The only way full recovery can be made for a unique document or record is to list it and provide a value for it. If the papers or records can be duplicated, are duplicates made and kept? If so, where are they kept?