Market Segments Division—Personal Care Services

(February 2023)

 

Collapsible Index

Eligibility

MS PS DS–Personal Care Supplemental Schedule

MS PS 01–Personal Care Analysis

I. Modifications To CP 00 10–Building And Personal Property Coverage Form

II. Modifications To CP 10 30–Causes Of Loss–Special Form

III. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

The Personal Care Services Program is an enhancement of the Commercial Package Policy. Any package written under the market segment division must be assembled according to the rules for all Market Segment policies.

Related Article: ISO Market Segment Overview for a discussion on policy construction

This article will discuss items that are specific to the Personal Care Services Program, including the eligibility, supplemental schedule, MS PS 01–Personal Care Services, and the special endorsements developed just for this program. In addition, there are sections on Underwriting and Rating.

This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.

ELIGIBILITY

The eligible classifications for this coverage are:

If one or more of these classes is used in conjunction with other classes, the operation remains eligible for coverage under this program. The listed class is not even required to be the primary classification. Of course, each company may establish its own criteria, which may be more restrictive. However, if any of the following classes are on the policy, the operation is not eligible for coverage:

MS PS DS– PERSONAL CARE SERVICES SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that needs to be shown on a Supplemental Schedule for the Personal Care Services Program.

Changes in Limits

This section's only purpose is to increase insurance limits. If no limit is entered, the limits shown in the MS PS 01 apply. Any limit changes are effective on a per location basis. This allows protection for one or two locations to be increased without affecting the remaining locations.

Ten specific coverages are listed in this section. However, there is another area of the schedule that could be used for making limit changes for an unlisted coverage. The coverages that are subject to change are:

Note: According to the coverage form, whatever limit is entered is a replacement (not an additional) limit. If an insured wants $5,000 in coverage and the existing limit is $2,500, a limit of $5,000 must simply be entered on the schedule to get the desired level of coverage.

Hired and Non-Owned Auto Liability Insurance

If coverage is desired, endorsement MS PS 03 must be attached. The limits can be entered on this Schedule or on the schedule that is part of the endorsement. Limits are separate for Hired Auto Liability and Non-owned Auto Liability.

Fine Arts Coverage

If Fine Arts Coverage is desired, the premises number where the coverage applies has to be indicated. However, in order for the coverage to be in effect, MS PS 04–Personal Care Services-Fine Arts Coverage, must also be attached.

Forms Applicable

The final section of the Supplemental Schedule allows for the listing of specific endorsements by premises.

MS PS 01–PERSONAL CARE SERVICES ANALYSIS

The opening paragraph of the Personal Care Services endorsement clarifies which of the coverage forms and the property causes of loss form are being modified by this endorsement. They are:

·         CP 00 10–Building and Personal Property Coverage Form

·         CP 10 30–Causes of Loss-Special Form

·         CG 00 01 or CG 00 02–Commercial General Liability Coverage Parts

The Personal Care Services endorsement is not a complete coverage part. It must be attached to a package containing all three of the above named forms. If all three forms are not a part of the policy, the Personal Care Services Program endorsement cannot apply.

This means that if a CPP is issued with commercial property coverage, commercial crime, commercial inland marine, and equipment breakdown coverage but no CGL, the Personal Care Services endorsement cannot be added.

When the Personal Care Services endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply, with the exception of those that are modified by the Personal Care Services endorsement. Each of the modifications will be reviewed in the following analysis.

I. Modifications to CP 00 10–Building and Personal Property Coverage Form

A. Additional Coverages Change – Fire Department Service Charge

The Limit for Fire Department Service Charge is increased to $5,000 and can be increased on the Supplemental Schedule.

B. Additional Coverages Additions

1. Money and Securities

Coverage is added for direct loss by theft, disappearance, or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured. The automatic amount of $10,000 applies when the covered property is either in the described premises or at a bank while the $5,000 applies when the covered property is anywhere else. Either or both limits can be increased by an entry on the Supplemental Schedule.

The following three types of loss are excluded:

·         Losses that result from errors or omissions in accounting or arithmetic.

·         Losses that occur because the property was voluntarily given out in an exchange or purchase

·         Any loss of covered property that is contained within any money-operated device (such as a vending machine). This exclusion does not apply if the device has a continuous reading instrument that records all amounts that are deposited or stored in the device that is covered.

Occurrence is defined under this segment as any loss that involves a single act or a series of related acts by one or more individuals. The named insured is required to keep records of all money and securities to verify any loss.

2. Fire Extinguisher Systems Expense (07 13 change)

Up to $5,000 is available in any one occurrence to pay the cost of recharging or replacing fire extinguishing equipment and systems. Coverage applies only if the discharge is within 100 feet of a described building or within 100 feet of the premises. The greater of the two distances is used to determine if coverage applies.

In addition, if the covered property is damaged due to an accidental discharge, it is covered but subject to the same $5,000 limit. No deductible applies to this coverage.

There is no coverage if the system is discharged during testing or installation.

 

Example: The salon was filled with customers and, unfortunately, customers’ children. Most were well behaved, but Jackie was a pretty curious guy. The bright red fire extinguisher grabbed his attention, and then he grabbed it. Within a very short time, he activated it, and the walls, floor, ceiling, and furniture were soon covered. The cost to clean the salon and refill the fire extinguisher is covered under this coverage.

3. Reward Payment

As an additional coverage, reward payments are available to assist in solving crimes that result in covered losses. The coverage consists of two categories of rewards. In the first category, up to $5,000 is available for information that leads to the arrest and conviction of any party that commits a crime resulting in a covered loss to the property portion of the policy. The coverage limit is also subject to the actual cash value of the damaged property at the time of the loss or the amount it takes to repair or replace the property, or however the value of the property has been determined by policy conditions. In other words, the policy would not pay $4,000 for information related to a crime that caused a $1,500 loss.

The second category of reward payment applies to the return of stolen property and is also for a maximum of $5,000. The reward amounts shown are the most that are available for any one occurrence. Should more than one source provide information or return stolen property, payment is made to the one that acts first.

Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, who voluntarily provides information that leads to a conviction or leads to the stolen property will receive the reward. However, that person cannot be any of the following:

·         Family members of the named insured

·         Employees

·         Family members of employees

·         Employees of law enforcement agencies

·         Employees of a business engaged in property protection

·         Any person having custody of the covered property at the time the theft was committed

·         Any person involved in the crime

The reward is not paid UNTIL there is a conviction or the property is returned.

4. Money Orders and Counterfeit Money

If the named insured, in good faith, provides services or hands over money or merchandise to another party who pays with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $5,000, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank.

Counterfeit money is also restricted to only money accepted during the course of business.

5. Forgery or Alteration

Loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent, or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.

If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.

The $2,500 limit is the most that will be paid under this coverage for a single loss. The amount may be exhausted by the loss itself, the defense of a suit or a combination. The limit can be increased on the Supplemental Schedule.

6. Outdoor Signs

Direct damage to outdoor signs owned or under the control of the named insured is covered. This coverage supersedes any other coverage provided for signs elsewhere in the policy.

The any one-occurrence limit is $5,000. This limit can be increased in the declarations.

7. Employee Dishonesty

Coverage of up to $10,000 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The limit of $10,000 can be increased by entering (and paying for) a higher limit in the declarations.

The employee may be working alone in committing the dishonest act(s), or the employee may collude with other persons. However, if any of those other persons are the named insured or a partner, member or manager of the named insured, there is no coverage.

 

Example: Lyle and Cramer are independent contractors working at Fredrica’s Spa and Gym. Both are licensed massage therapists. They also help Fredrica out at the front desk when they have time. Fredrica finds out that Lyle and Cramer have, over the course of 2 years, embezzled over $50,000 from her business. After the loss is discovered, she notifies her insurance carrier. There is no coverage because Lyle and Cramer were not employees.

 

There is no coverage for an indirect loss that is attributable to employee dishonesty, such as a business income loss, nor any costs to establish the existence or the amount of a loss or any legal liabilities. Legal expenses incurred are not covered.

An inventory computation and/or profit and loss statement cannot be the sole proof that a loss has occurred or be the sole method of establishing the value of the loss. In other words, there must be tangible evidence that a dishonest act occurred, and there must be a way to calculate the amount of that loss accurately.

The $10,000 limit (or higher if purchased) is the total amount available to respond to a single occurrence.

The dishonest act or event must happen during the policy period to be covered. However, the loss can be discovered up to one year after the expiration of the policy period.

The limit of insurance is not cumulative from year to year, so the limit shown is the maximum that will be paid for any one occurrence of a dishonest act or event. This limitation is not affected by how many years the policy has been in force or how much premium has been paid.

If the named insured, partner, officer, director, trustee, manager or member is aware of an employee’s prior dishonest acts, any loss caused by that employee is not covered unless the employee is acting in collusion with the individual who is aware of the past indiscretions.

If a loss that occurred in a prior policy period is discovered during the current policy period, this policy will pay for the loss provided there was no gap in coverage, and the loss would have been covered under this policy if it had been in effect at that time. The maximum payment is the lesser of the current limit of insurance or the prior insurance limit of insurance.

Possible Exclusion Ambiguity

There is an exclusion that may be confusing. It states that loss or damage due to a dishonest act performed by the named insured and any partner, member, officer, manager, director, or trustee is ineligible for coverage. Up to this point, the exclusion is very similar to exclusions in the Commercial Crime Form. However, the exclusion also bars loss for dishonest or criminal acts by authorized representatives and by anyone to whom the named insured has entrusted property. This part of the exclusion may be problematic. Doesn’t the named insured entrust items to employees as part of their duties? Aren’t employees authorized representatives? This wording is NOT used in the Commercial Crime policy and could cause confusion after a loss.

Related Court Case: Employee Dishonesty Exclusion Superseded Liability For Negligent Supervision.

8. Artificially Generated Electrical Current

This coverage is applicable only to computers. When an artificially generated electrical current damages or destroys the named insured's computers the carrier will pay, but only if the:

Any loss payment is subject to the deductibles in the policy and the limit on the Declarations that applies to this computer equipment.

9. Brands and Labels

Branding a product line is sometimes a very important issue for a customer. This coverage establishes how the insurance company will work with the customer after a loss to preserve brand value.

If the insurance carrier decides to take all or any part of the damaged property after a settlement value has been established, it agrees that the labels and identifiable markings of the salvageable property can be removed or that the property can be marked as salvage. The only condition is that such removal or marking cannot damage the property. The insurance company will absorb the loss of salvage value that results from this action.

The insurance company will also pay the reasonable costs the named insured incurs to have the labels removed, or the salvage markings added.

The maximum payment for the sum of the loss of salvage value and the relabeling or marking expenses is $25,000 per occurrence.

 

Example: Phyllis has exclusive rights to sell a hair care product within her geographic area. A loss occurs at her salon, destroying part of her stock, but the hair care product is salvageable. Phyllis is paid for the product, and Phyllis pays a firm to remove all identifying labels from the product while retaining the required ingredient labeling. The product given to the insurance carrier as salvage is worth $25,000 with the labels but only $15,000 without the labels. The cost to remove the labels is $5,000. The total cost to the carrier for this loss is $10,000 + $5,000 = $15,000.

C. Coverage Extensions Changes

1. Newly Acquired or Constructed Property

The only change is for computers. Coverage at newly acquired or constructed property in the CP 00 01 ends at the earliest of when the policy expires, thirty days after the property is acquired or when the values are reported to the insurance company.

This coverage extension adds one additional time of coverage ending but it applies only to computers. When ‘specific insurance’ is purchased at the newly acquired premises, coverage ends. The other times also continue to apply to computer.

Note: This extra item is confusing because it doesn’t say that coverage specific to computers is purchased but instead says only ‘specific insurance.’ This confusion could be an ambiguity to the benefit of the insured.  

2. Personal Effects and Property of Others

The limit is increased from $2,500 to $5,000 and can be further increased on the Supplemental Schedule. In addition, the coverage is extended to apply while in transit and while on a client’s premises.

 

Example: On Monday evenings, Mary drives to Mrs. Vexel’s to collect her wig for styling and every Tuesday morning she returns the wig to Mrs. Vexel. Unfortunately, one Monday evening, Mary’s car is in an accident and Mrs. Vexel’s wig is destroyed. The wig is covered for up to $5,000 because it was in Mary’s care, custody, and control and in transit.

 

3. Valuable Papers and Records (Other than Electronic Data)

The valuable papers and records coverage extension is increased from $2,500 to $10,000 for on-premises loss or damage. It also adds coverage when the valuable papers and records are off premises but only for $5,000. These limits can be increased for an additional premium.

Coverage is expanded to include not only the cost to replace or restore the lost information but also any physical loss or damage to the valuable papers and records owned by or in the named insured’s care, custody or control. The coverage extends to the cost of blank material and the labor necessary to transcribe any available records.

The covered cause of loss is more restricted and must be due to a specified cause of loss as defined in the CP 10 30–Causes of Loss - Special Form or due to collapse. Property that is held as samples or that has been sold and is waiting to be delivered is not covered. Any property that is being stored off premises is also not covered.

Note: If higher limits are needed, consider using one of the following forms because of causes of loss and coverage designed just for this exposure.

Related Articles:

AAIS Valuable Papers and Records Coverage Form

ISO Valuable Papers and Records Coverage Form

 

Example: A flood destroys all items in the basement of Phyliss’s Salon. Phyllis had all of her customer records, her independent contractor agreements, and her exclusive rights contracts in the basement and all were destroyed. Under an Inland Marine Valuable Papers Floater, she would have had coverage for the loss, but under this policy, the loss is excluded.

 

4. Property Off-Premises

The Personal Care Services Program enhances the property off-premises extension by adding computers while in transit.

5. Outdoor Property (07 13 change)

The Personal Care Services Program provides coverage for outdoor property for the following causes of loss:

·         Fire

·         Lightning

·         Explosion

·         Riot or civil commotion

·         Aircraft

The enhanced Personal Care Services Program applies limits based on the type of outdoor property.

The expense to remove property of others consisting of trees, shrubs, and plants debris is covered under this item. The property of others cannot belong to the owner of the building when the named insured is a tenant.

Note: No limit is mentioned with the expense to remove property of others item although there is a reference to the terms and conditions of the rest of extension. There could be an ambiguity as to what limit, if any, applies.

6. Employees’ Equipment

A very limited type of coverage is provided for employees’ equipment. The only causes of loss are fire, lightning, explosion, aircraft, vandalism, or theft. The equipment is covered while at the described location, on a client’s premises or while in transit with an employee. In transit means that the employee is traveling to or from the named insured’s described premises and a client’s premises, and the equipment is in a vehicle owned, leased or operation by the named insured.

Coverage is limited to $5,000 at the described location, $2,500 in transit and $2,500 on the client’s premises. The limit on premises and in transit limit (but not on client’s premises) may be increased on the Supplemental Schedule. There is a $500 per item of equipment and $1,000 per employee sublimit that cannot be increased on the schedule.

While many losses may be covered by this provision, there are significant gaps that will need to be explained to the customer when selling this product, such as:

·         Only six causes of loss

 

Example: Bitsy Curls has four employees and four independent contractors. A curling iron is left on and begins to smolder. Oily smoke soon engulfs the premises, permeating personal property and equipment so that it must be destroyed. The loss due to the damage to the equipment is denied because smoke is not a covered peril.

·         No transit coverage for items in employee or customer vehicles

·         $1,000 limit per employee

·         $500 limit per piece of equipment

In addition, this coverage is limited to employees. Many personal care services use independent contractors rather than employees, and this coverage would not be available to any of those individuals.

7. Accounts Receivable

The limit of insurance for the business personal property may be extended to include direct loss or damage to accounts receivable from a covered cause of loss. Coverage applies to:

·         The amounts the named insured is owed from customers but is unable to collect

·         Interest charges on loans the named insured obtains to offset collections while the insurer is handling the loss settlement

·         Any additional collection expenses that were created by the loss or damage

·         Other reasonable expenses incurred to re-establish accounts receivable records

The amount available is $10,000 for on-premises loss or damage and up to $1,500 for off-premises loss. The limit can be increased for an additional premium, and the higher limit will be shown in the declarations.

The reference to accounts receivables in the Property Not Covered section is deleted in regard to this supplemental coverage.

Note: If higher limits are needed, consider using one of the following forms because the coverage is designed just for this exposure.

Related Articles:

AAIS Accounts Receivable Coverage

Accounts Receivable Coverage

II. Modification to CP 10 30–Causes of Loss-Special Form

A number of the exclusions and limitations found in the CP 10 30–Causes of Loss-Special Form are modified for some of the additional coverages and coverage extensions. The modifications are as follows:

A. Mechanical Breakdown

The mechanical breakdown exclusion does not apply to computers.

B. Dampness, Dryness, Changes in Temperature, Marring Or Scratching

The only change in the dampness, dryness, changes in temperature, marring or scratching exclusion subparts is the dampness or dryness of the atmosphere portion.

An exception is added so that when an air conditioning system that is used with the computer is damaged by a covered cause of loss, the resulting damage to a computer because of any dampness or dryness is covered.

C. Additional Exclusions For Computer Coverage Only

1. Loss or damage caused directly or indirectly by any of the following are excluded. The exclusion applies even if other causes of loss contribute either concurrently or in sequence.

Note: The reason these extra exclusions are needed is that MS PS 01 includes coverage for mechanical breakdown of computers that is not provided by the CP 10 30.

a. Errors or Omission

There is no coverage for damage or loss due to human errors or omissions in processing, recording, or storing information on computers. There is an exception. Any resulting fire or explosion damage is covered when it is due to a covered cause of loss.

b. Electrical Disturbance

There is no coverage for damage due to electronic or magnetic injury, disturbance, or erasure of electronic recordings unless it is a result of a direct lightning loss or damage.

c. Computer-related Losses

There is no coverage for any loss or damage that is caused by or results from the failure, malfunction, or inadequacy of any of the following (regardless of who owns the property) because they cannot correctly recognize, process, distinguish, interpret, or accept dates or times:

·         Micro-processors and any other computer hardware

·         Software

·         Operating system software

·         Networks used by computers

·         Equipment that is computer-related or electronic and associated components

·         Any other products that depend on the items listed immediately above in any manner.

d. Computer Advice or Consultation

Any of the following provided by the named insured or for the named insured is not covered when used to determine, test, or rectify potential or actual problems described in exclusion c. above.

·         Advice

·         Consultation

·         Design

·         Evaluation

·         Inspection

·         Maintenance

·         Repair

·         Replacement

·         Supervision

2. When Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation excluded above result in a specified cause of loss or elevator collision, that resultant loss is covered. However, there is no payment to repair, replace, or modify any item listed in exclusion c. above.

The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.

D. Employee Dishonesty

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Employee Dishonesty Coverage provided in this endorsement. The only exclusions are Governmental Action, Nuclear Hazard, War and Military Action and the specific exclusions discussed in the Employee Dishonesty Additional Coverage.

E. Outdoor Signs

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Outdoor Sign Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War, Military Action, Wear and Tear, Rust and Mechanical Breakdown.

Related Article: Basic, Broad, and Special Causes Of Loss Forms Analysis, for a description of the exclusions

F. Valuable Papers and Records and Accounts Receivable

·         The only exclusions that apply to Valuable Papers and Records and Accounts Receivable are:

·         Governmental action

·         Nuclear hazard

·         War and military action

·         Computer-related losses

·         Computer advice or consultation

·         Continuous or repeated seepage or leakage of water—14 days or more

·         Water, other liquids, powder or molten material that leak or flow from plumbing, heating, air conditioning or other equipment caused by or resulting from freezing

·         The concurrent causation exclusions that are part of B.3.

Note: This item is ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapse, while accounts receivable coverage is subject to the CP 10 30 causes of loss. Remember that under the Valuable Papers Coverage Extension, only specified causes of loss and collapse are considered covered causes of loss. Combining the two coverages under this same modification would suggest that the two are covered for the same causes of loss when they are not.

G. Accounts Receivable

As noted in F. above, most of the exclusions in Cause of Loss Form do not apply to Accounts Receivable, but the following are unique to Accounts Receivable:

·         Loss involving alteration, falsification, concealment, or destruction of accounts receivable records if these actions were meant to conceal another action such as giving, taking, or withholding money, securities, or other property.

·         Loss due to errors or omissions in a covered operation's bookkeeping, accounting or billing functions.

·         Loss that is only found due to an audit or inventory. There must be some other outside evidence.

Changes to the Commercial General Liability Coverage Part

Note: This is one of the few market segments with no changes in the Commercial General Liability Coverage Part.

III. Definitions

Nine definitions are added:

Computer is a programmable electronic device used to work with data. While the definition does apply to peripheral equipment and to related air conditioning and fire suppression systems, it doesn’t apply to data or media.

Counterfeit money is a copy of money that is meant to deceive.

Employee is a defined term only for Money and Securities and Employee Dishonesty coverages. (07 13 changes)

Employee is expanded beyond the full-time employee of a business. There are seven different categories that qualify as employees:

a.     An actual person (not a corporation) who is paid by the named insured and is under the control of the named insured with respect to performing his or her duties. The person remains an employee for 30 days after termination, but only if termination is not related to dishonest actions.

b.    A person who is a substitute for an employee or is hired for short temporary work is considered an employee while under the control of the named insured except when caring for property off-premises.

c.     A person leased to the named insured that is not a person described in a. or b. above. There must be a contract and a labor-leasing firm involved.

d.    A consultant for the named insured but only if that consultant was formerly an employee, director, partner, member, trustee, or manager.

e.     A guest student or intern but only while acting as a student or providing services for the named insured. There is no coverage for loss of property off premises.

f.      Any employee of an entity that merged with the named insured or was acquired by it prior to the policy effective date.

g.    Managers, directors or trustees when acting as employees or while on a task-oriented board.

An employee does not include independent contractors or similar type individuals unless specifically described in the list above.

Forgery is when one party signs another party's name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.

Manager is any director in a limited liability company.

Member is one of the owners of a limited liability company. (07 13 addition)

Money includes all currency, coins, and banknotes with a face value and in current circulation, plus money orders, travelers’ checks and similar items that are held for sale to the public.

Occurrence, as defined here, applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money coverage, it means either one or more related acts or events by one or more persons or one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses involving one or more instruments caused by any person or in which that person was involved. Under Employee Dishonesty, it means all losses that result from a single act or series of acts caused by one or more employees.

Securities are evidence of debt such as stock certificates, bonds, contracts, tokens, stamps, credit card evidence that can be used to collect from the credit card company, and other items that represent money but are not money.

ENDORSEMENTS

The forms and endorsements developed for the Market Segments series of programs carry the designation “MS.”

Several specific endorsements are available to modify the coverage provided under the Personal Care Services program. However, all of the endorsements available under the Property and General Liability Coverage Parts are available under this division.

Related Articles:

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements and Their Uses

MS PS 03–Personal Care Services-Hired Auto and Non-Owned Auto Liability Insurance

This endorsement amends the General Liability Coverage Part to provide coverage on a basis similar to commercial auto coverage. Hired auto coverage applies to bodily injury and property damage that arises from the maintenance or use of a hired auto by the named insured or any employee of the named insured. Non-Owned Auto Liability applies to bodily injury or property damage that arises from any person using a non-owned auto in the course of the named insured’s business.

Note: Non-owned coverage is designed to protect the named insured, not the owner or driver of the vehicle.

MS PS 04—Personal Care Services—Fine Arts Coverage

This endorsement provides $25,000 for fine arts that are owned by the named insured or by others but are in the care, custody or control of the named insured.

Fine arts are described but not limited.

Important: The valuation is actual cash value, not replacement cost or stated value. This limits the usefulness of this endorsement. Consider using a Fine Arts Floater instead.

Related Articles:

AAIS Fine Arts Coverage Forms

ISO Commercial Fine Arts Coverage Form

UNDERWRITING CONSIDERATIONS

Any program offered by an individual insurer will have its own set of eligibility guidelines. If the program is a generic or standard program, as in the case of the Market Segments Programs developed by the Insurance Services Office, Inc. (ISO), it normally has a set of qualifying criteria. Because there may be differences between the two sources of eligibility criteria, it is important for the insurance professional to be thoroughly familiar with the applicable new business and renewal qualifications.

The following review of the underlying and eligibility requirements for the Personal Care Services Program is for the ISO generic program.

Specific Personal Care Services Operations

This wide variety of operations involves an owner, employee, or independent contractor having direct contact with customers. Professional coverage is important, but not part of the coverage included in this form. Hygiene issues must be the number one concern of any operation. Slip and fall exposures should be kept to a minimum, especially spills. Understanding the specific exposures should start with an assessment of the services offered to clients and where the services are provided. When services are provided at a client’s home or business there should be procedures in place to protect both the employee and the client.

COVERAGE ISSUES

Commercial Property Coverages

Many of the issues related to the underwriting of commercial property insurance, such as construction, occupancy, physical characteristics, types of rates and so forth, are discussed in detail under the commercial property section.

Related Article: Commercial Property Program Underwriting Considerations

Commercial General Liability Coverages

Many of the issues related to the underwriting of commercial general liability insurance, such as claims-made versus occurrence coverage, limits, deductibles, endorsements, and so forth, are discussed in detail under the commercial general liability section.

Related Article: Commercial General Liability Policy Underwriting Considerations

Property Enhancements

Several property enhancements are added to the commercial property coverages via the Market Segment endorsement. Any increase in exposure presented by the individual risk hazards and covered by the endorsement enhancements should be identified. Once identified, these hazards and exposures should be evaluated to determine if they are contemplated by the program's coverages and rating structure. The exposures should be addressed if any additional coverages, endorsements, premiums, or other tailoring is necessary. The property enhancements with the most significant underwriting concerns are as follows:

Accounts receivables are covered up to $10,000. The insured should have copies of records stored at a safe, off-premises location.

Brands and Labels coverage of up to $25,000 can reduce the salvage potential of any loss and therefore drive up the cost of a loss. It is important to be aware of any contractual agreements involving branding and labeling.

Outdoor Signs coverage is provided for up to $5,000 with very broad causes of loss. This can be significant if the operation is in a wind prone area.

Employee Equipment coverage is limited but could be significant for certain operations. If there are a number of employees, the theft exposure could be particularly attractive.

Crime and Dishonesty Enhancements

The Personal Care Services Program endorsements add coverage for money and securities, money orders and counterfeit paper currency, forgery and alteration, and employee dishonesty. The limits of $10,000 for the money and securities and $10,000 for Employee Dishonesty are significant and can be increased.

The insured should be evaluated for crime protection devices, including the type of devices used and how they are maintained. The evaluation should include alarms, locks, lighting, fencing, guards, or other security measures.

Sound hiring procedures, background checks, and internal controls are necessary to minimize employee dishonesty losses. Procedures should be implemented and reviewed regularly to monitor and prevent the potential for crime and dishonesty losses.

A significant coverage gap exists when independent contractors are allowed access to funds and property. The employee dishonesty will not respond and neither will the money and securities or commercial property form if such a person steals money or property. Therefore, it is very important to know if the named insured uses employees or independent contractors.

Related Article: Crime Underwriting Considerations

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated according to the rules found in the ISO Commercial Lines Manual. The MS PS 01 has a number of enhancements, and pricing should be in place for any one used. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in the policy's other parts.