COMPARE: COMMERCIAL OUTPUT PROGRAM EDITION 3.0 TO AAIS COMMERCIAL OUTPUT PROGRAM EDITION 2.0

(June 2025)

INTRODUCTION

The purpose of this comparison is to provide a brief overview of the differences between the 2.0 and 3.0 editions of the American Association of Insurance Services, Inc. (AAIS) Commercial Output Program. The 3.0 edition was introduced in 2002 and is the most current edition.

Related Articles:

Commercial Output Program Coverage Analysis is a detailed analysis of the 3.0 edition

Commercial Output Program Archive includes a detailed analysis of the 2.0 edition

CHANGES

The style of the policy includes two important changes:

· The declarations form in Edition 2.0 has been replaced by a Schedule of Coverages in Edition 3.0. The Schedule of Coverages details each coverage extension, supplemental coverage, and supplemental inland marine coverage. To change a default limit for a specific coverage, a new limit must be entered in the space next to the applicable coverage on the Schedule of Coverages.

This new method provides a very visible listing of the broad nature of the coverage provided by this form.

· Numerous items previously included in endorsements and other coverage sections are now incorporated into the coverage form itself. This change particularly impacts the definitions section.

AAIS COMMERCIAL OUTPUT PROGRAM CHANGES

Definitions

The definitions section in 3.0 increased from 20 to 36 terms. This change helps clarify coverage intent and exclusions. Some definitions were previously in other coverage parts but are now located in CO 1000—Commercial Output Program Property Coverage Part. Others are new, and a few have slightly different definitions from the previous edition. Nine definitions have no changes.

The new terms are:

· Accident

· Business

· Computer hacking

· Computer virus

· Covered equipment

· Data records

· Flood

· Media

· Money

· Off-site server

· One accident

· Perishable stock

· Programs and applications

· Proprietary programs

· Rents

· Restoration period

· Schedule of coverages

· Securities

· Spoilage

· Theft

The altered terms are:

· Covered location

· Dependent locations

· Fine arts

· Hardware

· Pollutant

· Software

· Valuable Papers

Property Covered

Covered Building Property in 3.0 is expanded in two ways:

· Contractors’ material situated on the insured’s premises is covered. However, it is covered only if there is no other coverage available for it and the named insured has a contractual obligation to cover it. The material must be on the premises and intended to be used in connection with construction, repair or renovation activities.

· Foundations are now covered up to the property limit. In the 2.0 edition, some foundation coverage was available in the Supplemental Coverages Section.

Covered Business Personal Property

This part is expanded to include the named insured’s loss of use of undamaged improvements caused when a building loss is sufficient to void the lease.

Building Property Not Covered / Business Personal Property Not Covered

These two sections now include new exceptions that eliminate coverage as described below:

· Building Property Not Covered lists retaining walls, underground pipes and bridges and other paved surfaces. Limited coverage is granted under Supplemental Coverages.

· Business Personal Property Not Covered lists off-site servers and six other items. The six items are covered later in the policy as Supplemental Marine Coverages. This change has no practical effect since, in edition 2.0, off-site servers were not covered, and the other six items also did not qualify for full coverage.

Property Not Covered

The following changes apply in the 3.0 edition:

· Animal coverage now clarifies that the exclusion is not limited to just birds and fish, and it provides coverage for owned animals held for sale by requiring them to be inside buildings.

· Manufactured, processed, or warehoused automobiles and vehicles are further restricted by not being covered while held for lease, loan or rented. Additionally, they are not covered while held for sale.

· Any type of computer checked as luggage is not covered if it is stolen or disappears.

· The cost of excavation is now listed separately as an item not covered. Backfilling is added to this exclusion. However, an exception has been added for excavation costs if a covered loss impacts underground property, allowing for coverage of the expenses incurred to excavate that property.

· Coverage for outdoor trees, shrubs, plants, or lawns is now excluded. However, limited coverage is available under Supplementary Coverages unless they are considered stock held for sale.

Coverage Extensions

This section in the 3.0 edition is renamed. It was previously known as ADDITIONAL COVERAGES, but the new title is more appropriate. As in the previous edition, the coverage limits in this section are included in the policy limits and are not additional limits. The language added at the beginning of this section explains how the limits apply.

This section contains seven coverage extensions. Some are new, some are removed, and some are revised. The changes are as follows:

Two coverage extensions are revised:

· Debris Removal limit is increased from $5,000 to $50,000

· Emergency Removal number of days covered is increased from 10 days to 365 days

Five coverage extensions are new:

· Consequential Loss was previously a supplemental coverage with a $10,000 limit. It is now a Coverage Extension that provides coverage up to the full limit unless a different limit is stated on the schedule of coverages.

· Emergency Removal Expenses is a new coverage. It is a separate limit to pay the insured’s emergency expenses to move or store covered property to mitigate loss from a covered peril. This coverage has a $5,000 limit up to 365 days, but does not extend past the policy expiration date.

· Fraud and Deceit coverage is added and will pay up to $5,000 for an insured being fraudulently deceived into parting with covered property.

· Damage From Theft to non-owned buildings for which the insured is contractually liable is covered up to the policy limit.

· Off Premises Utility Service Interruption coverage is now provided with additional provisions up to a $50,000 limit per occurrence unless a different limit is stated on the schedule of coverages.

Three coverages are moved from Coverage Extensions (formerly Additional Coverages in 2.0) to Supplemental Coverages:

· Fire Department Service Charge

· Pollutant Cleanup and Removal

· Recharge of Fire Protection Equipment

Supplemental Coverages

The introductory language of this section clarifies how the limits for these supplemental coverages can be modified on the Schedule of Coverages and how other coverage elements apply across all coverages.

The new supplemental coverages are as follows:

· Expediting Expenses for covered property when a covered peril occurs and urgent repairs or replacement is needed. The coverage includes expenses for additional labor, overtime, and transportation. The most paid is $50,000 unless a different limit is stated on the schedule of coverages.

· Sewer Backup and Water Below the Surface used to be available by a separate endorsement, but is now included in the 3.0 with a $25,000 limit.

The supplemental coverages amended are as follows:

· Fire Department Service Charge relocated here from Additional Coverages (now Coverage Extensions in 3.0), and the limit increased from $5,000 to $25,000.

· Inventory and Appraisal Expense now excludes attorneys' fees.

· Ordinance or Law coverage is restructured and is now two separate coverages as follows:

o Ordinance or Law (Undamaged Parts of a Building)

§ The limit for the Undamaged Parts of the Building is provided up to the policy limits.

o Ordinance or Law (Increased Cost of Repair and Cost to Demolish and Clear Site)

§ The limit for the Increased Cost of Repair and Cost to Demolish is a combined limit of $100,000 instead of $50,000.

· Personal Effects limit increased from $10,000 to $15,000.

· Pollutant Cleanup and Removal coverage is relocated from Additional Coverages (now Coverage Extensions in 3.0) with the limit increased from $25,000 to $50,000.

· Recharge of Fire Extinguishing Equipment coverage is broadened, and the limit is increased from $10,000 to $50,000. Additionally, the discharging of equipment while testing is now excluded. However, accidental discharge is now included.

· Rewards coverage is broadened to include theft, vandalism and arson, and the limit is increased from $5,000 to $10,000.

· Trees, Shrubs, and Plants now includes coverage for vandalism.

· Underground pipes, pilings, bridges and roadways

o The maximum payment for each occurrence is now $250,000.

o Coverage is broadened to include bridges, walkways, roadways and similar paved surfaces.

o Foundations of buildings, structures, machinery, or boilers coverage has been moved to the Property Covered section under Building Property.

· Newly Acquired Buildings and Personal Property – Acquired Locations coverage is removed from this section and relocated to the Scheduled Locations Endorsement.

Supplemental Marine Coverages

The new Supplemental Marine Coverages are as follows:

· Electrical or Magnetic Disturbance of Computers used to be available by a separate endorsement but is now included. Coverage is within the Property Covered limit and not an additional coverage limit.

· Power Supply Disturbance of Computers used to be available by a separate endorsement but is now included. Coverage is within the Property Covered limit and not an additional coverage limit.

· Virus and Hacking Coverage is now specifically addressed and subject to a $25,000 limit for each occurrence with a $50,000 aggregate limit for each 12-month policy period.

· Off Premises Computers used to be available by a separate endorsement but is now included and subject to a $25,000 limit.

· Software Storage used to be available by a separate endorsement but is now included and subject to a $50,000 limit.

Two coverages have higher limits in addition to significant changes in coverage:

· Fine Arts limit has increased from $50,000 to $100,000, with expanded coverage to include covered property during temporary exhibitions and while in transit.

· Valuable Papers limit was increased from $50,000 to $100,000 and the wording for electronic data has been removed.

The remaining coverages had changes made to the coverage provided, but the limits are the same:

· Accounts Receivable added the words "direct physical" before the word "loss."

· Property on Exhibition added the words "direct physical" before the word "loss."

· Sales Representative Samples added the words "direct physical" before the word "loss."

· Property in Transit was broadened to include additional property, but some limitations were also added.

Perils Covered

The word "external" before the word "risks" is removed.

Perils Excluded

The COP has two separate sets of exclusions. Each set has a number of subparts.

The first set of exclusions has eight subparts, compared to seven in the previous edition. Four of the seven subparts changed as follows:

· Ordinance or Law clarifies what is excluded without any apparent change in intent.

· War has been changed to War and Military Action and excludes additional actions.

· Water was divided into two new exclusions. One is Flood, and the other is Sewer Backup and Water Below the Surface. The new wording is virtually identical to that of the combined exclusion in the previous edition.

· Utility Failure has been amended to clarify that the only exception is found in the Coverage Extension for Off Premises Utility Services Interruption.

The second set of exclusions has 21 subparts, compared to 20 in the 2.0 edition. One exclusion, Freezing, has been deleted. Two others were added, and six were changed.

The added subparts are:

· Computer Virus or Computer Hacking

· Smog. This was part of Smoke, Vapor or Gas but is now a separate exclusion. The wording of the new exclusion is less restrictive than the language that applied in the 2.0 edition.

The six changed subparts are:

· Animals changed to Animal Nesting, Infestation or Discharge and is less restrictive than in the 2.0 edition.

· Electrical Current now specifies that the exclusion does not apply to computers.

· Explosion changed to Steam Boiler Explosion with no change in content.

· Smog, Smoke, Vapor or Gas changed to Smoke, Vapor or Gas to reflect the separation of Smog into a separate exclusion. While smog is excluded, it includes resulting loss from a specified peril or breaking of building glass.

· Temperature/Humidity has added perishable stock to the exclusion, as well as additional wording for clarification. An exception has also been added for coverage of personal property as provided under Coverage Extension Off Premises Utility Service Interruption.

· Voluntary Parting has added an exception to the exclusion for coverage as provided under Coverage Extensions Fraud and Deceit.

Additional Property Not Covered or Subject to Limitations

This section contains 12 separate exclusions compared to 13 in the previous edition. Two exclusions in the previous edition are removed, and one is added in the 3.0 edition. Four other exclusions have been amended.

Two exclusions are removed from this section as follows:

· Gutters and Downspouts are now covered for loss by weight of ice, sleet or snow in Other Coverages – Collapse.

· Interior of Buildings exclusion has been removed. Loss or damage due to rain, snow, sleet, ice, sand, or dust may now be covered without needing prior damage to the building's exterior. However, we cannot specify where this coverage is located, only that the exclusion has been eliminated.

One exclusion has been added as follows:

· Contamination of Perishable Stock Due to Release of Refrigerant

Four exclusions are amended as follows:

· Animals – the text “but not limited to” is added to clarify animals are not limited to birds and fish.

· Glassware/Fragile Articles includes fine arts, as described under Supplemental Marine Coverage, which is now an exception to the exclusion.

· Unauthorized or Fraudulent Transfer is the new title for what was previously

· Transferred Property - it now includes coverage for loss due to electronic transfer.

· Valuable Papers no longer has any exceptions.

Other Coverages

The policy’s Collapse coverage wording has been amended to improve the hazard’s explanation. A definition of collapse is now included to clarify the intent of coverage. Buildings in imminent danger of collapse are not covered.

What Must Be Done In Case Of Loss

This section did not change.

Valuation

This section contains 13 separate provisions compared to nine provisions in the 2.0 edition. Four provisions are added, and five are revised.

Four provisions added are as follows:

· Hardware

· Software

· Manufactured Stock

· Accounts Receivable

Five provisions revised are as follows:

· Actual Cash Value must now be specifically selected on the Schedule of Coverages. This was the default settlement basis in the previous edition.

· Replacement Cost is now the default valuation in the 3.0 edition.

· Fine Arts settlements are now based on fair market value instead of actual cash value.

· Tenants Improvements losses are settled on a replacement cost basis instead of actual cash value.

· Valuable Papers losses are now based on the actual cash value at the time of loss.

How Much We Pay

This section contains seven separate provisions compared to five in the 2.0 edition. Two new provisions are added and one provision has been amended.

Two new provisions are as follows:

· Earthquake Period

· Automatic Increase

One provision amended as follows:

· Loss Settlement Terms - the accounts receivable provision has been moved to the Valuation section.

Loss Payment

The only modification in this section is to clarify the Our Options provision, but the intent remains unchanged.

Other Conditions

Two items in this section are revised as follows:

· Restoration of Limits is amended to add Pollutant Cleanup and Virus and Hacking.

· Territorial Limits are expanded to include foreign shipments under Overseas Transit.