AAIS MUSICAL
INSTRUMENTS COVERAGE ANALYSIS
(August 2025)
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IM 1255–Schedule of Coverages–Musical
Instruments IM 1250–Musical Instruments Coverage Analysis
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The American
Association of Insurance Services (AAIS) Musical Instruments Coverage Form is
intended for professional musicians, businesses, commercial entities, and
educational institutions that own and use musical instruments. It covers
musical instruments, sheet music, instrument cases, music stands, and related
accessories and supplies, including stationary organs.
Additionally, property
of others in the care, custody, or control of the insured—similar
to their own instruments—can also be covered. This coverage can be
written as either blanket or scheduled property.
While professional
musicians are often the first to come to mind when considering this insurance
coverage, many other entities also own and utilize such equipment. Schools,
especially given the extensive scope of coverage territory, need this as well.
This policy can insure symphony orchestras, bands,
other organizational musical groups, and individual musicians in various
environments. The property eligible for coverage is so broadly defined that
only contraband is excluded.
Musical instruments,
related equipment, and accessories sold by dealers, as well as businesses that
operate using coins or tokens, are ineligible for this coverage. For musical
instrument dealers, see IM 1050 Camera and Musical Instrument Dealers.
Related Article: AAIS Camera And
Musical Instrument Dealers Coverage Analysis
AAIS Musical
Instruments Coverage requires at least these four forms:
Related Article: CL 0100 AAIS
Commercial Lines Common Policy Conditions
This Schedule of
Coverages is used with IM 1250–Musical Instruments Coverage. IM 1255 contains
the following information:
Coverage can be written
on a blanket basis, covering all musical instruments under a single insurance
limit. That limit is entered in the space provided.
NOTE: If certain
items are scheduled separately, their value should be deducted from the blanket
to avoid double billing. Items included in the blanket coverage are subject to
100% coinsurance.
Coverage can be written
on a scheduled basis. The descriptions and limits of each musical instrument should
be entered in the spaces provided.
This is the amount the
named insured retains for each covered loss. It must be entered in the space
provided.
IM 1251–Named Perils
Coverage is the only optional endorsement available. If selected, it changes
the perils covered in the coverage form from risks of direct physical loss to
only the perils of fire, lightning, windstorm, flood, and theft.
NOTE: There are only
five named perils, which significantly reduces coverage when this endorsement
is used. However, the covered perils are the primary perils most insureds would
be concerned about.
Musical Instruments
Coverage is typically written on a non-reporting basis.
This section includes spaces to enter the annual premium, the non-reporting
rate per $100, and any applicable minimum premium.
This analysis is based
on the 01 05 edition.
A statement indicates that certain
words and phrases highlighted in bold print in the coverage form are defined in
the Definitions section immediately following this Agreement.
NOTE: The schedule of coverages does
not have a clearly designated space to list endorsements or additional
schedules that apply at inception.
NOTE: The Editors added
titles to enhance clarity.
The
parties specifically listed on the declarations as insureds.
The
insurance company providing the coverage.
The applicable coverage
amount.
This term is broad
and covers various contaminants and irritants, including solids, liquids,
gases, or thermal or radioactive substances. It encompasses acids, alkalis,
chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials intended
for recycling, reclamation, reconditioning, or disposal. Additionally, visible
and invisible electrical or magnetic emissions, as well as sound emissions, are
also classified as pollutants.
A sinkhole occurs when the earth’s
surface suddenly sinks or collapses into an underground cavity formed by water
erosion on limestone or other rock types. This definition of sinkhole collapse
excludes considerations of the land value or expenses involved in filling
sinkholes.
The definition
contains the following specifically named perils:
•
aircraft
•
civil commotion
•
explosion
•
falling objects
•
fire
•
hail
•
leakage from fire
extinguishing equipment
•
lightning
•
riot
•
sinkhole collapse
•
smoke
•
sonic boom
•
vandalism
•
vehicles
•
volcanic action
•
water damage
•
weight of sleet, snow, or ice
•
windstorm
Two terms require
further clarification:
This coverage does
not extend to personal property stored outdoors. Additionally, it does not
cover damage to the interiors of buildings or personal property stored inside
buildings unless a falling object first breaches the building's exterior.
This refers to the
sudden or accidental release or leakage of water or steam. However, it must
directly result from a crack or break in a part of the system or appliance that
contains the water or steam.
All provisions, limitations, exclusions, conditions, and definitions
relevant to the coverage provided.
An airborne volcanic
blast or shock wave, which also includes ash, dust, and particulate matter, as
well as any lava flow. The term does not include the expenses for removing
dust, ash, or particulate matter from the covered property unless
there is direct physical damage to the property.
The insurance company
covers the property described below, subject to any exclusions or limitations.
Direct
physical loss caused by a covered peril to the insured’s musical instruments
and similar property of others under its care, custody, or control, as listed
on the coverage schedule with a description and limit.
Coverage applies only
to the musical instruments and similar property of others shown on the schedule
of coverages.
Direct
physical loss caused by a covered peril to musical instruments and similar
property belonging to others and under the care, custody, or control of the
insured is covered, provided there is a limit for blanket coverage shown on the
schedule coverages.
Coverage is limited to the
following:
·
Musical
instruments
·
Music
stands, instrument cases, sheet music, repair equipment, mouthpieces, reeds, and related musical items
·
Stationary
organs
·
Property similar to the property described
above
There is no coverage
for the following property:
Property illegal to
possess is not covered. Additionally, property legal to possess but used in illegal trade or
transported unlawfully is also excluded.
There is one
coverage extension. The limit is included within the applicable limit for
covered property and not in addition to it unless specified otherwise. The limit
does not combine with limits from any other coverage extension or supplemental coverage, and is not subject to any coinsurance
provisions that may apply in the coverage form.
Coverage for physical
damage to covered property, when caused by a covered peril, applies
automatically for newly acquired musical
Instruments.
The limit is either
$10,000 or 25% of the highest limit shown on the schedule of coverages,
whichever is less.
Coverage for newly
acquired instruments is automatically included, but this applies for a maximum
of 30 days. During this period, the insured must report the acquisition to the
insurance company. If not reported, coverage will end after 30 days. However,
coverage will also end before the 30 days if the policy expires or once the new
acquisition is reported to the insurance carrier.
This is not free
coverage. The premium for the newly acquired instrument(s) is based on the date
of acquisition.
This coverage is part of the limit for
the coverage described under Property Covered, not in addition to it.
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Example: The
musical instrument coverage at Findley’s School District is $75,000. The
estate of a local musician offers Findley’s Elementary School all his musical
instruments. Paul, the superintendent, accepts the gift immediately. Paul and the district band director catalog all the
instruments before reporting the gift to the insurance carrier. During the 15
days it took to catalog and value the items, coverage is limited to the
lesser of $18,750 (.25X $75,000) or $10,000. Fortunately, no loss occurred because the total
value of the gift was $50,000. |
Loss to covered property caused by a direct physical loss
caused by the collapse of a building, structure, or any part thereof containing
covered property.
Coverage for collapse is provided when caused by one
or more of the following:
The following buildings and structures are not
considered to be in a state of collapse:
The covered property
limit does not increase for this coverage.
There is no coverage
for loss resulting from an order issued by any civil or government
authority. These orders may include seizure, confiscation, destruction, or
quarantine of property, but this list is not exhaustive. The only exception is
when a civil authority destroys property to control a fire that causes loss or
damage. This exception applies only if the fire is caused by a covered peril.
The insurance company does not
cover loss or damage from any nuclear reaction, radiation, or contamination,
whether the incident was controlled or not, or caused by any means. Any loss
caused by the nuclear hazard is not considered a fire, explosion, or smoke
loss. However, coverage does include direct loss or damage caused
by fire resulting from the nuclear hazard.
The insurance company does not cover loss or damage
caused by any act of war. This includes undeclared
wars, civil wars, or warlike actions by military forces. Additionally, measures
taken to hinder or defend against actual or expected attack by any government
or sovereign authority using military personnel or agents are also
classified as war and are not covered.
In addition, acts of insurrection, rebellion,
revolution, or unlawful power seizure, along with any government measures to
prevent or defend against these acts, are excluded. If any such action
involves nuclear reactions, radiation, or contamination, this exclusion
overrides the nuclear hazard exclusion.
NOTE: This means the exception for fire resulting from a
nuclear hazard does not apply when it is caused by war.
The second group of exclusions pertains to loss or damage caused by or resulting from
specific events listed below. Some of these exclusions include exceptions,
conditions, or limitations that should be noted and carefully reviewed.
The insurance company will not cover any loss or damage caused by or resulting
from any of these events.
There is no coverage for losses caused by or resulting from acts or
decisions made by any person, organization, or government entity. This
exclusion also applies to instances where there is a failure to act or make a decision.
However, there is an exception to this exclusion. If an act or decision,
or a failure to act or decide, leads to a covered peril, then the loss or
damage caused by that peril is covered.
Coverage does
not apply to loss or damage due to nesting, infestation, or the discharge or
release of waste, secretions, or other substances by animals. In this context,
animals include, but are not limited to, birds, insects, and vermin. However,
if any of these excluded events result in a covered peril, the loss or damage
that peril causes is covered.
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Example: In
the bustling halls of Findley School District, an unexpected adventure
unfolded one crisp fall season. As the band director embarked on the annual
quest to retrieve the brass instruments from storage, a shocking discovery
awaited! Much to their astonishment, a family of mice had made themselves
right at home inside the shiny instruments, turning them into an unlikely
nesting ground! The excitement quickly transformed into a frantic
call for a professional to step in, who meticulously dismantled and cleaned
the instruments to restore their glorious sound. However, when the unexpected
incident was reported to their insurance company, the claim was denied due to
this exclusion. |
Loss
caused by collapse is not covered unless the collapse is included under Other
Coverages - Collapse, in which case coverage applies. Additionally, if an
excluded collapse results in a covered peril, coverage extends to the damage or
loss caused by that peril.
Loss or damage caused by contamination or deterioration
is excluded. This includes, but is not limited to, corrosion, decay, fungus,
mildew, mold, rot, and rust. It also applies to any quality, defect, or
weakness in the covered property that leads to self-damage or destruction,
although this list is not exhaustive.
However,
if contamination or deterioration results in a covered peril, the resulting
loss or damage from that peril is covered.
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Example: The band director felt a surge of
disappointment as he stumbled upon an unexpected scene: three gleaming
trumpets and a snare drum hidden away beneath the bleachers! It was clear
they had been stashed there in the aftermath of the graduation ceremony, a secret
hiding spot for these vibrant instruments. Although they bore a few battle
scars from their adventurous journey, the damage was fixable. However, the
hefty repair costs would fall squarely on the district's shoulders rather
than being covered by the insurance, thanks to this exclusion in the policy. |
Coverage does not apply
to loss caused by, or resulting from criminal, fraudulent, dishonest, or
illegal acts committed by any of the following, whether alone or in collusion
with others:
·
The
named insured.
·
Others
with an interest in the property.
·
Others
to whom the property has been entrusted.
·
The
named insured's partners, officers, directors, trustees, joint venturers,
members, or managers, as applicable, based on the named insured’s type of
business organization.
·
Employees
of any of the groups listed above. Employees are excluded even if the act
occurs when they are not considered to be working.
However, this exclusion
does not apply to covered property in the care of a
hired carrier.
There is an important provision. This exclusion applies
both on and off the designated premises and regardless of negligence. However,
if loss or damage from one of the listed events results in a covered peril,
then the loss or damage caused by that peril is covered.
Coverage does not apply to losses from delays, loss of use,
or loss of market.
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Example: Findley’s band program is buzzing with energy,
thanks to its vibrant partnership with the local shopping mall during the
festive Christmas season! However, excitement takes an unexpected turn when a
dramatic fire in the band room leaves many instruments in desperate need of
repair. Now, Findley faces a challenge: without the exhilarating performances
that draw crowds to the shopping center, the potential loss of income looms
large. Unfortunately, the loss of income from the shopping center is not
covered. |
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Example: The band director received an important call from
the secretary of Paul, the district superintendent, who conveyed that Paul
wanted him to gather all the gifted instruments for a significant photo
opportunity at the district office. Energized by the task, the band director
swiftly organized the collection of instruments, immersing himself in the
spirit of collaboration as they loaded the truck together. However, a
shocking twist awaited—neither the secretary nor the trucker was legitimate. Unfortunately, the loss of these cherished
instruments, resulting from following unauthorized instructions, was not
covered. |
Loss or damage caused
by wear and tear is not covered. However, if wear and tear leads
to a covered peril, the resulting loss or damage from that peril is covered.
Loss or damage due to weather conditions is excluded, but
only when the loss results from a weather condition combined with a cause of
loss excluded in 1–Primary Exclusion above. However, if weather conditions lead
to a covered peril, then the loss caused by that peril is covered.
However, there is no coverage for repairs or emergency
measures taken for property not already damaged by a covered peril.
NOTE: It is important to realize that any such costs
incurred will reduce the amount available to pay the actual loss.
The proof of loss must also specify the named insured’s
interest and the interests of others in the property involved, including liens
and mortgages. Any changes to the title of the property during the policy
period must be disclosed, along with any other reasonable information the
company may need, such as inventories, specifications, and estimates for
settling the loss.
The
insurance company determines when and if it will assume ownership of the
property belonging to the named insured. As a result, the named insured is not permitted to abandon
damaged property to the insurance company unless they receive written approval
to do so.
The value of the covered
property is its actual
cash
value on the date of loss. Actual Cash Value is replacement cost new minus
depreciation. This item is subject to items 2. through 4. of this section.
NOTE: This
recognizes the value of the whole is greater than the value of individual
parts, but the remaining part still has value as a separate.
NOTE: This
recognizes that the whole is more valuable than the sum of its parts, but the
individual parts still retain value on their own.
This provision pertains
exclusively to covered property written on a blanket basis.
The insurance company
will not pay the full amount for any loss if, at the time of the loss, the
total value of all covered property—excluding property in transit—exceeds the
insurance limit. The steps the company takes to determine the amount paid are as
follows:
Step 1: Determine the value of all covered property subject to coinsurance at the
time of the loss, except for items in transit.
Step 2:
Multiply Step 1 by the coinsurance percentage of 100%.
Step 3.
Divide the limit for the covered property subject to coinsurance by the result
determined in Step 2.
NOTE: Stop
here if the result is 1.00 or higher because no coinsurance penalty applies. Go
to Step 4 only if the result is less than 1.00.
Step 4.
Multiply the total amount of loss, prior to the application of a deductible, by
the percentage determined in Step 3.
Step 5.
Subtract the applicable deductible from Step 4.
The insurance company does not
pay more than the amount determined in Step 5. or the limit of insurance,
whichever is less. It does not pay any part of the remaining loss.
There may be another policy available to cover the
loss, aside from what is described in item 7.a. above. In such cases, this
coverage will apply on an excess basis. It will only pay the amount of the
covered loss exceeding the amount provided by the other policy, regardless of whether the other coverage can be collected. Any payment made is
subject to the applicable limit of insurance.
The insurance company has the following
loss payment options if a covered loss occurs:
·
Pay the value of the property
that sustained loss or damage.
·
Pay the cost to repair or
replace the property that sustained loss or damage.
·
Rebuild, repair, or replace the
property with similar property, to the extent possible, and it must be
accomplished within a reasonable period of time.
·
Take any part or all of the property based on the value agreed upon or
determined through appraisal.
The insurance company
settles all claims with the named insured. It will also only pay the named
insured, unless a loss payee is listed on the policy.
The insurance company settles a covered loss within
30 days of receiving a properly prepared proof of loss, and the loss amount is
confirmed. The amount is determined either through a written agreement with the
insured or after an appraisal award is filed with the company.
The insurance company
can adjust and pay losses involving others property to either the named insured
on behalf of the property owner or directly to the property owner.
The insurance company is not obligated to pay the
named insured if it has already paid the property owner. Additionally, if the
property owner sues the named insured, the company can choose to defend them in
the lawsuit.
The insurance company
and the insured may not always agree on the value of a covered claim. This condition
provides a way to resolve disputed claims.
Either party can
request an appraisal to determine the value of the disputed claim. Once a
request is made, both parties have 20 days to choose their own independent
appraisers and notify the other party of their
appraiser's name. The two appraisers then have 15 days to select a
competent and impartial umpire. If they cannot agree on an umpire within that
time, either party can ask a judge in the court of record in the state where
the property is located to appoint one.
The appraisers will
then determine the value of the claim and submit any differences to the umpire.
Once any two of the three parties (the two appraisers
and the umpire) agree, the amount of loss is finalized.
Each party is responsible for paying its own appraiser, while the costs associated with the umpire and other expenses are equally divided between the insurance company and the insured.
This condition is
applicable only when the insured is an individual.
When the named insured passes away, the
individual in custody of the insured's property remains an insured for that
property until a qualified legal representative is appointed. After the
appointment of the legal representative, that person becomes an insured, but
only for the property covered under this policy.
This coverage
does not extend past the policy’s expiration date.
NOTE: The named insured must deal with the insurance company
honestly. Its rights of recovery may be voided if it
intentionally misrepresents or conceals a material fact or information. This
means the insurance is treated as simply having never existed, versus a
particular claim being denied.
Only covered losses
occurring during the policy period are paid.
Payment
of the loss does not end the obligations of the named insured and the insurance
company toward each other. Additional provisions apply if the insurance company
pays a loss and the lost or damaged property is later recovered, or if the responsible party for the loss reimburses for the damage.
Either party that recovers property or payment must notify
the other. Recovery expenses incurred are reimbursed first. If the named
insured keeps the recovered property, they must repay the amount the insurance
company paid on the claim, unless the company agrees to a different amount.
If the paid claim is less than the agreed loss because of a
deductible or other limit, any recovery is prorated between the named insured
and the insurance company based on the company's respective interests in the
loss.
Payment of a claim does not
reduce the limit available for future claims.
The named insured can agree in writing to waive
recovery rights from any party, but only if this is done before a loss occurs.
The insurance company
cannot be sued by anyone for any coverage until all the terms of the coverage
form have been met. Suits must be brought within two years after the named
insured first became aware of a loss. If a state law
invalidates this condition, any suit brought must comply with that law’s
provisions and begin within the shortest period of time
allowed by law.
NOTE: It is common
for a basic coverage form to be modified by required state-specific
endorsements that address issues related to that state.
12. Territorial LimitsThere are no
territorial limits. Property is covered regardless of its location. |
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AAIS has developed one
endorsement to use with Musical Instruments Coverage.
This endorsement
modifies the coverage form's perils covered, limiting it to only: fire,
lightning, windstorm, flood, and theft.
It is important to note
a key limitation regarding theft: coverage for theft from vehicles is only
applicable if the vehicle was locked with the windows closed at the time of the
theft, and there are visible signs of forced entry.
Covered property is not
limited to specific locations. Coverage literally applies anywhere in the
world. Therefore, the main challenge is to create a profile of the equipment
and describe its typical usage and locations. It might usually be kept in one
location, or it may be regularly moved and stored in multiple places.
Records should be maintained to identify
who is usually responsible for certain musical instruments. The way the
equipment is stored and secured when not in use is an important issue to
consider. It is necessary to determine which parties have access to locked
storage areas and hold the keys for entry. Additionally, when equipment needs
to be at other locations, it is essential to ensure it is properly secured and
protected from damage or theft during those times.