BACKGROUND

The Commercial Output Program (COP) is the American Association of Insurance Services, Inc. (AAIS) version of a Manufacturer’s Output Policy. When switching a client from a standard commercial property coverage form or policy to the COP, it is important to understand that the foundation of the COP is grounded in Inland Marine, rather than Commercial Property. This indicates coverage under the COP is more flexible.

The COP is not location-specific unless modified to be so, and coinsurance does not apply. This means significant insurance-to-value issues could arise if adequate insurance limits are not provided and maintained. Adequate pricing depends on the client supplying appropriate and accurate statements of values for each location insured.

In the event the customer's coverage changes from the COP back to a standard commercial property coverage form or policy, it is important to remember to include full disclosure of the reductions in coverage involved with such a change.

ELIGIBILITY

Related Article: AAIS Commercial Output Program Eligibility

POLICY CONSTRUCTION

The COP can be issued as either a monoline policy or as part of a package policy.

Mandatory forms are:

CO 1100–Commercial Output Program Declarations
CO 1050 or CO 1051–Commercial Output Program Schedules of Coverages

CO 1000–Commercial Output Program–Property Coverage Part

CL 0100–Common Policy Conditions

ENDORSEMENTS

Several coverage components can be included, along with various expansions and limitations of coverage. The COP is intended for customization, so it is important to carefully review the list of available endorsements.

UNDERWRITING

The broad nature of the coverage offered by the COP requires both inland marine and commercial property underwriting.

RATING PLAN

The COP rating plan is a deficiency point rating system that starts at 0. As the risk is evaluated, deficiency points are developed. These points are added together and converted into rates. These rates are then added to category rates, resulting in a unique rate for the specific risk. The program includes an experience-rating plan that increases the rate but is applied only when the deductible is less than $5,000. This final risk rate is applied to the total property values to determine the final premium.

All rating is risk and loss experience rather than location specific.

Related Article: Commercial Output Program Rating Considerations

OTHER COVERAGES

The following coverages may be added to the COP and should be carefully considered.

Loss of Income and Extra Expense

Equipment Breakdown

· Spoilage Coverage

Crime