AAIS Riggers' Coverage Forms

142.13

AAIS RIGGERS' COVERAGE FORMS ANALYSIS

(February 2024)

 

Introduction

Eligibility

Policy Construction

Schedules of Coverages

IM 7155–Schedule of Coverages–Riggers' Coverage

IM 7150–Riggers' Coverage Analysis

   Introduction

   Agreement

   Property Covered

   Property Not Covered

   Coverage Extensions

   Supplemental Coverages

   Perils Covered

   Perils Excluded

   What Must Be Done in Case of Loss

   Valuation

   How Much We Pay

   Loss Payment

   Reporting Conditions

   Other Conditions

   Additional Coverage Limitations

   Definitions

IM 7156–Schedule of Coverages–Riggers' Legal Liability Coverage

IM 7151–Riggers' Legal Liability Coverage Analysis

Endorsements and Schedules

Underwriting Considerations

INTRODUCTION

The American Association of Insurance Services (AAIS) Riggers' Coverage is used by contractors that lift, set in place, and move property of others. Rigging contractors (riggers) specialize in lifting heavy property objects of others in conjunction with installation, construction, and moving operations. When the rigger’s actions damage the property being moved, the rigger may be held liable for the damages. This is more of a bailee type coverage form, so covered property is property of others in the named insured's care, custody, or control.

AAIS has developed two Riggers' coverage forms. Each has its own corresponding schedule of coverages.  

The IM 7150–Riggers' Coverage Analysis is analyzed first, and then the IM 7151–Riggers' Legal Liability Coverage is compared to the IM 7150 with only the differences between the two being analyzed.

ELIGIBILITY

Any contractor or commercial operation involved in rigging operations of objects that belong to others is eligible.

POLICY CONSTRUCTION

AAIS Riggers' coverage requires at least these four forms:

Related Article: CL 0100–AAIS Commercial Lines Common Policy Conditions

SCHEDULES OF COVERAGES

IM 7155–SCHEDULE OF COVERAGES–RIGGERS' COVERAGE (01 12 changes)

IM 7155–Schedule of Coverages–Riggers' Coverage is used with IM 7150–Riggers' Coverage. IM 7155 contains the following information:

Policy Number (01 12 addition)

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

Limits

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

This is the most paid for loss to a single project.

This is the most paid for loss in a single occurrence regardless of the number of projects.

Coverage Extensions (01 12 change)

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

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

There is no limit in the coverage form. As a result, full policy limits apply, but defense costs reduce the amount available to pay for the loss being defended against. The previous edition had the word “covered” in the space provided. The 01 12 edition has the words “See Form” in that space.

Supplemental Coverages

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

The limit is $2,500 unless a different limit is entered.

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

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

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

Reporting Conditions

One of two options must be selected:

The following entries are required if the reporting condition is selected:

This may be Monthly, Quarterly, or Annual.

This is entered for each project.

·         Monthly, quarterly or annual adjustment period

One of these must be selected.

Any additional premium the named insured owes to the insurance company because of the reporting condition is due on the date stated on the billing invoice.

Deductible

A deductible amount must be entered.

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 7150–RIGGERS' COVERAGE ANALYSIS

Note: This analysis is of the 06 08 edition. Changes from the previous edition are in bold print.

Introduction

You and your are the parties who are listed on the declarations as the insured. We, us and our is the insurance company that is providing coverage. The Definitions Section, which is at the end of the coverage form, must be consulted in order to discover how other terms used in this coverage form are to be interpreted. (06 08 addition)

Agreement

The insurance company agrees to provide the coverage described in the coverage form and the schedule of coverages, and in return, the named insured agrees to pay the premium. This agreement is subject to all of this policy’s terms, conditions, endorsements, and definitions.

Property Covered

Only the property described in this item is covered and is subject to any exclusions or limitations that may apply.

1. Coverage

Only property that is property of others while in the named insured's care, custody, or control is covered. This property is covered only during the time the named insured has been hired for rigging. Coverage applies when a covered peril causes direct physical loss or damage to this property.

2. Coverage Limitation

The property of others is covered only while actually at a location. The reason for the property being at the location must be for any of the following purposes:

Note: The comma used in this last item could be a problem. As currently expressed, this item could apply to a dismantling or assembling project unrelated to a rigging project.

 

Example: Rollie's Rigging is working on a commercial building construction site. Its job is to erect all scaffolding for a specific section of the building, disassemble it, and then move it to the next section. Coverage begins when the scaffolding is delivered to the construction site and continues as long as the job progresses through all the different erection and disassembly operations. When the scaffolding collapses, Rollie submits a claim for the damage to the scaffolding.

Property Not Covered

Seven specific types of property are excluded:

1. Airborne Property

Property that is airborne is not covered unless it is in transit but only while on a regularly scheduled airline flight.

A very important part of this item is that property being lifted or moved by a helicopter is specifically not covered.

2. Buildings, Structures, and Land

Buildings, structures and land are not covered. The only exception is for buildings or structures that are part of the named insured's rigging, assembling, or dismantling project.

3. Contraband

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

4. Money and Securities

A number of types of property are not covered under this item. Accounts, bills, currency, food stamps, evidences of debt, and lottery tickets not held for sale, and money, notes, or securities are all not covered.

5. Service Fee

Coverage does not apply to property that the named insured accepts when it does not make a charge for the rigging services being provided.

 

Example: McMillan is a public servant providing rigging services for the town of Merry as they erect their Christmas decorations. All services are donated. McMillan makes a mistake and drops a priceless decoration. The town sues McMillan, and this coverage declines all coverage because no service fee had been charged.

Note: Some municipalities and contractors have circumvented such requirements by paying minimal fees.

6. Trees, Shrubs, and Plants

All of these. Lawns are not covered.

Note: This not covered item might need to be revisited when a vegetated roof is part of a project.

7. Waterborne Property

Property that is waterborne is not covered. The only exception is when waterborne property is in transit and a carrier for hire's custody.

Note: This could be a significant problem when a rigger is working on a bridge or pier project.

Coverage Extensions

Provisions That Apply To Coverage Extensions

There are two coverage extensions. The limit for each is either the limit on the schedule of coverages or the default limit included in 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. It is not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Debris Removal

a. When a covered peril damages or destroys covered property, the cost to remove any created debris is covered under this extension.

b. Debris removal does not include any costs for removing, restoring, replacing polluted land or water or to extract pollutants.

c. There are two parts of 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. 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.

d. 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.

e. The named insured must report debris removal expenses to the insurance company within 180 days of the loss date for this coverage extension to apply.

2. Defense Costs

Note: This coverage form provides third party coverage for the benefit of the named insured. Because of this, the insurance company takes control of the loss and negotiates with the third party that sustained damage. This section explains how the insurance company and the named insured are to work together on any such claim.

a. The insurance company decides when to defend suits brought against the named insured that result from covered loss or damage to covered property. This is not the decision of the named insured. This means that the insurance company is in control of the investigation and how suits or claims are handled.

b. Once the insurance company has paid out its limits, based on a judgment or written settlement, the insurance company is no longer under an obligation to defend the named insured.

c. The named insured’s only involvement in the claim is to act within the written approval of the insurance company.

d. Once the insurance company agrees to defend a suit, it also agrees to pay seven specific expenses related to it. These expenses are not part of the limit of insurance, and no deductible applies to any of them:

Supplemental Coverages

Provisions That Apply To Supplemental Coverages

There are four 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 also are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Earned Charges (06 08 addition)

The insurance company covers charges owed to the named insured because it provided services but cannot collect because of a covered loss to covered property. The most paid in a single occurrence is $2,500. This limit can be increased.

Example: Rollie’s Rigging had performed services under its contract for two weeks prior to the scaffolding collapsing. The general contractor was furious with the drop because it put him off schedule. A new rigging contractor was hired, and the general contractor refused to pay Rollie’s for any part of its contract. This coverage would pay Rollie’s up to $2,500.

2. Pollutant Cleanup and Removal

a. The insurance company pays the named insured's expenses to extract pollutants from land or water if a covered peril that occurred during the policy period caused the pollutants to be released or discharged.

b. This is immediate coverage, so any expenses to extract pollutants are only paid when reported to the insurance company within 180 days of the date of loss.

c. Costs related to testing, evaluating, observing, or recording pollutants are excluded except for those costs that are part of the extraction process.

d. The most paid at any one location is $10,000 for all such expenses that a covered peril that occurs during each separate 12-month policy period causes. This limit can be increased.

3. Property in Storage

Covered property in storage while awaiting rigging is covered for direct physical loss by a covered peril. The most paid in a single occurrence is $10,000. This limit can be increased.

Note: There is no limitation as to where the property must be stored. It could be on-site or off-site. However, the property must be property of others and must be in the care, custody or control of the named insured at the time of the loss. This means that if it is off-site, but in the control of the property owner, there would be no coverage.

4. Transit

Covered property in transit to a rigging location is covered against direct physical loss by a covered peril. The most paid in a single occurrence is $10,000. This limit can be increased.

Note: The requirement that this property is in the care, custody or control of the named insured remains in place even though it is in transit. If the property is in the care of a carrier for hire but that hire is at the direction of the named insured, the coverage would apply.

Perils Covered

Coverage applies to risks of direct physical loss. This very broad statement is modified by the statement that it only applies if the loss is not 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 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 as a means of controlling a fire. This exception only applies if the fire results from 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 or not the nuclear incident was controlled 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. Ordinance or Law

Coverage does not apply to any loss or increased construction costs because a government regulation that controls the use, construction, or repair of any property is enforced. When the regulation requires the demolition of property and removing its debris created by the demolition, there is no coverage. This exclusion applies to enforcement that occurs even if the property has not been damaged, and it applies to increased costs that are incurred as a result of the named insured complying with the regulations.

d. Penalties

Penalties the named insured incurs because it failed to complete a project according to a contract’s terms and conditions are excluded. Penalties exacted against the named insured who did not comply with terms of the construction contract are also excluded.

Example: The general contractor notified Rollie’s that it was in non-compliance with contract terms. The accident investigation following the scaffolding damage revealed that Rollie’s was not using union employees even though he was being paid union scale under the contract. Rollie’s is not covered for this non-compliance penalty.

e. 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 is 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 that results from criminal, fraudulent, dishonest, or illegal acts that any of the following commit alone or in collusion with another:

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

Note: Crime coverages should be used to cover this type of loss. However, because the property being covered is property of others, the CR 04 01–Clients’ Property will need to be attached for employee dishonesty coverage to apply.

Related Article: CR 04 01–Clients’ Property

c. Defects, Errors and Omissions

Any loss caused by any act, defect, error, or omission related to specific construction activities is excluded. The activities can be in design, specifications, construction, materials, and workmanship, as well as maintenance, installation, renovation, remodeling, or repair. They may also be in planning, zoning, development, siting, surveying, grading, or compaction activities. There is an exception. If any of these excluded acts, defects, errors, or omissions result in a covered peril, then the loss or damage from that covered peril is covered.

 

Example: Rollie’s Rigging continues to have bad news. The accident investigation used improper bolts while assembling the scaffolding. Rollie’s claim was denied because it was due to a construction defect.

d. Electrical Currents

Loss caused by electrical arcing or currents is excluded unless the electrical is from lightning. The exception is when the excluded arcing or currents result in a covered peril, and any loss or damage from that covered peril causes is covered.

e. Explosion, Rupture, or Bursting

Loss or damage to boilers, turbines, pipes, or engines powered by steam or gas turbines is excluded when they explode, rupture, or burst. Loss or damage to other property due to these items exploding, rupturing, or bursting would be covered.

f. Loss of Use

There is no coverage for loss that results from delay, loss of use, or loss of market.

g. Mechanical Breakdown

Loss that is due to a mechanical breakdown is excluded. Damage to moving machinery parts due to centrifugal force is also excluded. The exception is when either results in a covered peril, the loss or damage that covered peril causes is covered.

h. Missing Property

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. This exception is that covered property in the custody of carriers for hire is covered.

i. Pollutants

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

Example: An earthquake causes a container of acid to spill. The acid burns through an electrical cord, and a fire occurs. The loss due to the fire is covered even though the cause was a pollutant because the loss that resulted was due to a specified cause of loss.

j. Rain, Snow, Ice, or Sleet

Loss caused by or that results from rain, snow, ice, or sleet to covered property in the open that is not yet a part of the permanent building or structure is excluded. The exception is for any covered property in a carrier for hire’s custody.

k. Temperature/Humidity

Loss due to dryness, dampness, humidity, changes in or extremes of temperature causes is excluded.

l. Testing

A loss caused by any type of testing is not covered. Start-up, performance, stress, pressure, or overload testing of covered property are examples of such testing.

 m. Voluntary Parting

When loss or damage occurs to property given to another voluntarily, it is not covered. This applies even if a trick or scheme caused the property to be given away.

Example: John arrived at the construction site in a panic. He told Marvin that parts of the rigging property he was installing were needed immediately at another jobsite. Marvin did not know John, but John had credentials and was in such a panic that Marvin not only agreed to release the items but also helped to secure it on the trailer. A few days later, when Marvin had not received the replacement property, he attempted to contact John. When that was unsuccessful, he contacted the general contractor’s supervisor, who denied all knowledge of John. Marvin has a problem because John and the property could not be found, and he has no coverage for its loss under this coverage form.

What Must Be Done In Case Of Loss

1. Notice

The named insured must promptly notify the insurance company or its agent of a loss. 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 the notice 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, but to do so, the named insured must maintain 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: Such costs incurred 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 title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require in order 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 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 cancelled 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 may not voluntarily make payments, assume obligations, pay or offer rewards, or incur other expenses without the insurance company's express approval. If it does, it does so at its own expense. The only exceptions are those 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.

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

The value of covered property is based on its actual cash value. Actual cash is replacement cost new minus depreciation.

2. 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 the individual items but that the remaining items still have value as separates.

3. Loss to Parts

The value of a lost or damaged part of property consisting 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 condition is confusing because the named insured has very little, if any, insurable interest in property of others. A condition that states that the loss is subject to the property owner’s insurable interest would be more helpful.

2. Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount on the schedule of coverages.

3. Loss Settlement Terms

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

4. Catastrophe Limit (06 08 change)

The catastrophe limit on the schedule of coverages is the most the insurance company pays, regardless of the number of rigging projects that are damaged at the same time.

Note: It is very important that the named insured be aware of this limit because of how it caps damages.

Example: Mandarin Rigging’s project limit was $40,000, and its catastrophe limit was $80,000. Mandarin acquired another contractor and started working four jobs at a time. In the busyness of the added jobs, Mandarin never contacted his agency to increase the catastrophe limit. A tornado came through and flattened three jobsites. Mandarin’s $40,000 project limit was adequate, but the $80,000 catastrophe limit was not enough to cover Mandarin’s $100,000 loss.

5. 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.

6. 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

There may be other coverage available to pay for the loss other than as described in 6. 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 has the following four loss payment options if a covered loss occurs.

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

The insurance company has the right to decide how it wants to settle the loss, but it is required to notify the named insured within 30 days of receiving a property completed proof of loss when the decision is to rebuild, repair, or replace.

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 it receives 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.

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

When the insurance company pays the property owner, it is not obligated to pay the named insured. 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

The reporting conditions only apply if there are entries for Reporting Conditions on the schedule of coverages. This section includes details on the timing and content of the required reports, provisions in the event of cancellation, how premiums are calculated and adjusted, and provisions that affect how losses are paid.

1. Reports

a. A report of the total receipts due from rigging operations (whether collected or not) for the reporting period involved must be submitted to the insurance company within 30 days after the end of the reporting period. Receipts include amounts earned from materials, labor, reasonable overhead and profit, and delivery charges forming part of rigging projects.

b. In case of cancellation, the report described above must be provided for the period up to and including the cancellation date. Any additional premium for that period must be paid.

2. Premium Computation and Adjustment

Premiums are calculated by multiplying the value of the reported receipts by the reporting rate on the schedule of coverages. The adjustment periods may be annual or for some other period.

a. Annual Adjustment

If the adjustment period on the schedule of coverages is annual, the calculated premium is compared to the deposit premium. If the calculated premium exceeds the deposit, 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.

b. Other Adjustment Period

If the adjustment period is other than annual, the calculated and reported premium is applied to the deposit until it is used up. After that, the named insured pays the insurance company any premiums that exceed the deposit. At expiration, if the calculated premium is less than the deposit, the insurance company refunds the difference to the named insured, subject to any applicable minimum premium.

3. Provisions That Affect How Much We Pay

a. Failure to Submit Reports

If required reports are not submitted, and a loss occurs, the most that the insurance company pays for that loss is 90% of the limit.

b. Reported Values Are Less than the Full Value

If the reported receipts are less than those earned during the reporting period, the insurance company pays only a proportion of the loss. The proportion is the receipts reported divided by the actual receipts. The deductible is then subtracted from the loss and multiplied by the remaining amount by the proportion.

c. We Will Not Pay More than the Limit

The insurance company does not pay more than the applicable limit at the designated location.

Other Conditions

1. Appraisal

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

Either party can request an appraisal to determine the value of a disputed claim. 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.

Note: This does not appear to apply because the named insured’s property is not covered.

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 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.

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 related to that specific state.

11. Territorial Limits

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

12. Carriers for Hire

The named insured may accept shipping documents from transportation companies that limit the carrier’s liability to amounts less than the covered property’s actual cash value.

Additional Coverage Limitations

Coverage ends when the first of the following events takes place:

Note: This could be a problem because the coverage includes property of others in the care, custody, and control of the named insured. The named insured never has an insurable interest in such property so does that mean there is never any coverage?

Note: Because coverage ends on the earliest date that one of these events takes place, it is extremely important to inform the named insured of them so that coverage being in force is not automatically or incorrectly assumed.

Definitions

Defined terms are used throughout the coverage form. Restricting their meaning to its definition is how all parties have a clearer understanding of the intended coverage. Nine terms are defined:

1. Limit

This is the amount of coverage that applies to the insured property.

2. 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.

3. Rigging

In addition to meaning rigging, this term includes moving, erecting, hoisting, or lowering.

Note: Rigging requires special skills, equipment, and experience to move large objects and machinery vertically, horizontally, and with pinpoint precision on an exact spot. Machinery installations may involve subsequent precision placement of various parts together to complete the job. It demands patience and attention to detail and relies heavily on the rigger's experience.

4. Schedule of coverages

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

5. Sinkhole collapse

The earth’s surface suddenly settling or collapsing into an underground opening created by water acting on limestone or some other rock formation. The value of the collapsing land or the cost to fill sinkholes is not sinkhole collapse.

6. 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, weight of sleet, snow or ice and windstorm. Two terms need further explanation.

Falling objects does not include loss to personal property stored in the open. Damage to the interior of buildings or personal property stored in buildings is not considered falling object unless that object first breaches the building's exterior.

When part of a system or appliance that holds water or steam cracks or breaks, the sudden or accidental discharge or leakage of water or steam from that system or appliance is considered water damage.

7. Suit

Any judicial or arbitration proceeding. The purpose of the proceeding must be to determine if the named insured is liable for damages to covered property of others while they were in its care, custody, or control. The proceedings will also determine the type or amount of the damages. (06 08 change)

8. Terms

All provisions, limitations, exclusions, conditions, and definitions that apply to this coverage policy.

9. Volcanic action

An airborne volcanic blast or shock waves, ash, dust, and particulate matter. The cost to remove dust, ash, or particulate matter is not volcanic action unless the covered property has been damages. Lava flow is also volcanic action.

IM 7156–SCHEDULE OF COVERAGES–RIGGERS' LEGAL LIABILITY COVERAGE
(01 12 changes)

IM 7156–Schedule of Coverages–Riggers' Legal Liability Coverage is used with IM 7151–Riggers' Legal Liability Coverage. IM 7156 contains the following information:

Policy Number (01 12 addition)

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

Limits

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

This is the most paid for loss to any one rigging, assembling, or dismantling project.

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

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

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

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

There is no limit in the coverage form. As a result, policy limits apply but defense costs reduce the amount available to pay for the loss. A limit entered restricts the amount of defense costs coverage available. The previous edition had the word “covered” in the space provided. The 01 12 edition has the words “See Form” in that space.

Supplemental Coverages

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

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

The limit is $2,500 unless a different limit is entered.

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

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

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

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

Reporting Conditions

One of two options must be selected:

The following entries are required if the reporting condition is selected:

·         Monthly, Quarterly, or Annual reporting period

·         Reporting Rate for each project

·         Monthly, Quarterly, or Annual adjustment period

Additional Premium Due After Expiration

Any additional premium owed to the insurance company because of the reporting condition is due on the date on the billing invoice.

Deductible

A deductible amount must be entered.

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 7151–RIGGERS' LEGAL LIABILITY COVERAGE FORM ANALYSIS

The difference between these two forms is the term “legal liability.” The term means that payment is made to the owner of the covered property only when the named insured is found legally liable and then only for damages for which it is legally liability to pay. The IM 7150 does not contain this restriction, so the loss paid is based only on the valuation of the covered property. The difference between legal liability and valuation only adjustment is often called “goodwill” because the customer is compensated for loss regardless of the named insured’s legal liability, which allows the named insured to maintain the customer’s goodwill.

 

This analysis is of the 08 08 edition.

This coverage form is identical to IM 7150–Riggers Coverage analyzed above except for changes made in specific sections. The differences are discussed as follows:

Coverage

This new section is added because it addresses the legal liability aspect of the coverage form.

1. Legal Liability Coverage

Only the named insured's legal liability for loss or damage to covered property under its care, custody, or control is covered. The legal requirement to pay must result from the named insured being a rigger, millwright or contractor. The obligation must be found in either statute, case law, or within a construction contract to which the named insured is a party.

Example: Metal Joy is working on a commercial building construction site. A tornado tears through the construction site destroying the property of others that Metal Joy was handling. Metal Joy is not legally liable by the law or in contract, so no coverage applies.

2. We Do Not Cover

When the named insured chooses to violate a law or regulation related to claims handling, the insurance company will not pay for any consequences of that violation. It will not pay any penalties, costs, expenses, fines or damages that result. So, any payments imposed upon it because of such violations are not payable under this coverage.

Property Covered

1. Coverage is worded slightly differently by not requiring that the named insured be hired for a rigging project.

2. Coverage Limitation is changed by including other operations specific to the rigging project but not including operations incidental to assembling or dismantling project.

3. Time Limitation is added. The time period coverage applies only during the period of time in which the named insured is legally liable for the property of others.

Example: The construction contract stated that Jacob was legally liable for the scaffolding only from March 1 to March 31. An unusual weather opening occurred, and Jacob was asked to start the job on February 15. No change was made in the contract, so when Jacob’s action caused damage to the scaffolding on February 27, there was no legal liability and, therefore, no coverage.

Property Not Covered

The following two items are considered property not covered.

4. Contractors’ Equipment

All kinds of contractors’ equipment are excluded, such as tools, hoists, jacks, lifts, or similar property used in the named insured's rigging operations.

Note: Remember that only property of others is covered. Under the IM 7150, these items would be covered, but under the IM 7151, they are not.

9. Vehicles

All kinds of vehicles are excluded. Trailers and other conveyances that have been specifically designed and used to transport covered property are specifically excluded.

Note: This is not limited to only vehicles on the road. All types of conveyances are not covered. There is no such restriction under the IM 7150.

Coverage Extensions

The following coverage extension is added.

1. Claim Mitigation Expense

Expenses the named insured incurs to prevent further loss or damage to covered property are paid if reasonable and necessary and incurred within 12 hours of the loss or damage. The most paid is $10,000 in a single occurrence, but the limit can be increased.

This coverage extension is not subject to a deductible.

Supplemental Coverages

Two supplemental coverages are added, and one is changed.

Added Supplemental Coverages

The following are the two supplemental coverages added:

1. Contract Penalty

The penalties exclusion specifically excludes contractually agreed upon penalties imposed on the named insured for non-completion or non-compliance. This Supplemental Coverage is added because of that and provides up to $10,000 if the penalty is accessed because a covered loss or damage prevented the named insured from completing the project according to contract terms. The most paid is $10,000 in a single occurrence, but it can be increased.

3. Expediting Expenses

When a covered loss impedes the ability of the named insured to complete the job within a designated time frame, this supplemental coverage pays up to $10,000 in a single occurrence for expenses the named insured incurs to quicken the pace so that it can meet the time frame. Examples of covered expenses are overtime pay, hiring additional labor, transportation costs, storage expenses, and costs of renting additional equipment. This $10,000 limit can be increased.

The following is supplemental coverage slightly changed:

Changed Supplemental Coverage

5. Property in Storage adds a time limitation. Coverage starts when the property arrives at the storage facility and ends 30 days later.

Perils Excluded

One exclusion is added, and one is changed.

Added Exclusion

n. Wear and Tear

Loss or damage caused by wear, tear, marring, or scratching is excluded. The exception is that if any of these causes a covered peril to occur, the loss or damage caused by that covered peril is covered.

Changed Exclusion

The following is the exclusion changed:

d. Penalties is changed by the exception for coverage that Supplemental Coverages 1. Contract Penalty provides.

Valuation

This Actual Cash Value items is replaced by the following labeled Property of Others.

1. Property of Others

The named insured’s liability as established in its construction contract PLUS the cost of labor, material or services furnished or arranged for by the named insured is the most paid. However, if the actual cash value of the covered property is less, then only the actual cash value of the property at the time of the loss is paid.

Note: While Pair or Set and Loss to Parts remain in the Valuation section, there is no indication of how they work with the Property of Others Valuation.

How Much We Pay

3. Loss Settlement Terms

This item is changed by the additional of a paragraph that limits the maximum amount paid to the legal liability as established under the construction contract. This would seem to conflict with the Valuation section, which provided some coverage for cost of labor, material or services.

4. Limits is changed from Catastrophe Limit to Project Limits because a Project Limit is added.

a. Project Limit

The Any One Project Limit on the schedule of coverages caps how much will be paid at a single project.

b. Catastrophe Limit

The Catastrophe Limit on the schedule of coverages caps how much will be paid in a single occurrence regardless of the number of locations, rigging projects, coverages, or combination of these.

Other Conditions

One condition is added, and one is changed.

Added Condition

The following is the condition added:

2. Bankruptcy of an Insured

When an insured is declared bankrupt or insolvent, the insurance company must continue its obligations as though that insured remained solvent.

Changed Conditions

The following is the condition changed:

11. Suit against Us

The time limit during which a suit can be brought has been eliminated. Instead, the suit cannot be brought until the liability of the insured has been established in a trial or a written agreement between the insured, the insurance company, and the claimant.

In addition, a statement is added that prevents any party from impleading the insurance company into any action in order to establish the insured’s liability.

Additional Coverage Limitations

When Coverage Ceases, item 5 is amended to:

5. The rigging, millwright, or construction project has been completed in more than 30 days.

Note: The words "assembling or dismantling" in IM 7150 are not in IM 7151. The words "millwright, or construction" are added in IM 7151.

Definitions

Rigging is changed to specifically refer to millwright operations.

3. Rigging

Millwright operations are added. Examples are lifting, installing, or disassembling machinery or equipment.

ENDORSEMENTS AND SCHEDULES

AAIS has developed two endorsements for use with this coverage form:

IM 7160–Contract Penalty Endorsement

(Use with IM 7150)

This endorsement adds coverage for loss due to contractual penalties imposed on the named insured because the rigging project is not completed based on a contract's requirements. The non-completion must be due to direct loss or damage to covered property by a covered peril.

IM 7161–Expediting Expenses Endorsement

(Use with IM 7150)

This endorsement adds coverage for expenses that become necessary so that a rigging project can be completed within a contract's time requirements. The expense must be necessary because of a delay caused by direct loss or damage to covered property by a covered peril.

Note: Additional company specific endorsements may be available and used. Each should be examined to determine its effect on coverage, especially when some may impose restrictions or controls that may be minimum requirements or prerequisites for the company to provide coverage or to accept a particular exposure. Some endorsements limit or broaden coverage or change conditions and terms. Particular areas of concern include weight exceeding the load capacity of a crane or lifting device, height restrictions, and property in transit. Earthquake and flood exclusions may be required or be subject to special deductibles if not excluded.

UNDERWRITING CONSIDERATIONS

This is coverage for property of others. The risk to this property is more than that of a storage facility, though, because while the named insured has the property it is becoming part of another structure.

PRIOR JOBS

A list of completed past jobs is probably the most important tool an underwriter can receive. The list should go back at least five years, but for larger contractors, more is better. The listing should include the following:

By reviewing past jobs, the underwriter has a good idea of the types of jobs that can be anticipated in the future.

CURRENT JOBS

A listing of current jobs that includes the following information is needed:

Comparing past jobs to current jobs is important especially if the types of jobs appear to be changing. A rigger taking on significantly larger projects should always be evaluated to ensure the rigger has the expertise and equipment to handle the job. A rigger taking on much smaller jobs is also a concern because its equipment for larger project is sitting idle, which could indicate a financial problem.

OPERATIONS

The type of operation and the exposures presented vary greatly from one rigger to another because the specialty of one rigger can be quite different from the specialty of another. Placing a large piece of machinery on the grade floor of a manufacturing building is much different from hoisting large steel beams at a high-rise building under construction. The primary causes of loss for this coverage form are dropping the covered property, the covered property striking other objects, and the covered property striking an overpass while in transit. Most of these losses are due to simple human error, failure to pay attention, and failure to plan. Riggers lift heavy, bulky, and awkward objects that can also be extremely valuable. If those objects fall or are upset, the loss or damage can be enormous.

In most cases, riggers' coverage begins when lifting devices are attached to the property to be moved and ends when the devices are removed and the owner or other authorized party accepts the job. Riggers must be evaluated based on the types of property moved, previous loss experience, descriptions of previous jobs performed (both successfully and unsuccessfully), annual receipts, operating territory, employee experience and training, condition of equipment, and the average and maximum values per job.

Some rigging projects involve multiple setups and take down situations. A movie production company will hire a rigger to set up the equipment throughout the making of a particular film. Outdoor concert venues may hire a rigger throughout a concert weekend or even season.

Equipment the rigger uses must be evaluated by type and include information concerning the manufacturer, model number, serial number, and the year of manufacture. The use of the equipment is important, especially if it is used to lift large, heavy, or high-value property. The height of the lift must also be determined.

The underwriter must explore and be satisfied with the fact that the rigging contractor knows what it is doing, has been doing it successfully for some time, and employs experienced, trained, competent, and professional workers.

JOBSITE

The job site must be evaluated. It should be reasonably level so the lifting devices do not overturn. The site should be large enough, so cranes or other lifting devices can be assembled and erected correctly, placed in the proper position, and outriggers deployed appropriately. The site must also be evaluated from the standpoint of earthquake and water damage, including flood. Wind is a factor in many lifts, and lifts should never be attempted during periods of high winds or severe weather. Property moved indoors should have sufficient room to make the move safely without the property coming into unintended contact with other property or objects.

SPECIALIZATION

Another area to evaluate is specialization. A rigging business that concentrates on or specializes in a specific type of work is easier for an insurance company underwriter to evaluate than a generalist or one with no particular focus or emphasis. The nature of employees and work crews are also important to evaluate along with the specialization issue. If the contractor uses the same people consistently, whether they are employees or independent contractors, the chances of successful operations are greater than if new crews and people are used for each project as it comes up. Teamwork is an essential element in successfully completing jobs, and this comes about only through regularly working together over a long period of time.

EQUIPMENT

Equipment is another issue. Does the rigger use owned equipment or rent or lease equipment for the specific job? If equipment is leased, is it leased with or without operators, and whose responsibility is it to maintain it? If the insured uses owned equipment, does it keep maintenance records and have a preventive maintenance program in place? Are operators experienced and periodically re-qualified, and are the working ranges and lifting capacities clearly marked and adhered to? All of these are important questions and points to consider because even an experienced rigging contractor is only as good and effective as the equipment it uses.

PROPERTY OF OTHERS

Finally, the nature of the property being set into place must be considered. It is best to evaluate this issue from a "worst case scenario" basis, giving attention and consideration to a number of factors. Things such as the type of property involved, its availability, be it custom-made, one-of-a-kind, or readily available stock or mass-produced, its damageability, and the consequences if the property is actually dropped or upset must all be considered.

Rigging risks are difficult to evaluate because of the broad scope of operations that can be involved. If they are approached systematically and step-by-step, paying attention to the important elements, they can be less intimidating and less difficult to evaluate.