MARKET SEGMENTS DIVISION—PLUMBING AND HVAC CONTRACTORS PROGRAM

(February 2023)

Collapsible Index

Eligibility

MS PC DS–Plumbing and HVAC Contractors Supplemental Schedule

MS PC 01–Plumbing and HVAC Contractors 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. Changes To The Commercial General Liability Coverage Part

IV. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

The Plumbing and HVAC Contractors 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 Plumbing and HVAC Contractors Program, including the eligibility, supplemental schedule, MS PC 01–Plumbing and HVAC Contractors, 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

Specific Contracting Operations

This classification is broad, consisting of plumbing contractors, heating/air conditioning contractors, boiler contractors and fire suppression contractors. The eligible classifications are as follows:

A business with other classifications as a part of its operations remains eligible for this program, provided there are none of the following classifications:

MS PC DS–PLUMBING AND HVAC CONTRACTORS SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that needs to be shown on a Supplemental Schedule for the Plumbing and HVAC Contractors 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 PC 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. A list of specific coverages appears in this section. However, another area of the schedule may also be used for making limit changes for an unlisted coverage. The coverages 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.

Forms Applicable

The final section of the Supplemental Schedule allows for the entry of specific endorsements that apply at a specific premises.

MS PC 01–PLUMBING AND HVAC CONTRACTORS ANALYSIS

The opening paragraph of the Plumbing and HVAC Contractors endorsement clarifies which of the coverage forms and the property causes of loss forms are being modified by this endorsement. They are:

The Plumbing and HVAC Contractors 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 Plumbing and HVAC Contractors Program endorsement cannot apply.

This means that if a CPP is issued with commercial crime, commercial inland marine, and commercial general liability coverage but no property coverage, the Plumbing and HVAC Contractors endorsement cannot be added.

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

A. Additional Coverage Change–Fire Department Service Charge

The Limit for Fire Department Service Charge is increased to $5,000 and can be further increased in 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 $5,000 applies when the covered property is either in the described premises or at a bank while the $2,500 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 expense.

Note: No deductible applies to this supplemental coverage, and there is no coverage if the system is discharged during testing or installation.

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 who 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:

·         The named insured

·         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.

Example: Peaceful Pipers advertises an award for help with a theft loss. The theft involving some expensive kitchen and bathroom faucets occurred on March 17. The local police hear from the following:

Party One – March 19 – An employee of Peaceful Pipers provides information voluntarily

Party Two – March 21 - A fellow contractor provides information voluntarily

Party Three – March 23 – A person notices important information on a video he was taping at the time of the loss. All of the information provided helps to lead the capture of the thieves. However, only Party Two receives the $1,000 reward.

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 $1,500, 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 such instruments that are 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 $5,000 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

Up to $5,000 is provided for direct loss or damage to outdoor signs in a single occurrence. This amount can be increased for an additional premium. The higher limit must be shown in the declarations.

To be covered, the sign(s) must be owned by or in the care, custody, or control of the insured.

Later in this form, there will be amendments to the Special Causes of Loss form that state the causes of loss that are applicable to this coverage.

7. Employee Dishonesty

Coverage of up to $5,000 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The limit of $5,000 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 include the named insured, partner, member, or manager of the named insured, there is no coverage.

There is no coverage for any type of indirect loss attributable to the employee dishonesty, such as a business income loss, 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 accurately calculate the amount of that loss.

The $5,000 limit (or higher if purchased) is the total amount available to respond to a single occurrence. The maximum is not affected by the loss involving more than one party or by it involving a series of related acts.

The dishonest act or event must happen during the policy period to be covered. 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, regardless of 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.

The act or event that causes a loss must have not only occurred during the policy period but must also be discovered no later than one year from the end of the policy period. There is an important exception. If the insured suffers a loss that would have been eligible under a previous policy but was not discovered until after the one-year limitation expired, there may be coverage. However, the old loss would have to meet two criteria. First, this policy must be the replacement for the one in force when the loss actually occurred. Second, the loss would have to involve a loss that is eligible under this policy provision. In addition, any payment made is subject to the current policy term's insurance limit (unless the prior term's limit was lower).

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 an insured's computers, the insurance company will pay, but only if one of the following applies:

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

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 computers.

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

There is no change in the limit, but it can be increased on the Supplemental Schedule. The coverage is modified to exclude personal effects coverage for employees’ tools to prevent a conflict with the Employees’ Tool Extension discussed later in this form.

An enhancement expands coverage under this extension to apply not only at the named insured’s premises but also while covered personal effects and property of others are at a client’s premises or while in transit.

The maximum paid for damage to a single client’s property is $500.

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

4. Property Off-Premises

The Plumbing and HVAC Contractors Program enhances the property off-premises extension by adding coverage for computers while in transit. It then restricts coverage by removing coverage for employees’ tool and property covered under the Contractors Installation Coverage Extension. The restriction prevents duplication of coverage.

5. Outdoor Property

The Plumbing and HVAC Contractors Program provides coverage for outdoor property (unless such property is merchandise) for the following causes of loss:

·         Fire

·         Lightning

·         Explosion

·         Riot or civil commotion

·         Aircraft

Applicable limits are 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 particular 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’ Tools

This extension covers damage or loss to tools belonging to the named insured’s employees. The coverage exists while the tools are at the named insured’s premises, at a client’s premises or in transit between those locations. Coverage applies only if the tools are in a vehicle owned, leased, or operated by the named insured. This extension limit is a maximum of $5,000 for any one occurrence at each described premises and a maximum of $2,500 for tools either in transit or at the client’s premises. There is a cap of $1,000 for the tools of any one employee and $500 for a single tool. The per occurrence limit may be increased for an additional premium, and the higher limit entered on the declarations.

Before using this form to increase limits, it is important to know that this extension provides coverage for only six causes of loss. They are:

A locked car warranty is part of this extension. There is no coverage for loss by theft from an unattended vehicle unless the windows, doors, and other compartments are closed and locked and there are visible signs of unauthorized entry. This warranty does not apply to property in the custody of carriers for hire.

Also, remember that this is an extension, not additional coverage, so the limit is part of the building and personal property limit, not in addition to it.

 

Example: John and Jerry drive separately from Ransom’s Plumbing to the Traylor Office Complex. John locks the company van, and Jerry locks his car as they meet with the complex’s head of maintenance. When they return to their vehicles to gather their tools, they are surprised to discover the doors jimmied opened and many tools missing. John’s tools are covered up to $2,500 because they were in a company owned vehicle, but Jerry’s are not covered because his tools were in his personal vehicle.

Tools Not Covered

Tools Covered

 

 

Related Article: AAIS Contractors’ Equipment Coverage Form – see that article’s section on Employees Tools.

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 $5,000 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

8. Contractors’ Installation Coverage

This coverage is normally provided under a Commercial Inland Marine Installation Floater.

Related Article: AAIS Installation Floater Coverage Form

The coverage provided with this Extension is much more limited than what is found under an inland marine installation floater but may be sufficient for many operations. The named insured can choose to extend coverage that is provided in the Building and Personal Property Coverage Form to include:

This above described property is covered when it is:

The described property is covered while it is waiting to be installed, while it is being installed and while it is waiting to be accepted by the person purchasing the property.

Coverage ends at the earliest of:

 

Example: Ransom Plumbing is installing new piping through the Traylor Office Complex. The work started on 9/1 and is scheduled to end on 3/1. The policy expiration date is 1/1. Piping is stolen from the site on New Year’s Day. There is no coverage because the policy expired at 12:01 AM 1/1.

 

There is no coverage for the following property items:

Any damage or loss that is the result of any of the following is not covered:

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

 Several exclusions and limitations found in the 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 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. The following exclusions apply to computer coverage. Loss or damage due to any of the following is excluded regardless of other concurrently or sequentially occurring causes of loss.

Note: The reason these extra exclusions are needed is that MS PC 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 caused by or resulting from errors or omissions in the processing, recording or storing of 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:

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.

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 applicable exclusions are Governmental Action, Nuclear Hazard, War, and Military Action. All other exclusions are located in the Employee Dishonesty Additional Coverage.

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

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 anti-concurrent causation exclusions

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 Receivables

The following exclusions apply in addition to the exclusions described in F. above:

III. Changes to the Commercial General Liability Coverage Part

A. One New Coverage is Added for Plumbing and HVAC Contractors

YOUR WORK COVERAGE

This is a separate Coverage with its own Insuring Agreement and Exclusions.

1. Insuring Agreement

The coverage is for damage to a client’s property because of the work performed by the named insured or a named insured employee (note that subcontractors are not included). The work must have been completed by the named insured or the employees of the named insured during the policy period. The named insured must agree that payment is necessary and must have received a request for payment from the client within 90 days of the completion of the work.

This coverage does not include defense costs or other services. The important part of this coverage is that legal liability is not required to be proven.

This is a no-fault coverage over which the named insured exercises control. If the named insured agrees that there is damage and the damage is not otherwise excluded under the policy, the named insured can satisfy the complaint and then provide all of the detail to the insurance company for repayment.

A limit of $5,000 per occurrence and a $10,000 annual aggregate limit are applicable.

There is a $250 per occurrence deductible applicable before the insurance company begins to pay anything.

 

 

Example: Lonnie installed a new water heater for Sharon. The next day he received a call that water was spewing throughout the basement. He returned and immediately corrected the problem. A week later Sharon submitted a bill to him asking for damages to items in her basement that were damaged by the water. Lonnie reviews the bill, agrees that the payment is owed, and agrees to pay, provided she has the bill notarized. She has the bill notarized, and when it is received, he issues the check to her. Lonnie turns the bill in to his carrier for reimbursement.

 

2. Exclusions

There are three exclusions:

No coverage if the damage is excluded under a CG 00 01 or 00 02-property damage exclusion.

3. Conditions

Duties in the Event of a Claim replaces the condition called Duties in the Event of Occurrence, Offense, Claim, or Suit and has the following terms:

IV. Definitions

The following eleven definitions are added:

Client is anyone who has a written agreement with the named insured to perform services for a particular location and who has been billed for the services performed by the named insured.

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 money imitation meant to deceive. (10 06 change)

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 person signs another person’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 in this endorsement, applies to only the Crime portions of this form, and its 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 refers to 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 receipts that can be used to collect from the credit card company, and other items that represent money but are not money.

Temporary Storage Location is a location where property that is meant to be installed is stored. This applies only if the job site where the property is to be installed is not owned or controlled by the named insured and will begin within 30 days or is already in progress.

ENDORSEMENTS

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

It is important to remember that 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

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 ISO’s Market Segments Programs, it 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 Plumbing and HVAC Contractors Program is for the ISO generic program.

Specific Contracting Operations

This classification is broad, including Plumbing, Heating and Air Conditioning, Boiler and Fire Suppression contractors. The classifications that qualify for coverage are as follows:

A business with other classifications as a part of its operations remains eligible for this program provided there are none of the following classifications:

Plumbers may operate in heavy manufacturing operations where the piping must be able to withstand extreme heat or cold as well as high pressure. Other plumbers operate in residential situations. Therefore, plumbing contractors must be underwritten very diligently.

Some operations are small and mistakes may cause only slight inconveniences. In other operations, an error may result in catastrophic loss. It is very important to obtain information on previous customers and job descriptions in order to understand the full scope of the operation.

It is also important to review the operation's equipment list to see if it matches the types of jobs the insured claims it is performing. An evaluation should include the study of the contractor's use of subcontractors and its contractual relationships because most plumbing and HVAC contractors work alongside a variety of contractors.

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 are necessary. The property enhancements with the most significant underwriting concerns are as follows:

·         Electronic data processing equipment and electronic media and records have been added via the endorsement. Theft and fire are major concerns. All media should be backed-up, and copies stored off-premises in a safe location. Mechanical breakdown is included, so the electrical system, including wiring, circuit breakers, and amperage, connecting to the electronic data equipment should be checked to reduce the potential for loss. Surge protection should be installed.

·         Accounts receivables are covered up to the stated limits. The insured should have adequate back-ups and copies stored off-premises in a safe location. The same is true of valuable papers and records.

·         Personal effects, property of others and employees’ tools provide additional exposures especially with the transit and off-premises coverage. The underwriting effort must include a determination of what kind of property is covered by these enhancements, the average and maximum values of such property, and how frequently the insured is exposed to these property hazards.

·         Installation Floater Coverage is provided up to $10,000. This provides coverage at a number of locations that are out of the direct control of the insured. There should be a method used to accurately track where all property is located and the status of all installation projects because coverage can continue up to 90 days after a job is complete.

Crime and Dishonesty Enhancements

The Plumbing and HVAC Contractors Program endorsements add coverage for money and securities, money orders and counterfeit money, forgery and alteration and employee dishonesty.

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. Particular attention should be given to any storage of copper piping and any other type of metal that is popular with local scavengers.

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.

Related Article: Crime Underwriting Considerations, for more information.

Liability Enhancements

Your work coverage gives $5,000/$10,000 coverage for damage caused by the work of the named insured. The named insured should have a method in place that prevents careless mistakes in handling client’s property to prevent minor accidents from occurring.

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated in accordance with the Commercial Lines Manual for the specific coverage part.

The MS PC 01 has several enhancements, and those must be priced. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in the other parts of the policy.