AAIS CONTRACTORS' EQUIPMENT COVERAGE FORMS

Contractors’ equipment coverage is needed by any contractor or business that owns, rents, or regularly uses the equipment. The coverage form is very flexible because equipment may be protected at construction projects, jobsites and/or fixed locations. It is also protected while in transit. The value of the equipment can be from $1,000 to millions of dollars. Hand tools, bulldozers, concrete mixers, asphalt plants, and backhoes are all considered contractors equipment. AAIS has developed five contractors' equipment coverage forms. Each has its own corresponding schedule of coverages. This analysis will examine the IM 7000 and its schedule of coverages IM 7005. At the end of the article, the other forms are analyzed, focusing on how they differ from the IM 7001.

ELIGIBILITY

The primary eligibility requirement is that the named insured owns, leases, rents, or has a financial interest in the equipment. Any commercial operation that uses equipment that qualifies and meets the definition of contractors' equipment of a mobile nature and is periodically in transit is eligible.

POLICY CONSTRUCTION

AAIS Contractors' Equipment coverage requires at least these four forms:

CL 0100–Common Policy Conditions. This form contains five basic conditions that apply to all AAIS commercial lines coverage forms and policies.

IM 7900–Inland Marine Declarations
The appropriate contractors' equipment coverage form
The corresponding schedule of coverages

SCHEDULES OF COVERAGES

IM 7005–Schedule of Coverages–Contractors' Equipment is used with IM 7000–Contractors' Equipment Coverage
IM 7006–Schedule of Coverages–Contractors' Equipment–Scheduled Equipment Form is used with
IM 7001–Contractors' Equipment Coverage–Scheduled Equipment Form
IM 7007–Schedule of Coverages–Contractors' Equipment–Blanket Equipment Form is used with
IM 7002–Contactors' Equipment Coverage–Blanket Equipment Form
IM 7008–Schedule of Coverages–Contractors' Equipment–Small Tools Floater is used with
IM 7003–Contractors' Equipment Coverage–Small Tools Floater
IM 7009–Schedule of Coverages–Contractors' Equipment Coverage–Leased or Rented Equipment is used with IM 7004–Contractors' Equipment Coverage–Leased or Rented Equipment Form

IM 7005–SCHEDULE OF COVERAGES–CONTRACTORS' EQUIPMENT (01 12 changes)

This schedule of coverages is used with IM 7000–Contractors' Equipment Coverage Form. IM 7005 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

Property covered is either equipment scheduled on IM 7030–Equipment Schedule–Contractors’ Equipment or equipment listed and described on a schedule filed with the insurance company.

“Limit”

The 01 12 edition added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

Catastrophe Limit

The Catastrophe Limit is the most paid for loss in any one occurrence.

Note: When there is an increase in the schedule on file with the company, the catastrophe limit should also be reviewed. Increasing the schedule without increasing the catastrophe limit could result in a loss not being fully covered.

Coverage Extensions

The limit on the Schedule of Coverages for the following coverage applies to all covered locations:

Additional Debris Removal Expenses

The limit is $5,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Employee Tools

The limit is $5,000 unless a different limit is entered.

Equipment Leased or Rented from Others

The limit is $25,000 unless a different limit is entered.

Newly Purchased Equipment

The limit can be either a specific dollar limit or a percentage of the Catastrophe Limit. The limit is 30% of the Catastrophe Limit unless a different limit or percentage is entered.

Pollutant Cleanup and Removal

The limit is $25,000 unless a different limit is entered.

Rental Reimbursement

The limit is $5,000 unless a different limit is entered. A 72-hour waiting period applies unless a different number of hours is entered.

Spare Parts and Fuel

The limit is $5,000 unless a different limit is entered.

Coinsurance

80%, 90%, 100%, or another coinsurance percentage must be selected, and the appropriate box checked or the required entry made in the space provided.

Reporting Conditions

Equipment Leased or Rented from Others may be subject to reporting. If so, the box must be checked, and the reporting rate, deposit premium, and minimum premium entered in the spaces provided.

Valuation

The valuation basis selected must be entered. The options are actual cash value, replacement cost, or as stated on the equipment schedule.

Deductible

The deductible may be a flat dollar amount or a percentage deductible. When the percentage deductible option is selected, a minimum and maximum deductible amount must also be entered in the spaces provided.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7000–CONTRACTORS' EQUIPMENT COVERAGE FORM ANALYSIS

This analysis is of the 04 04 edition.

Agreement

The named insured and the insurance company agree that in return for the named insured paying a premium, the company will provide the coverage described. The coverage is subject to all schedules, terms, endorsements, definitions, assignments, and duties described.

Definitions

Defined terms are used throughout the coverage form. It is important to review the definitions because coverage can be restricted and expanded within the definition. Twelve terms are defined:

1. You and your

These are the parties named on the declarations as the insured.

2. We, us, and our

This is the insurance company that provides the coverage.

3. Contractors’ equipment

Machinery, equipment, or tools of a mobile nature that the named insured uses in contracting, installation, erection, repair, or moving operations and projects. Self-propelled vehicles that transport mounted equipment and any vehicle not registered or licensed and not used on public roads, even though designed for highway use, are contractors’ equipment.

4. Equipment schedule

This is the list and description of each item of covered contractors’ equipment.

5. Jobsite

Any workplace where the named insured conducts construction, installation, erection, repair, or moving operations.

6. Limit

The amount of coverage that applies to the insured property.

7. Pollutant

This is a broad and expansive term. It is solids, liquids, thermal or radioactive contaminants, and irritants. It includes, but is not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials intended for recycling, reclamation, and reconditioning, as well as for disposal. Visible and invisible electrical or magnetic emissions and sound emissions are also considered pollutants.

8. Schedule of coverages

This is any page labeled as such that contains coverage information, including declarations or supplemental declarations.

9. Sinkhole Collapse

A sinkhole is created when an underground opening is created by water acting on limestone or other rock formations. The earth’s surface suddenly settling or collapsing into that sinkhole is sinkhole collapse. Sinkhole collapse does not include the land’s value or the cost to fill sinkholes.

10. Specified perils

The named perils of aircraft, civil commotion, explosion, falling objects, fire, hail, fire extinguishing equipment leakage, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action, water damage, the weight of sleet, snow or ice and windstorm. Two terms need further explanation.

Falling objects do not include loss to personal property stored in the open. It also does not include damage to the interior of buildings or personal property stored in buildings unless a falling object first breaches the building's exterior.

Water damage is the sudden or accidental discharge or leakage of water or steam. However, it must be a direct result of a part of the system or appliance that holds the water or steam cracking or breaking.

11. Terms

These are all policy provisions, limitations, exclusions, conditions, and definitions applicable to this coverage.

12. Volcanic action

An airborne volcanic blast or shock wave. It is also ash, dust, and particulate matter along with any lava flow. The term does not include the cost of removing dust, ash, or particulate matter from the covered property unless there is direct physical damage to the property.

PROPERTY COVERED

1. Scheduled Equipment

This item applies only when Scheduled Equipment on the schedule of coverages is selected.

Coverage applies to direct physical loss or damage to the named insured's contractors' equipment. Non-owned equipment that is in the named insured’s care, custody, or control is also included. An important restriction is that only equipment that is listed on the equipment schedule is covered.

2. Schedule on File

This item applies only when Schedule on File on the schedule of coverages is selected.

Coverage applies to direct physical loss or damage to the named insured's contractors' equipment. Non-owned equipment is also included, provided it is in the named insured’s care, custody, or control. However, only equipment that is listed on a schedule that has been submitted to the insurance company is covered.

Example: Master Machinery Movers owns a medium-duty telescoping crane and several other items of contractors' equipment. Master's clerk, Peter, prepares a list of all equipment for the insurance company, and it accepts the list and files it. Peter unintentionally forgot to list the crane. Four months after its purchase, the crane overturns when it lifts a heavy load on uneven terrain and is badly damaged. The insurance company denies the claim because it was not on its copy of the list.

PROPERTY NOT COVERED

Seven specific types of property are excluded:

1. Aircraft or Watercraft

There are no exceptions. This property is more correctly insured under aircraft and watercraft coverage forms and policies.

2. Contraband

Property that is illegal to possess is not covered. Property that is legal to possess but is being used as part of illegal trade or transported illegally is also not covered.

3. Leased or Rented Property

Property the named insured leases or rents to others.

4. Loaned Property

Property the named insured loans to others.

5. Underground Mining Operations

Property that is used in above ground mining operations is covered, but that which is stored or operated underground is not.

6. Vehicles

Vehicles designed for public highways and used to transport people or cargo. There are two exceptions:

Self-propelled vehicles designed and used primarily to transport mounted equipment are covered. These are covered as long as they are both designed and primarily used to transport mounted equipment, even though it may be used for something else at the time of loss.
Vehicles that are designed for highway use but that are not licensed and not operated on public roads

Note: This property is more correctly insured under commercial automobile coverage forms.

7. Waterborne Property

Property that is waterborne is covered only while in transit in the custody of carriers for hire.

Coverage Extensions

Provisions That Apply To Coverage Extensions

There is one coverage extension. Its limit is either the limit on the schedule of coverages or the default limit included on the coverage form. This limit is part of the applicable limit for covered property and not in addition to it unless otherwise indicated. It is not added to or combined with the limit for any other coverage extension or supplemental coverage and is not subject to any coinsurance provisions that apply elsewhere in the coverage form.

Debris Removal

When a covered peril damages or destroys covered property, the cost to remove any created debris is covered under this extension. Debris removal does not include any costs for removing, restoring, replacing polluted land or water or to extract pollutants.

There are two parts to the Limit section. The first is restricting any debris removal payment to no more than 25% of the amount paid for the actual direct physical loss or damage. The second part is that when the debris removal and the physical damage loss are added together, no more than the limit of insurance is paid.

An additional $5,000 (or a higher amount entered on the schedule of coverages) is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property.

Debris removal expenses must be reported to the insurance company within 180 days of the loss date for this extension to apply.

Supplemental Coverages

Provisions That Apply To Supplemental Coverages

There are six supplemental coverages. Each has its own default limit that can be increased by entering a higher limit on the schedule of coverages. Limits for any supplemental coverage are separate from the applicable limit for covered property, not part of it.

The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit for a supplemental coverage and the limit for covered property. The limits are not added to or combined with limits for any other supplemental coverage or coverage extension. They are also not subject to coinsurance provisions that apply elsewhere in the coverage form.

1. Employee Tools

Direct physical loss or damage from a covered peril to tools the named insured’s employees own is covered. There is an important restriction. Coverage only applies while the tools are at the named insured's premises or its jobsite. The most paid in any one occurrence is $5,000. This limit can be increased.

Example: Phil leaves the jobsite and stops at Burger Palace for lunch. He has his tools locked in his truck, but the tools are gone when he returns to his truck after lunch. He tells his boss about the loss and requests coverage under his boss' insurance coverage. The claim is denied because the tools were not at the jobsite when stolen.

2. Equipment Leased or Rented from Others

Direct physical loss or damage to contractors’ equipment the named insured leases or rents from others is covered when caused by a covered peril. The most paid in any one occurrence is $25,000, but the limit can be increased.

3. Newly Purchased Property

a. Direct physical loss or damage to contractors' equipment the named insured purchases during the policy period is covered when caused by a covered peril.

There are restrictions. The most paid is the lesser of the covered property’s actual cash value or the newly purchased property limit on the schedule of coverages. When the schedule of coverages does not display a limit, 30% of the Catastrophe Limit on the schedule of coverages is substituted.

The coverage applies for only 60 days following the date of acquisition. This is further modified so that regardless of the 60 days, the coverage ends when the equipment is reported by the named insured or when the policy expires, whichever comes first.

An additional premium is due as of the acquisition date.

Example: Tom purchases some used equipment at an auction for $25,000. The contractors' equipment catastrophe limit is $100,000. 30% of the catastrophe limit applies to the used equipment he purchased because he did not select a limit for Newly Purchased Property. Tom’s truck overturns on the way back from the auction, and the equipment he just purchased is destroyed. He is fully reimbursed for his loss because $30,000 (30% of the $100,000 catastrophe limit) is available for the equipment valued at $25,000. Tom will be required to pay a premium for the one day of coverage.

4. Pollutant Cleanup and Removal

The named insured's expenses to extract pollutants from land or water are covered if a covered peril that occurred during the policy period in any way caused their release or discharge. However, there are significant restrictions.

The expenses must be reported to the insurance company within 180 days of the date of loss.

Testing for, evaluating, observing, or recording pollutants costs are excluded except for those required as part of a covered pollutant extraction process.

A per location 12-month policy period aggregate limit of $25,000 applies. This limit can be increased.

5. Rental Reimbursement

When equipment is damaged by a covered peril, this coverage pays the costs the named insured incurs when it must rent equipment to replace that damaged equipment.

This coverage is subject to a 72 hour waiting period. Only the rental costs incurred after the first 72 hours following the loss are payable. The number of hours can be changed on the schedule of coverages. Coverage is for only rental expenses that have actually been incurred. The policy expiration impacts the time period for reimbursement but instead continues until the limit is used or the rental is no longer needed, whichever comes first.

If the named insured can continue operations with other owned or available equipment, no rental reimbursement is provided. There is also no reimbursement if the named insured is not acting diligently in repairing the damaged equipment.

The $5,000 per occurrence limit can be increased on the schedule of coverages.

Note: No deductible applies to this supplemental coverage.

Example: Herman's crane is struck and damaged, but the job is incomplete. He contacts friends in the business and attempts to borrow one of their cranes but is unsuccessful because they are all being used. He then contacts an equipment rental business and rents a replacement crane for ten days, anticipating that the new crane he ordered on a priority basis will arrive by then. Herman pays the first 72 hours of rental costs for the crane, and the insurance company pays the rental costs for the last seven days.

6. Spare Parts and Fuel

Coverage applies to the direct physical loss or damage to spare parts, accessories, and operating fluids resulting from a covered peril. This applies only when the items are on hand to be used with covered equipment. The most paid in any one occurrence is $5,000. This limit can be increased.

Example: Larry does not want to be working at a jobsite and have to stop and leave to purchase repair parts if the need arises. For this reason, he maintains a supply of basic replacement parts in a storage shed on the jobsite. Another contractor's front-end loader strikes the shed by accident and destroys it and all the parts in it. Larry is compensated for the loss of the parts.

Perils Covered

Coverage applies to risks of direct physical loss unless the loss is limited or caused by an excluded peril.

Perils Excluded

1. Primary Exclusions

The first group of exclusions is essentially absolute. Subject to specific exceptions, loss or damage by each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or results from any of these events.

a. Civil Authority

There is no coverage for a loss that results from an order that any civil or government authority issues. These orders may include seizure, confiscation, destruction, or quarantine of property, but this exclusion is not limited to only these. The only exception is when the loss or damage is caused by a civil authority destroying property to control a fire. This exception only applies if the fire is the result of a covered peril.

b. Nuclear Hazard

The insurance company does not cover loss or damage caused by or resulting from any nuclear reaction, radiation, or contamination. This is absolute and applies whether the nuclear incident was controlled or not, and by whatever means caused. Any loss the nuclear hazard causes is not treated as a loss that fire, explosion, or smoke causes. The only exception is when a fire results from the nuclear fire, direct loss or damage from that fire is covered, but the damage from the nuclear hazard remains excluded.

c. War and Military Action

The insurance company does not pay for loss or damage caused by any act of war. Undeclared and civil war or warlike action by a military force are all considered war. All actions taken to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents are also considered war and excluded. In addition, acts of insurrection, rebellion, revolution, or unlawful seizure of power and any action any government authority takes to prevent or defend against any such acts are excluded. If any action within the terms of this exclusion involves nuclear reaction, radiation, or contamination, this exclusion applies in place of the nuclear hazard exclusion.

Note: This means that the exception for resulting fire under the nuclear hazard is not covered when it results from war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Contamination or Deterioration

Loss or damage that is caused by contamination or deterioration is excluded. This applies to corrosion, decay, fungus, mildew, mold, rot, and rust. It also applies to any quality, fault, or weakness in covered property that causes it to damage or destroy itself. However, this exclusion is not limited to only these described causes.

b. Criminal, Fraudulent, Dishonest, or Illegal Acts

Coverage does not apply to loss caused by or results from criminal, fraudulent, dishonest, or illegal acts that any of the following commit alone or in collusion with another:

The named insured
Others with an interest in the property
Others to whom the property is entrusted
The named insured's partners, officers, directors, trustees, joint ventures, members, or managers as applicable based on the named insured’s type of business organization
Employees of any of the above groups. Employees are excluded even if the act occurs when they are not at work.

Coverage applies if employees destroy property. It does not apply if employees steal.

This exclusion does not apply to covered property in the custody of carriers for hire.

Coverage for this exposure should be purchased using a commercial crime coverage form.

c. Loss of Use

There is no coverage for loss caused by or resulting from delay, loss of use, or loss of market.

d. Mechanical Breakdown

Loss or damage caused by either a breakdown or a malfunction that is mechanical, structural, or electrical is excluded. Even such loss or damage occurring during reconditioning, structural, or mechanical processes is excluded.

There is a resulting peril exception that if such a breakdown or malfunction causes a covered peril, the loss or damage from that peril is covered.

Example: The backhoe bucket suddenly dislodged and dropped to the ground. Damage to the bucket and backhoe are not covered because the event was a breakdown. However, when it dropped, it fell on Jack’s toolbox, crushing all the tools. The damaged toolbox and tools would be covered.

e. Missing Property

The unexplained or mysterious disappearance of covered property is excluded when there is no physical evidence to suggest what happened to it. The only proof that a loss occurred is based on an audit or physical inventory.

The one exception is that this does not apply to covered property while it is in the custody of carriers for hire.

f. Pollutants

There is no coverage for loss caused by or resulting from any release, discharge, seepage, migration, dispersal, or escape of pollutants. There are three exceptions:

A specified peril causes the event
Coverage provided in Supplemental Coverages 7. Pollutant Cleanup and Removal provides
When a pollutant release results in a specified peril, the resulting loss from that specified peril to covered property is covered.

g. Temperature/Humidity

Coverage does not apply to loss that dryness, dampness, humidity, changes in, or extremes of temperature causes. However, if a covered peril occurs due to any of these, coverage applies to the loss that covered peril causes.

h. Voluntary Parting

There is no coverage for loss to covered property voluntarily given to others, even if the surrender was due to a fraudulent scheme, trick, or false pretense.

i. Wear and Tear

Loss or damage caused by wear, tear, marring, or scratching is excluded. The one exception is that if any of these results in a covered peril occurring, the covered property loss from that covered peril is covered.

What Must Be Done In Case Of Loss

1. Notice

The named insured must give prompt notice of a loss to the insurance company or its agent. The notice must include a description of the property lost or damaged. If a criminal act caused the loss, the appropriate law enforcement agency must also be notified. The insurance company has the right to require that any notice to it be in writing.

2. You Must Protect Property

During and after a loss, the named insured must take all reasonable steps to protect covered property from further loss. The insurance company pays reasonable costs the named insured incurs to do so if the named insured maintains accurate records to substantiate the costs. Paying these costs is not in addition to the policy limits. There is no coverage for any repairs or emergency measures performed on property not already damaged by a covered peril.

Note: It is important to realize that any such costs incurred will reduce the amount available to pay the actual loss.

3. Proof of Loss

The named insured must complete and return the insurance company's prescribed proof of loss forms within 60 days after the company requests it. The information provided must include the time, place, and circumstances involved with the loss and information on any other insurance coverage that may apply. It must also include the named insured’s interest and the interest of others with respect to the property involved, including lienholders, loss payees, and mortgagees. Any changes in the title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require to adjust and settle the loss.

4. Examination

Examination under oath may be required in matters that relate to the loss. The insurance company may request these examinations more than once, but such requests must be reasonable. If multiple persons are examined, the company has the right to examine each individual separately.

5. Records

The named insured must maintain and produce any records related to the loss. The insurance company must be allowed to make copies and take extracts of them as often as it reasonably requests. Records include tax returns and bank microfilms of all related canceled checks, but records are not limited to just these.

6. Damaged Property

Damaged and undamaged property must be made available for the insurance company's inspection as often as reasonably necessary. It must also be allowed to take samples of the property to the extent necessary to adjust and settle the loss.

7. Volunteer Payments

The named insured has the right to make payments, assume obligations, pay or offer rewards, or incur other expenses. However, unless the insurance company has given written approval for such actions, the named insured cannot expect any reimbursement. The only exception is that the insurance company will pay for the costs incurred to protect property as item 2. above describes.

8. Abandonment

The named insured may not abandon damaged property to the insurance company without its written consent.

Example: A turn was made too fast, and the forklift flew off the flatbed and down into the canyon. Mel, the owner, tells the insurance company that he just wants payment for the forklift, and they can have the salvage. The insurance company explains that they are not interested in the forklift, and Mel is responsible for collecting the forklift and dealing with any environmental issues that may have occurred.

9. Cooperation

The named insured must cooperate with the insurance company. Any actions required of the named insured within this policy must be performed.

Valuation

1. Actual Cash Value

When actual cash value valuation is selected on the schedule of coverages, the value of covered property is based on its actual cash value as of the time of loss. Actual cash is replacement cost new minus depreciation.

Example: Caleb’s contractors equipment loss occurred on February 2022, but because of many intervening issues, it is not settled until February 2023. The actual cash value of the equipment in 2022 was $45,000, but in 2023, due to competition for equipment from the hurricanes and recovery efforts in the area, it is now worth $60,000. Caleb will be paid no more than $45,000.

2. Replacement Cost

When replacement cost valuation is selected on the schedule of coverages, the value of the covered property is based on its replacement cost, subject to the following:

The cost is limited to costs to repair or replace damaged property with similar materials. If replaced, the equipment must be used for the same purpose. The value cannot exceed the amount the named insured actually spent to repair or replace the item.
The damaged or destroyed property must actually be repaired or replaced before replacement cost is paid.

The named insured has the option first to make a claim for actual cash value before the property is actually repaired or replaced. It can then make a claim for replacement cost, but only if it informs the insurance company of its intent to do so within 180 days after the date of loss.

Note: It is the intention to do so that must be provided within the 180 days, not the settlement itself.

3. Pair or Set

The value of a loss that involves damage to or loss of one part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. However, the loss of one part of a pair or set is not considered a total loss.

Note: This recognizes that the value of the whole is greater than the value of individual parts but that the remaining parts still have value as separates.

4. Loss to Parts

The value of a lost or damaged part of property that consists of several parts is the cost to repair or replace only the lost or damaged part.

How Much We Pay

1. Insurable Interest

The insurance company does not pay more than the named insured's insurable interest in the covered property at the time of loss.

Note: This could be an issue when the covered property is the property of others because the named insured does not necessarily have an insurable interest in that property.

2. Flat Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount entered on the schedule of coverages. The only exception is when a percentage deductible applies. In that case, refer to the Percentage Deductible below.

3. Percentage Deductible

If a percentage deductible applies, the insurance company pays only the amount of loss that exceeds the deductible amount. The deductible is determined as follows:

a. Multiply the deductible percentage on the schedule of coverages by the value of the covered property damaged in the loss. The value is based on the valuation method analyzed above.

b. In cases of loss or damage to two or more items of equipment, the deductible percentage applies to only the highest valued item.

c. The percentage deductible is capped and is not less than the Minimum Deductible amount or more than the Maximum Deductible amount on the schedule of coverages.

Example: Ernie's Excavating is a popular contractor. Other contractors who cannot justify owning their own excavating and grading equipment employ Ernie to do any needed excavation or grading work on their jobs. One of Ernie's graders on a jobsite is damaged when it strikes an adjacent structure. The deductible section on the schedule of coverages shows a 10% deductible subject to a $5,000 minimum and $15,000 maximum. The grader is valued at $100,000, and it sustains $25,000 in damage as a result of striking the adjacent building. The deductible is based on $100,000 multiplied by .10 equals $10,000. Ernie must pay the first $10,000 of the loss and therefore receives only $15,000 from the insurance company.

4. Loss Settlement Terms

Subject to all of the other items in this section, the insurance company pays the least of the following:

The amount determined under Valuation
The cost to repair, replace, or rebuild the property with material of similar kind and quality
The limit that applies to the covered property. There may be a catastrophe limit on the schedule of coverages. In that case, the catastrophe limit is the most the insurance company pays in any one occurrence.

5. Coinsurance

a. When coinsurance applies to a coverage provided, the insurance company pays only part of the loss if the limit is less than the percentage of the value of the covered property on the schedule of coverages.

b. The following are the three steps to determine the amount of loss to be paid:

Step 1. Multiply the percentage on the schedule of coverages by the covered property’s value at the time of loss.

Step 2. Divide the covered property’s limit by the result determined in step 1.

Note: There is no coinsurance penalty if the result is 1.00 or higher.

Step 3. There is a coinsurance penalty when step 2. is less than 1.00. Subtract the deductible from the amount of loss and then multiply the total amount of loss by the percentage determined in step 2.

The insurance company does not pay more than the amount determined in step 3. or the limit, whichever is less. It does not pay any remaining part of the loss.

c. If there is more than one limit on the schedule of coverages, this procedure applies separately to each limit.

d. If there is only one limit on the schedule of coverages, this procedure applies to the total of all covered property insured under that limit.

e. This coinsurance provision does not apply unless a coinsurance percentage is entered on the schedule of coverages.

6. Insurance under More Than One Coverage

Two or more coverages in the coverage form may apply to the same loss. In that case, the insurance company does not pay more than the value of the actual claim, loss, or damage sustained.

7. Insurance under More Than One Policy

a. Proportional Share

The named insured may have other coverage subject to the same terms as this coverage form. In that case, this coverage form pays only its share of the covered loss. That share is the proportion that its limit of insurance bears to the limits of insurance of all insurance that covers on the same basis.

b. Excess Amount

Other coverage may be available to pay for the loss other than as described in 7. a. above. In that case, this coverage form pays on an excess basis. It pays only the amount of covered loss that exceeds the amount due from the other coverage, whether collectible or not. Any payment is subject to the limit of insurance that applies.

Loss Payment

1. Loss Payment Options

a. Our Options

The insurance company makes the decision on how a loss will be paid – not the named insured or the third party. It may:
Pay the value of the lost or damaged property
Pay the cost to repair or replace the lost or damaged property
Rebuild, repair, or replace the property with similar property, to the extent possible, within a reasonable period of time
Take any part or all of the property at the agreed on or appraised amount

b. Notice of Our Intent to Rebuild, Repair, or Replace

The insurance company must notify the named insured of its intent to rebuild, repair, or replace within 30 days after receiving a properly completed proof of loss.

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured unless another loss payee named in the policy is involved.

b. Conditions for Payment of Loss

The insurance company pays a covered loss within 30 days after receiving a properly prepared proof of loss, and the amount of loss is established. The amount of loss is determined through either a written agreement between the company and the named insured or after an appraisal award is filed with the company.

3. Property of Others

a. Adjustment and Payment of Loss to Property of Others

The insurance company has the option to adjust and pay losses that involve property of others either to the named insured acting on the property owner’s behalf or to the property owner.

Note: There is no mention of who decides whether the named insured handles the adjustment or if the insurance company handles directly.

b. We Do Not Have to Pay You if We Pay the Owner

The insurance company is not obligated to pay the named insured when it pays the property owner. In addition, if the property owner sues the named insured, the company has the option to defend the named insured in that suit.

Reporting Conditions

This section applies to only Supplemental Coverages 2. Equipment Leased or Rented from Others and then only if the reporting conditions box on the schedule of coverages is checked.

1. Reports

The named insured must submit a report of the total amount of expenditures for contractors' equipment leased or rented from others to the insurance company within 30 days of the policy expiration. If the policy expiration was due to a cancellation, the report is to include the amount of such expenditures up to and including the actual cancellation date.

2. Premium Computation and Adjustment

Premiums are adjusted following the cancellation or expiration date. The premium is determined by multiplying the reported expenditures by the Equipment Leased or Rented from Others reporting rate on the schedule of coverages. If the calculated premium exceeds the deposit premium for this coverage, the named insured pays the insurance company the difference. If it is less, the insurance company refunds the difference to the named insured, subject to the minimum premium for this coverage.

3. Provisions That Affect How Much We Pay

If the named insured does not submit reports, the most paid for any loss is 90% of the limit.

If the last report that was submitted before the loss had expenditures that were less than the actual expenditures for contractors' equipment leased or rented from others, the insurance company pays only a portion of the loss. The reported expenditures are divided by the actual expenditures to determine the proportion. The deductible is then subtracted from the loss, and the remaining amount of loss is multiplied by the proportion.

Regardless of any reported value used to establish the premium, the most paid in any one loss is the limit that applies.

Other Conditions

1. Appraisal

The insurance company and the insured may not always agree on a covered claim’s value. This condition provides one method to resolve disputed claims.

Either party can request an appraisal to determine a disputed claim’s value. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their appraiser's name to the other party. The two appraisers then have 15 days to select a competent impartial umpire. If they cannot agree on an umpire within that time period, either can request that a judge in the court of record in the state where the property is located appoint one.

The appraisers then determine the claim’s value. They submit any differences to the umpire. Once any two of the three parties agree, the amount of loss is set.

Each party pays its own appraiser. Both parties share the umpire’s cost and other expenses equally.

2. Benefit to Others

The insurance provided does not directly or indirectly benefit any party with custody of the named insured's property.

3. Conformity with Statute

Any condition in this coverage form that conflicts with any applicable law is amended to conform to that law.

4. Estates

Note: This condition only applies if the named insured is an individual.

a. Your Death

If the named insured dies, the person who has custody of the named insured's property is an insured until a qualified legal representative is appointed. The named insured’s legal representative becomes an insured once he or she is appointed. Both are insureds, but only concerning the property this coverage form insures.

b. Policy Period is not Extended

This coverage does not extend past the policy’s expiration date.

5. Misrepresentation, Concealment, or Fraud

This coverage is void if any insured at any time willfully concealed or misrepresented a material fact related to the insurance provided, the property covered, or its interest in the property. It is also void if fraud or false swearing by any insured took place concerning the insurance provided or the property covered.

Note: The named insured must deal with the insurance company honestly. Its rights of recovery may be voided if it intentionally misrepresents or conceals a material fact or information. This means the insurance is treated as simply having never existed versus denying a particular claim.

6. Policy Period

Only covered losses that occur during the policy period are paid.

7. Recoveries

Paying the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply if the insurance company pays a loss and the lost or damaged property is subsequently recovered, or the parties responsible for the loss pay for it.

Either party that recovers property or payment must inform the other. Recovery expenses that either party incurred are reimbursed first. If the named insured keeps the recovered property, it must refund the amount of the claim the insurance company paid unless the company agrees to a different amount. If the claim paid is less than the agreed loss due to applying a deductible or another limitation, any recovery is prorated between the named insured and the insurance company based on the company's respective interest in the loss.

8. Restoration of Limits

Payment of a claim does not reduce the limit available for future claims unless the damaged item is considered a total loss. When an item is considered a total loss item, the insurance company refunds any unearned premium on that item to the named insured.

9. Subrogation

The insurance company acquires the named insured's rights of recovery from third parties after it pays a loss. The named insured must help the insurance company secure those rights. The company is not obligated to pay a loss if the named insured hinders or impairs the company's rights of subrogation. However, the named insured can agree in writing to waive recovery rights from others before a loss occurs.

10. Suit against Us

The insurance company cannot be sued by anyone for any coverage until all the terms of the coverage form are met. Suits must be brought within two years after the named insured first knew about a loss. If a state law invalidates this condition, any suit brought must comply with the provisions of that law and begin within the shortest period of time allowed by law.

Note: It is normal for a basic coverage form to be modified by mandatory state-specific endorsements that address issues that relate to that specific state.

11. Territorial Limits

Covered property must be located in the United States, its territories, and possessions, Canada, or Puerto Rico in order for coverage to apply.

Editor's Note: The coverages that IM 7000–Contractors' Equipment Coverage provides are included in IM 8000–Contractors' Combination Form–Scheduled Coverage. It combines the coverages these four separate coverage forms provide into a single combination coverage form. The other three forms are IM 7050–Builders’ Risk Coverage–Scheduled Jobsite Form–Comprehensive Form, IM 7203–Business Computer Coverage, and
IM 7100–Installation Floater Coverage.

IM 8000 is not analyzed because the coverages it provides are analyzed under the other coverage forms indicated in addition to the analysis of IM 7000.

AAIS Builders' Risk Coverage Forms

AAIS Electronic Data Processing Equipment and Business Computer Coverage Forms

AAIS Installation Floater Coverage Forms

IM 7006–SCHEDULE OF COVERAGES–CONTRACTORS' EQUIPMENT–SCHEDULED EQUIPMENT FORM (01 12 changes)

This Schedule of Coverages is used with IM 7001–Contractors' Equipment Coverage Form. IM 7006 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

Property covered is equipment scheduled on IM 7030–Equipment Schedule–Contractors’ Equipment.

Limit

The Catastrophe Limit is the most paid for loss in any one occurrence.

The 01 12 edition added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

Coverage Extensions

The limit on the schedule of coverages for the following coverage applies to all covered locations:

Additional Debris Removal Expenses

The limit is $5,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Newly Purchased Equipment

The limit is either a specific dollar limit or a percentage of the Catastrophe Limit. The limit is 30% of the Catastrophe Limit unless a different limit or percentage is entered.

Pollutant Cleanup and Removal

The limit is $10,000 unless a different limit is entered.

Coinsurance

80%, 90%, 100%, or another coinsurance percentage must be selected and the appropriate box checked.

Valuation

The valuation basis is actual cash value.

Deductible Amount

The deductible is a flat dollar amount.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7001–CONTRACTORS' EQUIPMENT COVERAGE–SCHEDULED EQUIPMENT FORM COVERAGE FORM ANALYSIS

This analysis is of the 04 04 edition.

This coverage form is a more restricted version of the IM 7000–Contractors' Equipment Coverage analyzed above. It is very important that when this coverage form is used as a replacement of a broader form, the named insured is aware of the differences. This analysis addresses the eight sections where differences occur.

Definitions

3. Contractors' equipment

This definition reverses the IM 7000 by stating that self-propelled vehicles that transport mounted equipment and vehicles that are not registered or licensed and not used on public roads even though designed for highway use specifically not covered, while in the IM 7000 the statement was made that they were specifically covered.

Note: This is a significant difference and should be carefully noted and explained to the named insured. It is very important to not schedule any of these excluded equipment items because such scheduling will cause additional confusion.

Property Covered

The only property covered is scheduled equipment. There is no option for property based on a schedule on file with the insurance company.

Property Not Covered

6. Vehicles

All vehicles are excluded. The IM 7000 had exceptions for self-propelled vehicles that transport mounted equipment and for any vehicle not registered or licensed and not used on public roads even though designed for highway use. The IM 7001 has no exceptions.

Note: This works with the Contractors Equipment definition change above.

Supplemental Coverages

Instead of seven supplemental coverages, there are only two, and the two remaining ones are significantly reduced.

IM 7001 provides only two Supplemental Coverages:

Newly Purchased Property

This property is covered up to 30 days from the acquisition date compared to 60 days in IM 7000.

Pollutant Cleanup and Removal

This Supplemental Coverage has a $10,000 limit compared to $25,000 in IM 7000.

There is no coverage for the Supplemental Coverages of:

Employee Tools
Equipment Leased or Rented from Others
Rental Reimbursement
Spare Parts and Fuel.

Perils Excluded

Two exclusions are added, and four exclusions are more restrictive.

The exclusions that do not appear in the IM 7000 but are part of the IM 7001 are:

2. g. Puncture, Blowout, and Road Damage

There is no coverage for loss or damage caused by or that result from puncture, blowout, or road damage to tires and tubes mounted on vehicles except when a specified peril causes such losses.

2. k. Weight of Load

Coverage does not apply to loss or damage caused by the weight of a load greater than the registered lifting capacity of any equipment or machine. The operating conditions at the time of such loss or damage are used to determine the lifting capacity.

The following exclusions are more restrictive:

2. a. Contamination or Deterioration

IM 7000 has an exception to this exclusion. If contamination or deterioration results in a covered peril occurring, the insurance company covers the loss or damage caused by or that results from that peril.
IM 7001 does not have this exception.

2. d. Mechanical Breakdown

Both coverage forms have a similar exception to this exclusion. The exception in IM 7000 is when a mechanical, structural, or electrical breakdown results in a covered peril. The exception in
IM 7001 is for cases where a mechanical, structural, or electrical breakdown results in a specified peril.

2. h. Temperature/Humidity

IM 7000 has an exception to this exclusion. If dryness, dampness, humidity, changes in or extremes of temperature result in a covered peril, coverage applies to the loss or damage caused by or that results from that peril. IM 7001 does not have this exception.

2. j. Wear and Tear

Both coverage forms have a similar exception to this exclusion. The exception in IM 7000 is for cases where wear, tear, marring, or scratching results in a covered peril. The exception in IM 7001 is for cases where wear, tear, marring, or scratching results in a specified peril.

Valuation

IM 7001 does not provide an option for replacement cost valuation.

How Much We Pay

IM 7001 provides only a flat deductible. There is no percentage deductible option.

Reporting Conditions

IM 7001 does not provide the Supplemental Coverage for Equipment Leased or Rented from Others. Because of this, there is no need for the reporting condition section.

IM 7007–SCHEDULE OF COVERAGES–CONTRACTORS' EQUIPMENT COVERAGE–BLANKET EQUIPMENT FORM (01 12 changes)

This Schedule of Coverages is used with IM 7002–Contractors' Equipment Coverage–Blanket Equipment Form. IM 7007 contains the following information.

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

Property covered is Blanket Equipment Coverage.

Limits

Equipment Limit

This is the most paid for loss to any one item of contractors' equipment.

Catastrophe Limit

This is the most paid for loss in any one occurrence.

The 01 12 edition added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

Coverage Extensions

The limits for the following coverages on the schedule of coverages apply to all covered locations.

Additional Debris Removal Expenses

The limit is $5,000 unless a different limit is entered.

Equipment Leased or Rented to Others

The limit is $50,000 unless a different limit is entered.

Equipment Loaned to Others

The limit is $50,000 unless a different limit is entered.

Fraud and Deceit

The limit is $50,000 unless a different limit is entered.

Waterborne Equipment

The limit is $50,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Construction Trailers

If limits are not entered, the limits are $10,000 for any one construction trailer and its contents and $50,000 for loss in any one occurrence for all construction trailers and their contents.

Employee Tools

The limit is $10,000 unless a different limit is entered.

Fire Department Service Charges

The limit is $1,000 unless a different limit is entered.

Pollutant Cleanup and Removal

The limit is $25,000 unless a different limit is entered.

Recharge of Fire Extinguishing Equipment

The limit is $1,000 unless a different limit is entered.

Rental Reimbursement

The limit is $5,000 unless a different limit is entered. A waiting period expressed in a number of hours must also be entered. The waiting period is 72 hours if no entry is made.

Reward for Recovery of Stolen Equipment

The limit is $1,000 unless a different limit is entered.

Spare Parts and Fuel

The limit is $10,000 unless a different limit is entered.

Reporting Conditions

Your Contractors’ Equipment

The named insured’s contractors' equipment reporting condition applies if the box on the schedule of coverages is checked. The reporting rate must be entered and a monthly, quarterly, or annual reporting option selected.

Additional Premium Due after Expiration

This item explains that any additional premium developed is due when it is billed. The reporting condition deposit premium and minimum premium must be entered in the spaces provided.

Equipment Leased or Rented from Others

If this coverage is on a reporting basis, a reporting rate, deposit premium, and minimum premium must be entered in the spaces provided.

Equipment Leased or Rented to Others

If this coverage is on a reporting basis, a reporting rate, deposit premium, and minimum premium must be entered in the spaces provided.

Valuation

The valuation basis selected must be entered. The options are actual cash value and replacement cost.

Deductible

The deductible may be a flat dollar amount or a percentage deductible. The percentage deductible is subject to a minimum deductible amount and a maximum deductible amount.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7002–CONTRACTORS' EQUIPMENT COVERAGE–BLANKET EQUIPMENT FORM COVERAGE FORM ANALYSIS

This analysis is of the 06 04 edition.

This coverage form is a broader version of IM 7000–Contractors' Equipment Coverage. The differences between it and IM 7000 are analyzed. This analysis addresses only the eight sections that are different.

Definitions

IM 7002 adds the following definition.

3. Construction trailer

This is a moveable trailer that the named insured owns, or that is owned by others but in the named insured's care, custody, or control. It is used at jobsites for storage or as an office.

Property Covered

IM 7002 eliminates the schedule restrictions. Coverage applies to the named insured’s contractors' equipment as well as equipment that is in the named insured's care, custody, or control.

Property Not Covered

IM 7002 removes Loaned Property, Leased or Rented Property, and Waterborne Property as Property Not Covered by this section. This means that such property is covered under this form.

Coverage Extensions

IM 7002 adds four coverage extensions.

Equipment Leased or Rented to Others

The named insured’s contractors' equipment is covered while leased or rented to others. The most paid for loss or damage to such equipment in any one occurrence is $50,000. This limit can be increased.

Note: This does not apply to property of others in the named insured’s care, custody, and control. So if the named insured leases out its own equipment and also equipment that it has in its care, custody, and control, there is no coverage for the latter, even though it would have been covered being used by the named insured at its own jobsite.

Equipment Loaned to Others

Covered equipment loaned to other contractors or individuals is covered. However, it is only covered while at a jobsite where the named insured also conducts operations. The most paid for loss or damage to such equipment in any one occurrence is $50,000. This limit can be increased.

Note: This applies to covered equipment, which means that the property of others would be covered along with the named insured property.

Fraud and Deceit

When covered property is willingly given to another person, even by trick or device, coverage is excluded. This extension provides a limited amount of coverage for such a situation. When the named insured, its agents, consignees, or customers allow covered property to be stolen in any of the following circumstances, and it is stolen, a limited amount of coverage is provided:

· Persons falsely represent themselves as the proper persons to receive the property.

· Fraudulent bills of lading or other shipping receipts are presented.

· Electronic data processing hardware or software fraudulently induces the property to be given away.

The most paid in a single occurrence is $50,000, but the limit can be increased.

Note: This is a sub-limit. If the property limit at the location is less than $50,000, the property limit caps the amount available. While the limit can be increased, it is still a sub-limit to the property limit.

Example: William is notified via email that the special tools he ordered for a specific project are faulty and should be returned immediately. Being responsible, William promptly sends them to the “Return Center” indicated in the notice and waits for the replacement tools. When William contacts the toolmaker ten days later, the toolmaker informs him that he did not send such a notice. By then, the tools are long gone, and William sadly realizes he has been tricked. This coverage pays to replace the tools.

Waterborne Equipment

The insurance company pays up to $50,000 in any one occurrence for direct physical loss or damage from a covered peril to covered equipment while waterborne. This limit can be increased.

Supplemental Coverages

IM 7002 adds four coverages, eliminates two, and changes two others.

The four new coverages are:

Construction Trailers

Construction trailers and their contents are covered. The limit in any single occurrence is $10,000 for a single trailer and its contents, and the maximum payout in a single occurrence is $50,000. Coverage applies only when construction trailers are at a jobsite, in storage, or in transit between a storage location and a jobsite.

Example: Perry owns six construction trailers. Four are at jobsites, and two are at his main location. A tornado rips through town destroying all trailers and scattering their contents. The most Perry will receive is $50,000, but this is capped by the actual amount of the loss at each trailer and no more than $10,000 for a single trailer and its contents.

Fire Department Service Charges

When the named insured has a contract or agreement in place to receive fire department service this supplement pays for such agreed upon charges as they relate to covered property at a jobsite when the fire department is called to save or protect such property from a covered peril. The most paid in any one occurrence is $1,000.

Recharge of Fire-Extinguishing Equipment

Subject to a $1,000 limit in any single occurrence, the insurance company covers the named insured's expenses to recharge automatic or handheld fire extinguishing equipment. However, the company covers only recharge expenses for extinguishing equipment mounted or installed on covered property that was discharged to fight a fire or as a result of a covered peril occurring.

Reward for Recovery of Stolen Equipment

The insurance company pays a reward for information that leads to the recovery of covered property stolen in a covered theft loss. The most paid in any one occurrence is $1,000, regardless of the number of persons who provide information.

The two coverages eliminated are:

Equipment Leased or Rented from Others

Note: This is not needed because the equipment is covered automatically.

Newly Purchased Property

Note: This is not needed because the equipment is covered automatically

The two coverages changed are:

Employee Tools

The default limit is increased from $5,000 to $10,000.

Spare Parts and Fuel

The default limit is increased from $5,000 to $10,000.

How Much We Pay

One item is changed and one is eliminated.

The item changed is:

Loss Settlement Terms

Paragraph c. is modified slightly to remove reference to the catastrophe limit because there is no catastrophe limit.

The item eliminated is:

Coinsurance

Reporting Conditions

This condition is very different because instead of only one coverage having the option of reporting, there are three coverages eligible for reporting.

1. Your Contractors’ Equipment

a. Reports

The named insured must provide the insurance company with a schedule of all its contractors equipment on or before the policy inception date. Within 30 days after the end of each reporting period, the named insured must submit a current schedule of equipment, including the description and value of each.

b. Premium Computation and Adjustment

The values of all equipment reported are added together to determine the total value for each report. The total values for each report are added together and divided by the number of reports to determine the average reporting period aggregate value. This aggregate value is multiplied by the rates on the schedule of coverages to develop an earned premium that is compared to the deposit premium. If the calculated premium exceeds the deposit premium, the named insured pays the insurance company the difference. If it is less, the insurance company refunds the difference to the named insured, subject to any applicable minimum premium.

c. Provisions That Affect How Much We Pay

The most paid for a loss is 90% of the limit if the named insured did not submit reports.

The last report submitted before the loss may be for values that are less than the actual value of each item of equipment. In that case, the insurance company pays only a portion of the loss. The reported values are divided by the actual values to determine the proportion. The deductible is then subtracted from the loss, and the remaining amount of loss is multiplied by the proportion.

The most paid in any single loss is the limit that applies, regardless of any reported value used to determine the premium.

2. Equipment Leased or Rented from Others

This section is identical to the reporting conditions section in IM 7000.

3. Equipment Leased or Rented to Others

a. Reports

The named insured must report the total amount of its receipts (collected and uncollected) earned from leasing its contractors' equipment to others during the policy period. It must send the report to the insurance company within 30 days after the expiration date. In case of cancellation, the named insured must report the amount of such receipts up to and including the cancellation date.

b. Premium Computation and Adjustment

Premiums are adjusted after the cancellation or expiration date. The premium is determined by multiplying the total earned receipts by the reporting rate on the schedule of coverages for Equipment Leased or Rented to Others. If the calculated premium is more than the deposit premium, the named insured pays the insurance company the difference. If it is less, the insurance company refunds the difference to the named insured, subject to any applicable minimum premium.

c. Provisions That Affect How Much We Pay

The most paid for a loss is 90% of the limit if the named insured did not submit reports.

The last report submitted before the loss may be for values that are less than the actual value of each item of equipment. In that case, the insurance company pays only a portion of the loss. The reported values are divided by the actual values to determine the proportion. The deductible is then subtracted from the loss, and the remaining amount of loss is multiplied by the proportion.

The most paid in any single loss is the limit that applies, regardless of any reported value used to determine the premium.

Other Conditions

8. Restoration of Limits

This condition is changed. There is no exception that provides for a return of unearned premium if a specific item is totally destroyed during the policy year and the limit of insurance is reduced.

IM 7008–SCHEDULE OF COVERAGES–CONTRACTORS' EQUIPMENT–SMALL TOOLS FLOATER (01 12 changes)

This Schedule of Coverages is used with IM 7003–Contractors' Equipment Coverage–Small Tools Floater.
IM 7008 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

Small Tools

Limit (01 12 change)

An entry must be made for the following:

Your Tools

This is the most paid for loss or damage to a single owned tool

Catastrophe Limit

This is the most paid in a single occurrence regardless of the number of lost or damaged tools.

If the box is checked and a limit entered, coverage applies to the following:

Employee Tools

This is the most paid for loss to a single tool an employee owns.

Leased/Rented Tools

This is the most paid for loss to a single the named insured rents or leases.

The 01 12 edition added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

Valuation

The valuation basis is actual cash value.

Deductible

The deductible is a flat dollar amount that must be entered in the space provided.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7003–CONTRACTORS' EQUIPMENT COVERAGE–SMALL TOOLS FLOATER COVERAGE FORM ANALYSIS

This analysis is of the 04 04 edition.

This is a very narrow and specific coverage form. It insures only small tools. It is more restrictive than other contractors' equipment coverage forms because of the limited application and the nature of the property covered. However, this is probably the exact form that many artisan contractors need. This analysis will concentrate on the differences between this form and the IM 7000.

Definitions

One definition is added, one is changed, and two are eliminated.

The definition added is:

Tools

Equipment and tools are considered tools if they are mobile and the named insured uses them in its contracting, installation, erection, repair, or moving operations or projects.

The definition changed is:

Specified perils

The explanation of water damage is eliminated, which reduces coverage.

These definitions are not in IM 7003:

Contractors' equipment
Equipment schedule

Property Covered

This section is a complete replacement. The insurance company covers direct physical loss or damage caused by a covered peril to the following:

1. Your Tools

These are tools the named insured owns.

2. Employee Tools

These are tools that the named insured's employees own. Coverage applies only if there is a limit for this coverage on the schedule of coverages and only when the tools are at the named insured's owned premises or jobsite(s).

3. Tools Leased or Rented from Others

These are tools leased or rented from others. Coverage applies only if there is a limit for this coverage on the schedule of coverages.

Example: Jess selected options for employee tools and tools leased and rented from others. His tools, his employees’ tools and tools he had leased from others were all stolen.

Scenario 1: The loss occurred at the jobsite. All three types of tools are covered.

Scenario 2; The loss occurred while Jess had the tools on his truck while he and two employees had lunch. The employees’ tools are not covered, but the other two types are.

Property Not Covered

Two items are combined into a new single item, one item is changed, and one item is eliminated.

Leased or Rented Property and Loaned Property

These are combined to become Loaned, Leased, or Rented Property.

Vehicles

These are excluded. Unlike IM 7000, there is no exception for self-propelled vehicles that transport mounted equipment and any vehicle not registered or licensed and not used on public roads even though designed for highway use.

Aircraft or Watercraft

This is eliminated. This means it could be covered property if it meets the definition of tools.

Coverage Extensions

All coverage extensions are eliminated.

Supplemental Coverages

All supplemental coverages are eliminated.

Perils Excluded

Five excluded perils are more restrictive because the exception in each of them is eliminated.

2. a. Contamination or Deterioration
2. d. Mechanical Breakdown
2. f. Pollutants
2. g. Temperature/Humidity
2. i. Wear and Tear

Valuation

The replacement cost valuation option is eliminated.

How Much We Pay

Two items are changed, and two are eliminated.

The items changed are the following:

2. Flat Deductible

This is changed to Deductible and all references to percentage deductibles are removed.

4. Loss Settlement Terms

Paragraph c. is modified slightly to remove the reference to the catastrophe limit because there is no catastrophe limit.

The items eliminated are the following:

3. Percentage Deductible
5. Coinsurance

REPORTING CONDITIONS

The reporting condition is eliminated.

IM 7009–SCHEDULE OF COVERAGES–CONTRACTORS' EQUIPMENT COVERAGE–LEASED OR RENTED EQUIPMENT (01 12 changes)

This Schedule of Coverages is used with IM 7004–Contractors' Equipment Coverage–Leased or Rented Equipment Form. IM 7009 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Limits (01 12 change)

Equipment Limit

This is the most paid for loss or damage to a single item of equipment the named insured rents or leases from others.

Catastrophe Limit

This is the most paid for loss or damage in a single occurrence to equipment the named insured rents or leases from others.

The 01 12 edition added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

Coverage Extensions

The limit on the schedule of coverages for the following coverage applies to all covered locations:

Additional Debris Removal Expenses

The limit is $5,000 unless a different limit is entered.

Supplemental Coverages

This coverage is additional coverage.

Pollutant Cleanup and Removal

The limit is $10,000 unless a different limit is entered.

Reporting Conditions

Coverage is based on reports of amounts the named insured spends to rent or lease contractors' equipment from others. A reporting rate, deposit premium, and minimum premium must be entered in the spaces provided unless the Reporting Conditions Do Not Apply box is checked.

Valuation

The valuation basis is actual cash value.

Deductible

The deductible is a flat dollar amount.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7004–CONTRACTORS' EQUIPMENT COVERAGE–LEASED OR RENTED EQUIPMENT FORM COVERAGE FORM ANALYSIS

This analysis is of the 04 04 edition.

This is a very narrow and specific coverage form. It insures only leased and rented equipment. It is more restrictive than other contractors' equipment coverage forms because of its limited application and the type of property covered. However, this can be exactly the form needed if the named insured does not own any equipment of any kind and only leases or rents equipment for certain applications for limited periods and not on a constant or ongoing basis. This analysis will concentrate on the differences between this form and the IM 7000.

Definitions

One definition is changed, and one is eliminated.

Contractors' equipment

This definition is changed to exclude self-propelled vehicles that transport mounted equipment and any vehicle not registered or licensed and not used on public roads even though designed for highway use. This is an important distinction compared to the definition in IM 7000 that should be carefully noted and explained to the named insured.

Equipment schedule

This definition is eliminated.

Property Covered

This section is completely replaced.

Coverage applies to only direct physical loss or damage from a covered peril to contractors' equipment that the named insured rents or leases from others.

Property Not Covered

The only change in this section is that one type of property is slightly restricted.

Vehicles

Vehicles are excluded. However, unlike IM 7000, there is no exception for self-propelled vehicles that transport mounted equipment and any vehicle not registered or licensed and not used on public roads even though designed for highway use.

Supplemental Coverages

All supplemental coverages are eliminated except Pollutant Cleanup and Removal. Its default limit is reduced from $25,000 to $10,000.

Perils Excluded

Two exclusions are added, and four are more restrictive.

The new exclusions are the following:

2. g. Puncture, Blowout, and Road Damage

There is no coverage for loss or damage caused by or that results from puncture, blowout, or road damage to tires and tubes mounted on vehicles. The only exception is when such loss is caused by or results from a specified peril.

2. k. Weight of Load

The following exclusions are more restrictive:

2. a. Contamination or Deterioration

The exception for when contamination or deterioration results in a covered peril occurring and the insurance company covering the loss or damage caused by or that results from that peril is eliminated.

2. d. Mechanical Breakdown

2. h. Temperature/Humidity

The exception for when dryness, dampness, humidity, or changes in or extremes of temperature result in a covered peril and coverage applies to the loss or damage caused by or that results from that peril is eliminated.

2. j. Wear and Tear

Valuation

The replacement cost valuation option is eliminated.

How Much We Pay

Two items are changed and two are eliminated.

The items changed are the following:

2. Flat Deductible

This is changed to Deductible. All references to percentage deductible are removed.

4. Loss Settlement Terms

Paragraph c. is modified slightly to remove reference to the catastrophe limit because there is no catastrophe limit.

The items eliminated are the following:

3. Percentage Deductible
5. Coinsurance

Reporting Conditions

3. Provisions That Affect How Much We Pay

This provision in IM 7000 is not in IM 7004.

Other Conditions

8. Restoration of Limits

This condition is changed to eliminate the restriction that limits are not restored if a scheduled item sustains a total loss and the unearned premium for that item is returned to the insured. The change is needed because there is no schedule of equipment.

ENDORSEMENTS AND SCHEDULES

AAIS has developed the following endorsement and schedule forms for use with the various Contractors' Equipment coverage forms.

IM 7012–Equipment Leased or Rented from Others Endorsement (07 11 change)

This endorsement covers equipment leased or rented from others. Coverage is on a reporting basis, but that can be waived. IM 7036–Equipment Leased or Rented from Others Schedule must be attached to display limits. The 07 11 edition added a Valuation section with provisions for Actual Cash Value and Replacement Cost.

IM 7013–Equipment Leased or Rented to Others Endorsement

This endorsement covers equipment leased or rented to others. Coverage is on a reporting basis but that provision can be waived. IM 7035–Equipment Leased or Rented to Others Schedule must be attached to display limits.

IM 7014–Rental Reimbursement Endorsement (01 12 changes)

Expenses the named insured incurs to rent equipment that replaces covered equipment lost or damaged due to a covered peril that occurs are covered by using this endorsement. Coverage does not apply if operations could be continued without the damaged equipment or if the named insured does not repair the equipment on a timely basis. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7015–Small Tools Endorsement (01 12 changes)

Small tools owned by the named insured or its employees while at the named insured's owned premises or jobsites are covered using this endorsement. Coverage applies on a blanket basis. Separate limits per tool and per occurrence for both the named insured's tools and employee tools and the deductible amount are entered in the appropriate spaces on the endorsement schedule. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7016–Boom Restriction Endorsement

Coverage is excluded for crane booms over 25 feet long except when the damage is caused while in transit and is caused by a specified peril.

IM 7017–Weight of Load Exclusion

Coverage for a loss caused by the lifting capacity of a piece of equipment being exceeded is excluded.

IM 7018–Percentage Deductible Endorsement (01 12 change)

How Much We Pay Deductible provision in the coverage form is replaced by the percentage deductible in this endorsement. This is the same percentage deductible that is part of the IM 7000. The 01 12 edition added a space to enter the policy number.

IM 7019–Waterborne Endorsement (01 12 changes)

This endorsement extends coverage to apply to covered property when it is waterborne. Coverage is subject to the specific limit and deductible on the endorsement schedule. The waterborne exclusion in the coverage form continues to apply except as modified by this endorsement. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7020–Replacement Cost Endorsement

This endorsement amends the valuation condition in the coverage form and provides replacement cost valuation in place of actual cash value, subject to specific cost, procedural, and time limitations it spells out.

IM 7021–Split Deductible Endorsement (01 12 change)

This endorsement allows one deductible to apply to one set of perils and a second deductible to apply to all other covered perils. The 01 12 edition added a space to enter the policy number.

IM 7022–Property Loaned to Others–Scheduled Contractors (01 12 changes)

Loss or damage to property loaned to individuals or other contractors listed on the endorsement schedule is covered up to the limit on the endorsement schedule. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7023–Property Loaned to Others–Jobsite Coverage (01 12 changes)

Loss or damage to covered property loaned to other contractors working on the same jobsite as the named insured is covered subject to the limit on the endorsement schedule. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7024–Trailers and Spare Parts Endorsement (01 12 changes)

Two supplemental coverages are added. One covers loss or damage to construction trailers and their contents. The other covers spare contractors' equipment parts and accessories and gasoline, oil, or hydraulic fluids for vehicles and equipment. Coverage is limited to jobsites where the named insured works, at storage locations, or in transit between such locations. A limit must be entered for coverage to apply. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7025–Additional Coverages Endorsement (01 12 changes)

Three coverages can be provided by using this endorsement. However, the coverage applies only if a limit is entered in the schedule for the coverage. The three available coverages are:

Fraud and deceit
Recharge of Fire Extinguishing Equipment
Reward for Recovery of Stolen Equipment

The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7026–Agreed Amount Endorsement

The valuation provisions in the coverage form are eliminated and replaced with valuation on an agreed amount basis. This valuation applies only to the property listed and described on IM 7033–Agreed Amount Schedule–Contractors' Equipment or on file with the insurance company with the agreed amount stated as the valuation.

IM 7027–Contractors' Equipment–Income Coverage

This endorsement covers the loss of earnings due to loss or damage to covered property by an insured peril. It is subject to its own additional definitions, coverage, exclusions, limitations, and coverage extensions. It also has its own valuation clause and conditions for what must be done in case of loss, how much is paid, and other conditions IM 7032–Equipment Schedule–Income Coverage–Contractors' Equipment must be attached to display limits

IM 7030–Equipment Schedule–Contractors' Equipment (01 12 changes)

(Use with IM 7000 and IM 7001)

This schedule is used to list, describe, and provide a limit for each item of covered equipment. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7031–Equipment Schedule–Contractors' Equipment–Valuation Basis (01 12 changes)

(Use with IM 7000 and IM 7001)

This schedule is used to list and describe each item of covered equipment and to state its limit and valuation basis. Valuation options are actual cash value, replacement cost, or agreed amount. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word and other minor editorial changes that do not affect coverage.

IM 7032–Equipment Schedule Income Coverage–Contractors' Equipment (01 12 changes)

This schedule must be attached when IM 7027–Contractors' Equipment–Income Coverage is added to provide income coverage. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7033–Agreed Amount Schedule–Contractors Equipment (01 12 changes)

This schedule is required when IM 7026 is attached to list, describe, and provide a limit for each item of covered equipment subject to agreed amount valuation. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7034–Tools Endorsement (01 12 changes)

(Use with IM 7000, IM 7001, and IM 7002)

Tools the named insured owns are covered when this endorsement is attached. It does not cover tools that employees own. The endorsement schedule has spaces to enter limits for any one tool, for all tools in a single occurrence, and the deductible amount that applies. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word and other minor editorial changes that do not affect coverage.

IM 7035–Equipment Leased or Rented to Others Schedule (01 12 changes)

This schedule is required when IM 7013 is attached. It states the equipment and catastrophe limits, deductible amount, and reporting conditions that apply. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word and other minor editorial changes that do not affect coverage.

IM 7036–Equipment Leased or Rented from Others Schedule (07 11 changes)

This schedule is required when IM 7012 is attached. It states the equipment and catastrophe limits, deductible amount, and reporting conditions that apply. The 01 12 edition added a space to enter the policy number. It also deleted the word Limit and added a Valuation section that includes provisions for Actual Cash Value or Replacement Cost.

IM 7037–Equipment Borrowed from Others (01 12 changes)

This endorsement adds coverage for direct physical loss or damage from a covered peril to contractors' equipment borrowed from others. There are spaces on the endorsement schedule for limits per item and in any one occurrence. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7038–Continuing Rental or Lease Payments (01 12 changes)

This endorsement pays rental or lease payments the named insured is legally obligated to pay on contractors’ equipment it leased or rented even after it sustains loss or damage by direct physical loss from a covered peril. The endorsement schedule has spaces to enter the limit per item and an annual limit. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7039–Below the Surface of the Ground Exclusion (07 11 addition)

This endorsement excludes equipment below the ground’s surface. It is important to note that covered equipment becomes excluded as soon as it penetrates the ground’s surface. The endorsement is primarily geared towards drilling operations. The buckets that are part of an excavator, backhoe, and other excavating and trenching equipment are not excluded when this endorsement is attached.

UNDERWRITING CONSIDERATIONS

Contractors come in all forms and sizes, and their equipment exposures vary according to their different operations. Artisan contractors are concerned with their small tools and equipment, while larger contractors have concerns about cranes and other large pieces of equipment. In either case, contractors’ equipment is usually one of the contractor's major owned physical assets. The equipment schedule is often the contractor’s most valuable asset and the equipment’s replacement is required for the contractor to continue to operate a business.

Contractors’ equipment is written to cover direct physical damage or loss unless specifically excluded or limited. The greatest concern for most contractors is loss or damage due to theft and vandalism. Large equipment can mysteriously disappear from a jobsite overnight and then just as mysteriously reappear at a jobsite in another country. Vandals may ransack a jobsite just for fun, using and destroying different equipment, such as compressors, paint sprayers, and pneumatic tools. Small equipment left unsecured on a jobsite usually disappears.

Contractors who are aware of the types of loss their equipment is exposed to and who implement controls and procedures to counter those exposures are more successful in limiting or eliminating losses. Security must be appropriate for the type of job involved and the area where the work takes place. Jobsite fencing, illuminated storage yards, watchpersons, equipment alarms, and effective security of equipment during non-operating hours are all effective deterrents to theft and vandalism.

Cranes

Many different types of cranes are used in construction, quarrying, strip mining, stevedoring, and shipyard operations. Because of their substantial values and potential for total loss, cranes are of special concern to contractors' equipment underwriters.

Boom collapse is the most serious hazard for crane operations. Booms are a major part of the crane value, and collapsed booms usually result in a total loss. Long booms must be transported in sections and be assembled and erected at the job site. If any boom members are bent during erection, dismantling, or transit, the structural integrity can be weakened, and the crane may fail under a load it should normally handle. Improper crane operation is the principal cause of boom damage, so operator experience is extremely important. In addition, the crane operator must be aware of load limits and avoid lifting loads that exceed its capacity.

These are some typical underwriting concerns for several specific classes of business:

Road Building

Excavators, graders, asphalt and concrete finishers, ditchers, loaders, rollers, scrapers, earthmovers, and concrete mixers are common. Principal hazards are fire, theft, vandalism, and vehicle upset. In addition, portable asphalt plants can be a major concern from the standpoint of fire.

Quarrying

Crushers, conveyor systems, air compressors, screens, shovels, drills, haulers, loaders, and material handling equipment are common. Principal hazards are landslides, collapse of walls, and explosion.

Mining

Draglines, drills, shovels, and loaders are common for strip mining. Principal hazards are equipment rollover and those associated with blasting.
Screens, crushers, conveyors, loaders, and material handling equipment are common with open pit mining. Principal hazards are equipment overturn, falling rock, flooding, and explosion.
Underground operations have significant exposures that are excluded from standard forms

Stevedoring

Forklifts, cherry pickers, gantry cranes, mechanical and hydraulic lifts, and material-handling equipment are common. Principal hazards are fire and equipment falling overboard.

Shipyard

Forklifts, gantry cranes, cherry pickers, mobile cranes, burning and welding units, and locomotive cranes are common. Principal hazards are fire and windstorm.

Building Contractors

Pile drivers, tower cranes, mobile cranes, derricks, and excavators are common. Principal hazards are fire, vandalism, windstorm, collision of crane booms, collapse of crane booms, and upset or overturn of excavating equipment and climbing cranes.

Marine Contractors

Waterborne equipment is subject to total loss. Cranes, compressors, pile drivers, and other equipment mounted on barges are common and may need to be covered under an Ocean Marine form.

Logging

Tractors, graders, tower/yarders, loaders, and skidders are common. Hazards are fire from overheated equipment or leaking of hydraulic fluid, brush, or forest fires, upset or overturn, theft, vandalism, and collapse of towers or spars.

Oil and gas rigs and well-servicing

Rigs used for drilling and associated equipment are common, including the drill bit. Major hazards are blowout, cratering, and losing that bit.