Two terms require further
explanation:
·
Falling
Objects
This coverage does not include loss to personal property
stored in the open. It also does not include damage to the interior of
buildings or personal property stored in buildings unless a falling object
first breaches the building's exterior.
·
Water
Damage
This refers to the sudden or accidental discharge or
leakage of water or steam. However, it must directly result from a
crack or break in a part of the system or appliance that contains the water or
steam.
Terms
All
provisions, limitations, exclusions, conditions, and definitions relevant to
the coverage provided.
Volcanic Action
An airborne volcanic blast or shock wave. It also
includes ash, dust, and particulate matter, as well as any lava flow. The term
does not include the cost of removing dust, ash, or particulate matter from the
covered property unless there is direct physical damage to the property.
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Examples of a mobile equipment dealer's
stock held for sale |
PROPERTY COVERED
The insurance company covers the
property described below unless it is excluded or subject to limitations.
1. Premises
a. Coverage
This covers the named insured’s stock and similar property belonging to others, as long as it is in the insured’s care, custody, and control, for direct physical loss or damage caused by a covered peril.b. Coverage Limitation
The insured’s
coverage for stock and similar property owned by others is limited to certain
types and only applies at the locations specified on
the Schedule of Coverages. This includes mobile equipment like agricultural,
construction, or material-handling equipment, along with related accessories
and supplies.
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Example:
Maybelline’s Fine, Inc. has built a
strong reputation for selling and servicing a wide range of vehicles. Their
offerings include new and used automobiles, agricultural equipment,
construction equipment, recreational vehicles, and motorcycles. The mechanics
at Maybelline’s are capable of servicing any vehicle
they sell. This equipment dealer coverage form
specifically insures Maybelline’s inventory of
mobile and agricultural equipment, as well as similar property owned by
others. However, other coverage forms and policies are required to insure automobiles, recreational vehicles, and motorcycles.
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2. Off Premises
a. Coverage
When a limit is entered on the
Schedule of Coverages for off-premises coverage, it applies to loss or damage
caused by a covered peril to owned stock and similar
property of others in the named insured's care, custody, or control located
away from the scheduled coverage locations.
b. Coverage Limitation
Coverage is not applicable if the
insured’s equipment or similar property belonging to others is at a location
listed on the schedule. It only covers situations where the equipment or
similar property of others is at an unscheduled location or is in transit.
3. Newly Acquired Locations
a. Coverage
Coverage for physical damage to
equipment at a new location is automatically provided if a limit is specified
for Newly Acquired Locations in the schedule of coverages. This coverage
applies only to property owned by the named insured or to similar or related
property belonging to others.
b. Time Limitation
Coverage for a newly acquired
location applies for a period of 30 days from the date of acquisition or until
the insured reports the newly acquired location, whichever comes first. If you
do not report it within 30 days, the automatic coverage will terminate at the
end of this period.
c. Additional Premium
This coverage will incur an
additional premium and is based on the date of acquisition of the newly
acquired location.
PROPERTY NOT COVERED
There is no coverage for the
following property:
1. Contraband
Property illegal to possess is not
covered. Additionally, property legal to possess but used in illegal
trade or transported unlawfully is also excluded.
2. Furniture, Fixtures, and Other Property
Furniture,
fixtures, office supplies, improvements and betterments, machines, tools,
fittings, patterns, dies, molds, and models are excluded from coverage.
NOTE: IM 1263–Personal Property
Coverage can be attached to this coverage form to insure most of this property and other property not listed here.
3. Manufactured Property
Property
being manufactured or assembled is not covered.
NOTE: Once it has been manufactured, it can become covered property.
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Example: Maybelline
develops plans for a machine that performs multiple functions. She imagines
making a lot of money on her invention as she works on it in a large, enclosed shed. A spark from the
welding unit ignites nearby combustible material, causing it to burn down and
destroy both the shed and the machine. She submits a claim for the equipment
under the Mobile Equipment Dealers Coverage, but it is denied due to this
exclusion. |
4. Money and Securities
Several types of property are not
covered under this item. These include accounts, bills, currency, food
stamps, evidence of debt, and lottery tickets not held for sale;
money, checks, notes, or securities are not covered.
NOTE: This property is better covered under
commercial crime insurance forms.
Related
Article: Commercial Crime Coverage Analysis
5. Property Leased, Rented, or Loaned
Coverage does not apply to any
property the named insured leases, rents, or loans to others.
6. Property of Others
When the named insured is
responsible for the property of others because they are arranging for its
transportation or acting as a carrier for hire, there is no coverage for that
property under this coverage form.
7. Sold Property
Property
remains covered until it is delivered. Coverage ends upon delivery, even
if the property has been sold under an installation agreement.
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Example: Maybelline
sells a front-end loader through a deferred sales contract. The customer
reports the loader caught fire and is now refusing to make any further
payments. Since the loader has already been sold, the loss from the damage is
not covered. Additionally, the customer's refusal to pay constitutes a loss
for Maybelline that is also not covered. |
8. Vehicles, Aircraft, and Watercraft
Aircraft, watercraft,
automobiles, trucks, and motorcycles designed for road use are not covered equipment.
Any other type of vehicle
designed for road use is also not covered.
NOTE: The section about other vehicles is especially
important in this coverage form. It means any mobile equipment designed for
highway use is not covered. Be sure to review any submitted list of items
before scheduling, since a vehicle designed for, or used on, a highway is not covered in
this form, even if scheduled. It’s important to remember, the form does not
state it is not covered if it is being used on a highway; it states it
is not covered if it is designed to be used on a highway,
regardless of how it is actually used.
9. Property of Named Persons, Firms, or Corporations
Mobile equipment dealers may hold
items on consignment or may have items insured under a floor plan coverage
form. To prevent duplicate coverage, the property belonging to a party or
parties listed in the schedule of coverages is excluded from coverage.
COVERAGE EXTENSIONS
1. Debris Removal
a. Coverage
When a covered peril damages or destroys
covered property, the cost to remove debris caused by the damage is
covered under this extension.
b. We Do Not Cover
Debris removal does not include any costs for
removing, restoring, or replacing polluted land or water or for
extracting pollutants.
c. Limit
The Limit section has two parts:
·
The first limits debris removal payment
to no more than 25% of the amount paid for the actual direct physical loss or
damage.
·
The second limitation indicates the total
payout for debris removal and physical damage loss will not exceed the
insurance limit.
d. Additional Limit
An additional $10,000 is available if the
debris removal expense exceeds 25% of the loss amount or if the combined cost
of loss and debris removal exceeds the limit of insurance for the covered
property.
e. You Must Report Your Expenses
The named insured
must report debris removal expenses to the insurance company within 180 days of
the loss date for this coverage extension to apply.
f. Coverage Limitation
This
coverage is part of the applicable limit available for coverage as described
under Property Covered, not in addition to it.
2. Emergency Removal
a. Coverage
This extension covers direct physical
loss to covered property removed from the scheduled location to avoid loss
or damage from an impending covered peril. The loss can occur while the
property is in transit between the scheduled and sanctuary locations.
This coverage extension is unique since the
property being moved is not subject to any exclusions while in transit or at a
sanctuary location. However, the reason for moving the property must
be due to a covered peril.
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Example:
A wildfire
in the neighboring county went out of control, and officials warned all
residents to gather their belongings and leave as quickly as possible.
Maybelline arranges to move her most heat-sensitive
equipment to a warehouse outside the fire’s projected path. The day after
Maybelline’s equipment arrives at the storage warehouse, a flash flood washes it away. The damage to the
equipment caused by the flood is covered because the equipment had been
relocated to protect it from the wildfire. |
b. Time Limitation
The coverage for this extension
is limited to 10 days after the property is moved to another location and will
not extend past the policy expiration date.
c. Coverage Limitation
This
coverage is part of the applicable limit available for coverage as described
under Property Covered, not in addition to it.
NOTE: Coverage does not extend beyond the
policy’s expiration date. This means if the named insured has property at an
emergency location when coverage renews, the emergency location must be listed
as a premises; otherwise, coverage will no longer apply.
3. Pollutant Cleanup and Removal
a. Coverage
The expenses incurred by the named insured to remove pollutants
from land or water are covered if a covered peril occurs during the
policy period caused by their release, discharge, migration, or similar escape.
b. Time Limitation
To be reimbursed, the costs associated with cleaning up or
removing these pollutants must be documented in writing and submitted to the
insurance company within 180 days of the loss date.
c. We Do Not Cover
Costs related to testing, evaluating, observing, or
recording pollutants are excluded, except when they are part of a covered
pollutant extraction process.
d. Limit
Each location has a maximum coverage limit of $10,000 for a
covered peril per 12-month policy period.
e. This is a Separate Limit
This limit is
independent of and not included in the policy limit described under Property
Covered.
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Example: A
semi-truck crashes onto Maybelline's property, damaging four pieces of
equipment. Oil and gasoline leak from Maybelline’s damaged equipment into the
ground and a nearby retention pond. This coverage addresses the required
cleanup for the oil and gasoline, subject to the limit, provided
that Maybelline incurs the expenses and reports the loss to the
insurance company within 180 days. |
4. Theft Damage to Building
a. Coverage
Coverage
applies to direct physical loss or damage caused by thieves to the part of the
building occupied by the named insured. Damage caused by thieves to equipment
used for maintenance or servicing of the building is also covered.
b. Coverage Condition
This
coverage applies only if the named insured owns the building or is legally
responsible to the building owner for this type of damage. The covered property
must be in a premises listed
on the schedule of coverages.
c. We Do Not Cover
Damage
or loss caused by fire is not covered. Additionally, damage to glass, glass
lettering, or glass decorations is not covered under this policy.
d. Coverage Limitation
This
coverage is part of the applicable limit available for coverage as described
under Property Covered, not in addition to it.
OPTIONAL COVERAGE
This optional coverage is only
applicable if the necessary entries are included in the schedule of coverages.
Peak Season
A location number, Peak Season Limit,
and dates for the Period of Coverage must be listed on the Schedule of
Coverages. The limit entered here replaces the limit listed on the Schedule of
Locations for the described premises, but it is only valid during the specified dates listed on the Schedule of Coverages.
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Example:
Maybelline's equipment inventory
increases significantly twice a year: from March 1 to April 15 and from
August 15 to October 1. During these periods, she doubles her insurance
limits. Unfortunately, a very wet spring left her with a
high amount of equipment on the premises even after April 15. When a
windstorm struck on April 16, her insurance limits had returned to normal,
despite her inventory still being elevated. As a result, a coinsurance penalty reduced the
amount she would have otherwise received for her loss. |
PERILS COVERED
Coverage protects against direct physical
loss, except when the loss is limited or caused by an excluded peril.
OTHER COVERAGES–COLLAPSE
1. Coverage
2. Covered Perils
Coverage
for collapse is provided when caused by one or
more of the following:
- One of the specified perils or breakage of
building glass, to the extent this coverage form insures against.
- Hidden decay. However, this does not
apply if the named insured was aware of the decay before the collapse.
- Hidden insect or vermin damage. However,
this does not apply if the named insured was aware of the damage before
the collapse.
- Weight of people or personal
property.
- Weight of rain. This is
limited to only rain that collects on a roof.
- Using defective materials or methods of
construction, remodeling, or renovation. This applies only if the
collapse occurs during any of these operations.
3. Collapse Means
Collapse refers to the
sudden and unexpected failure or caving in of a building or structure,
including any part of it, which makes the building unusable for its intended
purpose.
4. Collapse Does Not Mean
The following buildings and
structures are not considered to be in a state of collapse:
- Any remaining part of the building or
structure still standing, even if there are signs like bending, bulging,
cracking, expanding, leaning, sagging, settling, or shrinking.
- A building or structure in
danger of falling or caving in.
- When a portion of a building or structure
is still standing but has separated from another portion of the building
or structure.
5. Coverage Limitation
The covered property
limit does not increase for this coverage.
PERILS EXCLUDED
1. Primary Exclusions
a. Civil Authority
There is no coverage for loss resulting
from orders issued by any civil or government authority. Such orders may
include seizure, confiscation, destruction, or quarantine of property, but this list is not exhaustive. The only exception is when a civil authority destroys
property to control a fire causing loss
or damage. This exception applies only if the fire is caused
by a covered peril.
b. Flood
The insurance company does not cover
losses or damages caused by flooding.
However, there are exceptions as follows:
- If fire, explosion, or
sprinkler leakage occurs due to a flood, the resulting loss or damage is
covered, but flood damage itself remains excluded.
- This
exclusion applies only to the premises specified on the schedule of
coverages.
NOTE: This
means coverage could apply to covered property in transit and at unscheduled premises.
c. Nuclear Hazard
The insurance company does not
cover loss or damage from any nuclear reaction, radiation, or contamination,
whether the incident was controlled or not, or caused by any means. Any loss
caused by the nuclear hazard is not considered a fire, explosion, or smoke
loss. However, coverage does include direct loss or damage caused
by fire resulting from the nuclear hazard.
d. Sewer Backup and Water below the Surface
Coverage does not apply to loss or damage
from any of the following causes:
- Water that
backs up from a drain
or sewer.
- Water below the ground’s surface. Examples of such events
are when the water flows, leaks, seeps through, or exerts pressure on or into a
covered building or structure.
There are exceptions:
- If fire, explosion, or
sprinkler leakage occurs as a result of any of
the above, the loss or damage is covered. However, other types
of damage are not covered.
- This
exclusion applies only to the premises specified on the schedule of
coverages.
NOTE: This means coverage could apply to
covered property in transit and at unscheduled premises.
e. War and Military Action
The insurance company does not cover loss or damage caused by any act of war.
This includes undeclared wars, civil wars, or warlike actions by military
forces, all of which are considered war. Additionally, measures taken to hinder
or defend against actual or expected attacks by any government or sovereign
authority using military personnel or agents are also classified as war
and are not covered.
In addition, acts of insurrection, rebellion,
revolution, or unlawful power seizure, along with any government measures to
prevent or defend against these acts, are excluded. If any such action
involves nuclear reactions, radiation, or contamination, this exclusion
overrides the nuclear hazard exclusion.
NOTE: This means the exception for fire resulting from a
nuclear hazard does not apply when it is caused by war.
2. Secondary Exclusions
The second group of exclusions pertains to loss or damage caused by or resulting from
specific events listed below. Some of these exclusions include exceptions,
conditions, or limitations that should be noted and carefully reviewed.
The insurance company will not cover any loss or damage caused by or resulting
from any of these events.
a. Acts or Decisions
There is no coverage for losses caused by or resulting from acts or
decisions made by any person, organization, or government entity. This
exclusion also applies to instances where there is a failure to act or decide.
However, there is an exception to this exclusion. If an act or decision,
or a failure to act or decide, leads to a covered peril, then the loss or
damage caused by that peril is covered.
b. Animal Nesting, Infestation, or Discharge
Coverage does not apply to loss or damage due to nesting, infestation,
or the discharge or release of waste, secretions, or other substances by
animals. In this context, animals include, but are not limited to, birds,
insects, and vermin. However, if any of these excluded events result in a
covered peril, the loss or damage that peril causes is
covered.
c. Collapse
Loss
caused by collapse is not covered unless the collapse is included under Other
Coverages - Collapse, in which case coverage applies. Additionally, if an
excluded collapse results in a covered peril, coverage extends to the damage or
loss caused by that peril.
d. Contamination or Deterioration
Loss
or damage caused by contamination or deterioration is excluded. This
includes corrosion, decay, fungus, mildew, mold, rot, and rust. It also applies
to any quality, fault, or weakness in the covered property that leads to
self-damage or destruction. This exclusion is not limited to just these causes.
However, if contamination or deterioration results in a covered peril, the
resulting loss or damage from that peril is covered.
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Example: Vandals
broke into Maybelline’s and caused damage to several pieces of equipment
located outside. While some of the equipment was damaged on the exterior,
other equipment suffered damage due to gas contamination after sugar was
poured into the tanks. The
exterior damage caused by the vandals is covered since vandalism is not
excluded. Although
damage caused by contamination is usually excluded because vandalism is the
primary cause, one could argue that since vandalism is covered, the damage to
the gas tanks should also be covered despite the contamination exclusion. |
e. Criminal, Fraudulent, Dishonest, or Illegal Acts
Coverage does not apply to loss
caused by or resulting from criminal, fraudulent, dishonest, or illegal acts,
committed by any one of the following, whether alone or in collusion with others:
·
The named
insured.
·
Others with
an interest in the property.
·
Others to
whom the property has been entrusted.
·
The named
insured's partners, officers, directors, trustees, joint venturers, members, or
managers, as applicable, based on the named insured’s type of business organization.
·
Employees or
agents of any of the groups listed above. Employees are excluded even if the
act occurs when they are not considered to be working.
However, coverage applies if
employees destroy property, but it does not apply to employees stealing.
Additionally, coverage applies to carriers for hire with
custody of the covered property.
f. Electrical Currents
Loss or damage caused by artificially generated electrical currents that
damage electrical devices or wiring within the insured property is not covered.
This exclusion specifically applies to the property generating the electrical
current.
However, this
exclusion does not apply if electrical currents cause a fire or explosion. Loss
or damage from the fire or explosion is covered.
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Example: Some smaller agricultural equipment is battery-operated.
Maybelline keeps them plugged in overnight, so they are fully charged for any
customer who might want to test them the next day. One evening, a power surge
occurred, overpowering the surge protector and frying four of the battery
chargers. The damage to the chargers is not covered. |
g. Fault, Defect, or Error
Loss or damage due to errors,
faults, or defects in planning, zoning, surveying, site plans, grading,
compacting, land use, or development is not covered. Additionally, losses caused by
errors, faults, or defects related to property design, blueprints,
specifications, workmanship, building, maintenance, installation, renovation,
remodeling, or repair are also excluded.
There is a key
provision. This exclusion applies both on and off the designated premises, regardless
of negligence. However,
if loss or damage from one of these events results in a covered peril, then the
loss or damage caused by that peril is covered.
h. Loss of Use
Coverage does not apply to losses from delays, loss of use,
or loss of market.
i. Mechanical Breakdown
Loss caused by mechanical breakdown is not
covered. However, if this breakdown leads to a covered peril, then the
resulting loss from that peril is covered.
j. Missing Property
The
unexplained or mysterious disappearance of covered property is
not covered if there is no physical evidence of what happened to it, and the
only proof of loss comes from an audit or physical inventory.
However, this exclusion does not apply to covered property held in the custody
of carriers for hire.
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Example: When Maybelline arrives at work on Monday, she
discovers one of her most expensive excavators is missing. There is no
evidence that it was stolen because the fence is intact and the locks are
secure. Maybelline can provide
proof of ownership for the excavator, but cannot
explain what happened to it. Coverage is denied, so
Maybelline reports the loss to the police in hopes the excavator will be recovered someday.
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k. Pollutants
There is no coverage
for loss caused by or resulting from any release, discharge, seepage,
migration, dispersal, or escape of pollutants. However, when a pollutant
release results in a specified peril, the resulting loss from that specified
peril to covered property is covered.
l. Process to Repair, Adjust, Service, or Maintain
Loss or damage resulting from a repair to, adjustment of, service of, or
maintenance of covered property is excluded. However, if any of these actions
result in a fire or explosion, the loss or damage from the fire or explosion is
covered.
m. Temperature or Humidity
Coverage is excluded if loss or damage to covered property is caused by
dryness, dampness, humidity, or temperature extremes or fluctuations. However,
if one of these events causes a covered peril, the resulting loss or damage
from that peril is covered.
n. Unauthorized Instructions
Coverage
does not apply if a loss occurs because the property
was given or transferred to another person or sent to another place based on
unauthorized instructions.
o. Voluntary Parting
There is no coverage for loss to covered property willingly handed
over to another party, even if the surrender occurs because of
a fraudulent scheme, trick, or false pretense.
p. Wear and Tear
Loss or damage due to wear and tear is
excluded. However, if wear and tear leads to a covered peril, the resulting
loss or damage from that peril is covered.
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Example: Jerry attempts to evaluate an old
lawnmower. He pulls the cord to start it, but the cord breaks. The broken
cord is not a covered loss. However, because the lawnmower lacks a safety-off
switch, it jerks away from Jerry and crashes into a shelf in the maintenance
shed, which holds various accessories and other equipment. As a result, the
shelf collapses, damaging many items on it. Although the damage to the cord
and lawnmower is not covered due to the wear and tear exclusion, the damage
to the shelf and the items on it is covered. |
q. Weather
WHAT MUST BE DONE IN CASE OF LOSS
1. Notice
The named insured must
promptly inform the insurance company or its agent of any loss. The notice
should describe the property lost or damaged. If a criminal act led to the
loss, the relevant law enforcement agency must also be notified. The insurance
company may specify the notice be provided in writing.
2. You Must Protect Property
During and after a
loss, the named insured is required to take all reasonable steps to prevent
further damage to covered property. The insurance company will cover reasonable
costs incurred by the insured for this purpose, provided they maintain accurate
records to verify the costs. The expenses are part of the policy limits and not
in addition to them.
Additionally, there is
no coverage for repairs or emergency measures taken for property not already
damaged by a covered peril.
NOTE: It is important to
realize that any such costs incurred will reduce the amount available to
pay the actual loss.
3. Proof of Loss
The named insured must
complete and return the insurance company's required proof of loss forms within
60 days of the company's request. The information provided should include the
time, place, and circumstances of the loss, as well as details about any other
insurance coverage that might apply.
The proof of loss must
also specify the named insured’s interest and the interests of others in the
property involved, including liens and mortgages. Any changes to the title
of the property during the policy period must be disclosed, along with any
other reasonable information the company may need, such as inventories,
specifications, and estimates for settling the loss.
4. Examination
An examination of the
named insured under oath might be required in matters concerning the loss. The
insurance company can request these examinations multiple times, provided the
requests are reasonable. If several people are examined, the company has the
right to examine each person separately.
5. Records
The named insured is
required to provide any records related to the loss. The insurance
company must be permitted to copy and extract information from these
records whenever reasonably requested. Such records include, but are not
limited to, tax returns and bank microfilms of all related canceled checks.
6. Damaged Property
Both damaged and
undamaged property must be accessible for the insurance company's
inspection as frequently as reasonably needed. Additionally, the insurance
company should be permitted to take samples and conduct inspections of the
property.
7. Volunteer Payments
8. Abandonment
The insurance company
determines when and if it will assume ownership of the property belonging to
the named insured. As a result, the named insured is not permitted to abandon
damaged property to the insurance company unless they receive written approval
to accept it.
9. Cooperation
The named insured is
required to cooperate with the insurance company and perform any actions
specified in the policy.
VALUATION
1. Property Valuation
The value of the covered property
is determined as follows, subject to sections 2. Pair or Set and 3. Loss to
Parts below:
a. Property That Is Sold
Property sold but not yet
transferred to its new owner is valued based on its negotiated sale price. Once
the selling price is determined, it is then adjusted downward to account for
all discounts and allowances.
b. Property That Is Not Sold
The value of property that remains unsold is its
Actual Cash Value at the time of the loss. Actual Cash Value is calculated as
replacement cost new minus depreciation.
c. Property of Others
The property value of others has
two components: the amount the insured is liable for, and the value of labor
and materials invested by the insured. These two components are then added
together to determine the total value. If the total valuation exceeds the Actual
Cash Value of the damaged property, the valuation is limited to the Actual Cash
Value.
Actual Cash Value is replacement
cost new, less depreciation.
d. All Other Property
The value of all other covered property is
its Actual Cash Value at the time of loss. Actual Cash Value is calculated by
subtracting depreciation from the replacement cost new.
2. Pair or Set
The value of a loss related to damage or
the loss of one part of a pair or set is determined by a reasonable proportion
of the total value of the entire pair or set. However, losing one part of a
pair or set is not considered a total loss.
NOTE: This recognizes that the value of the whole is
greater than the value of individual parts, but the remaining parts still have
value as separates.
3. Loss to Parts
The value of a lost or damaged part, which comprises several parts, is
determined by the cost to repair or replace just the lost or damaged part.
NOTE: This recognizes that the whole is more
valuable than the sum of its parts, but the individual parts still retain value
on their own
HOW MUCH WE PAY
1. Insurable Interest
The insurance company will not pay more than the named
insured's insurable interest in the covered property at the time of loss.
2. Deductible
The insurance company pays only the amount of loss exceeding
the deductible amount shown on the schedule of coverages.
3. Loss Settlement Terms
a. The Insurance Company Pays The Lesser Of
The insurance company pays the
least of the following, subject to items 1., 2., 4., and 5. in this
section:
·
The amount
determined according
to the
Valuation section.
·
Costs to
repair, replace, or rebuild the damaged property.
- The material must be of
like kind and quality or as close as practically possible.
·
The applicable
limit for the covered property.
b. Catastrophe Limit
This applies only if a
catastrophe limit is entered on the schedule of coverages.
If a covered peril
causes loss or damage at multiple premises listed on the schedule, the most
paid in a single incident is the lowest of the following:
·
The
total of the limits for covered property
at all locations where the loss occurred.
·
The
catastrophe limit
NOTE: Whenever a catastrophe
limit is entered, it is essential to adjust it any time other limits on
the declarations are increased to prevent inadvertent capping.
4. Coinsurance
This provision only applies to
losses occurring at a covered premises listed on the schedule of coverages.
The insurance company does not
pay the full amount of any loss if, at the time of the loss, the value of all
covered property (subject to coinsurance) multiplied by .80 exceeds the limit
of insurance.
The following are the steps the
insurance company takes to determine the amount it pays:
Step
1: Determine
the value of items, at the time of the loss, of all covered property at the
loss premises subject to coinsurance.
Step 2: Multiply Step 1 by the
coinsurance percentage of 80.
Step 3. Divide the limit for the
covered property at the premises subject to coinsurance by the result
determined in Step 2.
NOTE: Stop here if the
result is 1.00 or higher because no coinsurance penalty applies. Go to Step 4
only if the result is less than 1.00.
Step 4. Multiply the total amount of
loss, prior to the application of a deductible, by the percentage determined in
Step 3.
Step 5. Subtract the applicable
deductible from Step 4.
The insurance company does not pay more than the
amount determined in Step 5. or the limit of insurance, whichever is less. It
does not pay any part of the remaining loss.
5. Insurance under More Than One Coverage
Two or
more coverages in the coverage form may cover the same loss. In such cases, the
insurance company will only pay up to the actual value of the claim, loss, or
damage incurred.
6. Insurance under More Than One Policy
a. Proportional Share
The named insured may have additional coverage, subject to terms similar to those of this coverage form. In such cases, this
coverage form only pays its portion of the covered loss. That portion is
determined by the ratio of its insurance limit to the total insurance limits
covering the same risk.
b. Excess Amount
There may be another policy available
to pay for a loss beyond what is described in item 5. a. above. In this
situation, the coverage form pays on an excess basis. It covers only the amount
of the covered loss exceeding what is owed under the other policy, regardless
of whether it can be collected or not. Any payment made is limited by the
applicable insurance limit.
LOSS PAYMENT
1. Loss Payment Options
a. Our Options
The insurance company has the following loss payment
options in the event of a covered loss:
·
Pay the value of the property that sustained loss or
damage
·
Pay the cost to repair or replace property that
sustained loss or damage.
·
Rebuild, repair, or replace the property with similar
property, to the extent possible, and it must be accomplished within a
reasonable period of time
·
Take any part or all the property based on the value
agreed upon or determined through appraisal.
b. Notice of Our Intent to Rebuild, Repair, or Replace
2. Your Losses
a. Adjustment and Payment of Loss
The insurance company settles all
losses with the named insured. It will also only pay the named insured, unless
a loss payee is listed on the policy.
b. Conditions for Payment of Loss
The insurance company settles a
covered loss within 30 days of receiving a properly prepared proof of loss and
confirming the loss amount. This amount is determined either through a written
agreement with the named insured or after an appraisal award is submitted to
the company.
3. Property of Others
a. Adjustment and Payment of Loss to Property of Others
The insurance company has the
option to adjust and pay losses involving others’ property either to the named
insured on behalf of the property owner or directly to the property owner.
b. We Do Not Have to Pay You if We Pay the Owner
The insurance company is not required to pay
the named insured when it pays the property owner. Additionally, if the
property owner sues the named insured, the company has the option to defend the
insured in the lawsuit.
OTHER CONDITIONS
1. Appraisal
Either
party can request an appraisal to determine the value of the disputed claim.
Once a request is made, both parties have 20 days to choose their own
independent appraisers and notify the other party of their
appraiser's name. The two appraisers then have 15 days to
select a competent impartial umpire. If they cannot agree on an umpire within
that time, either can request a judge in the court of record in the state
where the property is located to appoint one.
The
appraisers will then determine the value of the claim and submit any
differences to the umpire. Once any two of the three parties (the two
appraisers and the umpire) agree, the amount of loss is finalized.
Each party is responsible for paying its own appraiser, while the
costs associated with the umpire and other shared expenses are divided equally
between both parties.
2. Benefit to Others
3. Conformity with Statute
Any condition in this coverage form conflicting with
any applicable law is amended to conform to that law.
4. Estates
This condition is applicable only when the insured is an individual
a. Your Death
b. Policy Period is not Extended
This coverage does not extend past the
policy’s expiration date.
5. Liberalization
6. Misrepresentation, Concealment, or Fraud
This coverage is void if any insured at any time
willfully concealed or misrepresented a material fact related to the insurance
provided, the property covered, or their interest in the property. It is also
void if any insured engaged in fraud or false swearing with respect to the
insurance provided or the property covered.
NOTE: The named insured must deal with
the insurance company honestly. Its rights of recovery may be voided if it intentionally misrepresents or conceals a
material fact or information. This means the insurance is treated as if it had
never existed, rather than having a particular claim being denied.
7. Policy Period
Only covered losses that occur during the policy
period are paid.
8. Recoveries
Payment of the loss does not end
the obligations of the named insured and the insurance company toward one
another. Additional provisions apply if the insurance company pays a loss and
the lost or damaged property is later recovered, or if the responsible
party reimburses for the damage.
The party
that recovers property or payment must notify the other party. Expenses related
to recovery incurred by either party are reimbursed first. If the named insured keeps the
recovered property, they must repay the amount the insurance company paid on
the claim, unless the company agrees to a different amount.
If the claim paid is less than
the agreed loss due to the deductible or other limit, any recovery is prorated between the named insured and the insurance company
based on each party’s interest in the loss.
9. Restoration of Limits
Payment of a claim does not reduce the limit
available for future claims.
10. Subrogation
The insurance company gains the
right of recovery from third parties on behalf of the named insured after
paying a loss. The named insured is required to assist the company in securing
these rights. The company is not required to pay the loss if the named insured
obstructs or weakens its subrogation rights.
The named insured can agree in writing to waive
recovery rights from any party, provided it is done prior to a loss.
11. Suit Against Us
The insurance company cannot be
sued by anyone for any coverage until all the terms of the coverage form have
been met. Suits must be brought within two years after the named insured first became
aware of a loss. If a state
law invalidates this condition, any suit brought must comply with that law’s
provisions and begin within the shortest period of time
allowed by law.
NOTE:
It is common for a basic coverage form to be modified by mandatory
state-specific endorsements addressing issues related to that state.
12. Territorial Limits
Coverage is only
valid if the covered property is located in the United States of America, its territories, and possessions, Canada, or Puerto Rico.
13. Business Records
The named insured must maintain
business records throughout the policy period and retain them for a minimum of
three years after the policy expires. An itemized inventory of stock, updated
annually through a physical inventory, is also required.
The business records the named
insured must maintain should include all of the
following:
- Purchase invoices and sales
receipts.
- Detailed lists of the property belonging to others in the care,
custody, or control of the named insured.
- Records of property located away
from the premises listed on the schedule of coverages.
The insurance company can request
access to business records and inventory at any time, and the insured must
comply, provided the requests are reasonable.
NOTE:
This condition is very unusual, as it requires the named insured to maintain
records in a specified manner. However, it is common in all Inland Marine
dealer coverage forms, but not in commercial property coverage forms.
ADDITIONAL COVERAGE LIMITATION
Premises Protection
The protective devices in
operation as of the policy's effective date are required to remain functional throughout
the policy term. If any device is not installed or not working properly at the
named premises, coverage will be automatically suspended at that location.
Additionally, failure to activate the device
when the business is closed will result in the automatic suspension of coverage
at the location where the device is not in use. Coverage will automatically
resume once the device is operational again.
ENDORSEMENTS
AAIS has developed four
endorsements to use with Mobile Equipment Dealers Coverage.
IM 1261–Coinsurance Waiver
This endorsement deletes the
coinsurance provisions from the How Much We Pay section.
IM 1263–Personal Property Coverage
This endorsement adds coverage for
additional personal property, including furniture, fixtures, office equipment
and supplies, machinery, tools (and their parts), patterns, molds, models, and
dies. It also covers the insured's interest as a tenant in any improvements and
betterments made to the occupied premises. Entries must be made on the Schedule
of Coverages.
IM 1264–Reporting Conditions
This endorsement adds reporting
requirements and conditions to Additional Conditions and removes the
coinsurance provisions under How Much We Pay. Entries must be made on the
schedule of coverages.
IM 1273–Coinsurance Provisions
This endorsement revises the
coinsurance provision to be based on all premises rather than just one. All
other terms and conditions remain the same.
UNDERWRITING CONSIDERATIONS
To the extent covered property is located
inside a building, the construction, private and public protection, and
exposure to the building must be assessed. Equipment dealers should also be
evaluated based on the types of equipment stored inside versus outside. If the covered
property is kept outside, the extent of fencing and other protections to
restrict access to the premises must also be considered. The type and scope of
repair work must be determined and thoroughly reviewed, especially if flammable
liquids and welding activities are involved.