Market Segments Division—Restaurants Program

(February 2023)

Collapsible Index

Eligibility

MS RS DS–Restaurants Supplemental Schedule

MS RS 01–Restaurants 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 Restaurants Program is an enhancement of the Commercial Package Policy. This article will discuss items specific to the Restaurants Program, including the eligibility, supplemental schedule, MS RS 01–Restaurants and applicable special endorsements. In addition, there is a section on underwriting and rating.

This program is revised with a 07 13 edition date. Changes to the form appear in bold text.

ELIGIBILITY

Specific Restaurant Operations

Almost any restaurant or similar operation qualifies under this market segment as long as it serves food on premises and includes customer seating. The eligible classifications are:

Delicatessens – 11288
Ice Cream Stores – 14401
Restaurants – 16819, 16820, 16900, 16901, 16902, 16910, 16911, 16915, 16916, 16920, 16921, 16930, 16931
A business with other classifications as a part of its operations remains eligible for this program, provided there are none of the following classifications:

Caterers – 11039
Dance Halls, Ballrooms or Discotheques – 11273 and 11274
Nightclubs, Cabarets and Comedy Clubs – 15656
Restaurants with sales of alcohol in excess of 75% of the receipts with bar service only – 16940 and 16941

Note: ISO added two new restaurant classes in the 04 13 edition of the general liability class codes but did not update the eligibility criteria for this market segment. The codes – 16905 and 16906 – are for restaurants that allow patrons to bring their own alcoholic beverages onto the premises. Because it is more similar to the eligible classifications than the ineligible classification, they will probably be eligible for this market segment when it is updated.

MS RS DS–RESTAURANTS SUPPLEMENTAL SCHEDULE

This is a discussion about the specific information that must appear on a Supplemental Schedule for the Restaurants 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 RS 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. An open space is available for entering a coverage and limit of insurance. The coverages are:

· Fire Department Service Charge

· Money and Securities

· Money Orders and Counterfeit Money

· Forgery or Alteration

· Outdoor Signs

· Employee Dishonesty

· Spoilage

· Business Income From Dependent Properties

· Food Contamination

o Extra Expense

o Business Income

o Additional Advertising Expenses

· Personal Effects and Property of Others

· Valuable Papers & Records

· Property Off-Premises

· Property In Transit

· Other (specify)

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.

Business Income – Ordinary Payment Additional Exemption

There is a space to enter job classifications and/or employees considered exempt from ordinary payroll. This means that their payroll will continue after the ordinary payroll coverage ceases.

Example: Mercy Me Fishery is known for its dessert chef’s creations. If a loss occurs, Mercy Me will keep the chef on the payroll no matter how long it takes to return to business. The chef is listed here by name or job title so that the business income payment includes that salary.

Hired and Non-Owned Auto Liability Insurance

If coverage is desired, the box must be checked, and MS RS 03–Restaurants-Hired Auto and Non-owned Auto Liability Insurance is attached. The limits can be entered on this Supplemental Schedule or on the schedule included in the MS RS 03 form. Separate insurance limits apply for these two coverages.

Loss or Damage to Customers’ Autos Section

The insured has only one option regarding coverage for loss or damage to customers’ autos - Legal Liability Coverage for Loss or Damage to Customers’ Autos using MS RS 04.

The limit and deductibles are entered by premises. The items that must be entered are:

· The per event limit of insurance

· The per customer's auto deductible for loss by theft, vandalism or mischief

· The maximum deductible per occurrence for loss by theft, vandalism or mischief

· The per customer’s auto deductible for loss by collision

Fine Arts Coverage

In order for this optional coverage to apply, a premises and premium must be entered, and the MS RS 06–Restaurants-Fine Arts Coverage must be attached. This coverage was included in the MS RS 01 initially but is now optional coverage.

Forms Applicable

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

MS RS 01–RESTAURANTS ANALYSIS

The opening paragraph of the Restaurants endorsement clarifies which of the coverage forms and the property causes of loss form are being modified by this endorsement. The affected areas 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 Part

The Restaurants endorsement is not a complete coverage part. It must be attached to a package containing all three forms above.

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 Modifications

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 $25,000 applies but 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 $15,000 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 $15,000 limit.

The good news is that there is no deductible. However, there is no coverage if the system is discharged during testing or installation.

Example: Happy Hooders were hired by Le Lobster Dump restaurant. Happy was installing a hood-extinguishing unit over a new set of fryers purchased by Le Lobster. During the final stage of the installation, a Happy employee set off the extinguisher, and two fryers' internal components were ruined. Le Lobster was insured with a Market Segment-Restaurants form, so the owner submitted the $3,200 loss to its insurer. The insurer quickly replied that because the loss occurred during installation, compensation for the loss must come from Happy Hooder because the Le Lobster policy excludes such incidents.

3. Reward Payment

Reward payments are available to assist in solving crimes related to covered losses. There are two reward categories. First, 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 property loss. However, the reward payment will be for no more than the least of the actual cash value of the damaged property at the time of the loss, the amount it takes to repair or replace the property, or the settlement value developed based on the policy’s conditions.

Second, rewards up to $5,000 are paid for the return of stolen property. The reward is limited on the same basis as above. Should more than one source provide information or return stolen property, payment is made to the one that acts first.

Examples: The Brazen Bakerie offered a reward to help find the thief who stole some expensive cooking equipment. The local police report that they found the culprit based on information from the following:

Party One - February 6th - Involuntary source (revealed after coercion from authorities)

Party Two - February 9^{th -}Voluntary source – an accessory to the crime

Party Three - March 4^{th -}Voluntary source

All three provide information that leads to the capture of the thieves, but only Party Three receives the $3,500 reward because she was the first eligible voluntary source to respond.

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.

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 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 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. 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.

Coverage is also provided for loss or damage to money and securities or other property of a customer caused by a theft committed by an identified employee of the named insured who is acting alone or in collusion with others. The customer must own the property, holding the property for another or legally liable for the property. All settlements involving customer property loss are between the named insured and the insurance company. The customer cannot present the claim independently.

There is no coverage for any 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 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.

A special exclusion applies to employees known to have committed a dishonest act. If the named insured (or any partner, trustees, member, manager, officer or director of the named insured) discovers that an employee was previously involved in a dishonest act, there is no coverage for any acts of that party. It doesn’t matter whether the incident occurred before or after the insured hired the employee—coverage ceases. The termination takes effect the moment the party's prior act is discovered. There are no exceptions to this exclusion (unless the insurer is willing to write a manuscript endorsement to document an exception).

The $25,000 limit in the form may be increased on the Supplemental Schedule. This limit is the total amount available for a single occurrence. 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.

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

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 one more exclusion, and it may not be very clear. 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. By the way, under the customer’s property portion of this coverage, dishonest acts by the named insured managers, directors, trustees, or authorized representatives are covered.

8. 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 will pay the reasonable costs the named insured incurs to remove/replace labels or mark the items as salvage even though doing so reduces the salvage value of the items.

There is no separate limit for this coverage. This means the anticipated costs associated with this coverage should be included in the business personal property limit of insurance.

9. Ordinance or Law – Equipment Coverage

This coverage was inspired by the dynamism surrounding environmental laws. Federal, state and community standards may require changes in equipment when it is replaced for any reason. If so, this coverage pays for the upgrade but only if the equipment’s valuation is on replacement cost and the item is being replaced due to a covered cause of loss.

If refrigeration equipment is damaged this coverage pays three additional costs:

Mandatory refrigeration reclamation
Retrofitting of CFC-type equipment so that it uses non-CPC refrigerant to meet Clean Air Act requirements.
Recharge of the system with non-CFC refrigerant.

Coverage applies per piece of equipment.

This coverage does not pay for costs related to pollutant enforcement. In addition, if the named insured had an order to comply with an ordinance or law prior to the loss and failed to comply, there will be no payment for that previously neglected upgrade under this Additional Coverage.

When the equipment is actually repaired or replaced, the payment is the lesser of:

· Actual amount spent to repair or replace (repair cost cannot exceed the cost to actually replace) – this includes the cost to upgrade to the ordinance or law.

· Limit on the Declarations for covered building or business personal property.

Note: Coinsurance does not apply to this Additional Coverage.

Example: Happy Bakery has been in business at the same location for 50 years. A fire loss in their kitchen destroyed all the equipment. The destroyed refrigeration equipment must be replaced with equipment using non-CFC refrigerant. Because of this Additional Coverage, the upgraded equipment is covered. In addition, the reclaiming of the refrigerant from the damaged refrigerator is paid. There is no additional limit for this coverage, so the coverage is limited to the available limit of insurance for the covered property.

10. Lock Replacement

If keys to locks on premises are stolen or lost, the insurance company will pay up to $5,000 to replace or repair the locks, subject to a $100 per occurrence deductible.

Note: The keys can be to any locks as long as the locks are on premises.

11. Spoilage Coverage

Coverage applies if perishable stock is damaged by any of the following:

Change in temperature or humidity due to the failure of on-premises refrigeration, cooling or humidity controlling devices or to an on-premises mechanical breakdown.
Refrigerant contamination
Power outage but only when it is out of the named insured’s control. This is any type of interruption of electrical power, on or off the premises, that causes a temperature or humidity change.

The limit of $50,000 can be increased on the Supplemental Schedule.

The valuation is based on the selling price of the stock minus any discounts or expenses the named insured would have incurred in selling the product but did not incur because the items were damaged.

It is important to review the definition of perishable stock later in this analysis since it is a defined term.

This coverage has its own set of exclusions, deductible, and warranty. They are as follows:

Earth Movement
Governmental Action
Nuclear Hazard
War and Military Action
Water
Unplugging of the particular refrigeration, cooling or humidity controlling device
Flipping the switch and thereby turning off the electrical power to the device
The electrical utility’s inability to supply power because of either a lack of fuel or because of a governmental order
When there is an on premises power source such as a generator, solar power or wind turbine and it is unable to supply sufficient power because there is too much demand for power
The breaking of glass that is a permanent part of the refrigeration, cooling, or humidity-controlling unit.

There is a statement that the deductible on the Declarations applies, but there is no spoilage deductible on the supplemental schedule. This paragraph specifically states that no other deductible on the policy applies to this coverage. If left as is, it would appear that no deductible does apply to this coverage even though it is clear that the writers intend for a specific spoilage deductible to apply.

The warranty states that the named insured must maintain a refrigeration maintenance or service agreement. If the named insured ends the agreement and fails to notify the insurance company, coverage is suspended at the location impacted. Coverage is restored when the service agreement is reinstated or replaced.

Note: There is no suspension if the supplier of the agreement ends the arrangement. This is ambiguous and leaves situations in question, such as how does a named insured voluntarily terminate a service agreement. Must they phone or mail a request for termination? What happens if they just don’t pay the bill and then wait for the service company to cancel the contract?

12. Artificially Generated Electrical Current

This coverage is applicable only to computers. When artificially generated electrical current damages or destroys the named insured’s computers, the company will pay, but only if one of the following applies:

An occurrence that causes the loss or damage takes place within 1000 feet of a described premises
Power surge, interruption of power, blackout, or brownout is due to an occurrence that took place within 1000 feet of the premises

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

13. Business Income (07 13 change)

Coverage is provided for loss of business income for up to twelve months after the date of an eligible loss. The income interruption must be related to a direct covered loss to covered property that is located at the named insured’s premises. If the Covered Property is personal property in the open or in a vehicle, it must be within 100 feet of the premises. When the named insured occupies only part of the building, the definition of the named insured’s premises is all of the following:

The part of the building occupied, rented or leased by the named insured
As respects to damage to property in the open or in or on a vehicle, the greater distance of the space located within either 100 feet of the building or 100 feet of the premises described on the declarations. (07 13 addition)
The space, either in the building or on the premises, that is used to gain access to the named insured’s portion of the building. (07 13 change)

Ordinary payroll is covered for only the first 60 days following the date of loss. The policy defines ordinary payroll. The named insured can choose to remove specific employees or employee classifications from the ordinary payroll definition so that their payroll will continue to be covered. This is done by entering either additional employee classifications or specific employee names on the Supplemental Schedule.

Extended Business Income provides coverage for up to 30 days after the business has reopened in order to assist the named insured’s business income until it has returned to the earned income prior to the loss.

Refer to the definitions section under operations, period of restoration and suspension. These provide limitations and explanations of how this coverage operates.

It is important to note that there is no maximum limit of insurance for this coverage. Coverage is based solely on how long the operations are suspended. The only limitation is the 12 months.

Related Article: Time Element Coverages Overview

14. Extra Expense (07 13 change)

Up to 12 months of coverage is provided for the extra expenses that the named insured incurs to keep the business running or shorten the time the business is not open. As is the case with business income, extra expense coverage must be directly related to physical loss to Covered Property. Further, that loss must be created by a Covered Cause of Loss at a described premises.

When the named insured occupies only part of the building, the definition of the named insured’s premises is all of the following:

The part of the building occupied, rented or leased by the named insured
As respects to damage to property in the open or in or on a vehicle, the greater distance of the space located within either 100 feet of the building or 100 feet of the premises described in the declarations. (07 13 addition)
The space, either in the building or on the premises, that is used to gain access to the named insured’s portion of the building. (07 13 change)

Extra Expense is not defined, but it must involve a cost that helps to avoid or minimize the suspension of the named insured’s operations. The only expenses specifically barred from coverage are those related to dealing with interruptions caused by strikes or by the cancellation of lapse of license. There is no coverage or payment for any type of consequential loss. Further, there is no maximum limit of insurance for this coverage. Coverage is based solely on how long the operations are suspended. The only limitation is 12 months.

15. Business Income from Dependent Properties

This coverage protects against business income loss caused by direct damage to a dependent property. Protection applies only if the damage is from a covered cause of loss. A dependent property is an operation controlled by an entity other than the named insured that provides services for, accepts product or services from, manufactures products under contract for, or that attracts customers to the named insured’s business. The definition of dependent property later in this endorsement provides information on what is and what is not considered dependent property.

There is no coverage for business income lost due to electronic data – whether the electronic data is the only loss or is part of another property loss.

Any sustained loss is reduced by the extent the named insured can resume or continue operations by using other available sources of material or outlets for property. If the named insured delays resuming operations, payment is reduced to only the loss that should have been sustained.

Coverage starts 72 hours after the direct loss occurs and ends when the dependent property should have been repaired, rebuilt, or replaced. There is no coverage for the time required to meet ordinance or law requirements or to comply with pollution testing or cleanup.

The coverage limit is $10,000 or a higher limit on the Supplemental Schedule.

Related Article: Coverage from Dependent Properties

16. Food Contamination (07 13 changes)

This coverage is activated when a Board of Health or similar governmental authority orders a named insured to stop serving food. The order must be due to authorities discovering contaminated food or suspecting food contamination. Under this provision, the insurance company will pay extra expenses for up to $10,000, business income loss of up to $10,000 and additional advertising expense of up to $5,000. These limits can be increased on the Supplemental Schedule.

The extra expenses include the cost of cleaning all equipment and replacing the contaminated food. It also pays to provide tests and vaccination for full and part-time employees and any leased or temporary employees if there is a potential threat that they may be infected by the contamination event. The medical tests and vaccinations are not covered under this form if covered under workers compensation coverage.

The business income loss includes the amount of income lost while the business is closed. There is a 24-hour waiting period for business income coverage. Covered advertising expense is the cost of advertising to restore the named insured’s reputation.

Food contamination is defined as food poisoning to guests, patrons or invitees due to distributed or purchased food that was tainted, food that was improperly handled in the named insured’s business operations or food contaminated by an employee-transmitted virus or bacteria.

One important limitation – the insurance company will NOT pay any fines or penalties imposed by any governmental authority.

Any exclusion in the policy related to viruses or bacteria does not apply to this additional coverage.

Example: The party at The Pink Flamingo was fabulous. Unfortunately, by noon the next day, six of the guests were at the local hospital. The health department was notified, and Flamingo’s was closed until the investigation was complete. The identified bacterium was traced to one of Flamingo’s employees. This coverage paid to test all employees; it also paid to replace the contaminated food. In addition, payment was available for the extra cleaning help brought in to clean all equipment thoroughly. The restaurant was closed for seven days, and that loss of income was covered. Finally, a grand reopening took place, and this coverage paid for the advertising announcing the event.

C. Coverage Extension 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

The coverage is changed to increase the limit to $5,000 per occurrence and also permits it to be increased on the Supplemental Schedule.

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.

AAIS Valuable Papers and Records Coverage Form

ISO Valuable Papers and Records Coverage Form

4. Property Off-Premises

The Restaurants Program enhances the property off-premises extension by adding protection for computers while being transported (in transit). The limit can be increased in the Supplemental Schedule.

5. Outdoor Property (07 13 change)

The Restaurant Program provides coverage for outdoor property for the following Causes of Loss:

Fire
Lightning
Explosion
Riot or civil commotion
Aircraft

The enhanced Restaurant Program applies limits based on the type of outdoor property.

Fences and retaining walls not part of the building are covered for $5,000 in a single occurrence.
Outdoor radio and television, satellite or other antennas, including their masts, towers and lead-in and support wiring are covered for up to $15,000 for a single occurrence.
Trees, shrubs, and plants are covered for up to $5,000 for a single occurrence, but there is a maximum of $500 for any one tree, shrub, or plant. Trees, shrubs, and plants that are considered stock or that are part of a vegetated roof are not part of this extension because they are covered as personal property. The $5,000 limit must also cover any debris removal associated with the loss.

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. Accounts Receivable

The limit of insurance for the business personal property may be extended to include direct physical loss or damage created by a Covered Cause of Loss to accounts receivable for:

The amounts an insured is owed from customers but is unable to collect
Interest charges on loans the named insured has had to obtain to offset collections while the insurer was settling the claims payment process
Any additional collection expenses that were made necessary 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.

D. Valuation Condition Change

The valuation of any appliance used for refrigerating, ventilating, cooking, dishwashing, or laundering is based on Replacement Cost, even if the rest of the property is valued at Actual Cash Value. While this is an attractive addition, if the policy is subject to coinsurance and these items have not been valued at replacement cost when developing the limit of insurance, there could be a coinsurance penalty.

Example: Linda’s Café purchases coverage for all property on an actual cash value basis and carries a limit of $100,000. A smoke loss occurs and causes damage of $15,000 ACV and $30,000 RCV. Because of this valuation condition change, Linda’s Café submits the $30,000 damage estimate. The claims adjuster then computes the amount of insurance needed to be carried to satisfy the coinsurance as $250,000. The coinsurance penalty is computed as $100,000/$250,000 x $30,000 = $12,000. The penalty from the coinsurance negates the replacement valuation benefit.

One additional benefit of the change is that Ordinance or Law – Equipment Coverage applies to the listed equipment because it applies only to equipment that is subject to replacement cost valuation.

Example: Linda is very pleased to discover that in addition to the $12,000, she will also receive compensation for the mandatory upgrades in the refrigeration equipment.

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. Ordinance or Law

In order to not confuse coverages, the Ordinance or Law exclusion in the Special Cause of Loss form applies to the entire policy except for the Ordinance or Law – Equipment Coverage Additional Coverage that was added earlier in this endorsement.

B. Spoilage

The Utility Services Exclusion does not apply to the Business Income, Business Income from Dependent Properties, Extra Expense or Spoilage Additional Coverages.

C. Mechanical Breakdown

The mechanical breakdown exclusion does not apply to computers.

D. 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.

E. 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 RS 01 includes coverage for mechanical breakdown of computers that are 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. (Resulting fire or explosion is covered if caused by a covered peril.)

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 loss or damage caused by lightning.

c. Computer-related Losses

There is no coverage for any loss or damage due to the failure, malfunction, or inadequacy of any of the following:

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.

F. 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, in addition to specific exclusions discussed in the Employee Dishonesty Additional Coverage in this endorsement.

G. 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.

H. 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. By 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.

I. Accounts Receivables

The following exclusions apply in addition to the exclusions described in H. above: Any 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.
Any loss due to errors or omission in a covered operation's bookkeeping, accounting or billing functions.
Any loss that is only found due to an audit or inventory. There must be some other outside evidence.

J. Limitation Changes

The limit on payment for breakage to fragile items does not apply to chinaware.
The special theft limit for furs, fur garments, and garments trimmed in fur is increased to $10,000.

K. Property in Transit

Property in transit is increased to $10,000. This limit can be increased in the Supplemental Schedule.

III. Changes to the Commercial General Liability Coverage Part

A. Two Coverages Are Added For Restaurants

SERVICES ERRORS AND OMISSIONS COVERAGE

This separate Coverage Part has its own Insuring Agreement and Exclusions.

1. Insuring Agreement

The coverage is for the legal liability imposed on the named insured because of a failure to provide facilities, goods, or services. This includes the failure to deliver and the misdelivery of items the named insured holds for sale. The failure can be by the named insured, employees of the named insured or by a concessionaire operating on behalf of the named insured. The incidents must occur during the policy period and within the coverage territory. As with other liability insuring agreements, the insurance company has the right and duty to defend and investigate but is under no obligation if the damages or claim is ineligible for coverage. Any duty to defend ends when the limit is exhausted by payments.

A limit of $10,000 annual per premises limit, as well as a $250 per occurrence deductible, is applicable.

2. Exclusions

There are only four exclusions under this coverage part:

Failures and errors in providing services that are intentional
Failures and errors in delivery products that are intentional
Bodily injury, property damage, personal or advertising injury
Any type of a long list of discriminatory actions, ranging from race-based to redlining activities.

Example: Ashleigh reserves a room at Bountiful Restaurant for her best friend’s bridal shower without knowing that her ex-boyfriend is a Bountiful employee. The ex destroys the reservation and books another group for the same date. When Ashleigh’s guests arrive, they are turned away. Ashleigh sued Bountiful, and coverage would have been provided until the employee’s action was discovered. Coverage is denied; Bountiful must defend itself.

3. Conditions

Duties in the Event of a Services Error or Omission replaces the Duties in the Event of Occurrence, Offense,

Claim or Suit condition with the following section.

The named insured must make an effort to quickly notify the insurer that a potential claim has occurred. The notification should include enough details to identify it, such as the name and address of the customers, how, when and where the situation occurred.

If a claim or suit is actually presented, the named insured must record all of the information and notify the insurance company as soon as it is practical, including providing the insurer with all relevant written notices and materials.

All insureds who may be involved in an occurrence must send the insurance company all legal papers, authorize the insurance company to obtain information, cooperate with the insurance company, and assist in enforcing (the insurer's) rights, particularly the right to subrogate.

No insured has the right or authority to make any payment unless they make it voluntarily. They cannot act on behalf of the insurance company. It is important to realize that even if an insured agrees to make out-of-pocket payments, the action may violate the insurer's rights and endanger policy coverage. On the other hand, it is likely that voluntary payments made in conjunction with a restaurant exposure will involve particularly large amounts.

MERCHANDISE WITHDRAWAL EXPENSES COVERAGE

This is a separate Coverage Part with its own Insuring Agreement and Exclusions. It is similar to Product Recall coverage for a manufacturer. This provides some protection against a restaurant's expenses related to withdrawing merchandise.

1. Insuring Agreement

The named insured will be reimbursed up to $25,000 per occurrence for the expense incurred because of a merchandise withdrawal. The withdrawal must happen in the coverage territory and during the policy period. It must happen either because the named insured decides it must withdraw the merchandise or because a governmental authority has requested the action.

The starting date of the withdrawal is whichever of the following occurs earliest:

The named insured first announces to employees, the public or vendors that a withdrawal is going to occur
The named insured receives the governmental notice requesting or ordering the withdrawal

All expense associated with withdrawing merchandise with the same defect is considered the same occurrence.

Example: Truly Terrific Restaurant makes its own salad dressings. They are so popular that the restaurant began bottling and selling them.

A loyal customer calls and tells the owner that his wife had developed food poisoning from a bottle of Truly dressing. The owner immediately ceases dressing sales and orders a recall. The cost of the withdrawal is covered by this endorsement.

Each time a new defect is found, a new occurrence is started.

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

2. Exclusions

There are six exclusions applicable to this coverage part:

The withdrawal was because the product failed to perform; copyright or similar type infringements; spoilage, decomposition, deterioration of product unless due to an error before it came to the named insured or was tampered with
Date of use expired
Knowledge of the defect was prior to the start of the policy period
The particular product is excluded for bodily injury or property damage under the CGL coverage part.
Banned items
Any defense costs
The cost of regaining goodwill or market share or the cost to redesign the product.

Note: This coverage part does not receive the benefit of the Supplementary Payments section of the CGL.

3. Conditions

Duties in the Event of a Defect of Merchandise Withdrawal replaces the Duties in the Event of Occurrence, Offense, Claim or Suit condition as follows:

The named insured must quickly notify the insurer that, because of defects of products, a withdrawal may occur. The notice should include necessary details such as how, when and where the defect was discovered, names and addresses of witnesses and injured parties, and details about any injury.
Once the withdrawal begins, the named insured must record all the information and notify the insurance company. The written notice must be sent to the insurance company as soon as practicable.
The named insured must attempt to mitigate expenses associated with the withdrawal. If the named insured makes a profit while mitigating, the profit is deducted from the withdrawal expenses.
All insureds who may be involved must send the insurance company all legal papers, authorize the insurance company to obtain information, cooperate with the insurance company, and assist in enforcing rights.

B. Who is An Insured

This section is not just for the new coverage – it applies to the entire policy. This section adds two additional insureds:

Any entity that has granted the named insured a franchise, but the insured status applies only as respects its liability as such.
Any entity that is a concessionaire and has permission to trade under the named insured’s name, but the insured status applies only as respects its liability as such.

C. Products/Completed Operations Refined

The wording from CG 24 07–PRODUCTS/COMPLETED OPERATIONS HAZARD REDEFINED is added to the policy so that a separate endorsement is no longer required.

IV. Definitions

The following 21 defined terms 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 money imitation meant to deceive.

Defect, as defined here, is used only with the Merchandise Withdrawal coverage and includes defects, deficiencies, inadequacies, and dangerous conditions.

Dependent Property is property upon which the named insured depends in order to maintain normal operations. They cannot be owned by the named insured. There are four types of dependent property. It can deliver services or products to the named insured or others. This cannot include any utility services. It can be a customer that accepts services or products from the named insured, or it can manufacture products on behalf of the named insured for the named insured's customers. The last category of property may have no business relationship to the named insured, but its existence attracts customers to the named insured’s operation.

A part of the transportation infrastructures, such as a bridge, airfield, pipeline, is not considered a dependent property. (07 13 change)

In addition, the property must be located in the coverage territory.

Employee as used in the Money and Securities and Employee Dishonesty coverages provided in this endorsement, 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 one party signing 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 of a limited liability company.

Member is an owner of a limited liability company.

Merchandise Tampering is the intentional alteration of the named insured’s product as a method of causing bodily injury. If merchandise tampering is suspected, the merchandise withdrawal is limited to those tampered product batches.

Merchandise Withdrawal includes the withdrawal, and the recall of any item that the named insured sells because there is a known defect in the product. It also defines a recall due to suspected tampering when there is an expectation of bodily injury or property damage. The latter cause of recall may go beyond the items being held for sale by the named insured.

Merchandise Withdrawal Expense is the type of withdrawal costs that is eligible for reimbursement. Included are costs: to notify of and the stationary to produce the notice; for overtime and transportation costs of employees; for computer time; hiring of independent contractors and temporary help; transportation, packing, and shipping; proper disposal of withdrawn items. However, it does not include any costs to replace the items, regain goodwill, market share, or profit.

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, 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.

Operations is used with the business income coverage and describes the business activities occurring on the premises listed in the Declarations.

Other Property as defined here is used in Employee Dishonesty Customer’s property. It includes all tangible property that has value except for money and securities but excludes items considered property not covered under this policy.

Period of Restoration is defined in two ways. If the coverage is for business income and not related to dependent properties, the period of restoration for business income begins 72 hours after the direct physical loss at the described premises. Regarding extra expense coverage, the restoration period begins immediately when a loss occurs. The period ends when business should be able to resume at the described location or at a new location. The dependent property period of restoration is similar but relates to the dependent property instead of the described premises.

The ordinance or law requirements do not affect the period of restoration. In addition, the expiration date of the policy has no impact on the period of restoration.

Perishable Stock is personal property that must be kept in a controlled environment in order to be preserved, and that could be damaged if the controlled environment is changed.

Profit is used in the Merchandise Withdrawal Expenses Coverage and is considered the difference between business operations income less all expenses. To be considered profit, the difference must be positive.

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. Food stamps and lottery tickets are also considered securities.

Suspension is a term used only in business income coverage and means operation slowdowns and the total cessation of business activity.

Theft, as defined here, applies to only Employee Dishonesty within customers’ property coverage. It is the taking of property illegally from a customer so that the customer is deprived of it and its usefulness.

ENDORSEMENTS

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

The following program specific endorsements are available to modify the coverage provided under this program. However, it is important to remember that all of the endorsements available under the Property and General Liability Coverage Parts are available under this division.

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements and Their Uses

MS RS 03–Restaurants-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.

Example: The Midtowne Bar-BQ Munchery is insured under a Market Segment policy modified with the MS RS 03–Hired Auto and Non-Owned Auto Liability Insurance form. Midtowne's owner had an emergency. He needed a fresh supply of tablecloths for the evening's dinner shift. A friend of the owner agreed to drive across town to pick up the tablecloths. The friend caused an accident on the way back from the restaurant supply house. If Midtowne Bar-BQ is sued, it will be covered, but the owner’s friend will not.

MS RS 04–Restaurants-Loss or Damage to Customers' Autos (Legal Liability Coverage)

This endorsement provides coverage on a legal liability basis for damage to autos (and their equipment) that are left with the named insured either on the described premises or temporarily away from the premises. In other words, the form provides valet parking coverage.

It pays only for damage that occurs on the covered premises when the named insured bears legal responsibility for the damage. The Covered Cause of loss is any loss or damage, provided the named insured is found legally liable. However, there is no coverage for incidents involving:

Any agreement between the named insured and the customer stating that the named insured will take the primary responsibility for damage to the customer’s auto left with the named insured.
Loss or damage from theft or conversion caused by the named insured, partners, executive officers, or employees.

Because this is liability coverage, the Supplementary Payments should apply. Rather than make reference back to the Supplementary payments in the CGL, the endorsement lists the payments the company will make in addition to the coverage available under the policy's limit of insurance, and it does include defense costs.

A per event limit on the supplemental schedule is the most paid at a particular premises regardless of the number of cars involved in the incident. The deductibles shown on the Supplemental Schedule apply to:

Loss or damage to customers’ vehicles from theft, vandalism or mischief
Loss or damage from collision

Auto is defined as a land motor vehicle, trailer, or semitrailer.

MS RS 06–Restaurants-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 Article: AAIS Fine Arts Coverage Forms

MS RS 08–Restaurants–Exclusion of Loss Due to Virus or Bacteria (07 13 addition)

CP 01 40–Exclusion of Loss Due to Virus or Bacteria is not to be attached to a Restaurant Market Segment policy. Instead, this endorsement is to be attached. It is an absolute exclusion that eliminates almost all loss or damage caused by disease or illness that causes viruses and microorganisms. There is an exception for coverage provided in the Food Contamination Additional Coverage.

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 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 eligible requirements for the Restaurants Program is for the ISO generic program.

Specific Restaurant Operations

This market segment is designed for restaurants serving food on a pick-up basis or involving on-premises dining. Establishments that serve alcohol are eligible even when alcohol sales exceed 75% of the restaurant's revenues. However, such operations must provide tables for customers to consume food along with the alcohol. There is no limitation regarding entertainment unless the entertainment is the operation's main feature (i.e., dance halls and nightclubs). The latter operations are not eligible.

There are no limitations regarding receipts, the number of employees or the type of food served.

Restaurant underwriting starts with the fire exposures that exist in the kitchen. The type of cooking determines the protection and cleaning methods necessary for an acceptable risk. Grease laden vapor coats surfaces and increases the risk that any fire will quickly spread. The more vapor that is produced, the higher the level of protection and the more frequent cleaning required. Filters, automatic protection systems, standard clearances and automatic fuel shut-offs should be the focus of any questions regarding kitchen safeguards.

General liability exposures revolve around slip and falls, spills and food poisoning exposures. Spills must be cleaned up quickly, floors and counter surfaces must be kept free from defects, and food must be handled in a proper and safe manner.

Alcoholic beverage service is another area upon which to focus. This is true even if liquor liability coverage is not provided. Liquor use increases the likelihood of both liability and property losses.

A major part of underwriting is identifying the specific exposures involved with each restaurant risk. A questionnaire or survey is an important step that not only guides the underwriting effort but also helps to identify coverage gaps.

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.

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.

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:

Several types of outdoor property, including fences, outdoor antennas, trees, shrubs and plants (other than stock) and outdoor signs are covered.

Electronic data processing equipment and electronic media and records have been added via the enhancement endorsement. Theft is a major concern, along with fire. 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 and property of others. 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.

Ordinance or Law coverage extension replaces old equipment that must be updated due to ordinances. It is important to be aware of local environmental regulations concerning refrigerants since they could have a significant impact on any loss settlement and also on future operations for the insured.

Spoilage - The perishable nature of food makes this a significant coverage that must be evaluated carefully. Past experience with outages should be considered along with backup plans the insured has to handle them. Backup generators and alternative storage locations are two considerations that an insured should have in place if they are concerned about their stock. The amount of fresh stock kept on hand should be considered along with peak conditions around holidays.

Food Contamination Coverage is provided, so an analysis should be made of past food poisoning incidents. It is important to know how their Health Department grades have been in the past and if there are any outstanding problems.

Business Income, Extra Expense and Dependent Property Business Income are all great coverages that add considerable exposure to any risk. There should be an understanding of what will happen if a loss should occur. Can the applicant get back into normal operations quickly? Are there any bottlenecks that could cause unusual delays in reopening?

Crime and Dishonesty Enhancements

The Restaurants 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.

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.

Liability Enhancements

Two enhancements are added.

Service Errors or Omissions

Coverage is provided because mistakes regarding facility availability and misdelivery of services can result in significant problems for customers that include the potential loss of revenue due to delays. It is important that a regular procedure is established to handle customer reservations and orders carefully.

Merchandise Withdrawal Expense

This coverage encourages an insured to take quick action when a problem has been identified. The faster the product is removed, and affected customers are notified, the fewer product claims will occur. Proper underwriting should consider the products the named insured carries and whether any product recalls have ever occurred.

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 RS 01 has a number of enhancements, and pricing should be in place for any one that is used. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in the policy's other parts.