ISO Installation Coverage Form

ISO INSTALLATION COVERAGE FORM ANALYSIS

(April 2024)

 

Introduction

Policy Construction

IH DS 73–Installation Declarations

IH 00 73–Installation Coverage Form Analysis

Introduction

A. Coverage

   Covered Property

   Property Not Covered

   Covered Causes of Loss

   Additional Coverages

   Coverage Options

B. Exclusions

C. Limits of Insurance

D. Deductible

E. Additional Conditions

F. Definitions

Endorsements

Underwriting Considerations

INTRODUCTION

The Insurance Services Office (ISO) Installation Coverage Form insures property intended to be installed in buildings being renovated, remodeled, or upgraded. The named insured is usually the contractor that does the installation. The property covered can be owned property or property of others in the contractor’s care, custody, or control. This coverage form can cover almost any property on the construction site, at temporary locations, and in transit, as long as that property is destined to become a permanent part of the project.

POLICY CONSTRUCTION

Installation 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 73–INSTALLATION DECLARATIONS (05 17 change)

The advisory Installation 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. HD DS 73 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.

Jobsite Installation Project

Only property that is part of the described construction project is covered. Many coverages are only provided while property is at the described jobsite, so it is very important to complete the following information very precisely.

Limits of Insurance

Limits of insurance must be entered for the following items:

Note: This is similar to a catastrophe limit. There is no specific explanation in the coverage form as to how this limit works, though.

Additional Coverages

All of the following additional coverages apply at a defaulted limit in the coverage form. This area is used to change that default to a different limit.

The limits entered for this first grouping are sublimits of the Property at the Jobsite limit. This means that if these defaults are increased significantly, that Jobsite limit should also be increased, or not all coverage may be provided as anticipated.

o    Revised Limit - the default is $15,000

o    Business Income/Extra Expense–Revised Number of Days – the default number of days is 30

o    Separate Locations – if yes, the separate locations must be entered

The limits entered for this second grouping are separate and independent limits that have no impact on the coverage limits of Property at the Jobsite:

·         Contractual Penalties – the default limit is $10,000

·         Expediting Expenses - $25,000

·         Extra Expense - $25,000

·         Fire Department Service – the default limit is $10,000

·         Fire Extinguishing Systems Expense – the default limit is $10,000

·         Pollutant Cleanup and Removal – the default limit is $25,000

·         Preservation of Property Expense – the default limit is $10,000

Optional Coverages

Soft costs, Business Income and Rental Value per occurrence must be entered if desired. The occurrence limit is subject to any entered monthly aggregate Limits, but these are optional.

Installation Coverage Policy Limit of Insurance

A place to enter this limit is available, but there is no statement in the coverage form about the limit. It could be a catastrophe-type limit that caps the insurance company’s liability, but there is no statement about how this will be used. An entry made in this area should be handled with extreme caution because it could be used as a cap over all of the coverages provided in the coverage form plus all coverages provided in any attached endorsements.

Coinsurance

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

Deductible

This section has spaces to enter the amount of deductible that applies to the following:

Rates and Premiums–Non-reporting

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

Rates and Premiums–Reporting

The following is entered when coverage is written on a reporting basis:

Special Provisions

Any special provisions are entered in the space provided.

IH 00 73–INSTALLATION 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 broader 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)

a. The following is covered property but only while it is at the jobsite of the project described in the declarations:

Note: This description is much improved over the prior coverage form and declarations page.

b. The items in a. above are covered while at a temporary storage location and while in transit.

c. Coverage ends on the earliest date that one of the following occurs:

 

 

Example: Floyd’s Tile is to install interior and exterior marble tile on a new office building under construction. Transportation cost efficiencies and pressure from its supplier forces Floyd to accept delivery of all of the marble at one time. He keeps the exterior tile at the jobsite and stores the interior marble at a different location until the time comes to install it. Floyd determines the values at the job site, separates them from those at the storage location, and enters them in the appropriate spaces on the declarations. He also enters a transit limit to cover the transit exposure between the two locations and has all its exposures properly covered.

2. Property Not Covered (05 17 changes)

The following described property is excluded:

a. Property at the named insured's premises

The exception is that any property at such premises to be installed at the job site listed and described on the declarations is covered.

Example: The toilets delivered to the manufacturing building renovation job site did not include any tank hardware and equipment. Because there was time until they would be installed, Walt’s Water Solutions (the plumbing contractor on the project) had this equipment delivered to its own premises because the storage facility did not have any more storage space. Walt decided to keep this equipment at its location and move it to the storage facility after he installed the domestic water lines and storage space opened up. The tank hardware and equipment stored at Walt's premises is covered because they will eventually be installed at the job site.

b. Plans and blueprints

Note: Plans and blueprints have the details of the installation and, to some extent, outline how and when installation activities are to take place. They are excluded because they are more like valuable papers and are not an actual part of the installation.

Related Articles:

ISO Valuable Papers and Records Coverage Form

AAIS Valuable Papers and Records Coverage

c. Accounts, bills, currency, deeds, evidence of debt, money, notes, securities, stamps, and letters of credit

Note: This property is primarily money or money substitutes, and coverage is available under commercial crime coverage forms. Some might have actual application to the installation job but are excluded because they are not an actual part of the installation.

Related Article: Commercial Crime Coverage Analysis

d. Tools and equipment that the named insured or any subcontractor owns.

Machinery, supplies, and other similar items are also not covered unless they are meant to become a permanent part of the installation.

Note: Tools and equipment used in the installation are essential to get the job done. However, they are excluded because they are not to become part of the installation. This property is properly covered under contractors' equipment or employee tools coverage forms or policies.

Related Articles:

AAIS Contractors’ Equipment Coverage Forms

ISO Contractors’ Equipment Coverage Form

e. Contraband. Any property that is illegal for the named insured to own or that is in illegal trade or transportation is not covered.

f. Bodies of water or land. Land includes the land where the property is located. (05 17 addition)

g. Lawns, plants, shrubs, or trees (05 17 addition)

h. Any existing building or structure to which the changes are being made. (05 17 addition)

Example: Floyd has a contract with Grand Designs to remove old tile and add new to all bathrooms in a 12-story office building it is renovating. Floyd has completed three stories of tiling when a fire occurs damaging all of the work it had completed. The damage to the tiles is covered, but not the damage to the building to which that tiling was attached.

3. Covered Causes of Loss

Covered causes of loss are direct physical loss or damage to covered property apart from causes of loss that are listed in the exclusions section.

4. Additional Coverages (05 17 change)

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. Below Ground Water and Backup of Sewer and Drain (05 17 addition)

Water or waterborne material damage to covered property is covered if water or waterborne material does any of the following:

This coverage requires that the named insured keep up maintenance and repairs of sump pump and equipment, and also keep the sewers and drains obstruction free. No payment will be made if the named insured does not do so.

Any loss due to the sump pump not working due to power failure is not covered. 

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

b. Debris Removal

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 to remove, restore, or replace polluted land or water is not covered under this Additional Coverage.

c. 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 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.

Example: Floyd is working on a project at a private residence. He has the tiles delivered directly to the owner in anticipation of starting the job in the next week. Kelly arrives early at the job to inspect the tiles. He explains to the resident that the tiles are defective and must be returned. He apologizes profusely but assured her she would not be happy if those tiles were used. He places the tiles in his truck and leaves.

Scenario 1: Kelly, a contractor working on a job site in another state, takes the tiles to that job state and is never seen again. The loss is covered up to $25,000 because the customer freely gave away the property.

Scenario 2: Kelly is a recent hire of Floyd’s. He knew about the shipment and so intercepted it and took it to a friend working out of state. There is no coverage because Kelly was an employee at the time of the loss. Coverage may be available as Employee Dishonesty, though.

d. Limited Coverage for Fungi, Wet Rot, and Dry Rot

(1) Coverage applies only if the fungus, wet rot, or dry rot results from a specified cause of loss or flood, if flood coverage is provided. Fire and lightning losses are excepted from B. Exclusions 1.Primary Exclusions g. Fungus, Wet Rot, or Dry Rot. As a result, this Additional Coverage excludes losses that result from them.

This coverage also applies only if the named insured takes all reasonable steps to prevent further damage to property during or following a loss.

(2) Loss or damage includes more than the direct damage to the property by the fungus, wet rot, or dry rot. It also includes the costs to remove them and the costs to tear out and replace walls and other parts of the building to gain access to the problem area. Any testing necessary to verify the property is clean and the situation mitigated is also covered.

(3) The limit of insurance for this coverage is an aggregate limit of $15,000 per policy year. This means that the limit for the policy year is $15,000, regardless of the number of locations and occurrences. There is no additional limit available once the limit is used up. If the condition continues over multiple policy years, the limit available in the policy year when the loss occurred that caused the fungus, wet rot, or dry rot is the only limit that applies.

The limit can apply per premises but is still an aggregate limit per policy year. This option is available if it is selected on the declarations.

(4) The $15,000 limit is a sub-limit. It does not increase the limit of insurance.

(5) If business income and/or extra expense coverage is provided, this Additional Coverage provides coverage in two different situations:

e. Rewards (05 17 addition)

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

f. Testing (05 17 addition)

When covered equipment sustains a mechanical breakdown during any testing the loss or damage to covered property is paid for up to $50,000. This applies only when the equipment is at the jobsite.

Example: A pressure test is required on the water system before Walt will be paid for his work. A mistake is made and the testing is made at ten times the required pressure. This test causes pipes to burst and damages equipment. The cost for Walt to replace and repair the damaged equipment is paid up to $50,000.

Of course, the inspector performing the test will be sued for damages, but this payment will keep the project running on time.

5. Additional Coverages

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 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. Contractual Penalties (05 17 addition)

This coverage applies only when the first named insured is the general contractor for the project described on the declarations. 

Penalties that are stated in the contract for the described project on the Declarations that is between the first named insured and its customer are covered. In order to be paid, the penalty must meet all of the following criteria:

The most paid is $10,000 per occurrence, but the limit can be increased.

b. 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.

c. Extra Expense (05 17 addition)

After a covered cause of loss has damaged covered property there is a period of restoration. This additional coverage pays for expenses that are incurred by the named insured to reduce or avoid entirely the suspension of the named insured‘s operations.

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

If extra expense is more specifically covered elsewhere, this coverage is not in addition to that other coverage.

d. Fire Department Service Charge (05 17 change)

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 extinguisher system is accidentally discharged, 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. Pollutant Clean Up and Removal

The insurance company pays to clean up pollutants caused by or that result from a covered cause of loss that occurs during the policy period. The most paid is $25,000 per premises 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 process of extracting pollutants from either land or water.

The limit can be increased.

g. Preservation of Property Expense (05 17 addition, change, and removal)

Note: The Preservation of Property additional coverage has been eliminated, and this Additional Coverage that covers only the expense to do so is added. The prior form did not cover the expense, so it is a bonus, but this version does not provide the expanded coverage that is part of the Preservation of Property. The coverage for the property being moved would be under the Transit coverage and the Temporary Storage location coverage.

Covered property may need to be moved from an insured location to prevent damage by a covered cause of loss. In that case, the insurance company pays up to $10,000 per occurrence for the costs incurred by the named insured to place it in temporary storage and the costs to move it there.

Example: A tornado strikes Floyd’s warehouse and badly damages the marble tiles. Out of fear that the building might collapse because of the heavy damage, Floyd moves the damaged property outside to a neighbor’s building. His costs to move the property and the costs his neighbor is charging for storing it are covered for up to $10,000 a day but for no longer than 90 days.

5. Coverage Options

a. Earthquake-Volcanic Eruption (05 17 change)

The parts of the Earth Movement exclusion that conflict with this coverage option do not apply when a limit for Earthquake-Volcanic Eruption is on the Declarations.

Earthquake and Volcanic Eruption are added as a covered cause of loss. Volcanic eruption is defined as not only the eruption but also the explosion or effusion of a volcano. Volcanic and earthquake occurrences include all shocks that occur within 168 consecutive hours. The policy’s expiration date does not reduce this period as long as the event began before the policy expired.

The limit provided is within the limits and not in addition to the limits of insurance. It is also an aggregate limit so that only the remaining limits available after the first earthquake loss can be used to pay for any subsequent loss.

b. Water Damage

The parts of the Water exclusion that conflict with this coverage option do not apply when a limit for Water damage is on the Declarations. The limits provided are within the limits and not in addition to the limits of insurance. An occurrence limit and a separate 12-month aggregate limit can be entered. This means that only the remaining aggregate limits available after the first water damage loss can be used to pay for any subsequent loss. If only one occurrence limit is entered, it becomes the aggregate limit, too.

Water damage is added as a covered cause loss. It is defined as flood, surface water, waves, tidal water, tides, the overflow of a body of water or spray from any of the proceeding. It is also mudslide or mudflow.

B. 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 contributing to a loss, 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.

Related article: Concurrent Causation and Anti-concurrent Causation Clauses–A Discussion

a. Ordinance or Law

This exclusion applies to enforcing or complying with any law or ordinance that either regulates how property can be constructed, used, or repaired or requires a property to be torn down. The exclusion also applies to any associated debris removal.

This exclusion applies even if the loss or damage is from a law or ordinance that must be enforced despite the fact that the property was not damaged or when a law or ordinance is enforced during the constructing, repairing, renovating, remodeling, or demolishing of property following its physical loss or damage.

b. Earth Movement (05 17 change)

Earth Movement consists of five separate components:

(1) Earthquake includes any sinking, rising, or shifting of the earth directly related to the earthquake. 

(2) Landslide includes any sinking, rising, or shifting of the earth directly related to the landslide.

(3) Mine Subsidence applies to only man-made mines and applies whether the mine is operating or not. Note: Mine subsidence coverage is an option that may be purchased separately. In some states, mine subsidence coverage is required to be offered in certain counties. If coverage applies to property located in Illinois, Indiana, Kentucky, Pennsylvania, or West Virginia, the laws in those states should be reviewed carefully to determine the way to properly handle this exposure.

(4) Sinkhole Collapse is covered, but all other sinking, rising, shifting, eroding, contracting, or expanding of the earth is excluded. Loss or damage caused by or that result from water movement beneath the ground and poor soil conditions are also excluded.

However, if any of the events described in (1)-(4) above cause or result in a fire or explosion, the insurance company pays for the ensuing loss or damage the fire or explosion causes.

(5) Volcanic eruption is not covered unless fire, breakage of building glass, or volcanic action ensues. Volcanic action includes airborne blasts and shockwaves, dust, ash, and particulate material the volcano emits, as well as lava flow. The costs to remove dust, ash, and particulate matter are excluded unless there is direct damage to the covered property.

Volcanic eruptions are unpredictable, cause widespread damage, and usually occur over a period of days. An eruption that takes place over a period of 168 consecutive hours is treated as one occurrence. This is very important to an insured with a substantial deductible for this coverage. Instead of a number of deductibles applying to multiple events, only one deductible applies to each 168-hour period. On the other hand, this also means that only one limit is available for all losses occurring within that same period.

All aspects of this exclusion apply regardless of whether nature or any other force causes the event.

The one exception is that this exclusion does not apply to property while in transit.

c. 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.

d. 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.

e. War and Military Action

This exclusion lists three specific warlike activities.

f. Water (05 17 change)

Loss or damage caused by the action of water outside the building is excluded. To further clarify this exclusion, it is broken down into five separate components. Each defines exactly what water means.

(1) Flood is excluded. Flood is surface water, tides, tidal water, and waves. Waves include tidal waves and tsunami. Overflow of any body of water is also excluded. A body of water is a natural or man-made river, creek, ocean, or lake. Spray from any of the above, wind-driven water, and storm surge are also excluded.

(2) Mudslide and mudflow occur when a sudden large volume of water mixes with unstable soil conditions and is excluded.

(3) Water backing up, overflowing or being discharged in any way from a sewer or drain is not covered. Such backing up, overflowing or discharging of water from a sump, its pump, or related equipment is also excluded.

(4) Water saturated ground can create hydrostatic pressure against a building's surface or subsurface portions. Loss or damage caused by or that results from such water that enters through foundations, walls, floors, paved surfaces, basements, doors, windows, and other building openings is excluded.

(5) Damage caused by waterborne material that is carried by waters described in (1), (3), and (4) above is also excluded. Such material moved or carried by mudslides or mudflow described in (2) above is also excluded.  

ISO adds a paragraph that explains when this entire exclusion applies. It applies whether any of the events are caused by an act of nature or otherwise. In order to clarify the term "otherwise," ISO provides an example that uses the terms “dam,” “seawall," "levee," "boundary" or "containment system" and states that any of them failing to contain the water is an "otherwise" type situation. However, it is important to note that using this example format does not limit the exclusion to the failure of only those specific items. The goal is to define the term "otherwise" as broadly as possible.

Much like other exclusions, if fire or explosion occurs because of any action of water, coverage applies to the loss or damage the fire or explosion causes. In addition, if a sprinkler leakage loss occurs due to these actions of water, coverage applies to the loss or damage the sprinkler leakage causes. Sprinkler leakage coverage applies only if sprinkler leakage is a covered cause of loss on the coverage form or policy.

g. Fungi, Wet Rot, and Dry Rot

This is loss or damage caused by or that results from the existence of any activity of fungi, wet rot, or dry rot. However, if the existence of fungi, wet rot, or dry rot causes a specified cause of loss to occur, coverage applies to the loss or damage that specified cause of loss causes.

This exclusion does not apply if the fungi, wet rot, or dry rot result from a fire or lightning loss. It also does not apply to coverage that Additional Coverages Limited Coverage for Fungus, Wet Rot, and Dry Rot provides.

Note: Refer to F. Definitions 1. Fungi for a list of items that Fungi include.

h. Virus, Bacterium, or Other Microorganism

Virus, bacterium, or other microorganism means any of these that induces (or is capable of inducing) any physical distress, illness, or disease. This exclusion does not apply if the loss or damage is caused by or results from fungi, wet rot, or dry rot.

This exclusion (or the application of its terms to a specific loss) is not intended to create coverage for any loss otherwise excluded. It also applies to all coverages that this coverage form includes, including forms and endorsements that cover business income, extra expense, or acts of civil authorities.

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. Unexplained disappearance

When covered property is gone, and there is no obvious cause or explanation of what happened to it.

c. Shortage found upon taking inventory

Any loss discovered as a result of an inventory shortage, and there is no explanation as to what happened to the property, similar to unexplained disappearance. This is sometimes referred to as "inventory shrinkage."

d. 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 who act 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.

e. Artificially generated electrical, magnetic, or electromagnetic energy (05 17 change)

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 are two exceptions:

f. Voluntary parting (05 17 addition)

The named insured or anyone else entrusted with the property being tricked or deceived into giving that property away. There is one exception. This does not apply if coverage is provided in the False Pretense Additional Coverage.

g. Unauthorized instructions

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

h. 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.

i. Theft

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

j. Explosion (05 17 addition)

The following types of explosions are excluded:

There are three exceptions:

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. Weather conditions (05 17 change)

Loss or damage to covered property that weather conditions cause. This exclusion applies only if the weather conditions contribute in any way with a cause or event that involves the following.

1. Primary Exclusions to produce the loss or damage:

·         a. Ordinance or Law

·         b. Earth Movement

·         c. Governmental Action

·         d. Nuclear Hazard

·         e. War and Military Action

·         f. Water

·         g. Fungi, Wet Rot or Dry Rot

·         h. Virus, Bacterium or Other Microorganism

b. Acts or decisions

Acts or decisions any person, group, organization, or government entity makes that result in loss or damage. Failing to act or to make decisions is also excluded.

c. Faulty, inadequate, or defective

With respect to all or part of any property wherever located, coverage does not apply to any of the following faulty, inadequate, or defective:

d. Wear and tear

Loss or damage that is due to wear and tear.

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

e. 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.

f. Mechanical breakdown

Loss or damage caused by or results from machines, tools, or mechanisms failing to operate or to function properly.

g. Insects, vermin, or rodents

Loss or damage to covered property when 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.

h. Rust, other corrosion, dampness, or extremes of temperature

This is rust, other corrosion, dampness, or extremes of temperature that cause loss or damage to covered property.

Notes:

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

Dampness and temperature extremes can affect the oxidation process that affects different forms of property and can have other effects on the same and other forms of property.

i. Settling, cracking, shrinking, bulging or expansion (05 17 addition)

There are no exceptions.

C. Limits of Insurance (05 17 change)

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.

D. Deductible (05 17 change)

The deductible on the declarations must be exceeded before the insurance company pays anything. Once the deductible is satisfied the insurance company will pay up to the limit of the insurance that applies. The deductible applies on a per occurrence basis.

There is one exception. Property in transit is not subject to the deductible.

E. Additional Conditions

1. Valuation (05 17 change)

This condition replaces the Valuation General Condition in the Commercial Inland Marine Conditions.

The valuation of any covered property is based on its replacement cost as of the time of loss. Replacement is what it will cost to replace that property without considering 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:

The property is not required to be built on the same premises, but payment is limited to no more than what it would cost to build on the same premises.

Any cost to repair or replace must not include ordinance or law enforcement increases.

2. Other Conditions

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

a. Coverage Territory

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

b. 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 remaining amount must be paid by other insurance, or the named insured must pay it from its own funds.

F. Definitions

There are 11 definitions.

1. Breakdown (05 17 addition)

The physical loss causing damage to covered equipment in such a way that it must be repaired or replaced. The loss must be due to:

The following are not included in this definition:

2. Computer equipment (05 17 addition)

Electronic equipment that belongs to the named insured and is programmable, it must be used to store, retrieve and process information. The term is broad and includes the safety features needed for the equipment, such as air conditioning, fire suppression system and other devices exclusive to the computer operations.

Peripheral equipment that goes with the other computer equipment described above in order to provide additional functions such as printing and communication.

3. Covered Equipment (05 17 addition)

a. Covered equipment is the following:

b. Covered equipment does not mean or include the following:

Note: As used in chemistry, a catalyst is a substance that modifies and increases the rate of a reaction without being consumed in the process.

Note: Equipment otherwise covered and only occasionally used on dragline, excavation, or construction equipment is covered.

4. Data (05 17 addition)

Programmed and recorded material that is stored on media. It is also programming records used for electronic data processing or to electronically control equipment.

5. Extra Expense (05 17 addition)

The additional cost the named insured incurs to operate its business during the period of restoration. It is those costs that are in addition to the normal costs of operations that would have been incurred during the same period had there been no loss.

It does not include repair or replacement expenses unless the expenses reduce the loss that would otherwise have been paid. Similarly, research, replacement, and restoration costs related to information is not covered unless incurring those expenses reduces the loss that would otherwise be paid.

6. Fungi

These are any type or form of fungus. Fungi include mold, mildew, mycotoxins, spores, scents, or any by-product that fungi produce or release.

7. Media (05 17 addition)

This is electronic data processing or storage media. Examples are films, tapes, discs, drums, or cells.

8. Period of Restoration (05 17 addition)

This is the period of time during which coverage applies. It begins either:

Under either of these, coverage ends on either the date when property at the described premises should be repaired, rebuilt, or replaced or the date the business reopens at a new location. A major sticking point in evaluating when a premises should be ready is the clarifying statement that the repairs, building, or replacing must be done on a timely basis and with substantially similar materials.

The period of restoration does not include any increased time period required because of an ordinance, regulation, or law being enforced or because of the compliance with any ordinance, regulation, or law regulating construction, use, repair, or demolition of any structure.

The period of restoration also does not include any increased time period required to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of pollutants.

The policy expiration date does not affect the period of restoration.

9. Pollutants

These are irritants and contaminants such as smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste of a solid, liquid, gaseous, or thermal nature. Waste includes property to be disposed of, as well as property to be recycled, reconditioned, or reclaimed.

10. Temporary storage location (05 17 addition)

Any location where property that is supposed to become part of the construction project is stored as it awaits being taken to the jobsite.

11. Testing (05 17 addition)

Only the three types of testing described below are considered testing under this coverage form:

Commissioning test - a non-operational use of the equipment to establish specifications and assist in the training of the individuals who will be operating the equipment.

ENDORSEMENTS

ISO has not developed any specific endorsements for exclusive use with the Installation Coverage Form. ISO has developed seven other endorsements that can be used to respond to specific situations.

IH 99 08–Value Reporting Form

This endorsement is used to convert the coverage from a non-reporting form to a reporting basis. Reports of value can be provided on a daily, weekly, monthly, quarterly, or policy year basis.

IH 99 12–Separate or Subcontractors Coverage

Separate coverage may be provided for a portion of a construction project. In that case, this endorsement is used to provide that coverage.

IH 99 13–Separate or Subcontractors Exclusion

Separate coverage may be excluded for a portion of a construction project. In that case, this endorsement is used to exclude coverage for that portion of the construction project.

IH 99 14–Mortgageholders

This endorsement is used to outline the mortgagee’s rights and duties when the covered property is subject to a mortgage.

IH 99 15–Delay in Completion (05 17 change)

This endorsement covers softs costs, business income, and rental value after direct loss or damage to covered property. Examples of soft costs are additional interest, taxes, advertising expenses, insurance expenses, commissions, legal and accounting costs, architectural and building inspection expense, permit fees, storage charges, and survey costs.

Entries must be made on the Installation Declarations if this endorsement is attached.

IH 99 19–Additional Covered Property

This endorsement is used to include coverage for types of property the coverage form excludes.

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.

IH 99 23–Theft from Unattended Vehicle Exclusion

This restrictive endorsement eliminates theft coverage from unattended vehicles. The only exception to this is if the vehicle is locked, compartments closed and windows up AND there is evidence that a forcible entry had occurred.

IM 99 26–Named Storm Percentage Deductible

Any loss due to a storm that has been named by either the National Hurricane Center or the Central Pacific Hurricane Center is subject to the deductible scheduled on this endorsement when it is attached.

IM 99 27-Increased Cost of Loss and Related Expense for Green Upgrades

When a property is being built to green certifications, this endorsement should be attached in order to provide the needed green upgrades. This is particularly needed if the certification had been received prior to the loss and must be recertified.

UNDERWRITING CONSIDERATIONS

Installation coverage forms insure building materials and supplies at the construction site, in transit to the site, and similar property intended to be installed while at other locations as necessary or because of lack of storage space at the construction site. The primary exposures and causes of loss are fire, theft, vandalism, windstorm, collapse, and transit. The underwriting process involves evaluating the location and transit exposures and the protective services and arrangements incorporated into the project to eliminate or reduce the possibility of loss.

The key factors to effectively underwrite installation coverage are evaluating the contractor that does the work, the controls and specific features of the project, and the contracts that govern the responsibilities of each party to the contract that works at the jobsite.

The contractor should have experience doing the work the specific installation project calls for. It is unlikely that a contractor who usually works in a residential setting will be similarly successful on a commercial installation or construction job. A contractor excels only by doing the same or similar work repeatedly and well. Along the same line, a contractor should not do work beyond its area of expertise. A plumbing contractor will not likely do a good job setting drywall in place. A qualified contractor should be able to produce a list of references and jobs successfully completed during the previous three to five years. Doing so allows it to be evaluated relative to the work to be done on the prospective job for which it is being considered.

Controls and security at the jobsite should be adequate to eliminate (or at least reduce) the chances of fire, theft, and other unwanted and undesirable intrusions. In most cases, the general contractor is responsible for site security and directs how the various subcontractors are to work within those security arrangements. There are times when the insured subcontractor is actively involved in oversight of the project and might be responsible for arranging security. In a few rare cases, only a single subcontractor is on the site at a given time, and it assumes the responsibility for security. Arrangements for (and advance notice of) deliveries and vendors on the premises should be required, and others who come on the premises must be challenged and denied access unless and until they can prove that they have a reason or the right to be there.

The nature and content of the contracts the named insured executes are extremely important. The contracts should clearly outline subjects such as ownership of covered property, the responsibilities of each party, and the obligations for purchasing and delivering materials intended to be a permanent part of the installation. The arrangement and timing of subcontractors and their work must be scheduled and committed to writing. If subcontractors, in turn, subcontract part of their work, that relationship and detail must also be addressed. All contractors that work on a given job must produce certificates of insurance that should be filed for future reference if a loss occurs, and responsibility must be established.

The project’s duration is a concern because security is more of an issue on a long-term job than for one completed relatively quickly. The same concern applies to goods in transit because losses are more likely to occur when there are numerous deliveries of materials and supplies. The type of property being installed is also a concern because high-value property requires extra care in handling to reduce the chance of damage. Certain types of property may also be subject to additional exposure to loss or damage through extra-hazardous operations such as rigging and installation at extreme heights involving cranes.

The best way to evaluate, underwrite, and understand an installation project is to take every possible factor or consideration into account and to have some security arrangement, contractual, or risk management technique in place to address it. This results in a more efficient, safe, and properly completed installation or construction project.