commercial package policy (property)

BASIC

The basic form is a named peril form that covers 11 causes of loss. these causes of loss are similar to those already discussed in the dwelling and homeowners sections: 1. fire 2. lightning 3. explosion - does not include explosion of pressure relief vessels or if caused by water 4. windstorm or hail - typical types of property not covered include outdoor crops, signs, radio and television antennas, plants and shrubs. loss to the interior of the building is not covered unless there is first damage to the exterior of the building 5. smoke 6. aircraft or vehicles - there is no coverage for loss or damage caused by a vehicle owned or operated by the insured in the course of their business. 7. riot or civil commotion 8. vandalism - glass breakage or damage to an outside sign caused by vandals, or other damage resulting from theft (except the damage caused by breaking in or exiting the premises) is not covered 9. sprinkler leakage - covers discharge or leakage from an automatic fire protective sprinkler system, including collapse of a tank 10. sinkhole collapse - covers direct loss caused by the sudden sinking or collapse of land created by the action of water on limestone. if the collapse is into a man-made hole, there is no coverage. coverage also does not include filling the sinkhole 11. volcanic action - covers direct loss from volcanic eruptions if caused by lava, ash, dust, or airborne shockwaves. the cost to remove ash to dust that does not cause a direct loss is not covered. all volcanic eruptions that occur within any 168-hour period are considered 1 event. the basic cause of loss form contains the following exclusions: *ordinance or law *earth movement *governmental actions *nuclear hazard *utility services - if there is loss or damage because of a power failure away from the premises, there is no coverage *war and military actions *water *neglect *artificially generated electrical current *rupture of bursting or water pipes, unless it resulted from another covered cause of loss *leakage or discharge of water or steam *explosion of steam boilers, steam pipes, or engines owned or operated by the insured *mechanical breakdown the following special exclusions apply to the business income coverage (with or without extra expense) and extra expense coverage forms. the insurer will not pay for any loss or damage resulting from the following: *off-premises power or other utility failure *damage or destruction of finished stock, or the time required to reproduce the finished stock (this exclusion does not apply to extra expense) *any loss resulting from damage to radio or television antennas *any increase in loss caused by: -delays in rebuilding, repairing, replacing or resuming operations due to interference by strikers or other persons -suspension, lapse or cancellations of any license, lease or contract unless directly caused by the suspension of business operations (the insurer will only cover loss during the period of restoration) *any extra expense caused by the suspension, lapse or cancellation of a license, lease of contract, beyond the period of restoration *any other consequential loss leasehold interest coverage has one special exclusion. the insurer will not pay for any loss resulting from the following: *the insured canceling the lease *suspension, cancellation or lapse of any license *any other consequential loss

ONE OR MORE COVERAGE PARTS

a coverage part consists of the declarations and conditions, all of the coverage forms, endorsements, and other attachments applicable to a single line of insurance. these are in addition to the common policy declarations, common policy conditions, and interline endorsements. if a policy contains only one coverage part, it is classified as monoline; if the policy contains more than one coverage part, it will be classified as a commercial package policy.

TRANSIT COVERAGE FORMS

annual transit - this policy is used by those businesses that ship goods on a regular basis. coverage can be written for all outgoing shipments, incoming shipments, or both that occur during the policy period. trip transit - this policy form is a variation of the annual transit policy and is used to cover a specific shipment or trip. the policy period is for the time the goods leave the shipper until they reach their destination. loss or damage to covered goods is provided without regard to the legal liability of the carrier. coverage can be written on either a named peril or all-risk basis, but the all-risk coverage can be written only for goods shipped by a common carrier. continuous coverage can be provided for goods shipped by several different carriers during transportation until they reach their ultimate destination.

BAILEE'S CUSTOMERS

bailee's customer coverage forms are used to cover losses to customer's property in the care, custody, or control of the insured. each of these coverage forms is unfiled. *bailee's customers policy - this coverage form covers loss to customers' property without regard to the insured's legal liabilty for the loss. it covers both the bailee's interest and the bailor's. *furriers block - this coverage is written for insured in the fur business and covers merchandise held for sale and customer's property that the insured has temporary custody of for cleaning, repair, or storage *cleaners, dryers, and laundries - this coverage form provides protection for insureds in the laundry or dry cleaning business loss or damage to customer's property while in their possession. *warehouseman's - this coverage form covers customers' property while it is stored at a warehouse, and it is usually written to apply as excess over other valid and collectible insurance of the property owner.

COVERAGE

building coverage insures the building described, including outdoor fixtures and furniture, items used to service the property, permanently installed machinery and equipment, and additions under construction, including the materials, supplies and equipment within 100 feet of the premises. there is a $2500 per sign limitation for loss or damage to outdoor signs. business personal property coverage covers business personal property located in, or within 100 feet of the building, including improvements and betterments, and leased personal property that the insured has a contractual obligation to insure. personal property of others covers personal property that is located at the described premises or within 100 feet of the premises and in the insured's care, custody, or control.

INLAND MARINE COVERAGE FORMS

commercial inland marine coverage can be written as either monoline policy or as part of a commercial package policy. (CPP) a different inland marine declaration may be attached to a policy depending on the coverages written. besides the general information concerning the name of the insured, policy period, and endorsements, the commercial inland marine declarations specifically describes the insured property. most of the filed forms include a $250 deductible that applies to any one loss. in addition, the filed coverage forms are usually written on an all-risk basis. the commercial property causes of loss forms are not applicable to these coverages because the exclusions are specifically contained in each of the coverage forms. except for the mail coverage form, the following exclusions are common to all of the filed coverage forms and most of the unfiled forms: *governmental action *nuclear hazard *war and military action *delay, loss of use, or loss of market *dishonest acts by the insured or the insured's employees or representatives *voluntarily parting with property by fraudulent trick, scheme or device *unauthorized instruction to transfer property *loss or damage caused by any of the following, but if loss by a covered cause of the loss results, the additional loss will be covered in the following situations: -weather conditions -acts or decisions, or the failure to act or decide -faulty, inadequate or defective planning, zoning, construction, workmanship, etc -collapse, other than that provided as an additional charge -wear, tear, inherent device, gradual deterioration, etc in addition, all of the filed coverage forms, except the mail coverage form, also include the additional coverage collapse of a building is covered only if caused by one of the following specified causes of loss: *fire *lightning *extended coverage perils *breakage of glass *falling objects *weight of snow, ice, or sleet *water damage *hidden decay, insects, or vermin *weight of people or personal property *weight of rain that collects on the roof *use of defective building materials or methods

CAUSES OF LOSS FORMS

commercial property coverage can be written with 1 of 3 causes of loss forms, which tell which perils are being protected against: basic, broad, or special. these are similar to the coverage forms discussed for the dwelling and homeowners policies in that each form covers a wider range of perils than the previous form. in addition, a fourth cause of loss form can be attached to the policy to cover the peril of earthquake. however, when earthquake is covered, one of the other causes of loss forms also must be attached to the policy.

CONDOMINIUM ASSOCIATION

condominium association coverages form is used to cover buildings and permanent fixtures for condominium associations. because of the unique ownership situation that exists with condominiums due to multiple occupancy and multiple ownership, 2 different coverage forms have been developed to address the situation. the first coverage form, condominium association coverage form, provides coverage for common building property and other property that must be insured because of the condominium association agreement. the second form is the condominium unit-owners coverage form. it insures the owners personal property. covered property under the condominium association coverage form includes the building, business personal property, and property of others. the actual coverage is similar to what is provided under the building and personal property coverage form. however, the building coverage specifically includes the following: *fixtures *improvements and alterations that are a part of the building *refrigeration, ventilation, cooking, dishwashing, laundering, security or housekeeping appliances contained in individual units if the condominium association agreement requires the association to provide the insurance protection business personal property includes property owned by the association, or jointly by the unit owners, and leased business personal property that the association has a contractual agreement to insure. business personal property is insured if in or within 100 feet of the described premises. the same causes of loss forms used with the building and personal property coverage forms are used with this coverage form. in addition, the same additional coverages and coverage extensions are included in the condominium association coverage form. the additional coverages appear next. the coverage form also includes several other conditions that apply in addition to the common policy conditions and the commercial property conditions. these conditions are the same as the additional conditions found in the building and personal property coverage form, with 1 exception: unit owner's insurance. if the unit owner has insurance on the same property, this insurance is intended to be primary and not to contribute to the unit owner's insurance. there are 2 optional coverages built into the coverage form that are activated by a declarations page entry. these optional coverages are the following: 1. agreed value 2. inflation guard 3. replacement cost

COVERAGE B - OTHER PRIVATE STRUCTURES

coverage B - other private structures is similar to the homeowners coverage. however, this coverage B excludes coverage for any detached structure used principally for farming purposes. coverage B provides a special limitation for $1,000 for loss to antennas or satellite dishes.

COVERAGE C - HOUSEHOLD PERSONAL PROPERTY

coverage C - household personal property applies to personal property owned by an insured while the property is on the insured location. the following are the special limits of insurance for coverage C: *$200 for gold, money, platinum, and silver *$1,500 for letters of credit, manuscripts, passports, and securities *$1,500 for watercraft and their equipment, furnishings, outboard engines, and trailers *$1,500 for trailers not used for watercraft or farming operations *$2,500 for business property on the insured location *$500 for business property away from the insured location *in the event of loss by theft: -$2,500 for furs, jewelry, precious, and semiprecious stones and watches -$2,500 for gold ware, silverware, platinum ware, and pewter ware -$3,000 for firearms and related equipment *$1,500 for electronic apparatus and accessories in or on a motor vehicle only if equipped to be operated by power from the vehicles electrical system and other power sources *$1,500 for electronic apparatus and accessories used primarily for farming or business operations while off of the insured location and not in or on a motor vehicle

COVERAGE D - LOSS OF USE

coverage D - loss of use provides coverage for the fair rental value in the event the dwelling at the described location becomes uninhabitable due to a loss from an insured peril

COVERAGE E - SCHEDULED FARM PERSONAL PROPERTY

coverage E - scheduled farm personal property includes farm personal property insured on a scheduled basis and may include property such as the following: *livestock (excluding livestock in transit or at a stockyard) *other animals *bees, worms, fish *poultry (excluding turkeys, unless specified) *computers related to farm management *miscellaneous equipment (such as tools) *portable structures coverage E does not provide coverage for growing crops, trees, household personal property, and has special limits of liabilty that apply to the following: *hay, straw, or fodder in the open is limited to $10,000 per stack *miscellaneous farm equipment is limited to not more than $3,000 per item *poultry is limited to market value *livestock not specifically insured is limited to ACV, 120% of the amount obtains by dividing the total insurance on the class and type of animal by the number of head of that kind of animal owned at the time of loss, or $2,000 - whichever is lower (each horse, mule, or head of cattle 1 year old at the time of loss will be counted as 1/2 head)

COVERAGE G - OTHER FARM STRUCTURES

coverage G- other farm structures covers farming structures such as barns, fences, silos, and outdoor radio and television equipment. coverage can be on a replacement cost basis if expressly indicated in the declarations. if this option is not chosen, losses will be settled at the actual cash value at the time of the loss. with the replacement cost basis, loss settlement is determined by the ratio of the applicable limit of insurance for the damaged structure to the full replacement cost of the damaged property. if the limit of insurance is at least 80% of the full replacement cost at the time of loss, the insurer will pay: the cost to replace with like kind and quality, the amount actually necessary to repair or replace, or the limit of insurance, whichever is smallest. if the limit of insurance is less than 80%, the insurer will pay the larger of: the ACV at the time of loss, or a proportion of the cost equal to the ratio of the applicable insurance to 80% of the cost to repair or replace.

ELECTRONIC DATA PROCESSING

electronic data processing coverage has become more important in recent years. businesses that own, lease, or rent data processing equipment are eligible for coverage. these unfiled forms usually cover the following 4 coverages: 1. computer hardware that is specifically scheduled 2. data processing media, including magnetic tapes or paper tapes, punch cards and discs. 3. extra expense the insured incurs to continue the business following a loss 4. business interruption can also be provided to cover loss of income when the business is interrupted because of damage to equipment media

SELECTED ENDORSEMENTS

equipment breakdown coverage forms also may be endorsed to add coverage for business interruption, consequential damage, and extra expense

EXCLUSIONS

exclusions for farm coverage include the following: *ordinance or law *earth movement *governmental action *nuclear hazard *power failure off premises *war and military action *water (meaning flood and surface water) these exclusions have already been discussed under previous forms.

FARM COVERAGE

farm coverage is unique because it not only insures the property and liability exposures of the business of a farm operation, but also may include the personal residential exposures or property and liabilty of a family living on the farm premises. as in any commercial package policy, farm coverage may be written together in a single coverage (package), or separately as a single coverage (monoline). in addition to the common policy declarations and common policy conditions, the farm coverage part must include a farm declarations and a farm conditions form and one or more farm coverage forms. there are 4 farm coverage forms: 1. farm property 2. farm liability 3. mobile agricultural machinery and equipment 4. livestock

GLASS COVERAGE

glass coverage form covers types of glass including ornamentation and lettering glass coverage in the building and personal property coverage form is extremely limited. there is no coverage on the basic form and the broad and special forms only provide coverage for $100 per pane and $500 per occurrence. the glass coverage form is used to insure commercial plate glass, frames, lettering and ornamentation. coverage may be written as a monoline policy or as part of a commercial package policy when the glass coverage form is used, all insured glass will be described on a schedule including its location, any lettering or ornamentation, and the size and number of plates insured. glass coverage is written on an ACV basis, usually without a limit of insurance. the causes of loss forms do not apply to glass coverage. instead, the glass coverage form has only 2 covered causes of loss. it covers direct loss or damage to covered glass caused by breakage and chemicals accidentally or maliciously applied. the exclusions in the glass coverage form excludes loss or damage that result from fire (this is covered under the building and personal property coverage form), nuclear hazards, and war and military action. the form include 4 additional coverages which apply in addition to the limit of insurance: 1. debris removal 2. expenses incurred to put up temporary plates if repair is delayed 3. necessary repair or replacement of frames 4. expenses to remove or replace obstructions when making repairs there is also 1 extension of coverage included in the glass coverage form for newly acquired glass. the policy will cover additional glass of the same type at the described premises or at a new location for the earliest of 30 days, until the policy expires, or until the insured reports the new glass to the insurer the conditions found in the glass coverage form are similar to other property conditions, including the following: *duties in the event of loss or damage *loss payment, giving the insurer the option to pay for the actual loss or damage, repair or replace the damaged property, take the property at an agreed or appraised value, or repair the damaged property with property of like kind. this condition also requires the insurer to pay for the loss or damage within 30 days after agreement has been reached between the insurer and insured *vacancy for 60 days or more will suspend coverage, unless the insured has purchased the optional coverage for vacant buildings *valuation will be based on the actual cash value at the time of loss or the minimum cost to replace the glass with safety glazing material there is also 1 optional coverage built into the glass coverage form. if shown in the declarations coverage for loss payment for large plates will apply to each separate item. in case of loss to glass with a surface area of 100 sq. feet or more, the insurer has the option to settle the loss by replacing the glass with 2 or more plates or paying the insured the value of 2 smaller plates with a combined surface equal to the larger glass, and any alteration expenses to install the smaller plates.

MOBILE AGRICULTURAL MACHINERY AND EQUIPMENT COVERAGE FORM

mobile agricultural machinery and equipment includes mobile devices used in the everyday farm operation, such as accessories (whether attached or not attached), and tools and spare parts specifically designed for use in the maintenance and operation of the mobile devices. the mobile agricultural machinery and equipment coverage form insures eligible equipment for open perils subject to policy limitations and exclusions. this coverage also may be written on a separate standalone policy.

PROPERTY COVERED, NOT COVERED

property covered under a builder's risk coverage form includes the building or structure, temporary structures, foundations, fixtures, machinery, equipment, materials, and supplies within 100 feet of the premises if intended to become a permanent part of the building. the coverage form lists the types of property not covererd. these include lane or water, outfoor lawns, trees, shrubs or plants, radio and television antennas, and signs (excluding signs attached to the building, which is limited to a specified dollar amount: $1,000 under the builders risk (02) policy and $2,500 under the builders risk (07)policy. the same covered causes of loss forms used with the building and personal property coverage form applies to the builders risk coverage form

ACTUAL CASH VALUE

property damage for covered equipment is valued as follows: the insurer will pay the lesser of the cost to repair or replace the damaged property of the same kind, or the actual cash value of the damaged property at the time of breakdown. damage to property that is obsolete or not used by the insured is not covered.

TRANSPORTATION COVERAGES

property in transit is the oldest form of inland marine coverage. transportation coverage is available to cover the exposure of the shipper, carrier, or consignee of goods. carriers of property may be divided into 3 categories: 1. common carriers - transport the property of anyone who hires them 2. contract carriers - only transport property of others for which they have a written contract 3. private carriers - transport their own property in addition to the 3 types or carriers, there are 3 different parties that may have a financial interest in the property being transported: 1. shipper - this is the person or company that is sending the goods 2. consignee - this is the person or company that will receive the goods 3. carrier - this is the company that is transporting the goods both the shipper and the consignee have an ownership interest in the property being shipped, the extent of which is determined by the terms of the sales agreement. the term free on board (F.O.B.) may be used in connection with this coverage. for example, if the contract is written FOB - shippers location, then the shipper owns the property only until it is transferred to the carrier. once the carrier has possession, the consignee owns the property and will suffer any loss if the property is damaged during shipment. If, on the other hand, the property is shipped FOB - Consignee's location, then the shipper owns the property until it is delivered to the consignee.

ACCOUNTS RECEIVABLE

the accounts receivable coverage form is one of the most important and popular of the inland marine coverage forms. unlike most inland marine coverages, coverage is provided for property that is at a fixed location, rather than mobile property. the accounts receivable coverage form is a filed form that provides protection for losses of accounts due from customers that become uncollectible because of a loss to the insured's accounts receivable records. coverage is written on an all-risk basis. additional exclusions (other than those already discussed) include the following: *alteration, falsification, concealment or destruction of records to conceal a wrongful act *bookkeeping, accounting, or billing records *electrical or magnetic injury, disturbance, or erasure the following amounts will be subtracted from the total: *the amount of accounts in which there is no loss *the amount of accounts that the insured can re-establish and collect *an amount for probable "bad debts" that the insured is normally unable to collect *all unearned interest and service charges in addition, another condition requires the insured to store the accounts receivable records in a receptacle described in the declarations when the records are not in use.

BROAD

the broad form contains the same 11 causes of loss as the basic form, except that the peril of vandalism includes breakage to glass, which is excluded in the basic form. in addition, the broad form includes 3 more causes of loss: 1. falling objects - the insurer will not pay for loss or damage to personal property in the open, or to the interior of a building or structure unless the roof or an outside wall is first damaged by a falling object 2. weight of snow, ice, or sleet - except for the loss or damage to personal property outside of buildings or structures 3. water damage - includes accidental discharge or leakage of water or steam as the direct result of the breaking apart of a plumbing, heating, air conditioning, or other system or appliance. water damage does not include any of the following: -discharge or leakage from an automatic sprinkler system; a sump or related equipment, including over flow due to sump pump failure; roof drains, gutters, downspouts, or similar fixtures -the cost to repair defects that caused the water damage -loss or damage caused by continuous or repeated seepage or leakage that occurs over a period of at least 14 days -loss or damage caused by freezing as long as the insured demonstrated due diligence in trying to prevent freezing the following exclusions in the broad form are identical to those found in the basic form: *ordinance or law *nuclear hazard *war and military action *governmental actions *neglect *utility services *the special exclusions concerning the business income, extra expense, leasehold interest, and legal liability coverage forms the broad causes of loss form includes 2 additional coverages not found in the basic form 1.collapse - the policy will cover collapse of the building if the loss is the result of a covered cause of loss, including hidden decay, insect or vermin, weight of people, rain that collects on the roof, or the use of defective materials or methods in construction if the collapse occurs during construction. collapse does not include settling, cracking, shrinkage, bulging, or expansion 2. breakage of glass - damage to glass that is a part of the covered building (excluding neon tubing) is covered for up to $100 for each plate or $500 per occurrence if caused by vandalism or another covered cause of loss

BUILDING AND PERSONAL PROPERTY

the building and personal property coverage form (coverage forms tell what property is being covered) is the main form used to cover buildings, business personal property, and property of others on the insured's premises the most common form used to insure commercial property is the building and personal property coverage form. this form can be used to cover direct loss or damage to buildings, business personal property, and/or property of others in the insured's care, custody, or control. the insured must elect the applicable coverage and limits needed. replacement cost coverage can be written at the option of the insured for the building and business personal property, but not for personal property of others. replacement cost coverage for property of others that the insured is liable for under written contract may be added at the option of the insured if replacement cost coverage has been elected.

LOSS CONDITIONS

the building and personal property coverage form also contains several other conditions that are in addition to the commercial property conditions and the common policy conditions. these additional conditions include the following: *abandonment - the insured cannot abandon property to the insurer *appraisal - if the insurer and insured cannot agree on the value of property, both parties may make written demand for an appraisal of the loss. the decision agreed upon during the appraisal process will be binding on both policies. *coinsurance - the coinsurance clause defines how much will be paid in the event the insurance limites do not meet the policy coinsurance requirement. *duties in the event of loss or damage - in the event of loss or damage, the following duties are required of the insured: -notify the police if a law has been broken -give the insurer prompt notice of loss, and a description of how, when, and where it occurred -take all reasonable steps to protect property from further damage -at the insurer's request, provide an inventory of both damaged and undamaged property -permit the insurer to inspect the property as often as necessary -send the insurer to inspect the property as often as necessary -cooperate with the insurer in the investigation *loss payment - in the event of loss or damage, the insurance company has the option to do the following: -pay the value of the lost or damaged property -pay the cost of repairing or replacing the lost or damaged property -take all or any part of the property at an agreed or appraised value -repair, rebuild, or replace the property with other property of like kind and quality *mortgage holders - if the insurer denies coverage because the insured failed to comply with the policy provisions, the mortgage holder may still be able to receive payment if the mortgage holder pays any premium due under the policy, submits a signed proof of loss within 60 days, and has notified the insurer of any changes in ownership of occupancy. if the insurer cancels coverage for nonpayment of premium, it will provide the mortgage holder a written notice of the cancellation (10 days if for nonpayment of premium, and 30 days for all other reasons). *recovered property - if property is recovered after payment has been made, the insured has the option of keeping the property and returning the amount paid. *vacancy - if the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. if the loss is caused by any other peril, the insurer will reduce the amount it otherwise would have paid by 15% *valuation - the insurer will settle the loss on an actual cash value basis except under the following conditions: -if the limit of insurance satisfies the coinsurance clause and the amount of the loss is less than $2,500, the insurer will pay the cost to repair or replace the property. -stock sold, but not delivered, will be valued based on the selling price (stock means merchandise held in storage or for sale, raw materials, and in process or finished goods, including supplies used for packing and shipping). -glass will be valued at the cost of replacement with safety glazing material, if required by law -tenant's improvements and betterments will be valued at actual cash value if repairs are made promptly, or a proportion of the original cost of repairs are not made promptly. -valuable papers and records will be valued on the cost of blank material and the labor required to transcribe the records

OPTIONAL COVERAGES

the building and personal property coverage form has the following optional coverages, which must be shown in the declarations and apply separately to each item: *agreed value - the insurer and insured will determine a value for property. the insurer will pay no more for loss or damage to that property than the proportion the insurance limit for this coverage bears to the agreed value shown. coinsurance does not apply to property with an agreed value. *inflation guard - limits of insurance to which this coverage applies are automatically increased by an annual percentage shown in the declarations *replacement cost - the actual cash value in the valuation condition is replaced with replacement cost valuation. this coverage does not apply to personal property of others, contents of a residence, works of art, antiques or rare articles, or stock unless stock is shown in the declarations. this coverage may be extended with another optional coverage, extension of replacement cost to personal property of others.

ADDITIONAL COVERAGES

the building and personal property coverage form includes the following additional coverages: *debris removal - debris removal is limited to no more than 25% of the loss. debris removal covers the cost of removing debris following a covered loss. these expenses must be reported to the insurer within 180 days of the loss for coverage to apply. in a separate section of the policy, a grant of an additional $10,000 coverage is available if the 25% limit is insufficient *preservation of property - the policy also will pay for any damage to property moved to protect is from further damage, but only for 30 days after the property is first moved *fire department service charge - if the insured is under an obligation to pay for fire department service calls, the policy will reimburse the insured for up to $1,000 for this charge. the policy owner may purchase a higher amount as shown on the declarations page. the deductible does not apply to this additional coverage. *pollutant cleanup and removal - the policy will pay up to $10,000 for expenses incurred to remove pollutants if the discharge is caused by a covered cause of loss and reported in writing within 180 days of occurrence. this is the maximum amount the insurer will pay in any 12-month period. *increased cost of construction - the policy will pay the lesser of: $10,000 or 5% of the limit of insurance applicable to the building for increased cost of construction resulting from building laws enforcement *electronic data - the policy will pay up to $2,500 for the cost to replace or restore electronic data that has been destroyed or corrupted by a covered loss.

BUSINESS INCOME

the business income coverage form covers the consequential loss of business income that occurs when a business must suspend operations because of direct loss. these forms are also called time element forms because of the direct relation of the time a business is unable to operate to the amount of the loss. the longer a business is down, the bigger the amount of the loss. there is a 72-hour (3-day) waiting period (time deductible) before the coverage begins. this coverage helps to indemnify the business owner for loss of profits and fixed expenses that must continue to be paid during restoration following a direct loss to the covered premises. business income means net income (net profit before income taxes) that would have been earned or incurred, and continuing normal operating expenses incurred, including payroll the period of restoration is defined as the period of time that begins with the date of direct physical loss and ends on the date the property should be repaired or rebuild with reasonable speed and similar quality. four additional coverages are included in the business income coverage form. these additional coverages will not increase the applicable limit of insurance. *expenses to reduce loss *civil authority - the insurer also will pay for the actual loss of business income caused by the action of a civil authority that prohibits access to the damaged premises. this coverage will only apply for up to 4 weeks (28 days) *alterations and new buildings - under this additional coverage, the insurer agrees to pay for loss of business income resulting from loss to any of the following: -new buildings or structures, whether completed or under construction -alterations or additions to existing buildings -machinery, equipment, supplies, or building materials located on the described premises, or within 100 feet, used in the construction or incidental to the occupancy of the building. -if the direct physical damage delays the start of operations, the period of restoration will begin on the date operations would have begun *extended business income - the insurer will pay for the actual loss of business income that the insured incurs during the period that: -begins on the date the property (except finished stock) is actually repaired and operations are resumed -ends on the earlier of the date the insured could restore operations with reasonable speed and diligence, or 30 days after the date operations are actually resumed if a coinsurance percentage of 50% or more applies to the business income coverage part, the insured also may extend the coverage to newly acquired locations. this extension only applies for 30 days from the date the insured acquires the new location. the most the insurer will pay is 10% of the limit if insurance for business income, up to a maximum of $100,000 per location. this extension is considered additional insurance, and the coinsurance clause does not apply. the same covered causes of loss forms and exclusions that apply to the building and personal property coverage apply to this coverage. the following additional conditions are found in the business income coverage form: *appraisal *duties in the event of a loss *coinsurance *loss determination - this condition says that the insurer will determine the amount of business income loss based on the following: -the net income of the business before the loss -the likely net income of the business if no loss had occurred -the operating expenses, including payroll, necessary to resume operations with the same quality of service -other relevant sources of information *resumption of operations - the insurer will reduce the amount of business income loss payable to the extent that the insured can resume operations in whole or in part by using damaged or undamaged property at the described premises or elsewhere *electronic media and records - the coverage form also includes a limitation with respect to damage to electronic media and records. the insurer will not pay for any business income loss because of direct physical damage to electronic media and records after the longer of the following: -60 days following the loss -the period needed to repair other property damaged by the same occurrence if shown on the declarations page, the following optional coverages will apply: *maximum period of indemnity - if this optional coverage is selected by the insured, the coinsurance clause is replaced, and the most the insurer will pay for the loss of business income is the LESSER of the following: -the actual amount of loss sustained during the 120 days immediately following the loss -the limit of insurance *monthly period of indemnity - when this optional coverage is selected, the coinsurance clause is replaced, and the most the insurer will pay in each 30-day period after a direct physical loss is the limit of insurance times a specified percentage shown in the declarations *extended period of indemnity - the 30-day limit under the extended business income additional coverage can be replaced by another number, which will be shown on the declarations page *agreed value - to activate this coverage, the insured must complete a business income report showing the business financial data for the previous 12 months and an estimate for the next 12 months. this report becomes part of the policy. the formula for an agreed value is the coinsurance percentage multiplied by the estimated net income and operating expenses. if the business income limit is less than the agreed value, the insurer will pay no more than the limit of insurance divided by the agreed value. for example, if the limit of insurance is $100,000 and the agreed value is $200,000, the insurer will pay no more than 50% for any loss ($100,000/$200,000).

COMMON CARRIER CARGO LIABILITY

the carrier is considered responsible for the safe delivery of property. common carrier cargo liability covers the carriers legal liability for damage or loss to property in the insured's care and custody for transportation. the law recognizes certain instances in which the carrier will not be held responsible for damage or loss. these defenses are as follows: *acts of God or nature *exercise of public authority *acts of public enemy *negligence of the shipper - if damage is caused by negligence in packing or shipping or items highly susceptible to damage from ordinary handling *inherent vice or nature of the property

LEGAL LIABILITY

the carrier obviously has an interest in the property while in their custody for any legal liabilty that may be imposed on them for loss or damage to the property during shipment. however, the extent of responsibility for damage to property during transit depends on whether the carrier is a common carrier or a contract carrier. common carriers that offer their services to the public at large are legally liable for damage to property they are transporting with exceptions applying to loss caused by the following: *acts of God (earthquakes, floods, etc) *acts of public enemy (wars) *exercise of public authority (confiscated cargo by law enforcement) *shipper's fault (faulty or negligent packaging) *inherent vice (perishable goods) a common carrier issues a document called a bill of lading evidencing receipt of goods for shipment. to limit its liability, a common carrier will issue a released bill of lading, which limits its liability to a specified maximum dollar amount. contract carriers that agree to serve specific clients based upon a prearranged agreement are liable only for damage to cargo when they are negligent. the standard of care placed on a common carrier is much higher than required of a contract carrier

CAUSES OF LOSS (BASIC, BROAD, AND SPECIAL)

the causes of loss forms for farm coverage follow the perils of those in commercial property policies, with the following additions: *basic causes of loss include collision coverage for coverages E and F in the event of a collision causing damage to machinery, death to livestock, and damage to other farm personal property. *Broad form causes of loss also adds the perils of electrocution of livestock, attacks on livestock by dogs or wild animals (except attacks to sheep or by dogs or wild animals owned by the insured), accidental shooting of livestock, drowning of livestock (except swine under 30 days of age), and accidental death due to loading or unloading of livestock. *special form includes the usual open peril exclusions, but adds exclusion for fire if caused by curing tobacco

COMMERCIAL ARTICLES

the commercial artiles form is a filed form that covers the interest of the owners, as opposed to dealers, of commercial cameras, musical instruments, and similar property, including similar property of others in the insured's care, custody, or control. property not covered includes contraband and property in illegal trade or transportation. as with all inland marine coverage forms, coverage is provided on an all-risk basis. the form includes all of the common exclusions previously discussed. the coinsurance clause found in this coverage form is slightly different from other coinsurance clauses. it states that all items covered, but not specifically described or listed, must be insured for their total value at the time of loss to avoid a coinsurance penalty. another condition unique to this coverage form concerns additional acquired property, which is automatically covered for up to 30 days if it is of the same type of property already insured. the insurer will pay up to 25% of the limit of insurance for the similar property, to a maximum of $10,000.

COMMERCIAL INLAND MARINE CONDITIONS

the commercial inland marine conditions are in addition to the common policy conditions and any conditions applying to a specific coverage form. they are similar to other common conditions already discussed and include the following: *abandonment *appraisal *duties of the insured in the event of a loss *insurance under 2 or more coverages *loss payment *other insurance - if other valid insurance covering the same loss, the policy will be considered excess *pair, set or parts *recovery (salvage) *transfer of rights of recovery (subrogation) *privilege to adjust with the owner - because inland marine coverages can cover property of others in the insured's care, custody, or control, this condition says that the insurer will settle with the actual owners of the property in the event of a loss *reinstatement of limit - this condition states that payment of any claim will not reduce the limit of insurance, except in the case of a total loss on a scheduled item. in this case, the insurer will cancel the specific coverage and refund any unearned premium for the coverage on that item *concealment, misrepresentation or fraud *legal action against the insurer *no benefit to the bailee *policy period *valuation - this condition states that the insurer will determine the value of an item following a loss based on the lesser of: -the ACV of the item -the reasonable costs to restore the property -the cost of replacing the property with like kind a commercial floater refers to an inland marine policy designed to cover moveable commercial property, wherever it may be located (worldwide coverage)

COMMERCIAL PACKAGE POLICY

the commercial package policy was introduced in 1986 to replace the special multiple policy and other related monoline policies. some of the most important goals of this overhaul were the following: *simplify the text of the policy forms and endorsements *modernize coverage by eliminating outdated provisions, broadening certain coverages, increasing internal policy limits, and including popular coverage options in the basic forms. *reduce the number of policy forms and endorsements by standardizing monoline and package forms, and keeping the description of perils on separate forms to maximize efficiency. the coverages available in this program may be written together in a single contract (package) or written separately as a single coverage (monoline). a package policy does not necessarily contain all the available policies, but it can be personalized to the insured's needs. regardless of how the policy is written, it will be comprised of the following essential elements: *common policy declarations page *common policy conditions *interline endorsements (if required) *coverage parts

COMMON POLICY CONDITIONS

the common policy conditions is an interline form that contains provisions applicable to all lines of coverage that may be included in the policy. the conditions are as follows: *cancellation - the first named insured may cancel the policy at any time by giving written notice to the insurer. the insurer may cancel for an allowable reason by giving the proper notice to the first named insured. see state regulations for the time of notice requirements. *changes - changes in terms can be made only by endorsement issued by the insurer. request for change in the policy requested by the insured must be by the first named insured. *examination of books and records - the insurer is granted the right to audit books and records of the insured relating to the policy for a period of up to 3 years (36 months) after the end of the policy. *inspections and surveys - the insurer is granted the right, but does not have an obligation, to make inspections, surveys, reports, and recommendations relating to the insurance. *premiums - responsibility for payment of the premiums rests with the first named insured *transfer of rights and duties - the rights and duties of the insured under the policy can be transferred to another only with the written consent of the insurer. however, in the event of the insured's death, rights and duties are automatically transferred to the insured's legal representative.

CONTRACTORS EQUIPMENT FLOATER

the contractors equipment floater is an unfiled inland marine coverage form that generates more premium industry-wide than any other commercial inland marine coverage. it is used to insure mobile equipment and contractor's equipment owned, rented, or borrowed by contractors (as opposed to dealers). it provides coverage for the equipment not only while it is located on the job site but also during transportation to and from the job site, or while it is temporarily stored between jobs. coverage can be written on a named peril or all-risk basis. the coverage form usually includes coverage for newly acquired equipment for 30 days. the coverage extension is usually limited to a 25% of the limit of insurance. the form also can include business interruption coverage that will reimburse the insured for extra expense, such as for the rental of replacement equipment, to continue business following a loss.

ADDITIONAL COVERAGES

the coverage form includes 4 additional coverages: *debris removal - coverage applies if reported within 180 days of the loss or damage, or the end of the policy period. the policy will pay up to 25% of the direct physical loss plus any applicable deductible. this is not considered an additional amount of insurance. however, if the direct loss and the debris removal expense exceed the limit of insurance, the policy will pay an additional sum for debris removal on top of the amount of insurance ($5,000 on '02 policies, and $10,000 on '07 policies) *preservation of property - property removed to a temporary location to protect it from loss or damage is covered while it is being moved or stored at another location, provided loss or damage occurs within 30 days after the property is moved. this coverage is not considered an additional amount of insurance. *fire department service charge - up to $1,000 coverage is included,. this is considered an additional amount of insurance *pollutant cleanup and removal - up to $10,000 coverage is provided. this coverage is considered an additional amount of insurance

EXTRA EXPENSE

the extra expense coverage form covers consequential losses. it will reimburse the insured for extra expenses the insured incurs to keep the business operational following a direct loss to the business property. this coverage is used when a business cannot afford to be shut down for repairs businesses that, by their very nature, must continue operations after a direct loss need extra expense coverage. it provides the necessary extra expenses to resume operations at another location or with new equipment. the extra expense coverage form does not include coverage for business income. extra expense coverage form is designed to cover the costs that would help with the following: *avoid or minimize the suspension of business and to continue operations at the described premises, or at a replacement or temporary location, including relocation expenses, and costs to equip and operate at the replacement location *minimize the suspension of business if the insured is unable to continue operations *repair or replace property, or to research, replace, or restore lost information on damaged valuable papers and records *notify customers of a temporary business location two additional coverages are included in the extra expense coverage form. these additional coverages will not increase the total limit of insurance shown on the declarations page *alterations and new buildings - the policy will pay for any extra expenses the insurer sustains because of a direct loss to new buildings or structures, whether complete or under construction, alterations and additions, or any machinery, equipment, or supplies located within 100 feet of the premises and used in the construction, or that are incidental to the occupancy of the new addition or building. *civil authority - the policy also will pay for extra expense incurred by the insured because of the action of a civil authority that prohibits access to the premises because of a loss at some other property not owned by the insured. coverage begins immediately and will continue for up to 4 weeks (28 days) the remaining 2 conditions define how an extra expense loss is determined and any limitations that may apply. *limits on loss payment - there is no coinsurance clause in the extra expense form. instead, the insured selects 3 percentages that apply to the total limit of insurance. each percentage represents the following periods of time: -1st percentage - 30 days or less -2nd percentage - 31 to 60 days -3rd percentage - more than 60 days *loss determination - the amount of extra expense will be determined based on all expenses that exceed the normal operating expenses that would have been incurred during restoration if no loss had occurred. for certain types of businesses, the insured's income is dependent on the operation of other businesses. loss or damage to these dependent businesses could have an impact on the insured's liabilty to operate. for example, if the insured's business depends on a particular supplier, and loss or damage causes the supplier to temporarily suspend operations, the insured's business also will suffer a loss. extra expense coverage provides protection in the event of a covered cause of loss at the dependent location causes a suspension in the insured's operations. there is also an extra expense from dependent properties form that is available for insured's who are likely to incur extra expenses because of loss or damage to dependent properties (for example, securing alternate suppliers)

VALUABLE PAPERS AND RECORDS

the filed valuable papers and records form is one of the most important and most popular of the inland marine coverages. the commercial property coverage form includes a small amount of coverage, up to $1,000, for the cost to research, replace, or restore lost information. this coverage form also provides coverage to replace or reconstruct lost records. coverage includes both the insured's valuable papers and records and similar property of others in the insured's care, custody, or control. the limit for valuable papers in the CPP is $2,500 at each location. valuable papers and records is defined as inscribed, printed, or written documents; manuscripts or records; abstracts; books; deeds; drawings; films; maps; or mortgages. property not covered includes the following: *any property not specifically described on the declarations if the property cannot be easily replaced with other property *property held as samples or for delivery after sale *property in storage away from the described premises *contraband, and other property in illegal trade or transportation valuable papers and records also do not include any of the following: *money or securities *converted data *programs or instructions used in data processing *material on which such data is recorded property is covered on an all-risk basis, subject to the following additional exclusions: *errors or omissions by the insured, the insured's employees or representatives (except a carrier for hire) *electrical or magnetic injury, disturbance, or erasure there is no coinsurance provision found in the valuable papers and records coverage form. however, there is a special condition that requires the insured to keep all valuable papers and records, when not in use, in a receptacle described in the declarations.

COMPONENTS OF A COMMERCIAL POLICY

the following are 7 coverage parts that may be included in the commercial package policy. 1. commercial property 2. general liability 3. crime 4. equipment breakdown (also called boiler and machinery) 5. auto 6. inland marine 7. farm in each case, the policy consists of modular parts, which are combined to create the contract. a commercial policy written in this format consists of the following parts: *policy cover *common policy declarations *interline endorsements *line(s) of insurance declaration page(s) *line(s) of insurance coverage form(s) *common policy conditions *line(s) of insurance condition *causes of loss forms *endorsements

EXCLUSIONS

the following costs and types of property are not covered in he building and personal property coverage form: *accounts, bills, currency, money or securities *animals (unless owned by others and boarded, or owned by the insured as "stock" while inside a building) *automobiles held for sale *bridges, sidewalks, and other paved surfaces *illegal property or contraband *the costs of excavating *foundations of buildings, structures, machinery, or boilers if their foundations are below the lowest basement floor or the surface of the ground if there is no basement *outdoor radio and television antennas, and signs not attached to the building (a minimal amount of coverage is available in the coverage extensions) *land *personal property while airborne or waterborne *piers, wharves, or docks *property covered under another coverage form *retaining walls not a part of the described building *underground pipes or drains *the costs to research or replace valuable papers or records (a minimal amount of coverage is provided in the coverage extensions) *electronic data, except as covered under the electronic data additional coverage *vehicles or self-propelled machinery registered for use on the public highway or used principally away from the described premises *crops, fences, trees, shrubs, and plants (a minimal amount of coverage is provided in the coverage extensions)

COVERAGE EXTENSIONS

the form also includes several coverage extensions. the following types of property can be covered if the policy has an 80% or more coinsurance percentage or a value reporting period: *newly acquired or constructed property - coverage is for 30 days for newly acquired buildings and personal property that are similar in use to the property insured. this extension will pay up to 25% of the building limit to a maximum of $250,000 for newly acquired buildings, and 10% of the personal property limit for a maximum of $100,000 for personal property *personal effects and property of others - coverage is for up to $2,500 for personal effects of the insured or his employees (coverage does not apply to theft). this coverage also can be applied to personal property of others in the insured's care, custody, and control. *valuable papers and records - $2,500 for the cost to research, replace, or restore lose information from valuable papers and records - other than electronic data - can be covered *property off premises - up to $10,000 for property, excluding stock, that is temporarily at premises the insured does not own, lease, or operate. this coverage does not apply to personal property in a vehicle, or in the possession of a salesperson. *outdoor property - up to $1,000 for fences, radio and television antennas, or $250 for trees, shrubs, and plants damaged or destroyed by fire, lightning, explosion, riot, or civil commotion, or aircraft. *nonowned detached trailers - $5,000 coverage applies only if the loss occurs when the trailer is in the insured's custody and only if the insured is contractually obligated to pay for the loss or damage. a higher limit may be shown in the declarations. this coverage is considered excess over other insurance. the most the insurer is obligated to pay is the limit of insurance specified in the policy declarations, minus any deductible. the deductible applies only once per occurrence, regardless of the number of different properties involved. the standard deductible is $500 on most policies, but it may be higher or lower in some states.

INSTALLATION FLOATER

the installation floater is an unfiled form that is often purchased by contractors and covers items such as heating and air-conditioning equipment intended to become a permanent part of the building. property is covered during transportation to the construction site, while unloading and installing the equipment, and until control has passed to the building owner. coverage can be provided on either a named peril or open peril basis. coverage ceases when the work has been completed and is accepted by the ultimate user or owner of the property.

JEWELER'S BLOCK

the jewelers block coverage form is another filed dealer's form that covers the insured's merchandise held for sale, and similar property of others in the insured's care, custody, or control. typically, once the property leaves the premises, there is no further coverage. specific types of property not covered include the following: *property sold under a deferred sales arrangement after it leaves the insured's premises *property while it is at public or trade exhibitions *property exhibited in showcases away from the insured's premises *property while being worn by any insured, employee, representative, or member of their family, relatives, or friends (an exception is made for watches being worn for the sole purpose of adjustments) *property in transit by: -mail (except registered mail) -express carriers -railroad, waterborne or air carriers -motor carrier *contraband, or other property in illegal trade or transportation this coverage form offers several optional types of transit coverage, which will cover property in transit if one of the following is shown on the declarations page: *carriers operating exclusively as a merchants parcel delivery *armored car services *the passenger parcel or baggage service of railroads, passenger bus lines, waterborne or airborne carriers *registered mail one other condition not found in the other coverage forms it titled changes in premises. it states that the policy does not cover property is the risk has been materially increased by changes in the premises unless agreed to in writing by the insurer

EXTENSIONS OF COVERAGE

the legal liability coverage form includes 2 extensions of coverage that provide coverage for the following: *additional insured - if the named insured is a partnership or corporation, coverage also applies to the insured's partners, executive officers, trustees, directors and stockholders *newly acquired organization - newly acquired organizations, other than partnerships or joint ventures, also are covered, but only for 90 days or until the end of the policy period, whichever is sooner.

COVERED PROPERTY

the legal liability coverage form is used to insure property of others in the insured's care, custody, or control. it covers the insured's legal liability for loss or damage to property of others, including loss of use. the covered property must be specifically described in the declarations, and the limit of insurance is the most the insurer will pay for any one loss. (basic coverage of $2,500 for property in the insured's care, custody, or control is found in the building and personal property form. this coverage allows for increases if needed)

LIVESTOCK COVERAGE FORM

the livestock coverage form is a named peril coverage insuring losses resulting in death or necessary destruction of livestock by the basic causes of loss (except vehicles). coverage may be extended to include death or necessary destruction by accidental shooting, drowning, electrocution, attack by dogs or wild animals (except attacks to sheep or by dogs or wild animals owned by the insured), loading or unloading accidents, and building collapse.

NATIONWIDE MARINE DEFINITION

the nationwide marine definition is a statement about the types of coverage that may properly be written on inland marine and ocean marine insurance forms. the national association of insurance commissioners (NAIC) adopted a nationwide marine insurance definition in 1953, and revised it in 1976. this definition is used principally for classification purposes, rather than as a definition of underwriting powers. inland marine coverage can be written on almost any type of property that is portable. in addition, instruments of transportation and communication, such as bridges, wharves, and docks, are also covered on inland marine coverage forms. inland marine should be differentiated from ocean marine, which covers property being transported over water. inland marine exposures pertain to property located on land. the nationwide marine definition defines 4 general classes of risks that may be the subject or inland marine coverage. these risks are as follows: 1. domestic shipments and transportation risks 2. bridges, tunnels, and other instrumentalities of transportation and communication. 3. commercial property floater risks 4. personal property floater risks inland marine coverages are either filed or unfiled with state regulatory authorities. filed coverages have standardized coverage forms. unfiled inland marine classes are those that present a unique exposure to loss and in which standardized forms have not been developed.

PEAK SEASON LIMIT OF INSURANCE

the peak season limit of insurance endorsement adjusts the amount of insurance on business personal property to allow for the changes in value because of seasonal increases in stock. for instance, some retail businesses will have a much larger inventory on hand prior to winter holidays.

COVERAGE EXTENSIONS

the policy also includes 2 coverage extensions: building materials and supplies of others - the insured may extend coverage to include construction materials that would become a permanent part of the building for up to $5,000. this extension is considered an additional amount of insurance. sod, trees, shrubs and plants - the insured also may extend coverage to apply to a loss outside the building if the loss or damage is caused by fire, lightning, explosion, riot or civil commotion, or aircraft. the most the insurer will pay for this extension is $1,000, but not more than $250 per tree, shrub or plant.

CAUSES OF LOSS

the same causes of loss that apply to the building and personal property coverage form apply to this coverage

CONDOMINIUM COMMERCIAL UNIT-OWNERS

the second form used to insure condominiums is the condominiums unit-owners coverage form. the condominium (commercial) unit-owners coverage form is used to cover business personal property for commercial condominium unit owners. this form is used to insure commercial condominium unit owners, not residential condominium unit owners, who are covered under homeowners and dwelling policies. it has many of the same provisions as the condominium association coverage form, with 3 primary differences. these differences are as follows: 1. no building coverage is provided because the condominium building is jointly owned and insured under the association coverage form. 2.improvements and betterments are included as business personal property if owned by the insured, unless the condominium association agreement states that the association will provide coverage for these items. 3. the condominium association insurance condition, which states that if both the unit owner and association have insurance covering the same property, the insurance is excess and will not contribute to the association insurance

SPECIAL

the special form is referred to as open perils because it does not list the covered causes of loss. instead, all causes of loss are covered except for those specifically excluded. most of the exclusions in the basic and broad causes of loss forms are also excluded under the special form. these include the following: *ordinance or law *earth movements (including volcanic eruption and landslides, earth tremors, caused by volcanic eruptions) *governmental action *nuclear hazard *power failure *war and military action *water damage, including sewer backup *neglect *smoke, vapor, or gas from agricultural smudging or industrial operations *explosion of steam boilers, steam pipes, or steam engines *leakage or discharge of water or steam *freezing of plumbing *artificially generated electrical current *rain, snow, ice, or sleet that damages personal property in the open *nuclear reaction, or radiation, or radioactive contamination *mechanical breakdown *contractual liability *loss to the interior of any building or structure caused by rain, snow, sleep, ice, sand, or dust unless the exterior of the building is first damaged the following additional exclusions found in the special form generally refer to causes of loss that insurance was never intended to cover such as *delay, loss of use, or loss of market *wear and tear *rust, corrosion, fungus, decay, or hidden defects *smog *settling, cracking, shrinking, or expansion *insects, birds, rodents, or other animals *the following causes of loss: -dampness or dryness of atmosphere -changes or extremes in temperature -marring or scratching *dishonest or criminal acts of the insured or his employees *voluntarily parting with any property *release, discharge, or dispersal of pollutants *weather conditions, but only if the weather contributes to further damage from an excluded cause of loss *acts of decisions, including the failure to act or decide *faulty, inadequate, or defective planning, zoning, development, design, specifications, workmanship, repair, construction, materials used for repair, maintenance *losses to steam boilers, steam pipes, steam engines, steam turbines, and hot water boilers *theft of building materials and supplies not attached to the building *property that is missing, but in which there is no physical evidence to show what happened to it property transferred to a person or place based on unauthorized instructions in addition to the exclusions, the special form also has several limitations. certain types of property will be covered for only a specific amount or are covered only for certain causes of loss. the insurer will not pay for loss or damage to the following types of property unless the loss or damage is caused by one of the specified causes of loss. *valuable papers and records *animals, but only if they are killed, or their destruction is made necessary *fragile articles, if broken *builder's machinery, tools and equipment while away from the described premises specified causes of loss are the following: *fire *lightning *explosion *windstorm or hail *aircraft or vehicles *riot or civil commotion *vandalism *leakage from fire-extinguishing equipment *sinkhole collapse *falling objects *volcanic action *weight or snow, ice, or sleet, or water damage for any loss or damage caused by theft, the following types of property are covered only for the following limits: *$2,500 for furs and fur garments *$2,500 for jewelry, watches, precious and semiprecious stones, bullion, gold, silver, and other precious metals *$2,500 for patterns and dies any insured may extend the coverage provided by this coverage part to apply to his or her personal property in transit more than 100 feet from the described premises. property must be in or on a motor vehicle the insured owns, leases, or operates while between points in the coverage territory. the most the insurer will pay for this coverage extension is $5,000. loss or damage must be caused by or result from one of the following causes of loss: *fire, lightning, explosion, windstorm, hail, riot, civil commotion, or vandalism. *vehicle collision, upset or overturn (collision means accidental contact of the owner's vehicle with another vehicle or object. it does not mean contact between a vehicle and a roadbed) *theft of an entire bale, case, or package by forced entry into a securely locked body or compartment of the vehicle. there must be visible marks of the forced entry.

SPOILAGE

the spoilage endorsement may be used by businesses with perishable stock. if the perishable stock spoils because of changes in temperature or humidity, contamination, power failure on or off premises, or mechanical breakdown, this coverage will pay. the property must have been maintained in its proper controlled environment for this coverage to apply

EQUIPMENT DEALERS

the stock of mobile equipment and construction equipment dealers, including similar property of others in the insured's care, custody, or control may be insured under the filed equipment dealers coverage form. property not covered includes the following: *automobiles, motor trucks, and motorcycles *aircraft and watercraft *accounts, bills, currency, deeds, money, notes, etc *property during manufacturing *property leased, rented, or sold *furniture, fixtures, and office supplies *improvements and betterments *machinery, tools, fittings, patterns, molds, etc *contraband, or property in illegal trade or transportation coverage is provided on an all-risk basis and the following additional exclusions apply: *water, flood, surface water *unexplained disappearance *damage caused by processing or work done on the property *artificially generated electrical current the following extensions of coverage are included in this coverage form: *debris removal *pollution cleanup and removal *theft damage to building there are several additional conditions found in this coverage form: *valuation - this condition replaces the standard inland marine valuation clauses and states that the value of unsold property will be determined based on the lesser of the actual cash value of the property, the cost to reasonably restore the property, or the cost of replacing the damaged property with substantially identical property. -the value of sold property not yet delivered will be the net selling price minus discounts and allowances -the value of property of others will be the lesser of the amount for which the insured is liable, including the cost of labor and materials the insured has added, or the actual cash value of the property, including the cost of labor and material the insured has added. *coinsurance - property must be insured to 80% of its replacement cost *records and inventory - accurate records and inventory must be maintained by the insured for 3 years after the end of the policy period. these records include a detailed inventory of all stock in trade, purchases and sales, and property of others. in addition, a physical inventory of stock is required to be sent to the insurer at least once every 12 months. *protective safeguards - if protective safeguards are required by the insurer, this condition says that coverage will be suspended if the insured fails to keep them in working condition or in operation while the business is closed.

MOTOR TRUCK CARGO FORMS

the unfiled motor truck cargo policy - truckers form is used by common carriers that transport the goods of others for a fee. it is a legal liability coverage that protects the carrier only against liability for damage to the goods. a coverage extension also applies while the goods are in a terminal where they are unloaded, loaded, sorted, or reloaded for delivery. most coverage is written on a named peril basis, but some insurers do write all-risk coverage. private carriers, or owners who ship their goods using their own trucks, are insured on motor truck cargo policy - shippers/owners form coverage form. coverage is written for direct damage to the owner's property. liability is not a factor in these forms as with the motor truck cargo - truckers form. coverage is usually written on a named peril basis, but some insurers will offer all-risk coverage. losses that occur while the goods are on the insured's premises are excluded. the form only covers goods in transit on specified trucks.

VALUE REPORTING FORM

the value reporting form is the usual method of determining premiums and amount of coverage on those properties insured for fluctuating values. at the reporting period (either daily, weekly, monthly, quarterly, or policy period, whichever is specified in the contract), the insured reports the values at risk and pays premiums for that period based upon the report. the value reporting form allows the amount of coverage to float with the changing values. premiums are adjusted at the end of the policy period based on the average values reported the policy limit must be the maximum value expected during the policy period. in the beginning of the policy period, a provisional (or advance premium) is paid, typically based on 75% of the policy limit. during the policy period, the insured is required to file reports as to actual values for specified periods of time. at the end of the policy period, the premium is adjusted as if the average value was held every day of the policy period. it is important the reports be kept current as required. should a loss occur on a day when the reports are not current as required, the maximum payable will be whatever the last report said. if the reports are current, the policy will pay what the insured can prove was lost, up to the policy limit. should a loss occur before the first report is due, up to the full amount of insurance applies. if the first report has not been submitted as required when a loss occurs, the insurer will pay no more than 75% of the amount it would otherwise pay if values have been underreported, the insurer will not pay a greater portion of a loss than the amount reported divided by the actual value on the report due date. for example, if the insured reports $50,000 and the actual value is $75,000, only about 67% of the loss value has been reported, so only two-thirds (approximately 67%) of the loss will be covered

COMMERCIAL PROPERTY CONDITIONS FORM

there are numerous conditions found in the commercial property coverage part that are in addition to the conditions contained in the common policy conditions form. some of these conditions are found directly in the individual coverage forms, and others are attached by a separate endorsement, called the commercial property conditions. the following are the common conditions found in commercial property conditions forms: *concealment, misrepresentation, or fraud coverage - coverage will be voided in the event the insured committed fraud as it relates to the policy at any time. *control of property - this condition states that any act of negligence by persons not under the direction of the insured will not void coverage *insurance under two or more coverages - if more than one coverage under the policy can respond to the same loss, the insurer will pay no more than the actual loss *legal action against the insurer - no person may bring legal action against the insurer until all policy terms have been complied with, and then only if the legal action is brought within 2 years of the loss (this time may vary from state to state) *liberalization - if the insurer adopts any provisions that would broaden coverage during the policy period or within 45 days prior to the effective date, the broadened coverage will apply without having to be endorsed on the policy *no benefit to the bailee - no person who has custody of covered property, other than the insured, can benefit from the insurance *other insurance - if the insured has other insurance with the same terms, conditions, and provisions, the policy will contribute by limits. if the other insurance is other than that described above, the policy will respond on an excess basis, paying only for the amount of any loss in excess of the other insurance *policy period, coverage territory - the policy territory includes the US, its possessions, and Canada * transfer of rights of recovery against others (subrogation) - the insured must transfer any rights he or she has to recover damages from another person to the insurer after the insurer makes payment for the loss

COVERAGE F - UNSCHEDULED FARM PERSONAL PROPERTY

under coverage F- unscheduled farm personal property, a single limit of liability applies to all farm and personal property located on the insured premise, unless specifically excluded. excluded properties from this broad definition include household property, racehorses, crops and automobiles. away from the insured location, the only classes of property covered are the following: *grain, ground feed, fertilizer, herbicides, pesticides, etc. *livestock, except while transit by common carrier or at a public stockyard, sales barn or sales yard, packing plants, or slaughter houses *farm machinery and equipment *farm implements, tools, and supplies to discourage underinsurance, coverage F is subject to an 80% coinsurance clause. this clause has a provision to provide for an inadequate amount of insurance carried due to the purchase of additional or replacement equipment. in the event of loss or damage to additional or replacement equipment within 30 days of purchase, up to $100,000 of the new equipment value and $75,000 of the replacement equipment value will not be used to determine the required limit of insurance.

COVERAGE A - DWELLINGS

Coverage A - dwellings is similar to coverage A of the homeowners program. antennas, towers, and satellite dishes attached to the dwelling are covered under coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence. this limit is a part of the coverage A limit of insurance. the limits in coverage A provide coverage for the dwelling, including structures attached to the dwelling at the described premises. materials and supplies located on or next to the described location used to construct, alter, or repair the dwelling and its attached structures are covered, along with building and outdoor equipment - if not insured elsewhere - used to service the dwelling. the extension of building coverage to equipment eliminates the need for a landlord to schedule a small amount of contents coverage to protect such items as lawnmowers, ladders, and similar property used for the maintenance of the dwelling.

LIMITS

In the event of a loss, the most the insurer will pay is the amount for the loss or the limits as stated in the policy, whichever is less.

ORDINANCE OR LAW

Ordinance or law is an endorsement that can be added to the property coverage form. it covers a building in the event that the enforcement of any building, zoning, or land use law results in loss or damage, any increased cost of repairs or reconstruction, or demolition and removal costs. this endorsement is used to remove the exclusion of losses resulting from ordinances or laws. for example, building codes or regulations may have changed, or perhaps regulations require a partially damaged building be torn down and not repaired. with this endorsement, the additional loss caused by enforcement of laws regulating building repair or construction are covered. debris removal expenses are also covered. the ordinance or law coverage endorsement can be added only to a property policy written on a replacement cost basis.

BILLS OF LADING

a bill of lading is a contract for the transport of goods between the shipper and the carrier. this document specifies the carrier's duties and responsibilities for the property. common carriers are required to issue a uniform bill of lading to every person (shipper) that is transports good for. when a regular bill of lading is issued, the carrier will be responsible for the invoice cost of any damaged property, and the shipper does not have to specifically declare a value. however, the carrier may issue a released bill of lading in which the shipper must specifically declare the values of the property being shipped. with the released bill of lading, the shipper is charged a lower fee because the carrier is only liable of damage up to the stated amount.

COVERAGE BEGINS AND ENDS

coverage begins on the date the construction starts, and ceases when one of the following occurs: *the policy on the construction expires or is cancelled *construction is abandoned without any plans to complete it *whenever the property is accepted by the purchaser *90 days after construction is completed *60 days after the constructed building is occupied or put into its intended use *when the insured's interest in the property ceases

INTERLINE ENDORSEMENTS (AS NEEDED)

interline endorsements are those that apply, or could apply, to more than one coverage part. they are designed to eliminate redundancy and minimize the number of endorsements in the policy

SIGNS

limited coverage is provided in the commercial property coverage form for signs, usually limiting coverage to $2,500 for attached outdoor signs. coverage under the filed signs coverage form includes the insured's signs, including neon, fluorescent, automatic, or mechanical signs, and similar property of others in the insured's care, custody, or control. the form includes a 100% coinsurance requirement.

BUILDERS RISK PURPOSE

the builders risk coverage form is used to insure buildings while under construction. it provides coverage similar to that in the building and personal property coverage form. this coverage is most often written on a completed value form but may be written on a reporting form basis

CONDITIONS

the conditions under the farm coverage part are the standard commercial conditions, with the following exception: if a building or structure is vacant or unoccupied for more than 120 consecutive days, the limits of insurance applicable to the building and its contents are reduced by 50%

CONDITIONS

the coverage form contains several conditions that apply in addition to the common policy conditions. none of the commercial property conditions apply to this coverage except the following: *concealment, fraud, and misrepresentation *insurance under 2 or more coverages *liberalization *duties in the event of a loss *legal action against the insurer *other insurance - if other insurance applies, the insurer will settle on a pro rata basis if the other insurance is written on the same basis *transfer of rights of recovery (subrogation)

COMMON POLICY DECLARATIONS

the declaration provides all the information as to who, what, when, where, and how much. this is consistent in all of the policies. it is worth noting, however, that "when" (when the policy takes effect) is 12:01 AM at the mailing address of the "who" (first named insured). the next section of the declarations contains the first 7 coverage parts that may be made a part of the policy. if there is a premium amount shown for any of these coverage parts, the coverage part is triggered, and covered is provided. if no premium amount is shown, there is no coverage for that coverage part.

DEFINITIONS

the definitions section provides definitions of words and terms used in the farm policy. terms such as advertising injury and bodily injury are identical to the definitions found in earlier sections. words and terms unique to farm insurance are custom farming, meaning the performance of specific planting, cultivating, harvesting, or similar specific farming operations by an insured at a farm that is not an insured location; and livestock, meaning cattle, sheep,goats, horses, mules, and donkeys, but not poultry.

ADDITIONAL COVERAGES

the farm coverage policy provides the following as additional coverages: *debris removal *reasonable repairs *grave markers *water damage *fire department service charges *removal of trees *credit card and transfer funds coverage up to $500 *cost of restoring farm records up to $2,000 *extra expense and collapse

FARM PROPERTY COVERAGE FORMS

the farm property coverage form is structured similarly to the homeowner's policy's coverages A, B, C, and D to cover the personal residential property of the insured. in addition to these coverages, it includes coverages E, F, and G to insure the farm personal property and structures.

EQUIPMENT BREAKDOWN

the equipment breakdown coverage form, formerly called the boiler and machinery coverage form, is used to insure most types of business risks and all industrial risks. coverage will pay for direct loss to covered property caused by an accident of an insured object described in the declarations. for coverage to apply, the object must be in use, or connected and ready for use when the accident occurs. the policy covers the following losses and extensions of coverage: *loss to property owned by the insured *loss or damage to property of others in the insured's care, custody, or control or in which the insured is legally liable for damage *up to $25,000 for expediting expenses, which are the reasonable extra expenses incurred by the insured to make temporary repairs, or to speed up permanent repairs; this is not considered an additional amount of insurance *there is automatic coverage for newly acquired locations if the coverage is the same as the coverage at the currently insured location *the insurer will make the following supplementary payments: -all expenses incurred by the insurer to defend any suit -cost of bonds to release attachments -reasonable expenses incurred by the insured at the insurer's request, including up to $250 per day for loss of earnings -costs taxed against the insured in a suit -pre-judgment interest -interest on judgments that accrues before the judgment is paid property is insured on a replacement cost basis. however, if damaged property is not repaired or replaced within 18 months after the accident, settlement is at the smaller of ACV or the cost to repair or replace the policy does not cover bodily injury liability or consequential losses, such as business interruption and extra expense. however, the insured may purchase optional business interruption coverage. the policy defines accident as the sudden and accidental breakdown of an object, resulting in physical damage to the object. accident does not include the following: *depletion, deterioration, erosion, or corrosion *wear and tear *leakage at valves, joints, or fittings *breakdown of any vacuum tube, gas tube, or brush *breakdown of a foundation supporting the object *the functioning of any safety or protective device unless a higher limit is shown in the declarations, equipment breakdown coverage will pay for direct damage as a direct result of a breakdown to covered equipment up to $25,000 for each of the following: *consequential loss *data and media - the cost to research, replace, or restore the damaged data *expediting expenses *hazardous substance cleanup, or repair or replacement of contaminated property *ammonia contamination *water damage following a covered breakdown, coverage for fungus, wet or dry rot is generally limited to 12 months and $15,000 for testing, removal and restoration. the insured usually can buy optional higher limits for each of these coverages. in addition, the losses are subject to a deductible shown in the declarations. if more than one object is involved in an accident, then the highest deductible will apply. equipment breakdown coverage specifically excludes losses that result from any of the following: *ordinance or law - except for the use and operation of electrical supply and emergency generating equipment located on the premises of a hospital *earth movement *water *nuclear hazard *war or military action *explosion - if not otherwise excluded, the company will pay for direct loss or damage caused by an explosion of covered steam boilers, electric steam generators, steam piping, steam turbines, steam engines, or gas turbines. moving or rotating machinery is covered if the explosion is caused by centrifugal force or mechanical breakdown *fire or combustion explosion - including those that result in, occur at the same time as, or ensue (follows) from a breakdown *explosion within the furnace - of a chemical recovery-type boiler or within the passage from the furnace to the atmosphere *fungus, wet rot and dry rot (unless these conditions are caused by a breakdown) *virus, bacterium, or other microorganism (except if caused by a breakdown) *damage to covered equipment undergoing a pressure or electrical test *water or other means used to extinguish a fire, even when the attempt is unsuccessful *depletion, deterioration, corrosion, erosion, or wear and tear - if a breakdown results from these causes, the company will pay for the resulting loss or damage *a breakdown caused by aircraft or vehicles, freezing caused by cold weather, lightning, sinkhold collapse, smoke, riot, cilvil commotion or vandalism, or weight of snow, ice, or sleet *a breakdown caused by windstorm or hail *a delay in or an interruption of any business, manufacturing or processing activity - except for any coverage provided by the business income and extra expense, extra expense only, and utility interruption coverages *lack or excess of power, light, heat, steam or refrigeration - except for any coverage provided by the business income and extra expense only, spoilage damage, and utility interruption coverages *any indirect result of a breakdown to covered equipment - except for any coverage provided by the business income and extra expense, extra expense only, spoilage damage, and utility interruption coverages *the insured's neglect to use all reasonable means to save and preserve covered property from further damage at and after the time of the loss no coverage is provided under the business income and extra expense, extra expense only, and utility interruption coverages for the following situations: *business that would not or could not have been carried on if the breakdown had not occurred *the insured's failure to use due diligence and dispatch and all reasonable means to operate the business as nearly normal as practicable at the premises shown in the declarations *the suspension, lapse, or cancellation of a contract following a breakdown extending beyond the time business could have resumed if the contract had not lapsed, been suspended, or cancelled. no coverage is provided under utility interruption coverage for acts of sabotage; collapse; deliberate acts of load shedding by the supplying utility; freezing caused by cold weather; impact of aircraft, missile or vehicle; impact of objects falling from an aircraft or missile; lightning; riot, civil commotion or vandalism; sinkhole collapse; smoke; and weight of snow, ice, or sleet. many of these can be covered using commercial property forms. because equipment breakdown insurance places a lot of emphasis on inspections and loss control (the majority of the premium pays for inspections), the policy contains a unique condition that allows the insurer to immediately suspend coverage wherever an object is found in or exposed to a dangerous condition. no advance notice is required, and the suspension will take effect when the insured is notified in writing. the suspension applies only to losses that result from a particular object, not to the entire policy if more than one object is insured. in the equipment breakdown form, objects covered are defined as covered equipment and include pressure equipment, refrigeration equipment, mechanical equipment, electrical equipment, turbines, and production machinery. if an accident causes other accidents, all related accidents will be treated as a single accident. all accidents at the same location at the same time, and by the same cause, will be considered a single accident.

LEGAL LIABILITY

the legal liability coverage form covers property in the insured's care, custody, or control for which the insured is legally liable for damage.

ADDITIONAL COVERAGE

there are 6 additional coverages that apply in addition to the limit of insurance. they are the same as the supplemental payments found in the general liability coverage form. with respect to any claim suit, the insurer also will pay the following: *all expenses the insurer incurs *the cost of bonds to release attachments *all reasonable expenses incurred by the insured at the insurer's expense, including up to $250 per day for loss of earnings *all costs taxed against the insured in a suit *all prejudgment interest awarded *interest that accrues on any judgment awarded before it is paid by the insurer

COVERAGE FORMS

there are several different commercial property coverage forms available to meet the needs of commercial property owners. each of these coverage forms will be discussed separately.