ISO MISCELLANEOUS ARTICLES COVERAGE FORM ANALYSIS

The Insurance Services Office (ISO) Miscellaneous Articles Coverage Form insures the property subject to periodic or frequent movement and changes in location. The property can belong to either the named insured or to others when it is in the named insured's care, custody, or control. Camping equipment, engineering instruments and supplies, catering equipment, religious articles, relics, and artifacts are examples of the types of property that can be insured using this coverage form.

POLICY CONSTRUCTION

Miscellaneous Articles Coverage requires at least the following six forms:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions

CM DS 02–Commercial Inland Marine Declarations
CM 00 01–Commercial Inland Marine Conditions

IH DS 79–Miscellaneous Articles Declarations
IH 00 79–Miscellaneous Articles Coverage Form

IH DS 79–MISCELLANEOUS ARTICLES DECLARATIONS

The advisory Miscellaneous Articles 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 79 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. Specific entries are:

Schedule of Covered Property

Specific property is listed with a limit entered for each item.

All Covered Property in Any One Occurrence

A single limit must be entered that caps the amount available to pay for a single occurrence.

Theft from Any Unattended Vehicle

A Theft from Unattended Vehicle exclusion is part of the coverage form. If a check is placed in this box, that exclusion is deleted.

Deductible

This section has a space to enter the amount of deductible that applies.

Rates and Premiums

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

Rates per $100
Premium

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

Deposit Premium
Minimum Premium
Reporting Period
Premium Adjustment Period
Premium Base
Rates per $100

Special Provisions

Any special provisions are entered in the space provided.

IH 00 79–MISCELLANEOUS ARTICLES COVERAGE FORM ANALYSIS

This analysis is of the 12 13 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. Other words that have special meaning are defined in F. Definitions.

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

Covered property is the named insured's property listed and described on the declarations. Similar property of others in the named insured’s care, custody, or control is also considered covered property.

Note: Miscellaneous articles coverage is usually written by scheduling each item to be covered along with its limit of insurance. This may not always be practical because of the number of items to be covered. IH 79 01–Miscellaneous Articles Blanket Coverage can be used to blanket certain items while continuing to schedule others. The blanketed items are described and a per item sublimit provided and a per occurrence limit. This endorsement can be issued with a different deductible than the deductible for items listed and described on the declarations.

Example: Claude’s Catering has six enclosed box trucks that contain a variety of cooking equipment used at various catering events in Megatropolis and the surrounding counties. Claude uses the Miscellaneous Articles Coverage Form to insure the equipment because the Business Auto Coverage Form does not cover it. Scheduling the equipment on the declarations is a good way for Claude to ensure that all equipment is listed and described and that none is inadvertently omitted.

2. Property Not Covered

The following described property is excluded:

a. Real property

Note: Real property is buildings and other permanent structures.

This type of property is usually insured under standard commercial property coverage forms and policies.

b. Aircraft, watercraft, or motor vehicles. The exception is that only motor vehicles designed to be used on public roads are not covered.

Note: Aircraft and watercraft are usually insured under aircraft, boat, yacht, or watercraft coverage forms and policies. Motor vehicles are usually insured under commercial auto coverage forms and policies.

Example: Claude’s Catering insures his six enclosed box trucks under CA 00 01–Business Auto Coverage Form.

c. Property that has been sold and is no longer in the possession of the named insured. Property sold under a deferred payment sales agreement is considered sold.

Note: Property that has been sold and is no longer in the possession of the named insured is not insurable because the named insured no longer has a financial interest in it. When the named insured still has a financial interest in property sold under a deferred payment sales agreement, it can insure such property under an installment sales coverage form.

AAIS Installment Sales Coverage Form Analysis

ISO Installment Sales and Leased Property Coverage Form Analysis

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

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 Acquired Property

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 30 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 $10,000, whichever is less. The named insured must report the value of the newly acquired property to the insurance company within 30 days after it takes possession of it and pays premium for it from the acquisition date. If this is not done, coverage ends after 30 days or at the expiration date, whichever occurs first.

Two important conditions apply:

The coinsurance additional condition does not apply.
This additional coverage does not increase the limit of insurance.

Example: Claude’s Catering has an extensive list of equipment to be covered. The declarations states that all equipment scheduled and on file with the company is covered. That listing includes each item and its value. The total value of all equipment is $50,000. Claude’s buys a catering table for $3,000. His truck overturns as he brings it back to his business. Because of this coverage, the entire loss is covered even though he had not yet reported the new table to the insurance company.

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 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.

War. This can be a declared war, an undeclared war, or a civil war.
Military force of a warlike nature. These activities must utilize military personnel or agents of a government or other type of authority. Actions taken to prevent any of these activities are also considered war.
Insurrection, rebellion, revolution, and attempts to usurp power. Any action a government takes to respond to such actions is also considered war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or that result from any of these events.

a. Denting, chipping, marring, or scratching

Minor damage such as this is very common in property that is mobile and should be handled as a cost of doing business.

b. 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.

c. Dishonest or criminal acts (12 1 3 changes)

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.

The 12 13 edition removed the part of the exclusion in the previous edition that applied to dishonest or criminal acts committed by anyone entrusted with the property for any reason.

d. Breakdown of refrigeration equipment

There is no coverage for loss or damage to covered property when refrigerating equipment breaks down. There is an exception. If fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or by an accident that involves the vehicle transporting the covered property causes then direct loss or damage from the breakdown is covered. This exception applies only if this coverage form covers those listed causes of loss.

Note: This is similar to mechanical breakdown and malfunction or covered property failing to operate. This coverage is available under Equipment Breakdown (Boiler and Machinery) coverage forms and policies.

e. Processing or work upon the property

Loss or damage caused when covered property is being processed or worked upon is not covered. This applies regardless of who is doing the processing. There is one exception. If a fire or explosion results from such work or processing of covered property, any damage to covered property caused by that fire and explosion is covered, but only if the fire or explosion is otherwise covered under this form.

f. Theft from an unattended vehicle

When the loss is due to theft from an unattended vehicle, there is no coverage. There are three exceptions.

If the vehicle's doors, windows, and compartments were closed and locked at the time of the theft AND there are visible signs of forced entry, coverage does apply.
If the covered property is in a carrier for hire’s care, custody, or control.
When the Theft From Unattended Vehicle Exclusion Does Apply box is checked on the Declarations

Example: Louie’s van was full as he drove to a catering event. He saw a major disturbance ahead and noticed someone who looked a lot like his 16-year-old daughter. He stopped the van, jumped out and ran to see what she was doing there. He was relieved that she was fine and was only an observer. Then he realized the van was unattended. He ran back, but in the 15 minutes he had been gone, someone had removed most of the food and equipment. This theft loss was excluded because the truck was unlocked while it was unattended.

g. Unexplained disappearance

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

h. 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."

i. 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:

Networks, devices, systems, wires, or appliances of an electrical or electronic nature
Cellular or satellite devices, appliances, systems, or networks

Examples of this excluded energy are electrical current, charges a magnetic or electromagnetic field produces, and microwaves, but they are not limited to just these. There are two exceptions:

If the energy described in this exclusion results in a fire or explosion, coverage applies to the direct loss or damage that fire or explosion causes but only if the fire or exploration are considered covered causes of loss under this coverage form.
The exclusion applies only to the particular item in which the disturbance occurs

j. Voluntary parting

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

k. Unauthorized instructions

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

l. 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.

m. Theft (12 13 addition)

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 a 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 a loss or damage caused by hidden or latent defects in the property.

c. Mechanical breakdown

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

d. 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.

e. Corrosion, rust, dampness, or extremes of temperature

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

Notes:

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

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

C. 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.

D. Deductible

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 that applies) exceeds the deductible on the declarations. It then pays the amount of the adjusted loss or damage that exceeds the deductible up to the limit of insurance that applies.

E. Additional Conditions

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

1. Coverage Territory

The coverage territory is anywhere the property is located.

Note: This is essentially worldwide coverage.

2. Coinsurance

Each item of covered property must be covered for its total value at the time it sustains loss or damage. If not, the named insured incurs a coinsurance penalty. The insurance company pays only the proportion of any loss or damage to the item that its limit bears to its actual value at the time of loss or damage. The amount the company pays is determined as follows:

Step a. Divide the limit of insurance for the damaged item by its value at the time of loss.

Step b. Multiply the total amount of loss or damage by Step a. This is done before applying any deductible amount.

Step c. Subtract the amount of deductible from Step b.

The insurance company pays the lesser of Step c. 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.

Note: This coverage form’s coinsurance additional condition is different from the corresponding condition in most other non-filed ISO Inland Marine coverage forms because it basically requires 100% coinsurance. However, the process and intent are similar.

F. Definitions

There is one definition.

Accident

The upset or the overturn of any type of conveyance or transporting vehicle. Accident is also the forceful and accidental contact of a conveyance with another vehicle or object. It does not include any contact with the road itself or with curbs, railroad rails, or railroad ties. Contact the transporting vehicles makes with any stationary object while backing in to load or unload is also not considered an accident.

ENDORSEMENTS

ISO has developed one specific endorsement for exclusive use with the Miscellaneous Articles Coverage Form.

IH 79 01–Miscellaneous Articles Blanket Coverage

This endorsement allows the named insured to insure a large number of low-value items on a blanket basis. Coverage applies subject to a maximum limit on any one item and a separate limit to apply to all items damaged or destroyed in any one occurrence. A different deductible can apply to property written this way than the deductible that applies to scheduled property.

Example: Claude’s Catering prefers blanketing the equipment rather than having to constantly update the schedule. Claude lists, describes and declares values on his largest and highest-valued equipment. He insures the rest on a blanket basis, with a maximum value on any one item and an aggregate limit to apply in a single occurrence. The deductible on the scheduled items is different from the deductible for the items written on a blanket basis. Claude writes his coverage on a reporting form basis and submits a monthly report to the insurance company of all covered property. This report also enables Claude to automatically take care of the newly acquired property reporting requirement every month.

ISO has developed four other endorsements that can be used 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 Miscellaneous Articles Coverage Form is usually written on an actual cash value basis. This endorsement can be added to cover all property on a replacement cost basis or only certain described property identified on the declarations.

IH 99 08–Value Reporting Form

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

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 who have 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.

UNDERWRITING CONSIDERATIONS

This coverage form insures specific items or types of property that move from one location to another. This means that underwriting must address both transit and temporary location issues as well as permanent or fixed location-specific issues. The property itself can vary widely in its damageability, size, and value, and a single item can have all of these variable elements.

The first location(s) to be evaluated are those where the articles are kept while not in use. Basic property underwriting issues of construction, occupancy, public and private fire protection, and surrounding exposures must be evaluated. If theft is an issue, security must be evaluated and appropriate protective systems incorporated where needed.

The next locations to be evaluated are any premises the named insured does not control or operate but where the covered property is regularly used and may be stored to be used as needed. Again, basic property underwriting issues of construction, occupancy, public and private fire protection, and surrounding exposures must be evaluated. If theft is an issue, security must be evaluated, and appropriate protective systems must be incorporated where needed.

In both situations, storage should be above grade level and in well-ventilated areas if the property is susceptible to water damage or extreme dampness.

Exposures for this property in transit are significant because coverage applies to this property on a worldwide basis, regardless of the type of transportation. The type of property and its susceptibility to breakage, theft, and other types of damage must be evaluated, and loss prevention measures considered.

It is important to anticipate the types of losses that can occur to these articles, so loss runs containing no fewer than three years experience is vital. In some cases, the insurance company may require high deductibles, special handling requirements, or security systems and alarms as a condition of coverage.