INTRODUCTION

This is not a separate coverage part. This is an endorsement and is subject to all the terms and conditions in CO 1000 – Commercial Output Program – Property Coverage Part.

It does not apply to mobile equipment, the Supplemental Marine Coverages, or computers. This does not impact coverage for those items because the earth movement exclusion in CO 1000–Commercial Output Program–Property Coverage Part does not apply to these coverages.

The following sections of the CO 1000 are changed, but the changes only apply to this endorsement:

Additional Definitions
Perils Covered
Perils Excluded
How Much We Pay

SCHEDULE OF COVERAGES

Coverage is activated on either the CO 1050–Schedule of Coverages or the CO 1051–Schedule of Coverages by placing a checkmark beside either Scheduled Earthquake Coverage or Blanket Earthquake Coverage. Three selections are possible. Not covered, Scheduled Earthquake Coverage or Blanket Earthquake coverage.

· Scheduled Earthquake Coverage – if selected, a catastrophe limit and earthquake deductible must be entered, and the CO 1062–Earthquake Schedule must be attached.

· Blanket Earthquake Coverage – if selected, an occurrence limit, aggregate limit, catastrophe limit and earthquake deductible must be entered.

When the CO 1062–Earthquake Schedule is required, coverage is limited only to the listed locations, which are subject to their specific occurrence and aggregate limit.

ADDITIONAL DEFINITIONS

Three additional definitions apply to coverage provided by this endorsement.

Aggregate Limit

This is the most paid for all losses at a single covered location in each 12-month policy period. The 12-month policy period could end early due to the policy expiration or anniversary date.

Occurrence Limit

This is the most paid for a loss at a single covered location in a single occurrence.

Catastrophe Limit

This is better defined as an aggregate catastrophe limit. It is the most paid for all losses at all covered locations in each 12-month policy period. The 12-month policy period may end early because of policy expiration or anniversary date.

Example: The Pebble Company has 20 covered facilities but purchases earthquake coverage on only eight of them.

A limit of $5,000,000 is purchased for each occurrence. Due to the site configurations at each location, a $10,000,000 location aggregate is selected. A catastrophe limit of $20,000,000 is selected to apply over the eight locations.

Location 1 is a large industrial park with 12 separate buildings. A moderate earthquake occurs, causing $3,000,000 in building and $3,000,000 in business personal property damage. The most paid for this event is the $5,000,000 occurrence limit.

One month later, but during the same 12-month policy period, a second smaller earthquake occurs at the same location, causing $1,000,000 in building damage and $2,500,000 in business personal property damage. This loss is completely covered because the amount of damage is less than the $5,000,000 occurrence limit.

A third earthquake occurs five months later, but also during the same 12-month policy period. This time, there is $1,000,000 building damage and $3,250,000 business personal property damage. Because the sum of the previous two loss payments was $8,500,000, only $1,500,000 of the aggregate is available to apply to the third loss. Additionally, no coverage is available at this location for the remainder of the policy period because its aggregate limit has been exhausted.

A total of $10,000,000 remains available for the other seven locations.

PERILS COVERED

When the term volcanic eruption is used in the following coverages, it means not only eruption but also the volcanic explosion and effusion.

Scheduled Earthquake Coverage

When the Scheduled Earthquake Coverage option is selected on the CO 1050 or CO 1051, direct physical loss or damage to covered property caused by earthquake or volcanic eruption is provided, but only for the property and coverage described at the locations displayed on CO 1062–Earthquake Schedule.

Earthquake continues to be excluded from all other locations, coverages, and properties.

Blanket Earthquake Coverage

When the Blanket Earthquake Coverage option is selected on the CO 1050 or CO 1051, direct physical loss or damage to covered property caused by earthquake or volcanic eruption is applicable. There are no limitations on coverage or locations, except for the territorial limitations outlined in the property coverage part.

PERILS EXCLUDED

The Earth Movement exclusion in the property coverage part is deleted in its entirety and replaced by the following:

Earth Movement or Volcanic Eruption

There is no coverage for loss or damage due to the following:

Earthquakes and volcanic eruptions that start before the coverage inception date

NOTE: Earthquake coverage on the prior policy should apply for the 168 hours following the start of an earthquake without regard for the policy expiration date.

Blasting. The one exception is a volcanic explosion.
Landslide, mine subsidence, mudflow, or mudslide. These events are excluded even when triggered, caused by, or resulting from an earthquake or volcanic eruption.

NOTE: Earthquake coverage is provided by this endorsement – not earth movement coverage.

HOW MUCH WE PAY

The following items are added to the How Much We Pay section in the property coverage part:

1. Deductible

This replaces the deductible condition in the property coverage form, but only for losses covered by the earthquake peril.

Only the amount of a covered earthquake loss that exceeds the deductible shown on the Schedule of Coverages is payable. Deductibles can be expressed as specific dollar amounts or as a percentage. When the percentage is selected, the deductible amount is determined by multiplying the displayed percentage by the value of the covered property at the time of loss.

NOTE: This deductible refers to a value, not a limit, which can result in a significant variation in the deductible applied.

Example: The earthquake occurrence limit is $6,000,000. The value of the building damaged by the earthquake at the time of the loss is $900,000. The earthquake coverage is subject to a 5% deductible. The earthquake causes $500,000 in damage to the building.

The deductible is determined by multiplying the building value by the deductible percentage. In this case, the building value of $900,000 is multiplied by 5%, resulting in a deductible amount of $45,000. The insured must pay $45,000 before the insurance company makes any payment on the loss.

2. Limits That Apply to Scheduled Earthquake Coverage

This item applies when Scheduled Earthquake Coverage is selected on either of the Schedules of Coverage, and CO 1062–Earthquake Schedule is attached. The limits that apply to loss or damage to covered property due to earthquake or volcanic eruption are as follows:

The most paid for a single occurrence at a covered location is the occurrence limit for that location on CO 1062–Earthquake Schedule. There is no coverage if the location or the property damaged is not listed.
The most paid during a 12-month period for covered earthquake and volcanic eruption losses at a covered location is the aggregate limit on CO 1062–Earthquake Schedule for that location. There is no coverage if the location or the property damaged is not listed.
The most paid during a 12-month period for all covered earthquake and volcanic eruption losses at all covered locations on CO 1062–Earthquake Schedule is the catastrophe limit on either CO 1050 or CO 1051–Schedule of Coverages.

3. Limits That Apply to Blanket Earthquake Coverage

This item applies if Earthquake Coverage is selected on either of the Schedules of Coverages. The limits that apply to loss or damage to covered property due to earthquake and volcanic eruption are as follows:

The most paid for a single occurrence at a covered location is the occurrence limit on the Schedule of Coverages.
The most paid for all losses at a covered location during a 12-month period is the aggregate limit on the Schedule of Coverages.
The most paid for the sum of all losses at all covered locations during a 12-month period is the catastrophe limit on the Schedule of Coverages.

4. Excess Insurance

If additional earthquake coverage is purchased as excess or if this earthquake coverage is purchased as excess, the proportional sharing specified in How Much We Pay in the CO 1000 – Commercial Output Program – Property Coverage Part, under the section Insurance Under More than One Policy, will not apply.