ISO Contractors Equipment Coverage Form

ISO CONTRACTORS EQUIPMENT COVERAGE FORM ANALYSIS

(April 2024)

 

Introduction

Policy Construction

IH DS 68–Contractors Equipment Declarations

IH 00 68–Contractors Equipment Coverage Form Analysis

Introduction

A. Coverage

   Covered Property

   Property Not Covered

   Covered Causes of Loss

   Additional Coverages

B. Exclusions

C. Limits of Insurance

D. Deductible

E. Additional Conditions

F. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) IH 00 68–Contractors Equipment Coverage Form covers various contractors' machinery, tools, and equipment. Tractors, cranes, graders, power shovels, forklifts, drills, front-end loaders, backhoes, bulldozers, draglines, concrete mixers, derricks, pile drivers, forklifts, drills, tools, and similar mobile equipment subject to movement are all types of contractors equipment. In addition to owned equipment, coverage can also apply to borrowed, leased, or rented equipment of others in the named insured's care, custody, or control. Coverage applies to covered property at jobsites, at unnamed locations, and while in transit.

Many changes were made to the coverage form and its declarations and endorsements in 05 17.

POLICY CONSTRUCTION

Contractors Equipment Coverage requires at least the following six forms:

Related Article: IL 00 17–Common Policy Conditions Analysis

Related Article: CM 00 01–Commercial Inland Marine Conditions

IH DS 68–CONTRACTORS EQUIPMENT DECLARATIONS

This declaration was changed, and an optional IH DS 59–Contractors Equipment Declarations – Blanket was added. The two are identical, except all references to Scheduled equipment are eliminated from the IH DS 59. This analysis will, therefore, refer only to the IH DS 68 and by inference to IH DS 59.

The advisory Contractors Equipment Declarations does not have spaces for the named insured, its mailing address, other named insured information, the policy period, or the description of the insured business. That information is on the Common Policy Declarations. IH DS 68 contains the following information:

Insurance Company and Producer Name

The name of the insurance company that provides the coverage and the name of the agent or broker that produces the business are entered in the spaces provided.

Limits of Insurance

This section has spaces to enter the limits of insurance for the following:

o    The schedule may be attached to the policy, and the total limit of insurance from that schedule entered on the declarations

o    The schedule may be dated and on file with the insurance company. The date of the schedule is to be entered, and the location of the office where the schedule is must be entered. The total limit of insurance from that schedule is entered on the declarations.

o    When no more than five items are to be scheduled, they can be listed on the declarations with a specific limit for each item.

A description of the equipment owned by the insured that is to be blanketed must be provided. A per item and an occurrence limit must be entered.

A per item and an occurrence limit must be entered.

This is the catastrophe type limit that must be carefully reviewed because it limits the coverage provided in a single occurrence regardless of where that property is.

Additional Coverages

The following coverages are included automatically at a default limit provided in the coverage form. Any limit entered replaces the default limit.

Additional Coverage

Default Limit

Debris Removal Additional Limit

$10,000

False Pretense

$25,000

Rewards

$10,000

Additional Acquired Property

$250,000

Employee Tools and Clothing

$1,000 per employee

$5,000 per occurrence

Expediting Expense

$25,000

Fire Department Service Charge

$10,000

Fire Extinguishing Systems Expense

$10,000

Fuel, Accessories and Spare Parts

$10,000

Inventory and Appraisal Expense

$25,000

Pollutant Cleanup and Removal

$25,000

Rental Reimbursement

$500 per day/$10,000 per occurrence

72-hour waiting period

Trailers and Contents

$25,000

Optional Coverages

There is no default limit for these coverages, so a limit of insurance must be entered when coverage is selected.

Coinsurance

This section has a space to enter the coinsurance percentage that triggers the coinsurance additional condition if coinsurance applies.

Valuation

Replacement Cost can be selected, but an entry is required stating how old the equipment is subject to replacement cost. All items older than that number are valued as Actual Cash Value. The anticipated answer is five.

Deductible

This section has a space to enter the deductibles. Two entries may be required:

Reporting Form

If coverage is written on a reporting basis, the rate per $100, deposit premium and minimum premium must be entered for blanket equipment owned by the insured. If the Optional Coverages Equipment Leased or Rented to Others or Equipment Leased or Rented From Others are provided on a reporting basis, the rate per $100, deposit premium and minimum premium must be entered for the selected optional coverage.

The reporting and adjustment periods must also be entered.

Rates and Premiums

The following premiums are entered when coverage is written on a non-reporting basis:

Special Provisions

Any special provisions are entered in the space provided.

IH 00 68–CONTRACTORS EQUIPMENT COVERAGE FORM ANALYSIS

This analysis is of the 05 17 edition. Changes from the previous edition are in bold print.

Introduction

This section encourages carefully reading the entire coverage form to determine what is covered, what is not covered, rights, and duties. It defines we, us, and our as the insurance company that provides this insurance coverage. It also defines you and your as the named insured on the declarations. The reader is also pointed to the Definitions section because certain words or terms used in the form have a more broadened or restricted meaning.

A. Coverage

The insurance company pays for direct physical loss or damage to covered property but only when that loss is from a covered cause of loss.

1. Covered Property (05 17 change)

Covered property is covered only if described on the declarations. They must either be owned by the named insured or be in its care, custody, or control.  

Note: In the 05 17 edition, the requirement that the property in the care, custody or control of the named insured had to be similar to the named insured’s owned property has been eliminated.

 

2. Property Not Covered (05 17 changes)

The following described property is not covered:

a. Automobiles, motor trucks, trailers, and similar vehicles licensed for public road uses. There are exceptions. If a vehicle is unlicensed and not operated on the public road, it remains covered. In addition, self-propelled vehicles that carry equipment that is attached to them are covered.

b. Aircraft or watercraft

Note: This property should be covered under aircraft, boat, yacht, or watercraft coverage forms, and policies.

c. Plans, blueprints, designs, or specifications

Note: This property should be covered under Valuable Papers and Records coverage forms.

Related Articles:

ISO Valuable Papers and Records Coverage Form

AAIS Valuable Papers and Records Coverage

d. Waterborne property. Property that, during transit, is on a ferry operating on navigable waters of the continental United States and Canada, other than to and from Alaska, is an exception to this exclusion.

Note: This change would eliminate property while on the ferry to perform operations not while it is being transported to a job.

e. Property while it is under water. In addition, it is a property below the ground’s surface, but only while it is being used in mining, tunneling, and the like.

Note: Property underground or underwater is exposed to additional, unusual, and catastrophic hazards. Special policy provisions and underwriting considerations are needed for contractors engaged in any mining, underground, underwater, or waterborne activities or projects. Coverage for equipment in any of these situations is available under specialty coverage forms from specialty carriers. It is important to note that property that is underground is covered when not being used for mining or tunneling, etc., and while it is in storage.

f. Property the named insured loans, leases, or rents to others

Note: Limited coverage is available under Optional Coverages below but only if selected on the Declarations.

g. Contraband. Any property that is illegal to own or in illegal trade or transportation is not covered.

h. Employee-owned tools and clothing

Note: Tools that employees own can be covered by attaching IH 68 01–Tools and Clothing Belonging to Your Employees.

i. Accessories. These items are always not covered. (05 17 addition)

Note: Limited coverage is available under Additional Coverages f. below.

j. Spare parts when intended to be used with covered property. (05 17 addition)

Note: Limited coverage is available under Additional Coverages f. below.

3. Covered Causes of Loss

Covered causes of loss are direct physical loss or damage to covered property, except as limited or excluded.

4. Additional Coverages (05 17 changes)

Note: It is confusing, but there are two sections of additional coverage. Item 4. Additional Coverages are part of the limit of insurance, while Item 5. Additional Coverages are not.

The following additional coverages are provided within the limits of insurance and not in addition to those limits. This means that any amounts paid out for these items will reduce the limits available to pay for other losses in the occurrence. The only exception is limits provided in the Debris Removal Coverage.

a. Debris Removal (05 17 change)

Coverage applies to the costs to remove the debris of covered property from a covered loss at a described premises. The expenses must be reported to the insurance company in writing within 180 days of the date of loss. The most paid is the lesser of 25% of the following:

An additional $10,000 is available to pay for debris removal if either of the following applies:

Costs to extract pollutants from land or water or remove, restore, or replace polluted land or water are not covered under this Additional Coverage.

b. False Pretense (05 17 addition)

When the named insured, its agents, consignee or customer gives away covered property voluntarily because they have either accepted a fraudulent bill of lading or due to any other type of trick, scheme or similar type of con game, coverage applies for up to $25,000 per occurrence. The limit can be increased.

The only exception is when the perpetrator of the fraud or con is an employee.

c. Preservation of Property (05 17 change)

Covered property may need to be moved in order to keep it from being damaged by a covered cause of loss. In that case, the insurance company pays for any direct loss or damage such property sustains during the move. In addition, coverage applies at the location where the property is stored for up to 90 days after the date it was moved there.

This additional coverage does not increase the limit of insurance.

Notes: There are several important points to consider:

The property removed must be moved back 90 days from the date of the move.

d. Rewards (05 17 addition)

The insurance company reimburses a reward that is paid by the named insured for up to $10,000 per occurrence, subject to the following conditions:

There are some very important limitations on this coverage.

o    The named insured or any member of his or her family

o    An employee or any member of his or her family

o    An employee of law enforcement or property protection

o    The person who was in control of the property at the time of the loss

o    The person who committed the crime or was involved with it.

Even though the reward might have been paid, the insurance company will not reimburse the named insured until a conviction occurs or the property is returned.

The most paid per occurrence is the reward actually paid. This is subject to the limit of insurance.

The person providing information must have come forward after the reward was offered.

 

Example: David’s backhoe was stolen. He offered an award of $10,000 for its return.

Scenario 1: Edward contacts the police and tells them where the backhoe can be found. It is recovered, and Edward claims the reward. When it is discovered that Edward is the husband of an employee of David’s, the insurance company does not reimburse David’s reward payment.

Scenario 2: Julie, Ralph, Charlie, and Maria contact the police to notify them that the backhoe is hidden behind a local restaurant. The police logged each call, and because Julie called first, she is the only person who can receive the reward.

5. Additional Coverages

Note: It is confusing, but there are two sections of additional coverage. Item 4. Additional Coverages is part of the limit of insurance while Item 5. Additional Coverages is not.

The following additional coverages provide additional limits that are not within the limits of insurance and do not reduce the amounts available to pay for other losses in the occurrence.

a. Additionally Acquired Property (05 17 change)

The named insured may acquire additional property similar to the kind this coverage form insures during the policy period. If it does, such property is covered for up to 60 days but not past the expiration date. The most the insurance company pays for loss or damage is 25% of the sum of the limit of insurance for all scheduled equipment on the declarations or $250,000, whichever is less. The named insured must report the value of the newly acquired property to the insurance company within 60 days after it takes possession of it and pays a premium for it from the acquisition date. If this is not done, coverage ends after 60 days or at the expiration date, whichever occurs first.

The Coinsurance Additional Condition does not apply to this Additional Coverage.

Note: An important change is that this is additional coverage not subject to the limit of insurance for Covered Property.

b. Employee Tools and Clothing (05 17 addition)

Clothing and tools belonging to employees that are damaged by a covered cause of loss are covered while at a jobsite or while being transported in a vehicle of the named insured are covered. The maximum payment per employee is $1,000, and the maximum per occurrence is $5,000.

c. Expediting Expense (05 17 addition)

When a covered loss occurs a certain amount of time is required to complete the repairs or to replace the covered property. This additional coverage pays extra expenses that are incurred to reduce the “standard” amount of time needed for the repairs or replacement. Those extra expenses paid are for both of the following:

The most paid is $25,000 per occurrence, but the limit can be increased.

d. Fire Department Service Charge (05 17 addition)

The insurance company pays up to $10,000 when the fire department is called to save or protect covered property from a covered cause of loss. The limit can be increased. The limit applies regardless of the number of responding fire departments, fire units, or the number or type of services performed.

This coverage applies to only the named insured's liability for fire department service charges it either contractually assumes before a loss occurs or that a local ordinance or law requires.

This Additional Coverage is not subject to a deductible.

e. Fire Extinguishing Systems Expense (05 17 addition)

When a fire extinguishing system or handheld extinguisher is discharged due to a covered cause of loss, up to $10,000 is available to pay for its recharging or replacement. The cost of hydrostatic testing is included in this coverage.

When a fire extinguishing system is discharged accidentally, up to $10,000 is available to pay for loss or damage to covered property due to that discharge.

There is no coverage if any such discharge happens during testing or installation. 

The limit is per occurrence and can be increased.

f. Fuel, Accessories and Spare Parts (05 17 addition)

Accessories and spare parts are specifically listed as not covered property above. This Additional coverage provides up to $10,000 for these and also fuel and other fluids that covered property needs to operate.

g. Inventory and Appraisal Expense (05 17 addition)

This is very specific. If the insurance company requests an inventory or appraisal, the expenses the named insured incurs are covered up to $25,000. However, if the expenses are incurred as part of the Appraisal condition they are not covered. In addition, any expense requested or incurred by a public adjuster or public accountant is definitely not covered.

h. Pollutant Clean Up and Removal (05 17 change)

The insurance company pays to clean up pollutants caused by or resulting from a covered cause of loss that occurs during the policy period. The most paid is $25,000 as an aggregate amount during each separate 12-month policy period. The expenses are paid only if they are reported to the insurance company in writing within 180 days of the date of loss.

This coverage does not apply to costs to evaluate the presence or effects of pollutants. However, it does pay for testing that is part of the extracting of pollutants process from either land or water.

i. Rental Reimbursement (05 17 addition)

When a covered loss to covered property occurs, the insurance company will reimburse the rental expenses the named insured incurs, but only if the equipment being rented is needed for the named insured to continue its normal operation. However, if the named insured has idle equipment that could be used instead of renting, this coverage does not pay. There are conditions for payment:

This time period is not impacted by the policy expiration date.

The named insured is required to repair the property promptly.

Payment is limited to $10,000 per occurrence but no more than $500 per day.

 

Example: Top Drawer Constructor's crane was struck and damaged, but the job was not yet complete. Top Drawer contacted friends at crane rental businesses to try to borrow a crane for a few days without charge but was unsuccessful because they were all in use. Top Drawer then contacted an equipment rental business and contracted to rent a replacement crane for ten days, anticipating that the new crane it had ordered would arrive within that period. It takes Top Drawer 24 hours to arrange for the crane, so that satisfies the first 24 hours of the waiting period. Top Draw then pays for the next 48 hours of rental, and the insurance company pays the costs for the remaining six days until the new crane ordered arrives.

j. Trailer and Contents (05 17 addition)

If the named insured’s construction or office trailers are damaged by a covered cause of the loss, the trailer and its contents are covered for up to $25,000 per occurrence. The trailers can be owned, rented, or leased. The only exception is that tools are not covered.

Note: There is no per trailer limit but only a per occurrence limit. If multiple trailers could be subject to the same occurrence, it may be wise to increase the default limit.

B. Optional Coverages (05 17 addition)

These coverages must be selected on the declarations. There are no default limits, so when coverage is selected, a limit must also be entered.

1. Equipment Borrowed from Others (05 17 addition)

Contractors equipment is borrowed from others and is in the care, custody, or control of the named insured is covered if damaged by a covered cause of loss. This coverage applies only if the equipment is not scheduled on the declarations. The most paid is the limit on the declarations. The limit is an additional amount of insurance.

2. Equipment Borrowed from Others (05 17 addition)

Contractors equipment leased or rented from others and for which the named insured is legally liable in a written agreement is covered if damaged by a covered cause of loss. This coverage applies only if the equipment is not scheduled on the declarations. The most paid is the limit on the declarations. The limit is an additional amount of insurance.

3. Equipment Loaned To Others (05 17 addition)

Contractors equipment that the named insured owns but loans to others for less than 12 months is covered if damaged by a covered cause of loss. The most paid is the limit on the declarations. The limit is an additional amount of insurance. This optional coverage eliminates loaned equipment from the Not Covered section of the coverage form. The limit is NOT an additional amount of insurance.

4. Equipment Leased or Rented To Others (05 17 addition)

Contractors equipment that the named insured owns but leases or rents to others under a written agreement is covered if damaged by a covered cause of loss. The most paid is the limit on the declarations. The limit is an additional amount of insurance. This optional coverage eliminates leased and rental equipment from the Not Covered section of the coverage form. The limit is NOT an additional amount of insurance.

5. Waterborne (05 17 addition)

This eliminates the Waterborne Not covered property above. Loss or damage to covered property due to a covered cause of loss is covered while waterborne. The limit is NOT an additional amount of insurance.

C. Exclusions

1. Primary Exclusions

The first group of exclusions applies whether or not the loss event results in widespread damage or affects a significant geographical area and is essentially absolute. Subject to specific exceptions, 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 that results from any of these events.

a. Governmental Action

This exclusion applies to the legal and authorized seizure or destruction of property by a government entity’s order. There is one exception. Loss or damage that is caused when the governmental entity orders property to be destroyed is covered if used as a method to prevent a fire from spreading is covered. However, this exception applies only if the fire being contained would have been a covered fire under this coverage form.

 b. Nuclear Hazard

Nuclear reaction, radiation, or radioactive contamination is not covered. There is an exception. If a fire results from the nuclear reaction, radiation or radioactive contamination, there is coverage for the direct loss or damage caused by that fire.

 c. War and Military Action

This exclusion lists three specific warlike activities.

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 resulting from any of these events.

a. Delay, loss of use, and loss of market

These are consequential or indirect losses that develop as a result of a direct loss or damage.

b. Dishonest or criminal acts

These are any dishonest or criminal acts the named insured, its partners, employees, temporary employees, leased workers, officers, directors, trustees, authorized representatives, or members and managers of a limited liability company commit. This also includes theft.

Such acts committed by anyone with an interest in the property, their employees, temporary employees, leased workers, or authorized representatives who act alone or in collusion with other parties or with each other are also excluded. This exclusion also applies whether or not the acts take place during regular working hours.

This exclusion does not apply to acts of destruction by the named insured’s employees, temporary employees, leased workers, or authorized representatives. However, there is no coverage for theft by the named insured’s employees, temporary employees, leased workers, or authorized representatives.

c. Work upon the property

This is any work done on property that results in loss or damage. However, if the work done on the property results in a fire or explosion, and this insurance covers fire and explosion, the loss or damage the resulting fire or explosion causes is covered.

Note: The excluded work is not specific to covered property but instead is on property. This means that work on property not covered could also invoke this exclusion.

d. Artificially generated electrical, magnetic, or electromagnetic energy

Loss or damage that is caused by or that results from artificially generated electrical, magnetic, or electromagnetic energy damaging, disturbing, disrupting, or interfering with any of the following:

Examples of this excluded energy are electrical current, charges a magnetic or electromagnetic field produces, and microwaves, but is not limited to just these. There is one exception. If the energy described in this exclusion results in a fire, coverage applies to the direct loss or damage that fire or explosion causes, but only if the fire is considered covered cause of loss under this coverage form.

This exclusion does not apply to all property. It applies to only loss or damage to the specific article in which the disturbance occurs.

e. Voluntary parting

The named insured or anyone else entrusted with the property being tricked or deceived into giving that property away.

f. Unauthorized instructions

When covered property is transferred to another person or place because unauthorized instructions were received to do so.

g. Neglect

Neglect on an insured’s part to take reasonable measures to preserve and protect covered property from subsequent damage during and after the time of loss.

h. Theft

Theft by any person the named insured entrusts covered property to for any reason, whether they act alone or in collusion with any other party. This exclusion applies 24 hours a day/7 days a week. There is one exception. Covered property in a carrier for hire’s care, custody, or control is not subject to this exclusion.

3. Other Exclusions

This group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. In every case, if loss or damage by a covered cause of loss occurs as a result of one of these excluded events, coverage applies to the loss or damage the resulting covered cause of loss causes. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Wear and tear, depreciation

This is loss or damage due to wear, tear, and depreciation.

Notes:

Wear and tear is damage that occurs naturally as a result of aging or normal wear.

Depreciation is loss of value due to wear.

b. Any quality in the property

These are any qualities in the property that cause it to destroy or damage itself.

Note: An example is loss or damage caused by hidden or latent defects in the property.

c. Insects, vermin, or rodents

This is loss or damage to covered property caused by or that results from insects, vermin, or rodents.

Note: Some examples are damage from mice, rats, cockroaches, squirrels, beavers, spiders, ants, centipedes, and ticks. Each is characterized by destructive habits that cause damage, such as gnawing and nibbling.

d. Corrosion or rust

This is corrosion or rust that causes loss or damage to covered property.

Note: Rust and corrosion are low-temperature oxidation processes that result in deterioration over time due to inactivity or neglect.

e. Mechanical breakdown

This is loss or damage caused by or that results from machines, tools, or mechanisms failing to operate or function properly.

D. Limits of Insurance

The most the insurance company pays for loss or damage in a single occurrence is the limit of insurance on the declarations for the applicable coverage.

E. Deductible (05 17 change)

The deductible can be either a dollar amount or a percentage deductible. 

If a dollar deductible applies, the insurance company does not pay for loss or damage until the amount of the adjusted loss or damage (before capping with the limit of insurance) exceeds the deductible on the declarations. It then pays the amount of the adjusted loss or damage that exceeds the deductible up to the applicable limit of insurance.

If the percentage deductible is selected, the percentage on the declarations is multiplied by the actual cash value (or whatever valuation is determined in the coverage form) of the damaged property to establish the dollar amount to apply. That dollar amount is compared to the minimum and maximum deductible amounts. The calculated amount is used if it is in between the minimum and the maximum. If it is under or over, then the applicable deductible applies.

 

Example:

The percentage deductible is 5%. The minimum deductible is $100 and the maximum deductible is $1,500.

Scenario 1: The value of the damaged property is $10,000. The calculated deductible is $500. Because it is between $100 and $1,500, the deductible applied to the loss is $500.

Scenario 2: The value of the damaged property is $ 1,000. The calculated deductible is $50. Because it is lower than the minimum deductible, $100 is the deductible applied to the loss.

Scenario 3: The value of the damaged property is $50,000.The calculated deductible is $2,500. Because it is higher than the maximum deductible, $1,500 is the deductible applied to the loss.

If the policy is subject to reporting, the percentage deductible calculation is changed. If the amount of the property reported is less than the property’s actual cash value (or replacement cost if so indicated), the reported amount is used in the percentage calculation. However, if no report had yet been received when the loss occurred, the value of the property at the time of the loss is used to calculate the percentage.

 

Example: Crandall's Cranes and Rigging is a popular contractor. Other contractors that cannot justify owning their own cranes employ Crandall to do any needed crane work on their jobs. One of Crandall's cranes is preparing to lift equipment to the top of a tower under construction when the boom strikes an adjacent structure and the boom is damaged. The deductible on the declarations for Crandall's Contractors Equipment Coverage is 10%. The boom’s listed value is $100,000, but its reported value is only $90,000. Crandall’s percentage deductible is $9,000 which must be satisfied before any payment is made.

E. Additional Conditions

These conditions are in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions.

Related Articles:

IL 00 17–Common Policy Conditions Analysis

CM 00 01–Commercial Inland Marine Conditions

1. Coverage Territory

The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. Property that is shipped by air within and between these points is within the coverage territory.

2. Coinsurance

This condition applies if there is a coinsurance percentage on the declarations.

The insurance company does not pay the full amount of any loss or damage if the value of the covered property at the time of loss or damage multiplied by the coinsurance percentage is more than the limit of insurance for all covered property at that location. In such cases, the amount the company pays is determined as follows:

Step 1. Multiply the value of the covered property at the time and location of the loss or damage by the coinsurance percentage on the declarations.

Step 2. Divide the limit of insurance for the covered property at the location where the loss or damage occurred by Step 1.

Step 3. Multiply the total amount of loss or damage at the loss location by Step 2. before applying the deductible (if any).

Step 4. Subtract the amount of deductible from Step 3.

The insurance company pays the lesser of Step 4. or the limit of insurance. Any amount that remains must be paid by other insurance or the named insured must pay it from its own funds.

3. Valuation (05 17 change)

This valuation replaces the General Conditions Valuation but only When Replacement Cost for Covered Property is selected on the declarations.

The valuation of any covered property is based on its replacement cost at the time of loss. Replacement is what it will cost to replace that property without taking into consideration depreciation.

The named insured has the option to make a claim initially for actual cash value instead of replacement cost. This allows the named insured to obtain a monetary settlement to start rebuilding. It can then make a replacement cost claim later. This option of a second claim is permitted only if the named insured notifies the insurance company, within 180 days of the loss, that it will be doing so.

Replacement cost is paid only after the property is repaired or replaced and then only if the repair or replacement was handled within a reasonable amount of time. If both conditions are not met, the claim is paid as actual cash value.

The replacement cost based payment will be no more than the least of the following:

When the damage or lost property belongs to others, and there is a written contract that determines the named insured liability for that property, the valuation of that property is based on that liability established in that contract. However, it is still subject to the replacement cost of the property and the limit of insurance.

F. Definitions

There is one definition.

Pollutants

These are any solid, liquid, gaseous, or thermal irritants or contaminants. Pollutants also include smoke, vapor, soot, fumes, acids, alkalis, chemicals, or waste. Waste is any material intended to be recycled, reconditioned, or reclaimed.

ENDORSEMENTS

ISO has developed three specific endorsements for exclusive use with the Contractors Equipment Coverage Form.

IH 68 01–Tools and Clothing Belonging to Your Employees

Note: Do Not attach to the 05 17 edition.

This endorsement removes the exclusion for tools and clothing that the named insured’s employees own. However, coverage is limited to the limit on the endorsement schedule. Coverage applies only when the tools and/or clothing are in the named insured contractor's care, custody, or control.

IH 68 02–Miscellaneous Items Blanket Coverage

Note: Do Not attach to the 05 17 edition.

The Contractors Equipment Coverage Form is usually written where each item of equipment has its own separate limit of insurance. This endorsement allows the named insured to group all miscellaneous, low-valued items on a blanket basis. The sub-limit for each item and the maximum limit for all items in a single loss are entered on the endorsement schedule in the spaces provided.

IH 68 03–Rental Reimbursement

Note: Do Not attach to the 05 17 edition.

An item of covered contractors equipment may sustain loss or damage from a covered cause of loss. In this case, the contractor usually rents replacement equipment in order to continue the work, if it does not have similar equipment not already being used. This endorsement extends the coverage the Contractors Equipment Coverage Form provides to apply to such equipment the contractor rents.

IH 68 04–Boom Limitation (05 17 addition)

Any crane boom that is in excess of 25 feet is considered property not covered when this restrictive endorsement is attached.

IH 68 05–Contractors Equipment While Underwater or Underground (05 17 addition)

Property that is underwater or underground for mining or tunneling is considered property not covered under the coverage form. When covered property is used either underwater or underground, this endorsement can be added. A per item and per occurrence must be added for the selected property.

H 68 06–Contractors Equipment Reporting Form (05 17 addition)

When frequent additions and deletions are made to an equipment schedule, a reporting form may be more effective in providing coverage. This endorsement provides an explanation of how reports are to be made and how premium is adjusted. All rate and premium information is entered on the Declarations.

IH 68 07–Theft Deductible Waiver (05 17 addition)

An excellent theft recovery tool is an activated GPS device. When this endorsement is attached, the deductible is waived when any contractor’s equipment with the activated GPS device is stolen.

IH 68 08–Weight of Load Exclusion (05 17 addition)

Many pieces of contractors equipment contain a statement from the manufacturer regarding the equipment’s capacity. When this restrictive endorsement is attached, there is no coverage for damage to the weight of a load if it occurs because the capacity was exceeded during a lift, move or support operation.

 IH 68 09–Scheduled Contractors Equipment with Agreed Value (05 17 addition)

When this endorsement is attached, the valuation for the scheduled items changes from ACV or RCV to agreed value and coinsurance for those items is waived. ISO has developed general endorsements to use to respond to specific situations.

IH 99 06–Schedule

Additional items can be listed on this schedule when they do not fit on the Declarations.

IH 99 07–Replacement Cost

The Contractors Equipment Coverage Form is usually written on an actual cash value basis. This endorsement is added to cover all property (or only certain described property identified on the declarations) on a replacement cost basis.

IH 99 19–Additional Covered Property

This endorsement is used to include coverage for types of property ordinarily excluded.

IH 99 20–Additional Property Not Covered

This endorsement is used to exclude certain types of property the coverage form insures.

IH 99 22-Loss Payable

Loss payees with insurable interests in covered property are listed on this endorsement along with the property in which they have that interest.

Note: No commitment is made to notify them of any cancellation.

IH 99 29–Limited Coverage for Unmanned Aircraft Property (01 16 addition)

The coverage provided is similar to that provided for aircraft only in IH 00 61–Unmanned Aircraft Property and Cargo Coverage Form. The unmanned aircraft must be scheduled on the endorsement.

Related Article: Unmanned Aircraft Property and Cargo Coverage Form Analysis

UNDERWRITING CONSIDERATIONS

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

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

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

Cranes

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

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

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

Building Contractors

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

Mining

Logging

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

Marine Contractors

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

Oil and gas rigs and well-servicing

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

Quarrying

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

Road Building

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

Shipyard

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

Stevedoring

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