AAIS Jewelry Dealers Coverage

AAIS JEWELRY DEALERS COVERAGE ANALYSIS

(August 2024)

 

Introduction

Eligibility

Policy Construction

IM 1205–Schedule of Coverages–Jewelry Dealers

IM 1200–Jewelry Dealers Coverage Analysis

   Agreement

   Definitions

   Property Covered

   Property Not Covered

   Coverage Extensions

   Optional Coverage

   Perils Covered

   Other Coverages–Collapse

   Perils Excluded

   What Must Be Done in Case of Loss

   Valuation

   How Much We Pay

   Loss Payment

   Other Conditions

   Additional Coverage Limitation

IM 1201–Jewelry Dealers–Named Perils Coverage Analysis

Endorsements

Underwriting Considerations

INTRODUCTION

The American Association of Insurance Services (AAIS) Jewelry Dealers Coverage insures jewelry dealers' stock of diamonds, jewels, jewelry, watches, watch movements, and other precious and semi-precious stones. It also covers semi-precious and precious metals and alloys, such as gold, silver, and platinum. In addition, coverage applies to similar or related merchandise and other inventory held for sale, usual to the jewelers’ business.

This coverage form is limited to businesses with less than $250,000 in stock values.

ELIGIBILITY

Entities with a stock of $250,000 or less that sell, manufacture, or pawn jewelry, silverware, or watches are eligible. Two or more entities can be covered under the same coverage form but only when a single person or entity owns a majority of each involved entity.

The following risks are not eligible:

Businesses with stock more than $250,000 or that are ineligible for other reasons should consult the following articles that analyze non-filed policies that have the flexibility to provide coverage for their higher risk exposures.

Related Articles:

Jewelers Block Policy

ISO Jewelers Block Coverage Form

POLICY CONSTRUCTION

AAIS Jewelry Dealers Coverage requires at least these five forms:

Related Article: CL 0100 AAIS Commercial Lines Common Policy Conditions

IM 1205–SCHEDULE OF COVERAGES–JEWELRY DEALERS

This Schedule of Coverages can be used with either IM 1200–Jewelry Dealers Coverage or IM 1201–Jewelry Dealers–Named Perils Coverage.

Coverage Form

The coverage form that applies must be selected by placing a checkmark next to either IM 1200–Jewelry Dealers Coverage Form or IM 1201–Jewelry Dealers Named Perils Coverage.

Schedule of Locations

The location number and its description are entered along with its corresponding limit of insurance in the spaces provided.

Off Premises

Property that is described below is covered only when there is a limit for it on the schedule of coverages:

Property that is in transit is covered based on the type of transport. Transit by the following types of transport is covered subject to the limit of insurance entered. If no limit is entered, there is no coverage for that type of transport:

Property at a location not described above or in transit by any other means than described above is covered, but only if there is a limit in the space provided.

Deductible

The deductible amount the named insured retains for each covered loss must be entered in the space provided.

Optional Coverages

Four optional coverages are available. Coverage applies when selected in the spaces provided:

This section excludes certain types of property by entering a checkmark in the Property Excluded box and then describing the property to be excluded.

Note: This must be used very carefully, and the description should be precise. The value of the property is removed from the limit of insurance, so it will impact the coinsurance calculation as well as premium determination. The problems tend to arise when an actual loss to excluded property occurs and memories fade as to what was agreed upon. Precise wording and signed documentation are important to prevent coverage disputes and agency errors and omissions claims.

Coverage applies for damage to or theft of safes if a checkmark and a limit are entered in the spaces provided.

The peak season limit to be entered is the sum of the schedule of location limit above PLUS the peak season increase. This limit replaces the schedule of location limit during the peak season time period.

The inclusive dates during which the coverage applies and the location number where coverage applies is entered in the spaces provided.

Note: The dates are very important because the peak season limit applies only during the scheduled dates. Once the dates are over, the schedule of location limit for the entered location applies.

Coverage for property in show windows is provided only when limits are entered for the coverage. Limits are flexible. Limits vary based on the premises being open or closed and based on the windows being protected or unprotected. Limits are entered for the following:

Optional Endorsements

The following eight optional endorsements are available:

Coverage applies when the appropriate entries are made in the spaces provided. These endorsements are examined under Endorsements and Schedules.

Rates and Premium

Jewelry Dealers Coverage is usually written on a non-reporting basis. This section has spaces to enter the annual premium and the non-reporting rate per $100 that applies.

IM 1200–JEWELRY DEALERS COVERAGE

This analysis is of the 01 05 edition.

Agreement

This section states that the insurance company provides the coverage described in return for the named insured paying the required premium. This agreement is subject to all the coverage form’s terms, the schedule of coverages, and any additional conditions that apply. Endorsements or additional schedules identified on the schedule of coverages also apply.

A statement that certain words and phrases identified in bold print in the coverage form are defined in the Definitions section immediately following this Agreement.

Note: There is no clearly marked space on the schedule of coverages to list endorsements or additional schedules that apply at inception.

Definitions

Defined words are used throughout the coverage form. When these terms are used in the coverage form, the meaning provided in this section must be applied. Eleven terms are defined:

1. You and your

The parties that are specifically named on the declarations as insureds.

2. We, us, and our

The insurance company that is providing the coverage.

3. Earth movement

Movement of the earth’s surface. It is also a vibration of the earth’s surface. Examples of such movement and vibration are earthquake, landslide, mudflow, mudslide, mine subsidence, and other types of earth sinking, rising, or shifting. The only exception for sinkhole collapse.

4. Flood

Flood is flood, but it is also surface water, waves, tidal water, and other overflow of bodies of water. It may or may not be wind driven. Spray from any of these is also flood, regardless if it is driven by wind or not.

5. Limit

The amount of coverage that applies.

Note: There is no reference as to what it applies; it just applies.

6. 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.

7. Proposal

The application the named insured signed and dated becomes a part of the policy. The statements the named insured made in that proposal are warranted to be true.

Note: The definition is an unusual spot to place a warranty. It is saying that if the named insured’s statements are not true this policy can be voided.

8. Schedule of coverages

Any page labeled as such that contains coverage information, including declarations or supplemental declarations.

9. 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. Sinkhole collapse does not include the land’s value or the cost to fill sinkholes.

10. Specified perils

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

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

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

11. Terms

These are all provisions, limitations, exclusions, conditions, and definitions that apply to this coverage.

12. Volcanic action

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

Jewelry144

Examples of a jewelry dealer's merchandise held for sale

Property Covered

The insurance company covers property listed and described unless it is excluded or subject to limitations.

1. Premises

a. Coverage

The named insured’s stock being held to sell and similar property that belongs to others but is in the named insured’s care, custody, and control is covered for direct physical loss or damage caused by a covered peril. The property of others must have been delivered to or entrusted to the named insured.

Watches

Earrings1

b. Coverage Limitation

The only inventory covered is that of jewels, jewelry, precious and semi-precious stones, precious metals and alloys along with other inventory that is usual and incidental to the business of a jewelry dealer. All must be held for sale and be at locations described on the schedule of coverages.

The amount of coverage for property of others is limited to either of the following circumstances:

Note: The policy does not state whether the lesser of these two will be paid or the greater of the two. It just lists both options.

2. Off Premises

a. Coverage

Direct physical loss that a covered peril causes to off-premises owned stock and similar property of others in the named insured's care, custody, or control away is covered. This coverage applies only if there is a limit entered on the schedule of coverages for property off premises.

b. Coverage Limitation

This off-premises coverage is limited to when the named insured's stock and/or similar property of others is at one of the following:

The amount of coverage provided depends on the limit on the schedule of coverages for the above.

Property Not Covered

There is no coverage for the following property:

1. Contraband

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

2. Displayed in Show Windows or Showcases

100_8233

Example: Jeremy’s Jewels is located on the second floor of the Mercantile Plaza. Mercantile Plaza has four first floor display windows, and Jeremy’s Jewels placed inventory in one of those windows. A tornado rips through town, and the windows were damaged. Some of Jeremy’s inventory was lost. The description of Jeremy’s Jewels on the schedule of coverages listed only its second-floor premises. Because the window was not on that premises, the inventory lost from the show window is not covered.

Note: Property in show windows and showcases at the named insured’s scheduled premises is covered. Only such property at other premises is excluded.

3. Property at Exhibition

Property at exhibitions that public authorities or trade associations promote or financially assist is not covered.

4. Property Excluded

The Optional Coverages section of the schedule of coverages contains an item called Property Excluded. When the box for that item is checked, the property described in that item is excluded.

5. Property Sent C.O.D. (Cash on Delivery)

When the recipient of a C.O.D. sent parcel is permitted to open and examine the property before accepting its delivery, any loss or damage to that property is not covered.

6. Sold Property

Property that has been sold is no longer covered once it has left either the named insured's custody or the custody of a carrier for hire delivering that property on the named insured's behalf. Sold property includes property that has been sold on an installment sales plan.

7. Watch Dealers Warehouse and Storage Property

Watch dealers property in any type of storage facility or warehouse is not covered unless that facility or warehouse is described on the schedule of coverages.

8. Worn Property

Property that is being worn by named insured or others is not covered. The one exception is for watches being worn as part of their being serviced.

Note: While Property Covered appears to be broad and comprehensive, a careful review of Property Not Covered reveals several restrictions, limitations, and details that the insurance agent must review carefully and discuss with the named insured. In most cases, the named insured is the only party that knows the details of its business well enough to address these issues and communicate them effectively.

Coverage Extensions

There is one coverage extension. 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.

Theft Damage to Building

1. Coverage

Coverage applies to direct physical loss or damage that thieves cause to the part of the building the named insured occupies. Thief-caused damage to equipment used to maintain or service the building is also covered.

2. Coverage Condition

This coverage applies only if the named insured owns the building or if it is legally liable to the building owner for this type of damage. The covered property must be in a premises listed on the schedule of coverages.

3. We Do Not Cover

Damage or loss that is caused by fire is not covered. Damage to glass, glass lettering, or glass decorations is also not covered.

4. Coverage Limitation

This is not additional insurance. Any payment is part of the limit for covered property.

JewelryStore

Example: Martin was a patient thief who carefully studied the patterns of his intended victims. He noticed that Veronica, the main clerk at Pleasant Times Jewelers, would lock the front door and sneak out of the building to take a smoke break whenever her boss would leave her alone on the premises. As he watched the owner walk out the front, Martin watched Veronica quickly lock the front door. He waited one minute and then smashed open the door, grabbed all the jewelry he could stuff in his backpack and was out within two minutes. Veronica was quite surprised when she returned to find the destruction. The jewelry loss was covered, as was the damage to the front door.

Optional Coverages

There are three optional coverages. They apply only when the appropriate entries are made on the schedule of coverages.

1. Damage to or Theft of Safes

Loss or damage to the safes or vaults that are described in Part 15 of IM 1211–Jewelry Dealers Proposal are covered but only if the loss or damage is due to any of the following perils:

Coverage applies to only safes or vaults at locations listed on the schedule of coverages.

The most paid for a loss is the limit on the schedule of coverages for this optional coverage.

2. Peak Season

This coverage applies only when a location number, limit, and period of coverage are entered on the schedule of coverages for peak season. The limit entered replaces the regular limit for the described premises but it applies only during the inclusive dates entered on the schedule of coverages.

3. Show Window or Showcase Theft

Note: This coverage is needed because 2. Secondary Exclusions m. Show Window or Showcase Theft specifically excludes theft coverage from store windows or showcases if the theft occurs because the window is smashed or cut to gain access to the merchandise.

Theft losses that occur because a show window or outside showcase is cut or smashed are covered when there is a limit for Show Windows on the schedule of coverages. This coverage is limited to only those Show Windows at the location listed in the optional coverage. The most paid for loss is the applicable limit displayed on the schedule of coverages.

The Show Window or Showcase Theft exclusion under Perils Excluded does not apply to any location listed on the schedule of coverages for this coverage.

Example: Martin is still interested in Pleasant Times Jewelers. He likes the display in their windows and notices that the security cameras do not cover a corner of one of the windows. He watches and discovers a quiet time in the morning when he can work unobserved. Within 10 minutes, he has cut a hole in the glass and removed the necklace that had caught his eye. Veronica does not notice the necklace is gone until she is removing the display items that evening. This loss is covered because Pleasant Time Jewelers had purchased Show Windows Coverage.  

Perils Covered

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

Other Coverages–Collapse

1. Coverage

Loss to covered property when caused by a direct physical loss that involves collapse of a building or structure or any part of a building or structure containing covered property.

2. Covered Perils

The only collapse coverage provided is collapse caused by one or more of the following:

3. Collapse Means

Collapse is the sudden and unexpected falling in or caving in of a building or structure (or any part of it) that prevents the building from being occupied for its intended purpose.

4. Collapse Does Not Mean

The following buildings and structures are not considered to be in a state of collapse:

5. Coverage Limitation

This coverage does not provide any increase in the limit for the covered property.

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 resulting 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 a civil authority destroying property as a means of controlling a fire causes the loss or damage. This exception applies only if the fire is the result of a covered peril.

b. Earth Movement or Volcanic Eruption

Earth movement and volcanic eruption, explosion or effusion are not covered except for the following five exceptions:

Note: This means that coverage applies to covered property in transit and at unlisted premises.

c. Flood

The insurance company does not pay for loss or damage caused by flood.

There are two exceptions:

Note: This means coverage applies to covered property in transit and at unlisted premises.

d. Nuclear Hazard

The insurance company does not insure against loss or damage from any nuclear reaction, radiation, or contamination, whether the nuclear incident was controlled or not or was caused by any means. Any loss caused by the nuclear hazard is not treated as a loss caused by fire, explosion, or smoke. However, coverage applies to direct loss or damage caused by fire that results from the nuclear hazard.

e. Sewer Backup and Water below the Surface

Coverage does not apply to loss or damage that any of the following causes:

There are two exceptions:

Note: This means that coverage applies to covered property in transit and at unlisted premises.

f. 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 the exception for resulting fire under the nuclear hazard is not covered when it is the result of war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or that results 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. Acts or Decisions

There is no coverage for loss caused by or resulting from any acts or decisions by any person, organization, or government entity. This also includes failing to act or decide.

This exclusion has an exception. The act or decision, or the failure to act or decide, may result in a covered peril. In that case, the loss or damage that peril causes is covered.

b. Animal Nesting, Infestation, or Discharge

Coverage does not apply to loss or damage when it is due to nesting, infestation, discharge, or release of waste products or secretions by animals. The term animal includes birds, insects, and vermin but is not limited to only these.

This exclusion has an exception. If any of these excluded events results in a covered peril, the loss or damage that peril causes is covered.

c. Breakage of Fragile Items

Loss or damage due to the breaking of fragile items is excluded.

This exclusion has an exception. Breakage that is the result of a specified peril, theft, or attempted theft is covered.

d. Collapse

Loss caused by collapse is excluded.

This exclusion has two exceptions.

e. Contamination or Deterioration

Loss or damage 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. This exclusion has an exception. When contamination or deterioration results in a covered peril, the loss or damage that covered peril causes is covered.

f. Criminal, Fraudulent, Dishonest, or Illegal Acts

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

The following exceptions apply to this exclusion.

o    The United States Postal Service (USPS)

o    Armored car companies

o    Privately paid delivery services

o    Common or contract carriers for hire

o    Others hired by the named insured as helpers but who are not on the named insured's payroll

 

Example: Pleasant Times Jewelers hires a costumed Easter Bunny as part of a promotional spring event. He does a wonderful job with the families that attend. When Veronica is putting away the displays that evening, she notices certain pieces are missing. She is dismayed when watching the surveillance tapes to see the hired Bunny removing the items. Yes, Martin has struck again. Because the Easter Bunny had been hired and not employed, the loss is covered.

Note: This exclusion differs from the same exclusion in all other AAIS filed inland marine coverage forms because of the exceptions to the exclusion listed. They are relevant to the way jewelers run their businesses and because of the way they transact business.

g. Fault, Defect, or Error

Loss or damage due to errors, faults or defects in planning, zoning, surveying, site plans, grading, compacting, land use, or development is not covered. Loss or damage due to property related design, blueprint, specification, workmanship, building, maintaining, installing, renovating, remodeling, or repairing errors, faults or defects are also excluded.

An important provision is that this exclusion applies both on and away from the designated premises and applies regardless of negligence.

h. Inadequate or Defective Packing

The insurance company does not pay for loss or damage due to inadequate, inferior, or defective packing.

Example: Veronica’s new assistant, Chaz, was instructed to get a fragile gift item to an important client as soon as possible. Chaz called a friend who agreed to deliver the item. Chaz knew the customer lived close, so he skimped on the packing material. Chaz’s friend arrived, picked up the parcel and, wanting to impress Veronica with his responsiveness, drove at a high rate of speed. He missed a turn and hit a tree. The package went flying and because of the loose packing, the item was destroyed. All coverage for the item is denied, Chaz is fired, and his friend never does business with Pleasant Times again.

i. Loss of Use

There is no coverage for a loss that is the result of delay, loss of use, or loss of market.

j. 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 has an exception. It does not apply to covered property in the custody of carriers for hire.

k. 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 two exceptions:

l. Process to Repair, Adjust, Service, or Maintain

When loss or damage is the result of a repair to, adjustment of, service of, or maintenance of covered property is excluded.

This exclusion has an exception. If any of the above actions result in a fire or explosion, the loss or damage from the fire or explosion is covered.

m. Show Window or Showcase Theft

Loss or damage caused by actual or attempted theft during which a show window or outside showcase at a location listed on the schedule of coverages is smashed or cut is excluded.

Note: This is a “smash and grab” exclusion. There is no coverage for property taken from a show window or showcase at a scheduled location after it is smashed or cut.

The only exception is when Optional Coverages 3. Showcase Window or Showcase Theft is purchased to provide this coverage.

n. Shortage from a Package

Coverage does not apply when a package of property shipped to a consignee is received and appears to be in good condition and sealed but does not contain all the property alleged to have been sent.

Example: Veronica’s favorite customer moved to California but continues to order from Pleasant Times. She recently ordered a necklace, two rings, two pairs of earrings, and a bracelet. She contacted Veronica to tell her that everything was in the package except the bracelet. The packaging was in good condition, and the seals were not broken. There is no coverage for the missing bracelet.

o. Theft from Vehicle

There is no coverage for loss due to theft from an unattended vehicle at the time of the loss. Unattended means that a person with the sole duty of attending the vehicle, the named insured or the named insured’s employee is not on or in the vehicle. This exclusion has an exception. It does not apply to property in the custody of carriers for hire or the United States Postal Service.

Example: Veronica is making multiple deliveries and takes her son, Josh, to stay in the car while she makes the deliveries. Josh drives and knows that he is not allowed to leave the vehicle for any reason because of the value of the items in the vehicle:

Scenario 1: Josh notices he is low on gas, so while waiting for his mother, he stops at a nearby gas station. He gets out of the vehicle to fill the car, and while he is buying the gas, someone slips in and removes the items. There is no coverage because Josh was not on or in the vehicle at the time of the theft.

Scenario 2: John is waiting for his mother when one person smashes Josh’s window and grabs him as another person grabs the packages. This loss is covered because Josh was attending the vehicle.

Related Court Case: Car-Jacked Jewelry Not Covered

p. Unauthorized Instructions

Coverage does not apply if a loss occurs because the property was given to another person or sent to another place based on unauthorized instructions.

q. Voluntary Parting

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

r. Weather

Loss or damage due to weather conditions is excluded but only when the loss is caused by a weather condition combined with a cause of loss excluded in 1. Primary Exclusion above.

This exclusion has an exception. The weather conditions may result in a covered peril. In that case, the loss that peril causes is covered.

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 to do so if the named insured maintains accurate records to substantiate the costs. Paying these costs is not in addition to the policy limits. There is no coverage for any repairs or emergency measures performed on property not already damaged by a covered peril.

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

3. Proof of Loss

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

4. Examination

Examining the named insured under oath may be required in matters relating 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 everyone 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

Both 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 and to inspect it.

 7. Volunteer Payments

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

 8. Abandonment

The insurance company decides when and if it will take ownership of the named insured’s property. The named insured is, therefore, not permitted to abandon damaged property to the insurance company until the insurance company agrees in writing to accept it.

 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 the covered property is its actual cash value on the date of loss. Actual cash is replacement cost new minus depreciation. This item is subject to the rest of the items in this section.

2. Value of Property

The value of covered property does not include a value attributed to an item because of its antique, historic, or sentimental significance.

3. Pair or Set

The value of a loss that involves damage 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 the value of the whole is greater than the value of individual parts but the remaining parts still have value as separates.

4. Loss to Parts

The value of a loss that involves damage 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.

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.

2. Deductible

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

3. Earthquake Period

All loss or damage from earthquakes, tremors, or volcanic eruptions that occur within a 168-consecutive hour period is considered a single loss. This time period is not limited by the policy’s expiration date.

4. Loss Settlement Terms

The insurance company pays the least of the following, subject to items 1., 2., 3., 5., and 6. in this section:

·         The lowest figure for the property that is recorded in the named insured's stock book, stock papers, inventory records, or other records

·         Unpaid parts of amounts the named insured loaned on pledged property. The legal interest earned as of the date of loss is part of this amount.

·         The limit that applies to the covered property

5. Insurance under More Than One Coverage

Two or more coverages in the coverage form may cover the same loss. In that case, the insurance company does not pay more than the actual value of the 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 its limit of insurance bears to the limits of insurance on 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 item 5. 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 it can be collected 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 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 of 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. The only exception is when a loss payee is on the policy.

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 either through 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 to either the named insured 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.

Other Conditions

1. Appraisal

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

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

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

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

 2. Benefit to Others

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

3. Conformity with Statute

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

4. Estates

a. Your Death

This applies only when the named insured is an individual. When a named insured dies, the person who has custody of the named insured's property is an insured for that property until a qualified legal representative is appointed. Once the named insured’s legal representative is named, that person has custody but only for the property covered under this policy.

b. Policy Period is not Extended

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

5. Liberalization

A revision of this coverage form or an applicable endorsement that takes effect during the policy period or within six months of when this coverage takes effect may broaden coverage without an additional premium charge. In that case, the broadened coverage applies to this coverage.

6. Misrepresentation, Concealment, or Fraud

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

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

7. Policy Period

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

8. Recoveries

Payment of the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply if the insurance company pays a loss and the lost or damaged property is 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 incurs 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 other limitation, any recovery is prorated between the named insured and the insurance company based on the company's respective interest in the loss.

9. Restoration of Limits

Payment of a claim does not reduce the limit available for future claims.

10. Subrogation

The insurance company acquires the named insured's rights of recovery from third parties after it pays a loss. The named insured must help the company secure those rights. The insurance company is not obligated to pay the loss if the named insured hinders or impairs its rights of subrogation.

The named insured has the right to agree in writing to waive recovery rights from any party if it does so before a loss occurs.

11. Suit against Us

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

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

12. Territorial Limits

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

13. Business Records

The named insured is required to maintain business records throughout the policy period and keep them no less than three years after the policy expires. An itemized inventory of stock updated annually through a physical inventory is also required.

The business records the named insured is required to maintain must include all the following:

The insurance company has the right to request access to the business records and inventory as often as it chooses, and the named insured is required to comply. However, such requests must be considered reasonable.

Note: This condition is very unusual because it requires the named insured to maintain records in a prescribed way. It is common in all Inland Marine dealer coverage forms but not in commercial property coverage forms.

14. Proposal

The proposal the named insured prepares, and signs is added to and becomes part of this policy.

Note: This means the proposal must be attached to the policy when it is issued and that it is as important as the rest of the policy. It becomes a warranty and must be completed even more carefully than a standard application for coverage.

Additional Coverage Limitation

Premises Protection

The protective devices that are in operation as of the policy effective date are required to remain in proper working order throughout the policy term. Failure to have the device in place in working condition at the named premises results in automatic suspension of coverage at the location. Also, failure to place the device into operation when the business is closed will result in automatic suspension of coverage at the location where the device is not in operation. Coverage is automatically restored when the device is back in working condition or is in operation.

When the risk of loss or damage increases because of a change in the protection at the named insured’s premises, the insurance company does not provide coverage unless the insurance company has been notified of the change and has agreed in writing to the change.

 

Example: An alarm salesperson convinces Veronica that she can have the same protection at a much lower cost by switching to his company.

Scenario 1: Veronica changes protection, and a loss occurs. The insurance company denies coverage because the risk of loss was increased by the change in protection.

Scenario 2: Veronica notifies her insurance agent that she is considering a change in protection and asks for advice. Notice is provided to the insurance company, which advises that it would refuse to provide coverage if the change were made. Veronica notifies the salesperson that she is not interested.

IM 1201–JEWELRY DEALERS–NAMED PERILS COVERAGE ANALYSIS

This coverage form is identical to IM 1200–Jewelry Dealers Coverage except for six sections. This analysis addresses only the six sections that are different.

Definitions

These definitions in IM 1200 are not in IM 1201 because there is no reference to them in the IM 1200:

 

IM 1201 adds these definitions because burglary and robbery coverage is provided instead of theft:

Burglary

This is actual or threatened forceful illegal entry when the premise is closed for business. Visible marks of forced entry into the premises must be present.

Robbery

This is actual or threatened forceful illegal taking of property from a person.

Coverage Extensions

The coverage extension for Theft Damage to Building in IM 1200 is not in IM 1201.

Optional Coverages

The optional coverage for Damage to or Theft of Safes in IM 1200 is not in IM 1201.

Perils Covered

The perils covered in IM 1200 are completely replaced. IM 1201 covers only loss to covered property when it is caused by or that results from the perils of:

 

·         Fire

·         Smoke

·         Civil Commotion

·         Self-propelled missiles

·         Explosion

·         Aircraft

·         Spacecraft

·         Windstorm

·         Hail

·         Sprinkler Leakage

·         Riot

·         Burglary

·         Robbery

·         Objects falling from aircraft, spacecraft, or self-propelled missiles

·         Lightning Strike

·         Vandalism

·         Vehicle physically striking covered property

 

Other Coverages–Collapse

Coverage provided for Other Coverages–Collapse in IM 1200 is not in IM 1201.

Perils Excluded

These excluded perils in IM 1200 are not excluded in IM 1201.

Note: This does not mean that these perils are covered. They are still excluded because they are not included under covered perils.

In addition, the exception in the Weather exclusion in IM 1200 states that if weather conditions result in a covered peril, the insurance company pays the loss caused by or that results from that covered peril is not in IM 1201.

ENDORSEMENTS

AAIS has developed one proposal and eight endorsements to use with Jewelry Dealers Coverage.

IM 1211–Jewelry Dealers Proposal

This is the application for Jewelry Dealers Coverage. The named insured must complete each section and sign it. The Jewelry Dealers Coverage Form and the Jewelry Dealers Proposal are unique in the insurance industry because the proposal is attached to and becomes part of the coverage form. Without it, the policy is void, and there is no coverage. A separate proposal is required for each covered location.

IM 1212–Fire and Lightning Exclusion

This endorsement is used to exclude coverage for the perils of fire and lightning at locations on the schedule of coverages. Exceptions for items in safes or vault can be selected on the schedule of coverages.

Note: This option may be selected because coverage for fire and lightning is purchased under a commercial property coverage form.

IM 1213–Jewelers Security Alliance

This endorsement is used to add a condition that the named insured be a member of this organization for the inclusive dates on the schedule of coverages. A premium reduction is granted when this endorsement is attached.

IM 1215–Money in Safes

This endorsement is used to cover loss of money but only when kept in locked vaults or safes at locations. The coverage is subject to the limits on the schedule of coverages for this endorsement.

IM 1216–Money and Securities Robbery

This endorsement is used to cover loss of money and securities that is the result of robbery at locations and for limits on the schedule of coverages for this endorsement.

IM 1219–Inflation Guard

This endorsement deletes the Loss Settlement Terms under How Much We Pay and replaces them. It automatically increases the limit on covered property on two of the five settlement terms continuously during the policy period. The amount of increase is based on the percentage entered in the space provided on the schedule of coverages for this endorsement.

IM 1220–Pledged Articles in a Safe or Vault

This endorsement is used to exclude coverage for property items that are pledged as security while they are locked in the safe or vault of a bank, trust, or safe deposit company at locations on the schedule of coverages for this endorsement. This property is considered Property Not Covered.

IM 1223–Property Away from Premises Restriction

This endorsement limits the loss to covered property to $5,000 when away from named locations and in the possession of the named insured, a sales representative, a principal or officer, or an employee. However, under the exception to this endorsement on the schedule of coverages names can be added along with a limit of insurance that is specific to the particular individual named.

IM 1263–Personal Property Coverage

This endorsement extends coverage to other personal property that consists of the following:

UNDERWRITING CONSIDERATIONS

Underwriting jewelry and the other exposures this coverage form insures focuses on theft, burglary, and holdup issues. Alarm systems, vaults, and the store’s location must all be considered. Does the named insured remove property from the premises, and what precautions does it take if it does? How are precious stones and metals handled in the store? How are the showcases and show windows locked, and who controls the keys? Showroom windows and smash and grab hazards are always key underwriting considerations.

Underwriting must also evaluate the risk’s physical characteristics and the extent to which the named insured effectively controls and manages the property and exposures involved. Any type of jeweler usually occupies a fixed location, and these locations are subject to the same fixed location exposures to loss as any other business. Jewelry stock is usually made up of several small, valuable objects that can be moved easily and are highly attractive and susceptible to theft or burglary. Other property covered include other types of precious stones and precious metals, whose values are subject to significant fluctuations because of commodities trading in international markets. These factors demand closely evaluating the make-up of each risk’s inventory. Off premises issues to consider involve goods in various forms of transit and in the possession of salespersons.

Location factors to consider include the exposure to losses by fire. This involves evaluating the building construction, all the features and operations of the occupancy, exposing occupancies, and private and public fire protection. Jewelry not on display should be kept in safes and vaults and procedures should be in place to have high-valued merchandise removed in case of a fire. If the risk is equipped with automatic sprinklers, storage and display arrangements should be evaluated, and stock, especially susceptible to water damage, should be located away from it and protected in some other way. Damage from water can be reduced or eliminated by having all storage on shelves or some other way instead of simply being on the floor. Earthquake issues may be present in certain geographical areas.

Burglary is an extremely critical issue, and the premises should always be protected by an excellent quality alarm system that covers all exterior openings and connects to a certified central station alarm facility. Theft and mysterious disappearance are common issues for this class of business. The named insured should conduct background checks on all persons before hiring them. The premises should be equipped with video surveillance equipment. Arrangements should be made, and procedures implemented that address display and storage issues. Jewelry displayed in show windows and showcases should have suitable protection, and merchandise should be removed from them when the premises are closed. The same procedures should apply to property at other locations.

Transit exposures should be addressed using many different modes of transportation, varying the pattern and frequency of trips and keeping values shipped as low as possible. Strict accounting and sign-off procedures should be incorporated, and carriers evaluated to be certain they are experienced, qualified, and suitable for the task.

Salespersons should also vary their routes and schedules to avoid developing a pattern that a would-be perpetrator could capitalize on. Security issues such as traveling by personal vehicle, taxis, or other public vehicles and by foot must be evaluated, appropriate arrangements made, and procedures followed.

Ownership and management issues may be the most important ones of all. The named insured's financial condition dictates the degree of attention to protective devices and procedures the business incorporates into its operations. The named insured's experience in the business and hiring practices are other essential elements to consider and evaluate. Developing and implementing plans, procedures, protocols, and actions to take in an emergency in advance of need are other critical factors. Maintenance and care of the premises and protective devices also affect the overall desirability and success of a jewelry business.