CO
1289 –OFF-SITE SERVER COVERAGE AND INTERRUPTION OF WEB SITE
(July 2025)
This is an endorsement and is subject to all the terms and conditions in CO 1000–Commercial Output Program–Property Coverage Part, unless specifically modified or otherwise provided for in this endorsement.
The coverage
provided by this endorsement begins with the definition of Off-site server.
Since this definition is part of the CO 1000, it is included in this article
for reference.
Off-Site Server must
meet all of the following conditions:
Under the CO 1000, there is no coverage for
an off-site server because it is listed as business personal property not
covered. This means not only is there no direct physical damage coverage there
is also no loss of earning coverage.
The Off-Site Server Coverage and Interruption of Web Site endorsement provides coverage for either or both direct physical damage and loss of earnings.
There are two coverages provided, and only one must be selected. This means that loss of earnings coverage can be purchased without direct damage coverage.
Supplemental Marine Coverage, if selected, four different entries are required:
Supplemental Income Coverage, if selected, three entries are required, and two entries are optional.
This is the most paid under the Supplemental Income Coverage in a single occurrence.
The default waiting period is 12 hours. A different waiting period can be entered.
The maximum period of coverage is 14 days and 12 hours following the time of loss. A different number of days can be entered.
If a check is entered in the box, the denial of service exclusion in this endorsement applies.
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Example: Pellington, Inc. leases a server that is located off its premises. The server is housed and
maintained by the leasing company. It is Pellington’s contractual
responsibility to insure the leased
server. Since the server is not
covered on Pellington’s CO 1000 COP – Property Coverage Part, coverage is
purchased for the server using CO 1289–Off-Site Server Coverage and
Interruption of Web Site. The schedule is completed as follows: Both Supplemental Marine
and Supplemental Income Coverages are selected with a check and limits
entered as follows:
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NOTE:
Coverage applies only if a check is placed beside Supplemental Marine Coverage
on CO 1071–Off-Site Server Schedule and required limits are entered.
The Off-Server Coverage is an additional Supplemental Marine Coverage. Therefore, the opening language for the Supplemental Marine Coverage in the CO 1000 should be examined to understand how this coverage interacts with other supplemental marine coverages in the CO 1000.
Coverage is provided when a covered peril causes a direct physical loss to either of the following:
In addition to the server, coverage also extends to direct physical damage to the software when it is stored on an off-site server. However, this coverage is limited because it only applies if duplicates of the software are kept at a building at least 100 feet away from the premises where the off-site service is hosted.
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Example: A fire occurs at the location
where Pellington’s server is housed. It is not damaged by the fire, but there
is some smoke damage. There is coverage for up to $75,000 for the smoke
damage after the $1,000 deductible is paid by Pellington. |
Virus and hacking coverage direct damage loss to the off-site server is also covered. However, there is no coverage for loss or damage due to any of the following:
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Example: Despite its best
efforts to prevent it, hackers accessed Pellington’s off-site server. The
hackers modified the programs to send inappropriate emails to major
customers. They also copied proprietary program information. Additionally,
they removed some key components that prevented important functions from
being performed. The first two items are not covered,
but the last item is covered because it involves direct damage to the
software that requires repair. The software can be repaired quickly because
Pellington keeps duplicates of the software at its location rather than at
the server location. The most that is
paid in this loss is $25,000 after Pellington pays the $1,000 deductible. |
This coverage has its own deductible that is entered on the Off-Site Server Schedule. It applies per occurrence.
The maximum limit in a single occurrence is the Off-Site Server Limit or the Off-Site Server (Virus or Hacking) Limit on the schedule.
NOTE:
Coverage applies only if a check is placed beside Supplemental Income Coverage
on the CO 1071–Off-Site Service Schedule and required limits are entered.
The Interruption of Web Site Coverage is an additional Supplemental Marine Coverage. Therefore, the opening language for the Supplemental Income Coverage in the CO 1001–Commercial Output Program – Income Coverage Part should be examined to understand how this coverage interacts with other Supplemental Marine Coverages in the CO 1001.
Earnings coverage extends to earnings lost because the named insured’s business is interrupted due to direct physical loss to any or all of the following:
The loss must be caused by a covered peril. Coverage begins with the direct physical loss and ends when the named insured resumes or could have resumed operations.
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Example:
The fire at the
location where Pellington’s off-site server is housed resulted in the
server being down for 48 hours because the fire damaged the air conditioner
that cools the server. The loss of earnings sustained during the downtime is covered up $200,000. Pellington
is responsible for the first two hours of earnings loss because of its
waiting period entry. |
Coverage also includes loss of earnings due to direct damage caused by a virus or hacking. However, there is no coverage for loss or damage due to any of the following:
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Example:
Pellington’s server must be down for 36 hours following the hacker attack.
The decision was made to disinfect and reinstall the software because
tracking down the specific damage was too time-consuming
and labor-intensive. There is coverage up to $100,000, but Pellington
is responsible for the first two hours of earnings loss because of its
waiting period selection. |
Coverage for earnings is provided only if the following apply:
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Example:
Pellington files a claim for $50,000 loss of
earnings following the fire loss. The insurance company reviews their income
history and discovers that the $50,000 loss was actually offset by a significant
increase in volume in the 128 hours following the downtime. Due to this unusual spike, Pellington did not actually
suffer any loss of earnings, so the claim is denied. |
No earnings coverage applies until 12 hours following the direct physical damage to the server, software, or location. This period can be modified on the Schedule.
The default coverage is limited to a maximum of 14 days, and the default waiting period is set to 12 hours. This means if only default coverage is provided, coverage will end 14 days and 12 hours after direct damage occurs to the server, software, or location. If the waiting period is set to zero, coverage will end exactly 14 days after the damage. For any other waiting period specified in the schedule, coverage will last for 14 days plus the duration of that waiting period.
This default coverage can be
increased, and the waiting period can be extended on the Schedule, but coverage
will still end once the named insured's business resumes.
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Example:
A tornado roars through Roseville. It destroys the
location where Pellington’s off-site server is housed and also destroys
Pellington’s own location. This means that the software duplicates for the
server are also destroyed. It will take a minimum of three months to
reproduce the necessary proprietary programs. Pellington entered 20 days for
its coverage limitation, so there is a loss
of earnings coverage for up to 20 days plus two hours. Any loss is also
subject to the $200,000 occurrence limit. |
The maximum limit in a single occurrence is the Off-Site Server Limit or the Off-Site Server (Virus or Hacking) Limit on the schedule.
The Excluded Perils section of the CO 1000 is deleted in its entirety and replaced by the following exclusions, but only for the Off-Site Server Coverage and Interruption of Web Site endorsement.
The following exclusions apply only to the coverage provided by this endorsement.
The doctrine of concurrent causation states that coverage applies to a property loss caused by two factors, one excluded and one covered. As a result, coverage has been found for events like earth movement, flood, and other specifically excluded perils. These exclusions aim to prevent coverage in cases of concurrent causation by specifying if an excluded peril contributes to or worsens the loss, the entire loss is not covered. Under this approach, there is no coverage even if the primary cause of loss is typically covered.
a. Civil Authority
Loss or damage caused by the order of any civil authority is excluded. Seizure, confiscation, destruction, and quarantine of any property are examples of excluded civil authority actions. There is one exception. If the civil authority destroys the named insured’s property as a means of preventing the spread of a fire, there is coverage provided the fire itself is a covered peril.
b. Nuclear Hazard
Loss caused by nuclear reaction, nuclear radiation, or radioactive contamination is not covered. Any loss that is caused by the nuclear hazard is not considered a loss caused by fire, explosion, or smoke. There is one exception. If a direct loss by fire results from the nuclear hazard, there is coverage.
Coverage for nuclear risk is available only through nuclear coverage associations.
c. War and Military Action
This is an expanded War exclusion. There is no coverage for loss or damage caused by any of the following:
· War, undeclared and civil war
· Warlike action by a military force. Actions taken by the government to prevent or defend against an expected or actual attack by any government or other authority using military personnel or agents are also excluded.
· Rebellion, revolution, insurrection, or unlawful seizure of power. Actions taken by the government to prevent or defend any of these are also excluded.
If any action involves nuclear reaction, nuclear radiation, or radioactive contamination, this exclusion applies in place of the Nuclear Hazard exclusion. There are no exceptions in this exclusion.
The second group of
exclusions applies to loss or damage caused by or resulting from any of the
following loss events. Some of these exclusions have exceptions, conditions, or
limitations that should be noted and reviewed carefully.
NOTE: This endorsement has only eight exclusions,
while the CO 1000 policy has 21 limited exclusions.
a. Contamination or Deterioration
There is no coverage when contamination or deterioration is the cause of loss or damage. Examples of contamination and deterioration are corrosion, decay, fungus, mildew, mold, rot, and rust. Contamination or deterioration is also the qualities, faults, or weaknesses in the particular off-site server, resulting in it damaging or even destroying itself.
There are two exceptions.
· If contamination or deterioration to the off-site server is caused by a covered peril, coverage applies for that peril.
· If a covered peril causes direct physical damage to the air conditioning system servicing the off-site server, any corrosion, decay, fungus, mildew, mold, rot, or rust to the server caused by the air conditioning not functioning is covered.
b. Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion with others by any of the following:
· The named insured
· Any party having an interest in the property
· Any party entrusted with the property
· Partners, officers, directors, trustees, joint venturers
· Employees or agents of any of the above individuals or entities, whether they are on duty or off duty.
There are two exceptions.
· Loss due to acts of destruction by the named insured's employees is covered. However, if the act of destruction is theft, it is still not covered.
· Covered property in the custody of a carrier for hire is not subject to this exclusion.
c. Loss of Use
The following losses are not covered:
· Loss of use
This refers to any type of loss sustained because the named insured or its customers are unable to use the property.
· Delay
This occurs when economic benefits are lost due to a missed deadline, a sales opportunity that was not capitalized on, or a similar type of delay.
· Loss of market
This is when the loss of current customers, as well as the loss of potential customers, and similar types of market loss occur.
The only exception is the
Interruption of Web Site coverage when provided in this endorsement.
d. Pollutants
There is no coverage for loss caused by any action of pollutants.
There are three exceptions:
· The pollution event is caused by a specified peril.
· If the pollution event causes a specified peril, the damages caused by that specified peril are covered.
· The pollutant event is covered under Supplemental Coverages–Pollutant Cleanup and Removal.
e. Temperature/Humidity
Loss or damage because of dryness, dampness, humidity, or extremes of temperature is not covered.
There are two exceptions:
· If any of the above items cause a covered peril, then any resulting damage from that peril is covered.
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Loss or damage to off-site servers due to direct
physical loss or damage caused by a covered peril to the air conditioning
system servicing the off-site server is covered.
f. Wear and Tear
There is no coverage for loss or damage caused by or resulting from wear and tear, marring or scratching. These losses are excluded because they are typically normal business expenses. However, if any of the above causes a covered peril, any resulting damage from that particular peril is covered.
g. Virus or Hacking
Loss or damage caused by computer viruses or hacking is not covered. This includes direct, indirect loss or damage, as well as loss of access, use, or functionality. The only exception is the limited coverage provided under Virus and Hacking Coverage included in this endorsement.
h. Voluntary Parting
If property is voluntarily given to another party, there is no coverage. There is no coverage even if the receiving party was part of a fraudulent trick or scheme.
These exclusions apply only to the Supplemental Income Coverage section of this endorsement.
a. Bandwidth
When the named insured’s business is interrupted due to the off-site server not providing enough bandwidth, there is no coverage for loss of earnings. This applies whether the interruption is partial or complete. Insufficient bandwidth, as used in this exclusion, refers to a situation where the off-site server cannot handle the volume of data being sent to it.
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Example:
Pellington, Inc. has launched a new promotion and is receiving a lot of
attention on its website, which is filled with graphics and videos. Their
programmers had not anticipated the amount of traffic this promotion would
generate. When the server temporarily crashes, there is no loss of earnings
coverage because the reason is a lack
of bandwidth. |
b. Denial of Service Attack
When loss of earnings occurs because a denial of service attack is launched against the off-site server and interrupts the named insured’s business, there is no coverage. This exclusion applies regardless of the number of individuals participating in the attack and whether or not the individual(s) are employees of the named insured.
The definition of a denial-of-service attack, as used in this endorsement, is the use of either malicious data traffic or false data traffic to intentionally slow down or completely disable the off-site server. Examples of such data traffic include email messages, any type of request that requires the server’s memory, and any type of message or information request that intentionally consumes bandwidth.
This exclusion applies only when it is selected on the CO 1071–Off-Site Server Schedule.
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Example:
Certain radical groups are upset with the products Pellington is selling.
They decide to make it impossible for legitimate customers to place orders by
sending massive emails to the site and also sending many service inquiries.
The system is quickly overwhelmed, and the server is unable to provide
service to its customers for over 24 hours. Since Pellington did not check
for this exclusion to apply, the loss
of earnings starting after the two-hour waiting period is paid. |