AAIS INFRASTRUCTURE PROPERTY COVERAGE
(February 2024)
|
IM
7321–Schedule of Coverages–Infrastructure Property Coverage IM
7320–Infrastructure Property Coverage Analysis Additional
Property Not Covered or Subject to Limitations |
INTRODUCTION
The American
Association of Insurance Services (AAIS) IM 7320– Infrastructure Property
Coverage insures the
physical parts of interrelated systems that provide for the basic needs of a
community. Examples of the systems are the roads, communications, water supply,
and the electrical grid.
Any individual, private enterprise, or governmental entity with
infrastructure property is eligible.
POLICY CONSTRUCTION
AAIS
Renewable Energy Generating Equipment Coverage requires at least these
four forms:
Related Article: CL 0100–AAIS
Commercial Lines Common Policy Conditions
IM 7321–SCHEDULE OF COVERAGES–INFRASTRUCTURE PROPERTY
COVERAGE
This
schedule of coverages is used with IM 7320–Infrastructure Property Coverage. IM
7321 contains the following Information:
Policy Number
There is a space to enter the policy number.
Type of Covered
Infrastructure
There are five types of infrastructure listed, with a
space for another that must be listed and described. Only one
type may be selected, and that is achieved by checking the box next to it.
The following are the types of infrastructure that can be covered:
Described Facilities
This section has spaces to list the facility’s location, enter a
description of it, and enter the limit of insurance that applies.
Catastrophe Limit
This section has a space to enter the catastrophe limit of
insurance. It is the most paid in a single occurrence that involves one or more
structures, equipment, facilities, buildings (if added by endorsement), or any
combination of these along with Coverage Extensions, Supplemental Coverages, or
Other Coverages.
Coverage Extensions
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.
Supplemental Coverages
Each of these coverages provides additional limits of
coverage or additional coverage. Required entries vary by type of coverage.
The limit is $25,000 unless a different
limit is entered.
Deductible
The deductible that applies is
entered in the space provided.
Valuation
There are two valuation options. A box must be
checked to select the one desired. The two options are:
Coinsurance
One of the following coinsurance
options must be selected:
Income Coverage
Coverage
There
are two income coverage options if coverage is selected. A box must
be checked to select the one desired. The two options are:
Limit
The Income Coverage Limit must be entered in the
space provided if one of the two income coverages is covered.
Waiting Period
A
waiting period must be checked if one of the income Coverage options
is selected. The two options are:
The
number of days must be entered in the space provided.
Coverage
Extensions
Two income coverage extensions are available. A box must be
checked to select the one desired. The two options are:
The number of days other than the 30 days the coverage form
includes must be entered in the space provided.
This section has two possible entries:
The limit other than the $10,000 limit the coverage form
provides must be entered in the space provided.
The number of hours other than the 12 hours the coverage
form includes must be entered in the space provided.
IM 7320–INFRASTRUCTURE PROPERTY COVERAGE ANALYSIS
This analysis is of the 06 12
edition.
INTRODUCTION
The terms "you" and
"your" are the party(ies) identified on the declarations as the
insured. "We", "us," and "our" is the
insurance company that provides coverage. These are the only two definitions in
this introduction. However, there are many other defined terms used in this
coverage form. The other terms can be found in the Definitions
Section at the end of the coverage form. It is very important to
review these definitions because they can broaden or restrict coverage.
The insurance company agrees to provide the
coverage described in the coverage form and in the schedule of coverages. The
named insured agrees to pay the premium. This entire agreement is subject to
all the coverage form's terms, conditions, endorsements, and definitions.
1.
Coverage
Direct physical loss or damage to the named insured’s
infrastructure property is covered if caused by a covered peril.
Coverage also applies to similar property of others in the named insured's
care, custody, or control.
2.
Coverage Limitation
Coverage
applies only while the above described property is part of a facility
listed and described on the schedule of coverages.
3.
Limit
A
limit must be entered on the schedule of coverages beside a
described facility. This is the most paid in a single occurrence for loss or
damage to all infrastructure property at that described facility.
Note: The
specific infrastructure property itself is not described or itemized.
4.
We Do Not Pay
When
the value of the infrastructure, despite having been repaired or
replaced, is considered to have been diminished because of loss or damage, the
insurance company will not pay for that diminishment.
Property Not Covered
Seven
specific types of property are not covered:
1. Aircraft or Watercraft
Aircraft
and watercraft are not covered. Unmanned Aerial Vehicles (AUV or
drone) are aircraft and therefore not covered.
2. Buildings
No buildings
are covered. The buildings that house the infrastructure that support the
operation infrastructure are not covered. This extra wording is
supplied to support the basic wording that buildings are not covered.
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. Cost of Excavation
The costs to excavate,
fill, backfill, or grade land are not covered. There is one
exception. If covered property sustains a covered loss or damage
below ground, coverage does apply to the excavation costs incurred that are
necessary to repair, replace, or rebuild the property.
|
Example: A bulldozer being transported comes loose and strikes
Muddville’s water tower. One leg of the structure is badly
damaged and must be replaced. The excavation cost to remove and replace
the damaged leg is not covered because the damage was not below the
surface. |
5. Land
Land is not covered, even
the land where the covered property is located.
6. Trees, Shrubs, or Plants
Lawns are not
covered as well as trees, shrubs, or plants.
7. Vehicles
Any
type of vehicle that is self-propelled and designed for highway use – even
if not licensed – is not covered.
Note: This property is more
correctly insured under commercial automobile coverage forms.
Related Article: CA 00 01–Business Auto Coverage Form Analysis
Provisions
That Apply To Coverage Extensions
There is one coverage extension. The limit is
either the limit on the schedule of coverages or the default limit included in
the coverage form. These limits are part of the applicable limit for covered
property and not in addition to it unless otherwise indicated. These
limits are not added to or combined with limits for any other coverage
extension or supplemental coverage and are 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, or replacing polluted land or water or extracting
pollutants.
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 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 date of loss for
this extension to apply.
Provisions
That Apply To Supplemental Coverages
There is one supplemental coverage. It 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.
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.
Coverage applies to risks of direct physical loss
or damage 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 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 applies
only if the fire results from a covered peril.
b. Earth Movement
Coverage
does not apply to any natural or man-made earth movement. This is
regardless of the cause or whether the cause of the earth movement began
at the covered property or if others’ actions caused it at the named insured’s
request or for its benefit.
There are
four exceptions:
c. Flood
The
insurance company does not pay for loss or damage caused by flood or material
that the flood carries or moves. This exclusion applies even if the water is
driven by wind, such as a storm surge. Damage caused by material that mudslide
or mudflow carries or moves is also excluded.
There are two
exceptions:
d. 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.
e.
Ordinance or Law
There
is no coverage for any loss or increased construction costs because of
enforcing any government regulation that controls the use, construction, or
repair of any property. This includes demolishing that property and removing
its debris. This exclusion also applies to enforcement that occurs even if the
property has not been damaged and to increased costs incurred due to
complying with the regulation. This includes any construction, demolition, or
debris removal activities.
f. Sewer,
Septic Tank, Sump, or Drain Backup and Water below the Surface
Coverage
does not apply to loss or damage that any of the following causes:
There are two exceptions:
g. 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. Animal
Nesting, Infestation, or Discharge
Loss or
damage caused by or that results from any nesting, infestation, discharge,
or release of waste products or secretions by animals is excluded. The term
animal includes birds, insects, or vermin but is not limited to just these. If
any of these excluded events results in a specified peril occurring, coverage
applies to the loss or damage that specified peril causes.
|
Example: Several bats occupied the water tower at Mercy Hospital.
Their waste products cause metal fatigue. The metal fatigue is not covered.
However, when the tower collapses due to the metal fatigue and damages other
covered water property, the loss to the other property is covered. |
b. Collapse
Coverage
does not apply to loss or damage caused by or that results from
collapse. There are two exceptions.
|
Example: Mercy Hospital believes coverage should apply to the tower's
collapse because it was due to hidden vermin damage. The insurance company
rejects its claim because it discovers documentation proving that Mercy was
well aware of the bat infestation but did not take any action to repair the
known damage. |
c.
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.
There
is one exception. If a covered peril occurs due to any of these, coverage
applies to the loss or damage that covered peril causes.
d.
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.
This
exclusion does not apply to covered property in a carrier for hire’s custody.
Coverage
for this exposure should be purchased using a commercial crime
coverage form.
Related Article: ISO Commercial Crime
Coverage Forms and Policies Analysis
e. Defects, Errors, and Omissions
This
exclusion applies regardless of where the error, omission, act, or
defect originated and regardless of if being performed directly by
the named insured or by others doing so based on the named insured’s request or
for its benefit.
The
insurance company does not pay for loss or damage caused by, that results from,
or that consists of the following:
Note: Under this item, the
coverage form states that any act, error, or omission in giving of improper
instruction is also excluded, but the wording is unclear as to intent.
There
is also no coverage for loss to business personal property that
defects or deficiencies in specifications, designs, workmanship,
materials, or inherent or latent defects cause.
There
is one exception. If an error, omission, act, or defect results in a covered
peril, coverage applies to the loss or damage from that covered peril.
f.
Electrical Currents
Loss caused by electrical arcing or
currents is excluded unless the electrical is from lightning.
There is one exception. When excluded arcing or currents result in a fire, any
loss or damage from that fire is covered.
Another
exception is that if power or other utility service is
interrupted and a covered peril results in causing loss or damage, that
resulting loss or damage is covered.
g.
Increased Hazard
When
loss or damage occurs because the hazard is significantly increased, this is
not covered. This applies only if the named insured was aware of the increase
or had control over it.
h.
Loss of Use and Consequential Loss
Loss
or damage caused by or that results from loss of market, delay, loss
of use, or any kind of consequential loss or damage is excluded.
i. Mechanical Breakdown
Loss
or damage caused by or that results from a mechanical
breakdown or moving parts of machinery of machinery bursting or
rupturing because of centrifugal force is excluded. However, if any of
these results in a specified peril occurring, coverage applies to the loss or
damage for that specified peril causes.
j.
Neglect
Coverage
does not apply to loss or damage due to the named insured neglecting to use all
reasonable measures to save covered property at the time of loss
and afterward. There is also no coverage for loss caused by the named
insured neglecting to use all reasonable measures to keep covered property from being
endangered by a covered peril.
Note: It is always important to
consider what the word “reasonable” means.
k. 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:
l. Rain, Snow, Ice, or Sleet
Loss or damage that rain, snow,
ice, or sleet causes to property in the open is excluded. There are two
exceptions:
m. Settling,
Cracking, Shrinking, Bulging, or Expanding
Loss
or damage to pavements, footings, foundations, walls, ceilings, or
roofs is not covered if it is caused by or results from settling,
cracking, shrinking, bulging, or expanding. The one exception is that if a
specified peril occurs, the loss or damage for that specified peril causes is
covered.
n.
Smog
Loss
or damage caused by or is the result of smog is excluded. The one
exception is that if smog causes a specified peril to occur, the loss or damage
for that specified peril causes is covered.
o.
Smoke, Vapor, or Gas
Smoke,
vapor or gas caused loss or damage is not covered but only if they come from
industrial operations or agricultural smudging.
p. Steam
Boiler Explosion
Loss
or damage caused by the explosions of steam boilers, pipes, turbines, or
engines is not covered if they are owned, leased or operated by the
named insured or under its control.
There are two exceptions.
q. Temperature/Humidity
Loss
or damage to covered property caused by dryness, dampness, humidity, changes
in, or extremes of temperature is excluded. If any of these results
in a specified peril occurring, the loss or damage it causes is covered.
r. Voluntary
Parting
There
is no coverage for loss or damage to covered property voluntarily given to
others, even if the surrender was due to a fraudulent scheme, trick, or false
pretense.
s. Wear And
Tear
Loss
or damage caused by wear, tear, marring, or scratching is excluded.
Additional Property Not Covered or Subject to Limitations
1. Boilers
Loss to steam
equipment such as engines, boilers, turbines, or pipes is not
covered if caused by any condition or occurrence inside them. There is an
exception that loss to such equipment is covered if an explosion of
gas or fuel in a firebox, flue, or combustion chamber causes the loss.
Hot
water boilers of heaters are not covered for any occurrence that is
not the result of an explosion. Examples of such an occurrence are rupturing,
bursting, or cracking.
2.
Glassware/Fragile Articles
The
breakage of glassware, porcelains, and other fragile articles is
excluded unless the loss is caused by or results from a specified peril.
The one exception is for loss that is part of covered property;
it is not subject to this exclusion.
3.
Missing Property
The unexplained or mysterious
disappearance of covered property is excluded when there is
no physical evidence to suggest what happened to it, and the only proof that a
loss occurred is based on an audit or physical inventory. This
exclusion does not apply to covered property in a carrier for hire’s custody.
4.
Unauthorized or Fraudulent Transfer
When covered property is transferred or delivered from
a described facility to a place or person outside a described facility, there
is no coverage when a loss occurs because it was based on fraudulent or
unauthorized instructions. This is absolute and includes instructions
transmitted by an owned or non-owned computer or by any other mode of
telecommunications transmission.
1. Collapse
The insurance company covers direct physical loss or damage
that involves collapse as follows:
a. Coverage applies to collapse of
covered property (or any part of it) if one or more of the following causes the
collapse:
· Specified
perils as defined within this coverage form
· Hidden
decay. This applies only if the insured was unaware of the hidden decay
before the collapse.
· Hidden
insect or vermin damage. This applies only if the insured was unaware of
the hidden insect or vermin damage before the collapse.
· Weight
of personal property or people
· Weight
of water that accumulates on roofs
· Defective
construction material or construction methods. This applies only if the
collapse occurs while the building is being built, remodeled, or
renovated.
· Defective
construction material or construction methods. This applies only if the
collapse occurs after a building has been built or remodeled and is
caused by one of the first five causes of collapse listed above even
though defective methods or materials may have contributed to the collapse.
|
Example A transmitting tower collapses. The
investigation reveals that a recent renovation was poorly done and resulted in
a hole being created that permitted decay to set in. The decay in
the hole caused the collapse. Even though the hole was due to defective
methods, the collapse is covered because it was due to the hidden
decay. |
b. This
section defines collapse as it applies in this coverage form. It is whenever
covered property (or any part of it) suddenly and unexpectedly caves in or
falls in. The result of such an event must be that the property (or the part of
it that collapsed) cannot function or operate as intended.
c. None of the following is
collapse:
2.
Tearing Out and Replacing
When the insurance company pays for a loss to infrastructure
property caused by leaking water, other liquids, molten material, or
powder, it also pays for any cost incurred to tear out undamaged covered
property to find the cause of the leak. In addition to paying for repairing the
torn-out covered property, the insurance company will also pay to repair the
damage to the appliance or system so that it no longer leaks.
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 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 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: 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 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 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 and perform all acts this coverage form requires.
1.
Replacement Cost
The value of covered lost or damaged property is
based on the cost to replace it without a deduction for depreciation. It
is limited to the cost to repair it with similar property, on the same site,
and for the same purpose, but not for more than the named insured
spends to repair or replace it.
Note: This
does not mean the property must be rebuilt on the same premises. It
only means that if the property is rebuilt elsewhere, the insurance company
does not pay more than it would have paid to rebuild at the old premises.
This valuation does not apply until the named insured
actually repairs or replaces the damaged or destroyed property. A claim can
be made for actual cash value before the property is repaired or replaced.
A claim for replacement cost valuation can be made later if the named
insured informs the insurance company of its intent to do so within 180 days
after the date of loss.
Replacement cost does not apply to items
3. and 4. below.
2. Actual Cash Value
Covered
property’s value is based on its actual cash value at the time of
loss when there is an entry for Actual Cash Value on the schedule of
coverages. Actual cash value includes a deduction for depreciation.
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.
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.
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 other items in this section, the insurance
company pays the least of the following:
4.
Catastrophe Limit
The most the insurance company pays in a single occurrence
is the Catastrophe Limit on the schedule of coverages. This is regardless of
the number of structures, equipment, described facilities, buildings (if this
coverage form insures buildings), or any combination of these coupled
with coverage that Coverage Extensions, Supplemental Coverages, or Other
Coverages provides.
Note: It
is very important to update the catastrophe limit when structures are added,
values updated, or new premises added.
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
There may be other coverage 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.
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 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 it receives a properly prepared proof of loss, and the amount of loss is
established. The amount of loss is determined by 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
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.
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.
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 applies only 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.
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.
11. Territorial Limits
Covered property must be located in the
United States, its territories and possessions, Canada, or Puerto
Rico for coverage to apply.
Certain terms within the policy are subject to unique definitions
within this section. These terms may broaden or restrict coverage, so it is
very important to review this when evaluating coverage. Thirteen terms are defined:
1. Business
The
named insured’s usual service or business operations that are related to its
infrastructure services. Only such operations occurring on the described
facility are considered business.
2. Earth Movement
This is a broad and expansive definition because of the nature of
the property this coverage form insures. It means all of the following:
Movement of the ground, sediments, soil, strata, or substrates
caused by an act of nature or by a man-made event. All of the
following are considered earth movement, but the term is not limited
to only these:
Movement of the ground, sediments, soil, strata, or
substrates caused by any act, error, or omission. All of the
following are considered earth movement, but the term is not limited
to only these:
3. Facility
The
premises or location that infrastructure property uses to provide private or
public services.
4. Flood
A general but temporary condition where
normally dry land becomes at least partially inundated.
The overflow can be the result of natural or artificial
causes that could be by an animal, human, or natural forces.
|
Example: The wiring in a transmitter is destroyed because water unexpectedly
flowed into and accumulated in it. The water accumulated because a family of
beavers built a dam that blocked the nearby creek. This is
considered a flood even though the proximate cause was the beavers
building the dam. |
This cause of the inundation may be due to an overflow of
inland or tidal waters, waves, tidal waves, or tsunamis. It may also be due
to spray from these that may be wind-driven or not.
Surface water runoff or unusually rapid
accumulation is also flood, regardless of the source of the water.
Mudslide or mudflow is
considered flood only when the cause is either surface water runoff or
unusually rapid accumulation or waves or because water exceeds the cyclical
levels that would be expected.
5.
Infrastructure property
This
is the equipment and physical structures of an interrelated system that provides
private or public service. Some examples of such services are water supplies,
roads, telecommunications, and electrical grids, but this is not limited to
just these.
It
does not include buildings that cover or house infrastructure property or
buildings used to support infrastructure property’s 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. Restoration period
This
is the length of time the named insured should reasonably need to resume
operations and restore its business to a level of service similar to the level
that existed before the loss occurred. It begins on the date of physical loss
or damage by a covered peril to property at a described facility. It ends on
the date that the property should be repaired, replaced, or rebuilt or the
date that business resumes at a new permanent facility, whichever is first. The
policy’s expiration date does not limit this time period.
This
term also means the increased period of time needed to comply with
any law, ordinance, or decree in force at the time of loss that regulates any
property’s construction, use, or repair or that requires demolishing all or any
part of covered property that a covered peril damaged. However,
there is no coverage for the costs associated with enforcing any law,
ordinance, or decree that requires that the named insured or any other party
address the effects of pollutants in any way.
This
part of the definition applies to only IM 7322– Infrastructure Property Income
Coverage Part Coverage Extensions 2. Off-Premises Utility Service Interruption
if it is attached. In this application, the restoration period is also the
reasonable length of time the named insured should need to resume its business.
It begins on the date that a covered peril causes direct physical loss or
damage to property not at a described facility owned by a
utility, landlord, or another utility supplier. It ends on the date that
the property should be repaired, replaced, or rebuilt. The policy’s
expiration date does not limit this time period.
9. Schedule of coverages
Any page labeled as such that contains coverage
information. Declarations and supplemental declarations are included.
10. Sinkhole collapse
A sinkhole is created when an
underground opening is created by water acting on limestone or some other rock
formation. The earth’s surface suddenly settling or collapsing into that
sinkhole is sinkhole collapse. Sinkhole collapse does not include either the
land’s value or the cost to fill sinkholes.
11. 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.
12. Terms
All policy provisions, limitations, exclusions, conditions,
and definitions that apply to this coverage.
13. 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 covered property unless there is direct physical damage
to the property.
AAIS has developed the following endorsements and schedules
for use with the Infrastructure Property Coverage Form.
IM 7322–Infrastructure Property–Income Coverage Part
This endorsement is actually a coverage part. It is
used to provide income (Earnings and Extra Expense) coverage.
IM
7323–Infrastructure Building Endorsement
This endorsement is used to insure the
building(s) that covers or houses infrastructure property. It
also insures buildings and personal property the named insured uses
to support infrastructure property’s operations.
IM
7324–Infrastructure Building Schedule
This schedule is used with IM 7323–Infrastructure Building
Endorsement. It has spaces to enter the facility number, the building coverage
that applies, and the limits for that building coverage.
IM
7325–Earthquake and Flood Coverage Endorsement–Infrastructure Property Coverage
This endorsement is used to add earthquake and/or flood
coverage.
IM
7326–Earthquake and Flood Schedule–Infrastructure Property Coverage
This schedule is used with IM 7325–Earthquake and Flood Coverage
Endorsement–Infrastructure Property Coverage. It has spaces to enter the
coverage(s) that apply, the limits for each coverage, and the
deductible amount.
IM
7327–Sewer Backup Coverage–Infrastructure Property Coverage
This endorsement covers loss or damage caused by or that results from
water or material that water carries that backs up, overflows from, or is
discharged through a drain, sewer, sump, or septic pump. It also covers loss
or damage caused by or results from water or material that water carries
beneath the ground’s surface.
UNDERWRITING CONSIDERATIONS
Introduction
The term infrastructure usually means the basic structures
and equipment that are needed for the economy as a whole to function
properly. Public works systems of governmental bodies, entities, or units and
the resources required, the system’s basic framework or underlying
foundation are considered infrastructure. There are five basic types
of infrastructure.
Transportation Infrastructure
Transportation infrastructure
involves instrumentalities of transportation such as the following:
Energy Infrastructure
Energy
infrastructure involves several items that are familiar to nearly everyone:
Water Infrastructure
Water infrastructure
includes some obvious and some more subtle items:
Communications Infrastructure
Communications
infrastructure, like water infrastructure, has some obvious items and some that
are less obvious. Many of these have transmission and receiver towers, above
ground and underground transmission lines, and structures, machinery, and
equipment used to manage their processes.
Solid Waste Management Infrastructure
Solid waste
management infrastructure basically disposes of what society throws
away.
Earth measurement and monitoring infrastructure
This infrastructure
is extremely specialized and deserves mention, even though it is
not like the other five infrastructures outlined above.
Location Based Underwriting
There is obviously no
one-size-fits-all, one and done, or silver bullet underwriting approach because
of the large number of types of property that infrastructure
includes. The best approach is to apply the underwriting techniques that fit
the particular type of property. Many of these exposures are at fixed locations,
and the Construction, Occupancy, Protection,
and Exposure (COPE) approach is an appropriate
starting point for them.
Related Article: Commercial Property Underwriting Considerations
Another
approach is to apply the underwriting techniques to specific property types,
such as radio and television transmission towers, electronic data processing
equipment, and irrigation equipment.
Management
Infrastructure is generally a
federal, state, county, or municipal responsibility. They all have the right to
tax their citizens to pay for maintenance; often, they are cash-strapped and
unable to keep up with current plant failures, let alone perform long-term
maintenance goals. It is important to know the funding source for the property
and the success of tax referendums or bond issues to pay for the
infrastructure.
Public/Provide Partnerships.
Some public infrastructure
projects are becoming public-private partnerships with long-term
goals and long-term contracts. These should be carefully
reviewed because of obligations of the public and the private side of the
contract. The private entities background and history of providing the services
required in the contract should be of particular interest. If the public entity
owns the structures and the private entity is responsible for the operations
and maintenance, it is important to have appropriate oversight by the public
entity.