MARKET SEGMENTS DIVISION—FUNERAL HOMES
(February 2023)
The Funeral Homes 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.
This article discusses items specific to the Funeral Homes Program, including the eligibility, supplemental schedule, MS FH 01– Funeral Homes, and the special endorsement developed just for this program. In addition, there are sections on Underwriting and Rating.
This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.
Related Article: ISO Market Segment Overview
ELIGIBILITY
The only eligible classification for this coverage is Funeral Homes and Chapels. The general liability class code is 43889. If the 43899 class is along with other classes, the operation usually remains eligible, even if 43899 class is not primary. However, each company may establish their own criteria, and it may be more restrictive.
Crematories – Not for Profit and Other than Not for Profit (general liability class codes 41697 and 41696) are not eligible when written as a stand-alone operation.
FUNERAL HOMES SUPPLEMENTAL SCHEDULE—MS FH DS
What follows is a discussion of the specific information that must be shown on a Supplemental Schedule for the Funeral Homes 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 FH 01 apply. Any limit changes are effective on a per location basis. This allows protection for selected 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
- Forgery or Alteration
- Outdoor Signs
- Employee Dishonesty
- Personal Effects and Property of Others
- Valuable Papers & Records
- Accounts Receivable
- 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.
Limited Pollution Liability Coverage – Embalming Fluids
An aggregate limit of $10,000 applies, but this amount can be increased.
Loss or Damage to Guests’ Autos Section
Coverage is provided at any premises where limits are shown as long as MS FH 04–Funeral Homes-Loss or damage to Guests’ Autos (Legal Liability Coverage) is attached. The form describes the coverage being provided but the limits must be entered by premises in this section as follows:
- The per event limit of insurance
- The per guest auto deductible for loss by theft, vandalism or mischief
- The maximum deductible for single occurrence of loss by theft, vandalism or mischief
- The per guest auto for deductible for loss by collision
Funeral Directors Professional Liability
This optional coverage applies only if a premium is entered in this area.
Forms Applicable
The final section of the Supplemental Schedule allows for a listing of specific endorsements by premises.
MS FH 01–FUNERAL HOMES ANALYSIS
The opening paragraph of the Funeral Homes endorsement says that it modifies the following coverage and causes of loss forms:
- CP 00 10–Building and Personal Property Coverage Form
- CP 10 30–Causes of Loss-Special Form
- CG 00 01 or CG 00 02–Commercial General Liability Coverage Parts
The Funeral Homes endorsement is not a complete coverage part, so it must be attached to a package containing all of the above forms.
|
Example: A company issues a CPP with commercial property coverage using CP 10 20–Causes of Loss- Broad Form, commercial crime, commercial general liability and commercial inland marine. The Funeral Homes endorsement cannot be added because the CP 10 20 is attached instead of the CP 10 30. |
When the Funeral Homes endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply except as modified by this endorsement. Each of the modifications will be reviewed in the following analysis.
I. Modifications to CP 00 10–Building and Personal Property Coverage Form
A. Additional Coverages Change –Fire Department Service Charge
The Fire Department Service Charge limit is increased to $5,000 and may be increased on the Supplemental Schedule.
B. Additional Coverages Change–Pollutant Clean Up and Removal
The limit for Pollutant Clean Up and Removal is increased to $25,000.
C. Additional Coverages Additions
1. Money and Securities
Coverage is added for direct loss by theft, disappearance, or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured. The automatic amount of $10,000 applies when the covered property is either in the described premises or at a bank while the $5,000 applies when the covered property is anywhere else. Either or both limits can be increased by an entry on the Supplemental Schedule.
The following three types of loss are
excluded:
·
Losses that result from errors or omissions in
accounting or arithmetic.
· Losses that occur because the property was voluntarily given out in an exchange or purchase
Any loss of covered property that
is contained within any money-operated device (such as a vending machine). This
exclusion does not apply if there is a continuous reading instrument that
records all amounts that are deposited or stored in that device. 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
covered property is damaged due to an
accidental discharge, it is covered and subject to the same $5,000 limit.
The good news is that there is no
deductible. However, there is no coverage if the system is discharged during
testing or installation.
3.
Reward Payment
Reward payments are available to assist in finding out who committed a crime and recovering stolen property. It is important to point out that an insurance company’s claims department may use rewards as part of their regular process, regardless of whether this provision exists.
This coverage is available for an insured’s discretionary use. The coverage consists of two categories of rewards. First, up to $5,000 is available for information that leads to the arrest and conviction of any party who commits a crime that results in a covered loss to the property portion of the policy. The coverage limit is the maximum that is available and is 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 based on the value of the property as determined by policy conditions. In other words, the policy would not pay $5,000 for information related to a crime that caused a $2,500 loss.
Second, a reward may be offered for the return of stolen property. It is also for a maximum of $5,000 subject to the same limitations as above.
The reward amounts shown are the most that are available for any one occurrence. Should more than one source provide information or return stolen property, payment is made to the one that voluntarily acts first.
The eligible
source must be identified as such by a law enforcement agency.
Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, which 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 $5,000, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank.
Counterfeit
money is also restricted to only money accepted during the course of business.
5. Forgery or Alteration
Loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent, or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.
If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.
The $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, 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
a. The Named Insured’s Property
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 or a partner, member or manager of the named insured, there is no coverage.
b. The
Client’s Property
Coverage is also provided for loss or damage to money and securities or other property that belongs to a client. However, the coverage is only for theft committed by a named insured’s employee who is identified. The employee could have acted alone or may have acted in collusion with others. The client must own the property, be holding the property for another or be legally liable for the property. An important condition is that all settlements for any client property loss are between the named insured and the insurance company. The client cannot present the claim independently.
There is no coverage for indirect loss related to employee dishonesty, such as a business income loss, any costs to establish the existence or the amount of a loss or any legal liabilities. Related legal expenses are also ineligible for coverage.
|
Example: Tim helps at the Family Funeral Home performing non-professional
services such as directing cars, placing processional flags on the cars,
placing floral arrangements and other manual labor. Jane, the funeral
director, has been receiving complaints from client families regarding
missing items. Later, she catches Tim stealing a coat. She gets him to provide
details of various thefts. Jane presents the evidence to the insurance
carrier who pays for the losses under this coverage item, and then Jane
compensates the families. |
|
No protection exists when the only proof a loss occurred or verification of the amount of the loss is a shortage as a result of an inventory computation or a profit and loss statement. 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 who have committed prior acts of dishonesty. If the named insured, any partner, trustee, 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 employee. It doesn’t matter whether the incident occurred before or after the named insured hired the employee—coverage ceases. The termination takes effect the moment the employee'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 $10,000 limit in the form may be increased on the Supplemental Schedule. This limit is the total amount available to respond to 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 named 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 under this
current policy. The old loss would have to meet two criteria. First, this
current 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 current policy’s provisions. In addition, any payment made
is subject to the lesser of either the current policy term's limit or the prior
term's limit.
Possible Exclusion Ambiguity - There is one more exclusion and it 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
Article: Commercial Crime Analysis
8. Spoilage Coverage
Coverage applies if perishable stock is damaged by any of the following:
- Change in temperature or humidity due to refrigeration, cooling or humidity controlling devices failing or sustaining an on premises mechanical breakdown. This applies only if the device is on premises.
- Refrigerant contamination
- Power outage, but only when such outage is out of the named insured’s control. This applies to only a change in temperature that results from electrical power being interrupted. The power interruption can take place either on or off the premises.
The limit of $10,000 can be increased on the Supplemental Schedule.
Any settlement is based on the selling price of the damaged 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.
If spoilage is a result of any of the following, it is not covered:
- 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 governmental order
- When there is an on-premises power source (such as a generator, solar panels or wind turbine) and it is unable to supply sufficient power because there is too much demand for power
- The breakage of permanent glass that is part of the refrigeration, cooling or humidity-controlling unit.
Note: The endorsement does not refer to the CP 10 30 exclusions and does not state that the CP 10 30 exclusions do not apply. Earth Movement, Governmental Action, Nuclear Hazard, War and Military Action and Water exclusions are listed but not explained. This could mean that reference should be made to the CP 10 30 exclusions.
Deductible
There is a statement that the deductible on the Declarations applies. However, no separate deductible for this coverage part appears in the Supplemental Schedule. This could lead to a debate over what deductible, if any, applies to a spoilage loss.
Warranty
The warranty provision states that the named insured must adhere to 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 affected location.
Note: NO suspension is triggered if the agreement's supplier ends the arrangement. Does this mean that if a supplier ends the agreement because of nonpayment, the coverage remains in effect?
9.
Artificially Generated Electrical Current
This coverage is applicable only to computers. When artificially generated electrical current damages or destroys an insured's computers, the insurance company will pay if either of the following occurs:
- An event causing 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 event taking 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.
10. Preservation of Dead Bodies
If power or other utility service is disrupted by a covered cause of loss, this additional coverage will pay for the expenses necessary to move and store dead bodies away from the insured’s premises in order to preserve them. The limit of insurance is $5,000 per premise per occurrence. If there is any conflict between this and the Utility Services exclusion, this additional coverage applies.
|
Example: Two bodies were on premises at the Pleasant Valley Funeral Home when spring storms brought down the power lines. The anticipated downtime was 72 hours, so action needed to be taken. Jerry, the funeral director, called Ryan, a fellow funeral director located in an area not impacted by the storm. Jerry transported the bodies and kept them with Ryan until power was restored. All expenses related to the removal and storage of the bodies with Ryan are covered by this Additional Coverage. |
11. Ordinance or Law – Equipment Coverage
(07 13 change)
Payment under this coverage is available only when the covered property is subject to the replacement cost valuation and the equipment is actually repaired or replaced.
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 provided when 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.
The ordinance coverage is paid only if the equipment is actually repaired or replaced. The total payment cannot exceed the limit of insurance on the declarations.
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.
Note: Coinsurance does not apply to this Additional Coverage.
D. 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
The personal property of others provision is expanded to include property in the named insured’s care, custody, or control. The property can be at described premises, a premise associated with funeral services being provided or in transit on a motor vehicle being operated in connection with funeral services provided by the named insured.
If a loss occurs to property of a client, there is no deductible, but the deductible does apply to any other loss.
This coverage extension limit is raised to $10,000 and can be increased even more by so indicating on the Supplemental Schedule.
|
|
|
Example: The Franklin family arranged for their father’s funeral
service to be conducted at the local airport, where he had been a popular
flight instructor. The body was transported by hearse from Smith’s Funeral
Home to the airport. Smith’s was also responsible for transporting the
flowers, books, and memorabilia that were to be displayed during the service.
The van carrying the property slid on ice, flipped-over
and caught on fire. The driver survived, but all contents were destroyed.
This coverage extension was available to pay up to $10,000 for the |
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 to 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 Funeral Homes Program enhances
the property off-premises extension by adding coverage for computers while in
transit. The limit for Coverage Extension is increased to $25,000. The limit
can be increased on the Supplemental Schedule.
5. Outdoor Property
The Funeral Homes Program provides coverage for outdoor property for the following causes of loss:
- Fire
- Lightning
- Explosion
- Riot or civil commotion
- Aircraft
Limits are based on the type of outdoor property.
- Fences and retaining walls are covered for up to $2,500 in any one occurrence, provided they are not part of the building.
- Outdoor radio and television, satellite or other antennas are covered for up to $3,000 in a single occurrence. The coverage extends to masts, towers, lead-in, and support wiring that are part of the covered items.
- Trees, shrubs, and plants are covered for up to $5,000 for any one 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 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 business personal property may be extended to include direct loss or damage caused by a covered cause of loss to accounts receivable. The coverage applies to:
- The amounts owed but are unable to collect from tenants
- Interest charges on loans the named insured has had to obtain to offset revenue uncollected during the claims process
- Any additional collection expenses that were made necessary by the loss or damage
- Other reasonable expenses incurred to reestablish accounts receivable records
The amount available is $10,000 for on-premises loss or damage and up to $1,500 for off-premises loss.
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
II. Modifications to CP 10 30–Causes of Loss-Special Form
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. Mechanical Breakdown
The mechanical breakdown exclusion does not apply to computers.
C. Dampness, Dryness, Changes in Temperature, Marring or Scratching
The only change in the dampness, dryness, and 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.
D. Additional Exclusions for Computer Coverage Only:
1. Loss or damage caused directly or indirectly by any of the following is excluded. The exclusion applies even if other causes of loss contribute either concurrently or in sequence.
Note: The reason these extra exclusions are needed is because MS FH 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 processing, recording, or storing of information on computers. There is an exception. Any resulting fire or explosion is covered if caused by a covered cause of loss.
b.
Electrical Disturbance
There is no coverage for damage caused by electronic or magnetic injury, disturbance, or erasure of electronic recordings unless it results from 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 the process, distinguish, interpret, or accept dates or times:
- Micro-processors and any other computer hardware
- Software
- Operating system software
- Networks used by computers
- Equipment that is computer-related or electronic and associated components
- Any other products that depend on the items listed immediately above in any manner.
d. Computer
Advice or Consultation
Any of the following provided by the named insured or for the named insured is not covered when used to determine, test, or rectify potential or actual problems described in exclusion c. above.
- Advice
- Consultation
- Design
- Evaluation
- Inspection
- Maintenance
- Repair
- Replacement
- Supervision
2. If a condition that is excluded by Electrical Disturbance, Computer-Related Losses and Computer Advice Or Consultation exclusions above results in a specified cause of loss or elevator collision, that resultant loss is covered. This does not include the cost to correct the excluded deficiencies or to change any features of the property involved.
The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.
E. Employee Dishonesty
Most of the exclusions in the Special Cause of Loss 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 and the specific exclusions discussed in the Employee Dishonesty Additional Coverage.
Related Article: Basic, Broad and Special Causes Of Loss Forms Analysis
F. Outdoor Signs
Most of the exclusions in the Special Cause of Loss 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
G. Valuable Papers and Records and Accounts Receivable
The only exclusions in Paragraph B. 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 that are part of B.3.
Note: This item is ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapses, while accounts receivable coverage is subject to the CP 10 30 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.
H. Accounts Receivables
The following exclusions apply in addition to the exclusions described in G. above:
- Any loss involving alteration, falsification, concealment or destruction of accounts receivable records are excluded 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 documented solely through an audit or inventory. There must be some other outside evidence.
I. Limitation for Furs and Jewelry
The sublimits for theft of furs and jewelry are increased to $10,000.
J. Property in Transit
The limit for the Property In Transit Additional Coverage Extension in the CP 10 30 is increased to $10,000. The limit can be increased in the Supplemental Schedule.
III. Changes to the Commercial General Liability Coverage Part
One New Coverage Is Added For Funeral Homes
LIMITED
POLLUTION LIABILITY COVERAGE – EMBALMING FLUIDS
A. Revision
of the Bodily Injury and Property Damage Liability Pollution Exclusion
Coverage for pollution due to embalming fluids is provided by removing the pollution exclusion in the CG 00 01 or CG 00 02 and replacing it with this one. It is important to remember that this revised pollution exclusion applies only to embalming fluids, and the standard pollution exclusion remains in effect for all other pollutants.
Exclusion f. subparts (1) (a), (1) (d) and (1) (e) in the CG 00 01 or CG 00 02 are removed in their entirety. The only remaining exclusion f. subparts (1)(b) and (c), which deal with waste handling, processing and treatment and exclusion f. (2), which excludes loss, cost or expense due to regulatory and governmental demands.
|
|
Example: A neighbor of the Family Funeral Home files a lawsuit claiming that the embalming fluid fumes have contaminated their home to the point that they can no longer live there. They also claim that the fumes have made them, their children, and their pets very ill. Family Funeral Homes’ carrier will defend this case but will pay no more than $10,000. |
B.
Aggregate Limits of Insurance
The limit of insurance is $10,000
aggregate, subject to the general aggregate on the policy. A higher limit can
be entered on the Supplemental Schedule.
C.
Occurrence and Medical Expense Limit
The each occurrence and the medical expense limits do not apply to this coverage.
Note: This coverage may cause confusion if used along with any of the pollution liability endorsements that change the pollution exclusion in the CG 00 01. Consider not attaching such endorsements when providing this coverage or rewriting this coverage to incorporate any attached pollution exclusion.
IV. Definitions
Eleven definitions are added.
Client is the individual, company, or organization to whom the named insured is
contractually obligated to provide funeral services and who have been billed
for such services. The individual family members of the deceased and other
attendees of funeral services that are provided by the named insured are also
clients. This term is used for the form’s employee dishonesty and personal
effects and property of others coverages.
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 that is meant to deceive.
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 refers to one party signing another party's name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.
Manager is any director in a limited liability company.
Member is one of the owners of a limited
liability company. (07 13 addition)
Money includes all currency, coins, and bank notes 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 applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money coverage, it means one or more related acts or events by one or more persons, but it also can be one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses in which a particular person was involved regardless of how many instruments were forged or altered Under Employee Dishonesty, it means all losses that result from a single act or series of acts caused by one or more employees.
Other Property is used in Employee Dishonesty Client’s property. It includes all tangible property that has value except for money and securities. It also includes the deceased’s body, including all parts and organs and any of the deceased’s personal effects.
Perishable Stock is flowers or other stock that must be kept in a controlled environment in order to be preserved, and that could be damaged if the controlled environment is changed.
Note: This definition does not include bodies.
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.
Theft is a term used in the Employee Dishonesty Client’s
property coverage that means illegal activity depriving the client of money, securities,
or other property.
ENDORSEMENTS
The forms and endorsements developed for the Market Segments series of programs carry the designation “MS.”
Only five program specific endorsements are available to modify the coverage provided under the Funeral Homes program. However, all of the endorsements available under the Property and General Liability Coverage Parts are available under this division.
Related Articles:
Commercial Property Program Available Endorsements and Their Uses
Commercial General Liability Available Endorsements And Their Uses
MS FH 03–Funeral Homes-Fine Arts Coverage
Funeral homes often have fine arts on their premises, and they also may have fine arts brought onto their premises by family members of a deceased for a funeral service. 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 FH 04– Funeral Homes -Loss or Damage to Guest' Autos (Legal Liability Coverage)
This endorsement provides legal liability coverage for damage to guests' autos under the Building And Personal Property Coverage.
It offers protection against direct loss of or damage to guests’ autos and auto equipment while on the covered premises.
It pays only for damage that occurs on the covered premises when the insured bears legal responsibility for the damage. The exclusions in the Cause of Loss-Special Form do not apply, but the named insured must be legally liable. In addition, there is no coverage for incidents involving:
· Loss or damage from theft or conversion caused by the named insured or any insured
· Liability because the named insured has agreed in writing to accept responsibility for the auto
Because this is legal liability coverage, a list of Supplementary Payments is provided in addition to the limit of insurance available under this coverage.
The limit and deductibles are shown on the Supplemental Schedule.
Auto is defined as a land motor vehicle, trailer, or semitrailer.
MS FH 05–Funeral Homes Professional Liability
This endorsement is designed to provide coverage for bodily injury, property damage or personal and advertising injury that occurs because of a funeral home’s professional service. Errors or omissions in how a
dead body is embalmed, cremated, buried, and disinterred are included as professional service.
Note: Throughout this endorsement, the term other injury is used, but other injury is not described, defined or included in the coverage statement. While the intent of the form may be to provide professional liability, the use of the term other injury throughout makes the form confusing.
MS FH 06–Funeral Homes-Suspension/Reinstatement of Coverage
MS FH 02–Equipment Breakdown Endorsement–allows any insurance company representative to immediately suspend coverage for equipment that is considered unsafe. This endorsement is used to initiate any suspension. If the Suspension box is checked, the MS FH 02 coverage is suspended at the described property as of the effective date. A suspension is lifted by marking this form’s reinstatement box. Coverage then applies at the described property shown and the effective date of the reinstatement.
Note: The equipment’s coverage can be suspended without this endorsement, but the form MUST be used for any reinstatement.
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 Program, 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 eligibly requirements for the Funeral Homes Program is for the ISO generic program.
Specific Funeral Homes Operations
Funeral
directors or morticians arrange for a variety of services to prepare the
deceased for burial. These services include transport of the body, preparation and embalming, sale of caskets,
memorial services at any location chosen by the client and notification to the
newspaper. Cremation also can be arranged through the funeral director. They
also offer a pre-payment option, which creates a long-term fiduciary
responsibility.
Property exposure depends on the services performed and the items sold on premises. A crematory is a large furnace with extremely high temperatures. There must be adequate clearances as the flue exits the chimney, and a procedure must be in place to handle overheating. The equipment must be monitored. Furnishings are very susceptible to smoke, water and fire damage. Caskets are often wooden and lined with fabric that will help feed a fire. If embalming takes place on premises, the embalming fluid should be stored in small quantities and kept in a cabinet due to its corrosive and toxic nature. Embalming fluid is a popular but deadly additive to PCP, marijuana, and other drugs, so theft can be a problem. Security is important.
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 great 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 hazards and covered by the endorsement enhancements should be identified. Once identified, these 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 coverage, endorsements, premium, or other tailoring is necessary. The property enhancements with the most significant underwriting concerns are as follows:
Ordinance or Law – Equipment Coverage
This attractive feature may encourage a moral hazard, especially if a funeral home is aware of a new statute requiring a significant investment in new equipment. The value of the personal property should reflect the values needed to replace the old equipment with new equipment.
Personal Effects and Property of Others
The expansive definition of property of others could result in a significant loss since coverage applies not only in the funeral home but also at off-site locations. This could also be a frequency nightmare because there is no deductible applicable to personal property of a client. Combine this with the increase of the fur and jewelry theft limitation to $10,000, and the problem increases.
Accounts receivables
Are covered up to $5,000. The insured should have copies of records stored at a safe, off-premises location. The same is true of valuable papers and records that are covered for up to $10,000 on-premises and $5,000 off-premises.
Crime and Dishonesty Enhancements
The Funeral Homes Program endorsements add coverage for money and securities, money orders and counterfeit money, forgery and alteration and employee dishonesty. The limits of $10,000 for money and securities and $10,000 for employee dishonesty are significant and can be increased.
The inclusion of theft of client’s property as part of the employee dishonesty increases the exposure and raises the need for controls in the handling of all property brought into the home by the family and other guests.
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.
Related Article: Crime Underwriting Considerations
Liability Enhancements
The Limited Pollution Liability Coverage-Embalming Fluids eliminates the pollution exclusion except for that related to waste, and government required testing. This may be highly significant if the funeral home consolidates all embalming for multiple homes at a single location. The limit is $10,000, but it can be increased.
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 FH 01 has several 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.