FP 00 14–FARM PROPERTY–BARNS, OUTBUILDINGS AND OTHER FARM STRUCTURES COVERAGE FORM ANALYSIS

(April 2023)

Section I–Coverages–Coverage G–Other Farm Structures

This analysis is based on the 04 16 edition of this coverage form. Changes from the 09 03 edition are in bold.

INTRODUCTION

The entire form must be reviewed in order to understand how coverage applies. The term you in the form means named insured. If the named insured is married and they live together in a common household, the term you also includes the spouse. Us, we and ours refer to the insurance company. The other definitions that apply to this coverage form can be found in FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions and Definitions.

SECTION I COVERAGES

Coverage G–Barns, Outbuildings and Other Farm Structures

A. COVERAGE

The insurance company pays for direct physical loss or damage due to a Covered Cause of Loss to covered property.

1. Covered Property

The following property is considered covered property under Coverage G but only when a limit of insurance is shown in the declarations for the specific property:

Note: This is different from most coverages because covered property is determined item by item. While all of the following items are considered covered property as part of Coverage G, they are ONLY covered property when the type of property is listed and a limit is provided beside it on the declarations.

· Farm buildings and structures. This includes all attached sheds and permanent fixtures. It does not include dwellings. Dwellings should be covered under FP 00 12–. Farm Property–Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form.

Related Article: FP 00 12–Farm Property–Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form Analysis

· Silos when they are individually listed and described in the declarations or schedule. A silo can be attached to a building but is not required to be.

· Structures and buildings that are portable.

· Fences, corrals, pens, chutes, and feed racks. Field and pasture fences are not included in this item.

· Radio and television equipment, antennas, masts, and towers provided they are outdoors. Guy wires and lead-in wiring are considered part of this item.

· Improvements and betterments. These are additions, alterations, fixtures, or installations made to the described building that are not legally removable by an insured. When the named insured is a tenant, the use interest in any improvements and betterments is covered.

· Building materials and supplies are covered only when they are to be used for the building, altering or repairing, or farm buildings and structures but only when they are on the insured location or very close to it.

2. Property Not Covered (04 16 addition)

The following property is excluded under Coverage G:

· Land This is an unrestricted word that includes the land upon which buildings and structures are located

· Water

· Field fences or pasture fences (See above for other types of fences that are covered)

· Foundations of buildings or structures but only when below ground level. Coverage may be provided using FP 14 01–Coverage G–Damage to Below-Ground Foundations of Buildings or Structures, and Related Consequential Expenses.

· Pilings, piers, wharves, or docks

· The cost to excavate, grade, fill or back fill

· Poles used to provide power or light. This is modified in the Coverage Extensions, which can be further modified by entries on the Declarations.

B. COVERAGE G–CONDITIONS

The conditions listed in FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverages, Conditions and Definitions and in IL 00 17–Common Policy Conditions apply to this Coverage.

Common Policy Conditions Analysis

FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions, Definitions Analysis

In addition, the following Loss Conditions apply:

1. Fences, Corrals, Pens, Chutes, Feed Racks

The amount paid for loss or damage to any covered fence, corral, pen, chute, or feed rack is the proportion the limit of insurance shown on the declarations bears to the actual value of the sum of all such covered items.

Example: One of a farmer’s corrals is damaged, and he turns in a claim that the insurer determines to be $2,200. The insurer investigates further and discovers that the value of all of such property owned by the farmer was $60,000, but the limit written for that property was only $30,000. Because his limit of insurance was only 50% of what he should have carried, the loss payment is for only 50% of the loss or $1,100.

2. Portable Buildings and Portable Structures (04 16 change)

The amount paid for loss or damage to any portable building or portable structure is the proportion the limit of insurance shown on the declarations bears to their actual value. If the policy limit is only 50% of the actual value, only 50% of the loss is paid. However, if a particular portable building or structure has a specific limit shown on the declarations, this condition does not apply.

3. Valuation–Property Other than Improvements and Betterments

Valuation can be on the basis of either replacement cost or actual cash value.

Actual Cash Value – If replacement cost option does not appear on the policy declarations, then losses are paid based on actual cash value as of the date of loss. However, payment will not exceed the amount required to replace or repair the damaged property. The cost to repair or replace does not include any increase in the cost to meet ordinance or law construction or use requirements.

Replacement Cost – This applies only if replacement cost valuation is entered on the declarations. Under this basis, the insurance company can either pay an amount to replace damaged or lost property with property of like kind and quality, repair the structure, or pay the limit of insurance, whichever is the least expensive option. Even if the replacement cost is entered on the declaration, the valuation will only apply if the limit on the declaration is 80% or more of the values at the time of loss. The value of underground excavations, basements, foundations, and structures are not included in determining the replacement cost values to use in the 80% calculation.

Two important provisions apply. One is that the structure can be rebuilt at another location, but the company pays only the amount it would have cost to rebuild at the original location. The other is that if there are any ordinances that require changes in construction when damaged property is repaired or replaced, the company does not pay for any additional such related construction costs. FP 04 04–Ordinance or Law is available to address this situation.

Example: The roof on Fernie’s riding arena collapsed due to the weight of ice and snow, for a loss of $50,000. It was insured on a replacement cost basis for $90,000. The actual replacement cost is $100,000, but Fernie is informed that the building must be brought into compliance with state building code requirements because of the extent of the loss. The additional cost for code compliance is $15,000. As a result, the claim is $50,000 for the roof and other damage and $15,000 for building code enforcement. The insurance company informs Fernie that they will only pay the $50,000, and she is on her own for the $15,000.

If the policy includes replacement cost valuation but is not insured to 80% of the replacement value, the policy pays on an actual cash value basis or the proportion of the actual limit to 80% of replacement cost, whichever is larger.

Example: Fred insured his barn for $15,000. At the time a windstorm damaged it, it had a replacement cost of $30,000. Though his policy indicated replacement cost settlement, it was subject to a penalty for underinsurance. The proportional loss basis is determined as follows:

· Replacement cost at time of loss = $30,000

· Required limit is 80% of replacement cost is $30,000 X .80 = $24,000

· Proportional penalty is $15,000/$24,000 = .625

· Amount of payment available under proportional is $10,000 X .625 = $6,250.

· Actual Cash Value = $4,500.

Because the proportional settlement is greater than the actual cash value, the settlement is $6,250, which must then be further reduced by the deductible amount.

In any replacement cost loss payment situation, the insurance company does not pay on a replacement cost basis until the repairs are completed. The company pays the actual cash value until the repairs are completed and then provides a final payment to reach the final replacement cost figure. The insured must tell the company within 180 days after the loss whether or not rebuilding will occur. However, if the loss is less than $5,000, or 5% of the total applicable property limit, the replacement cost is paid prior to repairs being made to expedite the claims handling process.

Example: Fernie, from a previous example, decides not to rebuild because she had no coverage for the mandatory ordinance upgrade. She is surprised that instead of being paid replacement cost settlement of $50,000, the company offers to pay the Actual Cash Value of only $25,000.

4. Valuation–Improvements and Betterments

This valuation applies only if the named insured is a tenant. Damaged improvements and betterments repaired or replaced by the insured within 12 months after the loss occurs are paid on an actual cash value basis. If the repairs are not completed within 12 months, the company pays only a proportional amount based on the remaining lease period. There is no coverage for repairs or replacements made by anyone who is not an insured.

5. Valuation–Glass Replacement

When glass is replaced, the cost of safety glazing material is included, but only when laws require replacement with such material. This replacement provision applies even if the original glass was not glazed.

SECTION II–COVERAGE EXTENSIONS

A. PRIVATE POWER AND LIGHT POLES

Private power and light poles, wiring and attachments mounted on them, are covered for direct physical loss or damage up to a $1,000 limit per occurrence – not per pole. This is an additional amount of insurance and is subject to the policy deductible. The attachments are covered only when the poles are owned by the named insured and are located on a covered location.

If power and light poles are listed on the declarations, with a limit also shown, that listed limit is in addition to this limit.

Note: There is no requirement that the poles be owned by the named insured or be located on an insured location to be covered. That requirement applies only to attachments.

B. NEW CONSTRUCTION

A $100,000 limit is available for covered loss or damage to newly constructed permanent farm structures at the insured location. Coverage includes materials and supplies used in the construction. This extension applies only to structures that are not covered elsewhere. The causes of loss are limited to only loss or damage caused by aircraft, explosion, fire, lightning, riot or civil commotion, smoke, vandalism, vehicles, windstorm or hail. The coverage on each farm structure under this extension ends when the values are reported to the insurance company at the end of 60 days or when the policy expires, whichever occurs first. This is not an additional amount of insurance.

SECTION III–ADDITIONAL COVERAGES

A. EXTRA EXPENSE

When a limit for extra expense is shown on the declarations, the insurance company pays the necessary and actual expenses incurred by the named insured in order to continue or resume normal farming operations after a covered cause of loss damages covered property.

Example: Nanci’s Vanilla Hills Dairy Farm’s milking needs are handled by equipment that was paid off a couple of years ago. However, when her largest barn was struck by lightning, her entire inventory of machines was fried and had to be replaced. Due to a backorder situation, it would be several weeks before she could get replacements delivered. Until that time, she rents some milking machines from a dairy cooperative. Nanci’s insurance policy covers this extra expense as part of the loss.

Coverage ends when the time needed to rebuild, replace or repair the covered property ends. No deductible applies to this coverage. This coverage does not apply to any expenses for the testing or monitoring of pollutants that are the result of an ordinance or law being enforced or due to the compliance with that ordinance or law.

B. WATER DAMAGE

In the event of a water or steam damage claim, this coverage pays to tear out and replace the parts of the building or structure that block access to the pipe or other equipment causing the damage. This coverage does not apply to the actual repair of the faulty part or equipment. This coverage does not increase the limit of insurance. Sumps, sump pumps and other similar types of equipment are not part of this additional coverage.

C. Other Additional Coverages

Other additional coverages are described FP 00 90–Farm Property–Other Farm Provision Form–Additional Coverages, Conditions and Definitions.

SECTION IV–OTHER PROVISIONS

A. COVERED CAUSES OF LOSS, EXCLUSIONS AND LIMITATIONS

A policy is incomplete without the Causes of Loss section. These provisions will be discussed in FP 10 60–Causes of Loss Form–Farm Property Analysis.

B. LIMITS OF INSURANCE

This is discussed in FP 00 90–Farm Property–Other Farm Provision Form–Additional Coverages, Condition and Definitions.

C. DEDUCTIBLE

This is discussed in FP 00 90–Farm Property–Other Farm Provision Form–Additional Coverages, Condition and Definitions.