Two terms require
further clarification:
- Falling Objects
This coverage does
not extend to personal property stored outdoors. Additionally, it does not
cover damage to the interiors of buildings or personal property stored inside
buildings unless a falling object first breaches the building's exterior.
- Water Damage
This refers to the
sudden or accidental release or leakage of water or steam. However, it must
directly result from a crack or break in a part of the system or appliance that
contains the water or steam.
Terms
All provisions, limitations, exclusions, conditions, and definitions
relevant to the coverage provided.
Volcanic Action
An airborne volcanic
blast or shock wave, which also includes ash, dust, and particulate matter, as
well as any lava flow. The term does not include the expenses for removing
dust, ash, or particulate matter from the covered property unless
there is direct physical damage to the property.
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Example of an automatic sign |
PROPERTY COVERED
The insurance company
covers property described below unless it is excluded or subject to specific
limitations.
1. Scheduled Signs
a. Coverage
Coverage
applies when the signs listed on the schedule of coverages suffer direct
physical damage.
b. Coverage Limitations
Coverage is only applicable if a limit
is specified for scheduled signs. The sign must be located at the location
listed on the schedule of coverages or be in transit between locations listed
on the schedule of coverages.
2. Unscheduled Signs
a. Coverage
Direct
physical loss to unscheduled signs is covered if it results from a covered
peril. Loss to similar property of others under the insured's care, custody, or
control is also covered.
b. Coverage Limitations
Coverage for
unscheduled signs is limited to the following:
·
Unscheduled
signs must have a limit specified on the coverage schedule.
·
Coverage
only applies at a location listed on the schedule of coverage or while the sign
is traveling between scheduled locations.
·
Signs
that are automatic, electric, fluorescent, mechanical, or neon, as well as
lamps and street clocks, are covered. Data processing equipment used for the
operation of these signs is also included.
PROPERTY NOT COVERED
There is no coverage
for the following property:
1. Contraband
Property illegal to
possess is not covered. Additionally, property legal to possess but used
in illegal trade or transported unlawfully is also excluded.
PERILS COVERED
Coverage applies to
risks of direct physical loss unless the loss is limited or caused by an excluded peril.
OTHER COVERAGES–COLLAPSE
1. Coverage
2. Covered Perils
Coverage
for collapse is provided when caused by one or
more of the following:
- One of the specified perils or breakage of
building glass, to the extent this coverage form insures against.
- Hidden decay. However, this does not
apply if the named insured was aware of the decay before the collapse.
- Hidden insect or
vermin damage. However, this does not apply if the named insured was aware
of the damage before the collapse.
- Weight of people or
personal property.
- Weight of
rain. This is limited to only rain that collects on a roof.
- Using defective materials or methods of
construction, remodeling, or renovation. This applies only if the
collapse occurs during any of these operations. However, if the collapse
occurs after the work is finished and it is partly due to defective materials
or methods used, coverage applies if any of the factors
mentioned above also contributed to the loss.
3. Collapse Means
Collapse
refers to the sudden and unexpected sinking or caving in of a building,
structure, or parts of it, making the structure unusable for its intended
purpose.
4. Collapse Does Not Mean
The
following buildings and structures are not considered to be in a
state of collapse:
- A building or structure, or part of it,
that remains upright even if it shows signs like bending, bulging,
cracking, expanding, leaning, sagging, settling, or shrinking.
- A building or structure in
danger of falling or caving in.
- When a portion of a building or structure
is still standing but has separated from another portion of the building
or structure.
5. Coverage Limitation
The covered property
limit does not increase for this coverage.
PERILS EXCLUDED
1. Primary Exclusions
a. Civil Authority
There is no coverage
for loss resulting from an order issued by any civil or government
authority. These orders may include seizure, confiscation, destruction, or
quarantine of property, but this list is not exhaustive. The only exception is
when a civil authority destroys property to control a fire that causes loss or
damage. This exception applies only if the fire is caused by a covered peril.
b. Nuclear Hazard
The insurance company does not
cover loss or damage from any nuclear reaction, radiation, or contamination,
whether the incident was controlled or not, or caused by any means. Any loss
caused by the nuclear hazard is not considered a fire, explosion, or smoke
loss. However, coverage does include direct loss or damage caused
by fire resulting from the nuclear hazard.
c. War and Military Action
The insurance company does not cover loss or damage caused by any act of war.
This includes undeclared wars, civil wars, or warlike actions by military
forces, all of which are considered war. Additionally, measures taken to hinder
or defend against actual or expected attacks by any government or sovereign
authority using military personnel or agents are also classified as war
and are not covered.
In addition, acts of insurrection, rebellion,
revolution, or unlawful power seizure, along with any government measures to
prevent or defend against these acts, are excluded. If any such action
involves nuclear reactions, radiation, or contamination, this exclusion
overrides the nuclear hazard exclusion.
NOTE: This means the exception for fire resulting from a
nuclear hazard does not apply when it is caused by war.
2. Secondary Exclusions
The second group of exclusions pertains to loss or damage caused by or resulting from
specific events listed below. Some of these exclusions include exceptions,
conditions, or limitations that should be noted and carefully reviewed.
The insurance company will not cover any loss or damage caused by or resulting
from any of these events.
a. Acts or Decisions
There is no coverage for losses caused by or resulting from acts or
decisions made by any person, organization, or government entity. This
exclusion also applies to instances where there is a failure to act or decide.
However, there is an exception to this exclusion. If an act or decision,
or a failure to act or decide, leads to a covered peril, then the loss or
damage caused by that peril is covered.
b. Breakage
Property that
breaks during transit or while being installed, dismantled, or repaired is not
covered.
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Example: Just Now, Inc. is moving a sign from
one covered location to another. Scenario 1: Justin turns his back at a crucial
point of the dismantling, and the sign falls and shatters on the ground. The
loss is not covered because it occurred during the dismantling process. Scenario 2: Larry is driving the truck with the
sign attached to it. The truck is sideswiped, and the sign is destroyed.
Coverage applies since the entire sign is destroyed in a car accident. Scenario 3: The sign arrives at the new location,
and the installation is complete, when a windstorm
occurs that breaks the sign. The breakage is covered because it occurred
after the transit and installation had been completed. |
c. Collapse
Loss
caused by collapse is not covered unless the collapse is included under Other
Coverages - Collapse, in which case coverage applies. Additionally, if an
excluded collapse results in a covered peril, coverage extends to the damage or
loss caused by that peril.
d. Contamination or Deterioration
Loss or damage caused by contamination or deterioration
is excluded. This includes corrosion, decay, fungus, mildew, mold, rot, and
rust. It also applies to any quality, fault, or weakness in the covered
property that leads to self-damage or destruction. This exclusion is not
limited to just these particular causes.
However, if contamination or deterioration results in a
covered peril, the resulting loss or damage from that peril is covered.
e. 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, whether alone or in collusion
with others:
·
The
named insured
·
Others
with an interest in the property
·
Others
to whom the property has been entrusted
·
The
named insured's partners, officers, directors, trustees, joint venturers,
members, or managers, as applicable, based on the named insured’s type of
business organization
·
Employees
of any of the groups listed above. Employees are excluded even if the act
occurs when they are not considered to be working.
o Coverage applies if
employees destroy property, but it does not apply to employees stealing.
However, this exclusion
does not apply to covered property in the care of a
hired carrier.
f. Electrical Currents
However, this exclusion does not apply if
electrical currents cause a fire or explosion. Loss or damage from the fire or
explosion is covered.
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Example: Justin forgets to turn off an attached
sign one night after closing. A power surge causes it to short-circuit and
start a fire, which causes significant damage before being extinguished.
While the short circuit is not covered, the damage caused by the fire is
covered since the fire destroyed the sign. |
g. Fault, Defect, or Error
Loss
or damage due to errors, faults, or defects in planning, zoning, surveying,
site plans, grading, compaction, land use, or development is not covered.
Additionally, losses caused by errors, faults, or defects related to property
design, blueprints, specifications, workmanship, building, maintenance,
installation, renovation, remodeling, or repair are also excluded. This
exclusion applies whether or not the property is covered by this policy
h. Loss of Use
Coverage does not apply to losses from delays, loss of use,
or loss of market.
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Example: Justin is pleased to find out his sign
is covered. However, he gets upset when the Board of Health closes his
restaurant for a week until the fire damage is repaired and it gets a
"clean bill of health." His business income loss during that period
isn't covered due to this exclusion. |
i. Mechanical Breakdown
Loss caused by mechanical breakdown is not
covered. However, if this breakdown leads to a covered peril, then the
resulting loss from that peril is covered.
j. Pollutants
k. Temperature or Humidity
Coverage is excluded if loss or damage to covered property is caused by
dryness, dampness, humidity, or temperature extremes or fluctuations. However,
if one of these events causes a covered peril, the resulting loss or damage
from that peril is covered.
l. Unauthorized Instructions
m. Voluntary Parting
n. Wear and Tear
Loss or damage caused
by wear and tear is not covered. However, if wear and
tear leads to a covered peril, the resulting loss or
damage from that peril is covered.
o. Weather
Loss or damage due to weather conditions is excluded, but
only when the loss results from a weather condition combined with a cause of
loss excluded in 1–Primary Exclusion above. However, if weather conditions lead
to a covered peril, then the loss caused by that peril is covered.
WHAT MUST BE DONE IN CASE OF LOSS
1. Notice
2. You Must Protect Property
Additionally, there is no coverage for repairs or emergency
measures taken for 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 proof of loss must also specify the named insured’s
interest and the interests of others in the property involved, including liens
and mortgages. Any changes to the title of the property during the policy
period must be disclosed, along with any other reasonable information the
company may need, such as inventories, specifications, and estimates for
settling the loss.
4. Examination
5. Records
6. Damaged Property
7. Volunteer Payments
8. Abandonment
9. Cooperation
VALUATION
1. Actual Cash Value
The
value of the covered
property is its actual cash value on the date
of loss. Actual Cash Value is replacement cost new minus depreciation. This
item is subject to items 2. through 4. of this section.
2. Scheduled Property
The property listed as
scheduled property on the schedule of coverages is valued at the specified
limit for that particular property.
3. Pair or Set
The value of a loss
involving damage or loss of one item from a pair or set is determined by a
fair proportion of the total value of the entire pair or set. However, losing
one part of a pair or set does not constitute a total loss.
NOTE: This recognizes the value of the whole is
greater than the value of individual parts, but the remaining part still has
value as a separate.
4. Loss to Parts
The value of a lost
or damaged part, which comprises several parts, is determined by the cost to
repair or replace just the lost or damaged part.
NOTE: This recognizes that the whole is more
valuable than the sum of its parts, but the individual parts still retain value
on their own.
HOW MUCH WE PAY
1. Insurable Interest
The insurance company will not
pay more than the insured's insurable interest in the covered property at the
time of loss.
2. Deductible
The insurance company pays only
the amount of loss exceeding the deductible amount shown on the Schedule of
Coverages for any one occurrence.
3. Loss Settlement Terms
a. The insurance company pays the least of the following:
All of these are
subject to items 1., 2., 4., and 5. in this section.
·
The
amount determined based on the Valuation section.
·
Costs
to repair, replace, or rebuild the damaged property.
- The material must
be of like kind and quality or as similar as practicable.
·
The
limit pertaining to the damaged property.
b. Catastrophe Limit
This applies only if a
catastrophe limit is entered on the Schedule of Coverages and only to the
unscheduled sign coverage.
If a covered peril
causes loss or damage at multiple premises listed on the schedule, the most
paid in a single incident is the lowest of the following:
·
The
total limits for covered property at all locations where the loss took place.
·
The
catastrophe limit.
4. Coinsurance
This provision applies
only to the unscheduled signs. Scheduled signs are not subject to coinsurance.
Only losses occurring at a covered premises listed on
the schedule of coverages are subject to this
provision.
The insurance company does not pay the
full amount of any loss if the value, at the time of the loss, of all covered
property (subject to coinsurance) multiplied by 100% exceeds the insurance
limit. The following are the steps the insurance company takes to determine the
amount it pays:
Step 1: Determine the value of
items, at the time of loss, of all covered property at the loss premises
subject to coinsurance.
Step 2. Divide the limit for
the covered property at the premises subject to coinsurance by the result
determined in Step 1.
NOTE: Stop
here if the result is 1.00 or higher because no coinsurance penalty applies. Go
to Step 4 only if the result is less than 1.00.
Step 3.
Multiply the total amount of loss, prior to the application of a deductible, by
the percentage determined in Step 2.
Step 4. Subtract the applicable deductible from Step 3.
The insurance company does not
pay more than the amount determined in Step 4 or the limit of insurance,
whichever is less. It does not pay any part of the remaining loss.
NOTE: The schedule of coverage does not refer to coinsurance.
5. Insurance Under More Than One Coverage
6. Insurance under More Than One Policy
a. Proportional Share
b. Excess Amount
LOSS PAYMENT
1. Loss Payment Options
a. Our Options
The insurance company has the following loss payment
options if a covered loss occurs:
·
Pay the value of the property
that sustained loss or damage.
·
Pay the cost to repair or
replace the property that sustained loss or damage.
·
Rebuild, repair, or replace the
property with similar property, to the extent possible, and it must be
accomplished within a reasonable period of time.
·
Take any part or all of the property based on the value agreed upon or
determined through appraisal.
b. Notice of Our Intent to Rebuild, Repair, or Replace
The insurance company is required to inform 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
settles all claims with the named insured. It will also only pay the named
insured unless there is a loss payee listed on the policy.
b. Conditions for Payment of Loss
The insurance company
settles a covered loss within 30 days of receiving a properly
prepared proof of loss, and the loss amount is confirmed. The amount is
determined either through a written agreement with the 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
can adjust and pay losses involving others' property to either the named
insured on behalf of the property owner or directly 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 if it has already paid the property
owner. Additionally, if the property owner sues the named insured, the company
can choose to defend them in the lawsuit.
OTHER CONDITIONS
1. Appraisal
The
insurance company and the insured may not always agree on the value of a covered
claim. This condition provides a way to resolve disputed claims.
Either
party can request an appraisal to determine the value of the disputed claim.
Once a request is made, both parties have 20 days to choose their own
independent appraisers and notify the other party of their appraiser's name.
The two appraisers then have 15 days to select a competent and impartial
umpire. If they cannot agree on an umpire within that time, either party can
ask a judge in the court of record in the state where the property is located
to appoint one.
The
appraisers will then determine the value of the claim and submit any
differences to the umpire. Once any two of the three parties (the two
appraisers and the umpire) agree, the amount of loss is finalized.
Each
party is responsible for paying their own appraiser, while the costs associated
with the umpire and other shared expenses are divided equally between both
parties.
2. Benefit to Others
The insurance does not provide any benefit, directly or
indirectly, to any party with custody of the 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
This condition is applicable only when the insured is an
individual.
a. Your Death
When the named
insured passes away, the individual in custody of the insured's property
remains an insured for that property until a qualified legal representative is
appointed. After the appointment of the legal representative, that person
becomes an insured, 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
Any revisions to this
coverage form or applicable endorsements that become effective during the
policy period or within six months of the coverage effective date that broadens
coverage without an additional premium will apply to this policy.
6. Misrepresentation, Concealment, or Fraud
This
coverage is void if any insured at any time willfully concealed or misrepresented a material fact that relates 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 occurring 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 each other. Additional provisions apply if the insurance company pays a
loss and the lost or damaged property is later recovered, or if the responsible party for the loss reimburses for the
damage.
Either party that
recovers property or payment must notify the other. Recovery expenses incurred
are reimbursed first. If the named insured keeps the recovered property, they
must repay the amount the insurance company paid on the claim, unless the company
agrees to a different amount.
If the paid claim is
less than the agreed loss because of a deductible or other limit, any recovery
is prorated between the named insured and the insurance company based on the
company's respective interests 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
gains the right of recovery from third parties on behalf of the named insured
after paying a loss. The named insured is required to assist the company in
securing these rights. The company is not required to pay the loss if the named
insured obstructs or weakens its subrogation rights.
The named insured can agree in
writing to waive recovery rights from any party, but only if this is done
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 became aware of 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 common
for a basic coverage form to be modified by required state-specific
endorsements that address issues related to that state.
12. Territorial Limits
Coverage is only valid
if the covered property is located in the United
States, its territories and possessions, Canada, or Puerto Rico.
ENDORSEMENTS
AAIS has developed one
endorsement to use with Sign Coverage.
IM 1456–Coinsurance Provisions–Signs
This endorsement amends
the coinsurance provision to be based on all premises
instead of just one. All other terms and conditions remain unchanged.
UNDERWRITING CONSIDERATIONS
The size of the sign or
signs, the general geographic location, and the specific location are all
factors in underwriting sign exposures. Larger signs are clearly more likely to
sustain greater damage than smaller signs. Signs positioned away from the main
premises and not regularly observed are more vulnerable to vandalism and theft.
Signs can be easily damaged by windstorm and hail, and geographic risks vary
across different regions.
Interior signs should
be insured as business personal property.