(May 2010)
This document is a repository of analyses, comparisons and articles that relate to various earlier editions and historical inland marine coverage forms and policies. Refer to the various Inland Marine PF&M Sections for analyses of and information about the latest inland marine coverage forms and policies.
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Archive Index |
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Overview |
Inland Marine Historical Forms Overview |
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Analysis |
Furriers' Block Policy (08/92) |
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Analysis |
Furriers' Customers Policy (08/92) |
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Analysis |
Furriers' Customers Excess Legal Liability Endorsement (08/92) |
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Analysis |
Furriers' Customers Certification Endorsement (08/92) |
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Analysis |
Garment Contractors Insurance (07/92) |
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Analysis |
AAIS Builders' Risk Coverage Forms (04 04 edition) |
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Comparisons |
Reserved For Future Use |
Occasionally, an Inland Marine Form that was once widely available may lose its relevance, become a proprietary (filed) form or may evolve into a market niche; served by specialty companies. Such is the case with the forms that are part of the Inland Marine Historical section. The forms included here were, in the past, offered by many carriers but are now offered by very few (if written at all). However, the information may still be useful for the sake of comparison and/or perspective. While, naturally, some of the information is obsolete (regarding current market needs, language, etc.), much of it remains relevant for the class and the coverage provided. These analyses have been republished here, along with notations of their last review date. The republished material also includes updated references to other, related, article sections.
FURRIERS'
BLOCK POLICY
Editor’s note: The material in this analysis was last published in August 1992. Currently, there is no AAIS or ISO version of this form. Each company that offers this coverage uses their own form. The various form provisions may be reflected in the items appearing in this discussion. While points in this discussion remain relevant to this exposure, please use this as an historical reference rather than as a current analysis.
Purpose
This policy covers, on an all risk basis, stock consisting of fur garments and garments trimmed with fur, belonging to the insured dealer in such property (fur departments of department stores are eligible) and fur garments of other dealers for which the insured is liable. This insurance does not cover furs of customers in the custody of the insured for storage or repair. A Furriers' Customers policy, a bailee form, covers that exposure.
The two policies are an excellent combination, there being no overlapping of coverage. The policy is written subject to the submission of a proposal form which supplies necessary rating and underwriting information.
ANALYSIS OF POLICY
COVERAGE
A Furriers' Block policy covers, against risks of direct physical loss or damage, on stock in trade of the insured, consisting principally of furs, fur garments, garments trimmed with fur and accessories, the property of the insured or sold but not delivered. The policy also applies to property of others who are dealers in such property or otherwise engaged in the trade for which the insured may be liable. Coverage includes the insured's interest in such property for labor performed and materials used.
The policy provides specific limits for the maximum liability of the company resulting in any one loss, disaster or casualty for the following situations:
The policy also pays for damage (except by fire) to that part of the building occupied by the insured and to equipment in it, directly resulting from theft or attempted theft. This provision does not apply to department store premises. It applies in other cases only when the insured is the owner of the premises or is legally liable for the damage. There is no indemnity for damage to glass, except to structural glass.
The combined liability of the company under premises damage and under damage or loss to property on the premises may not exceed the maximum limit of the company for property at that location.
PROPERTY NOT COVERED
A Furriers' Block policy does not cover the following property:
· Property while at any exhibition promoted or financially assisted by any public authority or by any trade association
· Property while being worn by the insured, an officer of the corporation, member of the firm, director, agent, employee or messenger, or by any dealer or other person, firm or corporation engaged in the fur trade, or by any member of the family, relative or friend of the insured or other dealers. The exclusion does not apply to property being modeled on the premises of the insured or another dealer, or while at exhibitions not otherwise excluded
· Property while exhibited in showcases or show windows away from the insured's premises
· Property in transit by mail (unless registered)
· Property in transit by express, railroad, waterborne, air, motor carrier or freight forwarders, unless:
A full declaration of value is made to the carrier on shipments of less than $200
A declaration of 25% of the value of the shipment or $200, whichever is greater, is made to the carrier, if shipment is $200 or more. If shipment is by REA Express, merchandise must be designated as "furs" on the carrier receipt
The shipment is by carrier operating exclusively as a Merchant's Parcel Delivery Service; or
Property is in custody of air carriers' passenger baggage service for transportation under air freight tariff with delivery to passenger at destination. Such property is considered as accompanied baggage and subject to the limitation stated in the policy for property in locations other than those otherwise scheduled.
ADDITIONAL COVERAGE
The policy also pays for direct loss caused by or resulting from risks of direct physical loss involving the collapse of all or part of a building caused by one or more of the following:
This additional coverage was added to commercial all risk policies under the simplified commercial property and inland marine insurance programs inaugurated in the late 1980s.
EXCLUSIONS
The policy is an all risk form, but does not pay for loss caused directly or indirectly by the following:
REQUIRED OF THE INSURED
It is a condition of the insurance that the insured maintain a detailed and itemized inventory of his property and separate listing of all travelers' stocks, in such a manner that the exact amount of loss can be accurately determined from the records by the company; and that the insured also maintain detailed records of the property of others covered under the policy.
It is also a condition of the policy that the insured maintain so far as is within his control such protective devices as were stipulated on the proposal form or in endorsements attached to the policy for which rate credit has been granted. Failure to maintain such safeguards may suspend the insurance as respects the premises or situation affected during the time of discontinuance of the safeguard.
VALUATION
On unsold property, the company is not liable for more than the actual cash value of the property at the time of the loss. The loss or damage is to be estimated according to actual cash value less depreciation, but not exceeding the lowest amount put on the property in the insured's inventories, stock books, stock papers or lists existing at the time of the loss, nor the cost to repair or replace the property with material of like kind and quality.
On sold property, the company is not liable for more than the net selling price after all allowances and discounts.
On property of others, the company is not liable for more than the amount for which the insured is liable, not exceeding the actual cash value at the time and place of the loss, including labor performed and materials used by the insured.
IN EVENT OF LOSS
In event of loss or damage to property of others held by the insured, the company reserves the right to adjust such loss or damage with the owners of the property. If legal proceedings are taken by others to enforce a claim against the insured as respects such loss or damage, the company reserves the right at its option without expense to the insured to defend on behalf and in name of the insured.
The Furriers' Block policy does not cover loss or damage when there is any other insurance, except as to the legal liability of the insured. However, if under the other insurance the liability would be for a lesser amount than would have been recoverable under the Furriers' Block policy, then the Furriers' Block policy would pay the difference.
UNDERWRITING (Acceptability)
Furriers' Block policies may be written only for dealers in property consisting principally of furs, fur garments and garments trimmed with fur, excluding those who deal exclusively in raw or dressed skins and those who manufacture exclusively for the fur trade. The fur department of a department store may be insured. A two-part proposal must be completed and signed by the applicant. The first part is concerned mainly with insurance limits and business operations; the second, with protective facilities. Understandably, this insurance is available only to risks maintaining first-rate crime prevention equipment.
Although the policy was previously written with an 80% Coinsurance clause, the latest form does not contain any Coinsurance provision, limits of liability depending on maximum limits selected by the insured in the declarations of the policy and stated in the proposal for insurance. The reporting form of coverage is no longer written as a standard form.
PROPOSAL
A proposal is required to be submitted before the risk is accepted and the policy issued by the company. Similar to the Jewelers Block policy, the proposal is attached to the policy and becomes part of the policy's provisions. The insured warrants that the information on the proposal is correct. This warranty that information is factual is of vital importance to the underwriter.
The proposal contains detailed information concerning prior loss history, the amounts of insurance required, the insured's inventory, bookkeeping procedures, and the burglary protection afforded the stock enclosure and premises.
Also requested is the proportion by value of property kept in locked enclosures protected by the burglar alarm system, as well as the proportion kept in other locked enclosures and outside of enclosures.
Details concerning the travel and messenger exposure during the prior twelve months are required. Space is also provided on the proposal for information about the show window and show case exposure, if that coverage is requested.
TERRITORY
The property is covered wherever located within the United States, Puerto Rico and Canada.
DEDUCTIBLES
The rules provide for the use of optional deductibles of $500, $1,000, $2,500 or $5,000. The deductible applies to each adjusted claim or the applicable limit of liability, whichever is less. The deductible does not apply to loss or damage caused by fire or lightning at the insured's premises. The deductible must be assumed by the insured, and may not be covered under any other policy of insurance.
Rate credits for the various deductibles are figured on a formula based on the size of the premium and the amount of the deductible.
RATE AND PREMIUM
Each risk is required to be submitted to the company for rating and annually for rerating. The risk is not rated unless a proposal form is submitted and dated within 60 days prior to the time it is received.
ADDITIONAL COVERAGE BY ENDORSEMENT
Show Window And Show Cases Endorsement may be attached for additional charge, determined from proposal facts, covering theft from show windows and show cases at the premises and at described locations elsewhere.
The endorsement provides coverage for theft from show windows when the premises are open or closed to business, and coverage in any one window or all windows. The insured must indicate in the proposal the desired coverage in each situation, and the maximum limits of the company are declared on the endorsement.
Other Property coverage may be endorsed on to the policy to cover one or more of the following categories: Furniture and fixtures, tenants’ improvements and betterments, machinery and fittings.
The endorsement extends the All Risk coverage and exclusions of the policy to such property. There is an 80% Coinsurance clause applicable to property insured under this endorsement.
Editor’s note: The material in this analysis was last published in August 1992. Currently, there is no AAIS or ISO version of this form. Each company that offers this coverage uses their own form. The various form provisions may be reflected in the items appearing in this discussion. While points in this discussion remain relevant to this exposure, please use this as an historical reference rather than as a current analysis.
This policy is designed to provide coverage on furs and garments trimmed with fur for furriers, banks, stores, warehouses, laundries and cleaners who accept such garments for storage. The policy covers property of customers left with the insured for a declared value for which receipts are given to the customers. The policy is written on application.
The Furriers' Customers Custody policy insures against all risks of loss or damage to insured property, except for certain named exclusions. Within the policy limits, it covers for the insured's legal liability for property of others in his custody for alterations, repairing, cleaning, remodeling or storage.
Property Covered - Insured property consists of furs and garments trimmed with fur owned by customers of the insured or under contract of sale to customers.
Coverage applies only to garments for which the insured has provided customers with receipts. The receipts contain an agreement that the insured will effect insurance in accordance with policy conditions.
Where Covered - The policy covers within the United States, Puerto Rico and Canada, while the property is in the custody of the insured. Losses are covered which occur during transportation or at the premises named in the policy. Limits of liability in any one casualty are specified for each location and while in transit.
While this is a broad coverage policy, it contains an important exclusion that should be made clear to the applicant: Loss or damage by processing or any work done upon the property is not covered, unless caused by fire or explosion. Careless workmanship is the object of this exclusion. The policy also does not insure:
Receipts - The insured gives a receipt to his customers which provides that: the customer accepts the receipt as correct in all respects; the insured will have effected insurance on each article listed on the receipt for a specified amount, which is the limit of the insured's liability for any loss or damage to the articles; the provisions of the receipt do not extend the insurance provided by the policy; the receipt supersedes any temporary receipt.
Records - The insured maintains an accurate record of receipts issued which describes each article, shows the customer's name and address, description, amount of value and where located. This record is open to inspection by company representatives at all reasonable times.
Reports - A report of values is made by the insured to the company not later than the 15th of each month. The total amount of values in all receipts outstanding on the last day of the previous month is stated and the insurance rate per $100 of value is applied against that amount.
Limits of insurance are described carefully and clearly. Premiums are paid on the basis of the aggregate amount of insurance set forth in all receipts, but the limits of insurance apply even if the aggregate of the values stored should exceed the limits.
Specific dollar limits are set forth applying to:
(1) the aggregate amount for which the company is liable in any one casualty;
(2) storage enclosures at specified premises;
(3) locations outside storage enclosures at the specified storage premises;
(4) other premises not used for storage purposes;
(5) any other unnamed premises;
(6) property in transit.
The insurer is not liable for more than: the amount stipulated on the storage receipt; the actual cash value; or the cost of repair with materials of like kind and quality, whichever is the least.
The policy is written subject to the completion and approval of a proposal which is signed by the insured. The proposal is not binding on the applicant, but it and the accompanying description of location are the basis of the contract if a policy is issued. The entire policy is void if any material fact is misrepresented.
Proposal describes name, location and nature of business. Peak values of customers' goods during the preceding 12 months at all locations are given, as well as loss experience.
A detailed description of each storage enclosure and location completes the necessary underwriting information. A separate form, entitled Description of Storage Enclosure and Location, accompanies the proposal. This form requests information concerning the construction of the building housing the storage enclosure, and other detailed information concerning the burglary protection at the premises and the construction of the storage enclosure.
The proposer may specify if he desires Excess Legal Liability coverage. The proposer may also express a need to issue certificates.
No insurance is issued on the specified articles by or through the insured in another company.
Maintenance Of Protective Safeguards -The insured must use due diligence to maintain the protective safeguards which were stated in the proposal of the insurance to be in effect at the time of inception of the policy. This is important because many fur storage premises are protected by burglar alarms, sprinkler systems or watchman service. Rates and underwriting are based upon the presence of these safeguards. The insurance company must be notified if any of them are discontinued.
It is good public relations on the part of the insured, as well as a policy requirement, that he report losses immediately to the company or its agent. A proof of loss is filed within 60 days from the date of loss.
The insured is privileged to take reasonable steps to recover and preserve insured property in the event of loss. The company will contribute to the cost of such efforts.
The insured and other interested persons submit to examinations by company representatives when necessary. Books and records are produced by the insured to facilitate the settling of claims.
Losses are paid to the insured or adjusted with the owner of the property. The company protects, removes and reconditions insured property as it deems necessary, reserving the right to employ independent workmen.
Recovery by a customer is limited to the amount contained in the receipt given him by the insured.
Claims are paid within 30 days after satisfactory proof of loss is received at the home office of the company.
No action may be brought against the company for recovery of a claim unless it is begun within two years after the occurrence of the loss. When a state law is in conflict with this provision, the shortest limit of time permitted applies.
Policy Period - The policy is written on a continuing basis and terminates only when canceled by either party giving notice to the other.
Cancellation - Earned premiums are computed pro rata. Cancellation by the company requires 30 days' (10 for nonpayment of premium) written notice. Premium adjustment is made as soon as possible after cancellation becomes effective.
The Furriers' Customers policy is issued only to proposers who have superior storage facilities. Reputable furriers, department stores, banks, cold storage companies and storage warehouses are the kind of prospects who should be solicited for this coverage.
Fireproof vaults, central station alarm systems and sprinkler systems are features which make risks desirable. If the risk is not good from a fire and burglary standpoint, it is generally ineligible for this policy.
Frequent losses over a one to three year period indicate excessive carelessness or vulnerability to some peril. Such risks should be avoided.
Underwriting a furriers' customer policy requires the analysis of the exposures from the time the garment is first accepted from the customer until the time it is returned. The transit exposure is important if the insured has a pickup and delivery service or does not store garments on its own premises and must transport them to the storage warehouse. Suitable locks and alarms on each vehicle will cut down on the chance of loss. Principal exposures are fire and theft while at the insured's premises or at a storage warehouse.
Each risk is individually rated by the company. The agent indicates in the proposal the Fire contents rate for each storage enclosure and location, and this is the basis of the rate.
Loadings are added to the base Fire rates for all other hazards, and credits are allowed for burglary and theft protection.
In order to eliminate monthly billings and collection in the case of policies producing small monthly earned premiums, the company may collect from the insured on each anniversary date of the policy a deposit premium equivalent to the full estimated annual earned premium. Earned premiums as developed by the monthly reports are credited against the deposit premium and:
If the deposit is fully earned prior to anniversary, additional earned premiums are billed and collected until anniversary date, at which time another deposit premium is secured. If the deposit is not fully earned upon the anniversary date, an appropriate adjustment is made and a further deposit secured.
The following endorsements may be attached to the Furriers' Customers policy for an additional premium:
Legal Liability Endorsement - covers the liability imposed upon the insured by law for sums in excess of the amounts entered in customers' receipts.
Furriers' Customers Certification Endorsement - Extends the policy to cover garments of customers while in their possession when certificates of insurance (not receipts) have been issued by the insured.
Editor’s note: The material in this analysis was last published in August 1992. Currently, there is no AAIS or ISO version of this form. Each company that offers this coverage uses their own form. The various form provisions may be reflected in the items appearing in this discussion. While points in this discussion remain relevant to this exposure, please use this as an historical reference rather than as a current analysis.
The purpose of this policy is to protect a furrier, insured under a Furriers' Customers policy, to the extent of the liability imposed on him by law for damage to property left in his custody. An endorsement is attached to basic policy and applies only to the difference between amount declared in customers' receipts and actual cash value. There are two forms: Form A and Form B, which differ slightly.
The Furriers' Customers Excess Legal Liability endorsement ("Form A"), when attached to the Furriers' Customers policy, pays all sums which the insured may become obligated by law as a bailee to pay in excess of the valuations entered in customers' receipts.
Limits of liability are specified for any one article and for any one casualty.
Customers who store their furs with furriers usually have Fur Floater policies of their own. They often declare their furs at a figure far below the actual cash value in order to avoid paying insurance charges that are unnecessary for their point of view. However, the furrier is exposed to potentially great losses when he accepts garments at a low declared value. The liability imposed upon him by law might be the full value of destroyed garments and the full cost of repairing damaged garments.
The Excess Legal Liability endorsement protects him against losses in excess of values entered in customers' receipts.
The insurance afforded by the Excess Legal Liability endorsement does not apply to:
It should be emphasized that this endorsement extends the Furriers' Customers policy, Custody form, to cover in excess of the amount per article stipulated in the insured's storage receipt, on the common law or statutory liability of the insured. Under certain circumstances the courts have held fur stores, repairers, etc., liable for amounts in excess of the storage receipt limits, and such suits frequently involve, in addition, substantial defense costs.
The same underwriting selectivity applies to the Excess Legal Liability endorsement as applies to the basic Custody policy. Reputable furriers, department stores, cold storage companies and storage warehouses are the kind of prospects that should be solicited for the coverage if they have superior facilities.
Fireproof vaults, central station alarm systems and sprinkler systems are features which make risks desirable. If the risk is not good from a fire and burglary standpoint, it is generally ineligible for the coverage.
It is important, also, that expert appraisers of furs be employed by the insured. If all furs were accepted at figures far below their actual value, the exposure might be too great for the premium obtained for the endorsement. The public relations position of the furrier is improved, however, when he is able to accept furs from customers who carry full insurance themselves at a declaration somewhat below the true value. This must be held to a minimum by the furrier for the Excess Legal Liability coverage to be satisfactory from a company underwriting standpoint.
The basis for the rate for this endorsement is the Fire contents rate for each storage enclosure and location. Loadings are added for all other hazards and credits are given for protective measures. The home office or departmental office of the company considers the risk before the coverage can be made effective. The coverage calls for experienced underwriting judgment because of the indefinite exposure within the limits of liability, with weight given to the physical factors and the quality of the risk. Therefore, rates vary among different risks.
The rate for the coverage afforded by the endorsement is applied to each $100 of value in all outstanding receipts as of the last day of each month. Reports of values are made not later than the 15th of the following month. This premium is in addition to that charged for the basic Custody policy.
Rates are quoted upon request and depend largely upon the limits of liability required. For retailers or bailees issuing receipts to garment owners, the rate is applied to the same values as reported under the Custody form. For wholesalers or bailees storing property of customers of other bailees, a flat annual premium is promulgated.
Editor’s note: The material in this analysis was last published in August 1992. Currently, there is no AAIS or ISO version of this form. Each company that offers this coverage uses their own form. The various form provisions may be reflected in the items appearing in this discussion. While points in this discussion remain relevant to this exposure, please use this as an historical reference rather than as a current analysis.
The purpose of this endorsement is to permit the insured to furnish to his customers Certifications of Insurance that extend the coverage of the basic Custody policy when garments are returned to their owners. Other endorsements may be added to Furriers' Customers policies in some states that provide for the issuance of special Personal Fur policies.
The policy is extended to cover, while in all situations, furs and garments trimmed with fur that are property of the insured's customers and for which the insured has issued a Certification of Insurance. Certification of Insurance forms must be approved by the company and do not cover beyond the time the ownership of a garment remains vested in the person to whom issued. Certifications may not be issued for a period longer than 12 months.
It is agreed by the insured that Certifications of Insurance will be issued only in combination with annual storage agreements at a combined storage and insurance charge. The insured also agrees that the rate and premium applying to the insurance will not be stipulated as such on any Certification, bill, circular or advertising matter. No Certification shall be issued on any article for an amount greater than the valuation stipulated in the named insured's storage receipt applying to the article.
Certificates act as individual fur floaters to cover personal furs wherever they are located, either in storage or in the customers' possession. The customer pays an extra premium for such certificates, but not as much as would be charged under a Personal Articles Policy or Fur Floater.
Before the certificates are issued, an endorsement must be attached to the Furriers' Customers policy. The terms of the endorsement, as well as the conditions of the certificate, vary in accordance with the requirements of each individual state insurance department.
Some states require that the amount of insurance on the certificate not exceed the insured's estimate of the value of the article at the time of issuance. Other states require that the amount of insurance on the certificate not exceed the amount stated in the storage receipt. Requirements also vary with respect to premium shown on the certificate. Some states require that separate charges be shown for the certificate and for storage. Other states do not have this requirement.
The certificate must be countersigned in accordance with the state countersignature laws. Copies of each certificate are issued and sent to the insurance company. In the event that a certificate is to be canceled by the company, an individual notice of cancellation must be sent to the certificate holder. Cancellation of the basic policy does not effect the cancellation of certificates.
Editor’s note: The material in this analysis was last published in July 1992. Currently, there is no generic form of this policy. Today, aspects of this coverage may be found under the AAIS Commercial Output Policy or the ISO Capital Assets Policy. While points in this discussion remain relevant to this exposure, please use this as an historical reference rather than as a current analysis.
The Garment Contractors policy protects a garment manufacturer against loss of or damage to garments while such property is at risk on the premises of contractors and sub-contractors and in transit between the insured and such persons. This is a specified peril coverage written by companies active in commercial Inland Marine insurance. Insurance is also available on the insured's premises or on an all risk basis.
The Garment Contractors Floater policy covers specified types of garments manufactured, unmanufactured or in the process of manufacture, including materials, supplies and containers, that are the property of the insured, held by him in trust, on commission or on consignment, or on which he has made advances.
The policy insures, while the property is in transit, against all risks of direct physical loss of or damage to insured property.
It insures, while the property is on the premises of contractors or sub-contractors, against direct physical loss or damage to insured property directly caused by:
A Garment Contractors Floater policy covers property in course of transit between the premises of the insured and premises of his contractors and premises of his sub- contractors or from mills or other suppliers to contractors or sub-contractors. It also covers on the premises of contractors and sub-contractors for the purpose of performing work on the property for the account of the insured. (Not considered contractors or sub-contractors within the meaning of the policy are throwsters or other yarn processors, weavers, finishers or other cloth finishing works, printers, dyers, spongers, shrinkers, tanners or testing houses.)
Insurance is effective on property within and between the States of the United States and District of Columbia, excluding Alaska and Hawaii. The policy does not cover mail shipments, for which a Mail Coverage Form is suggested.
The Garment Contractors Floater policy does not cover:
The following three coverages are expressly excluded from the policy coverage unless the word "COVERED" is inserted in the space opposite the "Optional Coverage" item in the declarations and additional premium is paid as required:
The following are the definitions contained in the policy provisions for Optional Additional coverages:
No claim is payable for Consequential Damage unless the insured has for a period of 21 days from the date of the loss made a bona fide effort to replace lost or damaged property and to refill or complete the lots or range of sizes or colors. The company may require the insured to surrender to the company the remaining garments or parts of garments, damaged or undamaged, upon the payment or offer to pay of any loss.
Garments, parts of garments and other insured property physically lost or damaged are valued at the actual cost thereof, including labor performed at date of loss, but not exceeding replacement cost on the date and at the place of loss.
If any other kind of insurance exists on property covered under the Garment Contractors Floater at the time of the loss, the insurance afforded under the Garment Contractors Floater does not apply except as excess insurance. Insurance provided by the floater policy does not contribute to the payment of any loss until the amount due from all such other insurance has been exhausted.
The company is not liable for a greater proportion of any loss or damage than the amount insured under the policy bears to 100% of the actual aggregate value at all places, excluding property in transit, where coverage is afforded by the policy at the time such loss occurs. When the policy becomes excess insurance, then the liability of the company does not exceed the above proportion of the amount of excess.
Any act or agreement by the insured, before or after loss or damage, whereby any right of the insured to recover from any carrier in whole or in part for loss or damage to covered property is released, impaired or lost, renders the policy null and void. The company is not liable for any loss or damage which has been settled or compromised by the insured without the written consent of the company. It is agreed, however, that the insured, its agents, servants or employees, or any person, firm or corporation shipping goods at the risk of the insured may accept from carriers bills of lading or receipts whereby the carrier's liability is limited to $50 per shipment or $1.00 per garment.
This insurance may in no manner benefit any carrier or other bailee directly or indirectly.
The insured must as soon as practicable report in writing to the company or its agent every loss, damage or occurrence which may give rise to a claim under the policy. The insured must also file with the company or its agent a detailed sworn proof of loss within 90 days from date of discovery of such loss, damage or occurrence. All adjusted claims must be paid by the company within 60 days after presentation and acceptance of satisfactory proof of interest and loss at the office of the company.
It is understood and agreed that books and records will be kept by the insured in such a manner that the exact amount of loss or damage can be accurately determined by the company. The books and records of the insured, at all times during business hours, must be open to representatives of the company.
Each claim paid under a Garment Contractors Floater policy reduces the amount of insurance by the sum paid. However, the amount of the loss is automatically reinstated and a pro rata additional premium is due and payable from the date of the occurrence.
Though the Policy Period may not be longer than one year; a policy may be written for a period of time less than one year. Cancellation by the insured is short rate; the company cancels pro rata with 5 days' written notice. Cancellation or termination of the policy does not affect shipments in due course of transit at the time of cancellation or termination.
Garment manufacturers with good financial ratings and good physical plants are prospects for this coverage. It is intended for those who send unfinished property to others for completion, or contractors having property of manufacturers on their premises. Certain types of property are not eligible for coverage under the policy, so those dealing in such goods should be eliminated from the prospect list. Ineligible property includes: leggings, spats, footwear, or hosiery; headwear; jewelry or costume jewelry; fine arts; musical instruments, photographic equipment and supplies and accessories; signs or outdoor equipment; air conditioners or domestic appliances; carpets or cloth awnings; data processing equipment and media.
The garment contractors policy is a bailor form, covering the insured bailor's property in transit, and while on the premises of contractors and subcontractors. The insured may require the use of a number of contractors before the garments it manufactures are completed. The major contractors, those that require the higher limits of insurance, are scheduled on the policy. Those with lesser exposures are grouped in the category of unnamed contractors with a single limit applying for any one of these. This limit may usually not exceed 25 percent of the largest limit of scheduled locations.
All policies covering property insurable under a Garment Contractors floater or liability for such property, even though limited to the liability of a contractor or sub- contractor, are subject to the Garment Contractors floater rules. Necessary special conditions applicable to liability policies are authorized by the company in each specific case.
Application-Policies are written only by the service, departmental or home offices of companies upon receipt of a completed application for rating. Provision is made in the application for information relative to: name and address of applicant; each type of garment manufactured by the applicant; the length of time the applicant has conducted his business; whether the applicant or any of the principals have engaged in business under any other names or trade style; losses suffered during the previous three years; limits of liability and optional coverage (see below) desired; names and addresses of contractors used by the applicant; name of present insurance carrier; and details of cancellations or declinations by other companies.
A separate amount of insurance is scheduled while on the premises of each contractor. In addition, there is a separate limit for property at any contractor's premises not scheduled.
There are also separate limits for property in the custody of any air transportation carrier and for property in the custody of other common or contract carriers.
A separate limit applies to property in the custody of messengers of the insured, his contractors or subcontractors; and a separate limit applies to property in transit by any other means not otherwise scheduled.
There is considerable transit exposure in the garment contractors insurance coverage. Theft is an important risk during transit. While the property is on the contractor's premises major exposures are fire, theft and water damage. Major exposures on the insured's premises (when that coverage is written) are fire and theft.
The coverage applies only while the property, including property in transit, is within the U. S., Canada and Puerto Rico. Property in transit to or from Alaska, Hawaii or Puerto Rico is excluded.
The Garment Contractors Floater may be extended to cover on an All Risk basis by the attachment of the All Risk Extension endorsement. In other than a gross sales policy, the Garment Contractors Floater may also be extended to cover on the insured's premises through the attachment of one of the following endorsements upon the submission of the Extension Endorsement Application Supplement and rating by the insurer:
The Garment Contractors Floater by the use of this endorsement is extended to cover the property covered while in, on, or in transit between the premises of the insured as scheduled.
The following exclusion is added to the policy when this endorsement is attached:
This policy does not cover loss or damage contributed to or aggravated by any of the following while the property is in or on the insured's premises:
The Garment Contractors Floater, when the All Risk Extension endorsement is attached, insures against all risks of direct physical loss of or damage to the property covered, subject to the perils excluded.
The All Risk endorsement contains the following exclusions:
This endorsement is a combination of the two previously explained endorsements. The coverage of the Garment Contractors Floater is extended by the use of this endorsement to cover on the insured's premises and also extended to cover on an All Risk basis.
The Personal Property Extension endorsement to the Garment Contractors Floater is available on an All Risk basis only. This endorsement covers the following property against all risks of direct physical loss or damage:
The same exclusions as found in the Insured’s Premises Extension and the All Risk Extension are included in this endorsement with the following additional exclusions:
A special valuation clause is contained in the Personal Property Extension form. Valuation in the event of loss is as follows:
On unfinished property at the actual cost, including labor performed to date of loss, but not exceeding replacement cost
On finished property at the actual cash value at the time of the loss or damage, not exceeding the cost to repair or replace with material of like kind and quality
On all other property at actual cash value.
The American Association of Insurance Services (AAIS) Builders' Risk Coverage Forms insure buildings or structures during construction, renovation or repair. The named insured may be the building owner, the builder/contractor or the party for whom the building is being constructed, renovated or repaired. Coverage may apply to either a single construction project or multiple jobsites. In general, non-reporting builders risk coverage is written for the full, completed value of the project but loss payment is based on the amount of construction actually completed at the time of loss. The premium is based on the full, completed value but is discounted by a mathematical formula, since the value of the building when construction begins is zero and does not reach the full value until construction is complete and the building released for occupancy. On the other hand, a number of reporting techniques or methods are available and used when builders' risk coverage is written on a reporting basis. It is important to understand the method a particular insurance company uses before arranging coverage since coverage form comparisons should include a comparison of the reporting method used and the premium payment arrangements available.
Builders risk coverage is
not a controlled line of insurance and no standard form is available for use. In the past, each insurance company designed
its own coverage form or policy and provided its own unique coverages and other
features. However, AAIS has a reputation for developing excellent inland marine
coverage forms used in whole or in part by its members and subscribers. AAIS
coverage forms are used here as the model to analyze, evaluate and explain the
various builders' risk coverage forms.
AAIS has developed five builders' risk coverage forms, each having its own corresponding schedule of coverages. This analysis outlines and discusses each of these forms. (04 04 edition)
Any builder or contractor, owner or purchaser with a financial interest in the building or structure under construction, renovation or repair is eligible for coverage using the scheduled locations or jobsite forms. Only builders or contractors can use the Builders Risk Coverage–Contractors' Reporting Form or the Builders' Risk Coverage–Builders Risk And Installation Floater Form.
AAIS Builders' Risk coverage requires at least these four forms:
The various Schedule Of Coverages forms do not have spaces in which to enter the name, mailing address or other named insured information. That and other information is indicated on IM 7900–Inland Marine Declarations.
This Schedule Of Coverages is used with IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form.
Note: IM 7055–Schedule Of Coverages–Builders' Risk Broad Form does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7055 contains the following information:
Scheduled Locations
All covered locations
must be listed. Unlisted locations are not covered. IM 7087–Additional
Builders' Risk Schedule is used to indicate locations that cannot fit on IM
7055 because of space considerations.
Note: Do not list a location without indicating either a limit or the word "none."
Coverage Extensions
The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:
Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.
Supplemental Coverages
Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.
Note: It must be noted that Earthquake and Flood coverages have no default coverage. Coverage applies only when the box is checked and a limit is entered.
Deductible
One deductible is entered that applies to all covered premises.
Note: Under
Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage is
provided, a deductible that applies specifically to that selected coverage must
be entered. This deductible applies instead of the deductible that applies to
all covered premises.
Permission To Occupy
The permission to occupy granted box or the permission to occupy not granted box must be checked. If permission to occupy is granted, the date that the building or structure can be occupied is indicated in the spaces provided.
Optional Coverages And
Endorsements
This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.
This section states that the insurance company provides the coverage described in the coverage form and in the schedule of coverages in return for the insured's premium payment, subject to all the terms, conditions, endorsements and definitions of the coverage form.
Defined terms are used throughout the policy. Restricting their meaning to the definition in it provides the means for all parties involved with the policy to have a clearer understanding of the coverage intended. Thirteen terms are defined:
1. You and your are the parties indicated on the declarations as the insured.
2. We, us and our refer to the insurance company providing the coverage.
3. Earth movement includes, but is not limited to, earthquake,
landslide, mudflow, mudslide, mine subsidence, sinking, rising or shifting of
earth or any other movement of the surface of the earth. It does not include
sinkhole collapse.
4. Flood includes flood, surface water, waves, tidal water or overflow of bodies
of water. It also includes spray resulting from these, whether driven by wind
or not.
5. Fungus includes, but is not limited to, mold, mildew, protists, algae, slime mold, wet rot and dry rot. It also includes bacterium or a chemical, matter or compound produced or released by any of these elements including, but not limited to, toxins, spores, fragments and metabolites, such as microbial volatile organic compounds.
6. Jobsite is any location, project or work site at which
the insured is constructing, erecting or fabricating buildings or structures.
7. Limit is the amount of coverage that applies to the insured property.
8. Pollutant is a broad and expansive term. It includes
solids, liquids, thermal or radioactive contaminants and irritants including,
but not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor and
waste. Waste also includes materials intended for recycling, reclamation and
reconditioning, as well as for disposal. Visible and invisible electrical or
magnetic emissions and sound emissions are also considered pollutants and are
included.
9. Schedule of coverages is any page labeled as such that contains
coverage information, including declarations or supplemental declarations.
10. Sinkhole collapse is the sudden settling or collapsing of the
earth's surface into an underground opening created by water acting on
limestone or some other rock formation. It does not include similar collapse
into mines or other man-made voids, the value of the land or the cost to fill
sinkholes.
11. Specified perils are the named perils of aircraft, civil
commotion, explosion, falling objects, fire, hail, fire extinguishing equipment
leakage, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism,
vehicles, volcanic action, water damage, weight of sleet, snow or ice and
windstorm. Falling objects excludes loss to personal property stored in the
open or to the interior of buildings or personal property stored in buildings
unless the building's exterior is first damaged and opened by a falling object.
Water damage is sudden or accidental discharge or leakage of water or steam
directly resulting from the breaking or cracking of a part of the system or
appliance holding the water or steam.
12. Terms are all policy provisions, limitations, exclusions, conditions and
definitions that apply to this coverage.
13. Volcanic action is airborne volcanic blast or shock waves,
including ash, dust and particulate matter. It includes lava flow but does not
include the cost to remove dust, ash or particulate matter that does not
directly damage covered property.
Course Of Construction: Coverage applies to the property described
below, subject to any exclusions or limitations.
1. Coverage
Coverage applies to direct physical loss or damage to buildings or
structures in the course of construction, erection or fabrication caused by or
resulting from a covered peril, limited to:
2. Coverage Limitation
Coverage applies only to buildings or structures in the course of
construction at scheduled locations on the schedule of coverages.
Example: Carol is acting as her own general contractor for her new home and purchases builders risk coverage for the designated project. The supplies arrive and are kept in a storage shed on the jobsite, awaiting arrival of the construction crew. A sudden windstorm destroys the shed and $35,000 worth of building supplies. Coverage applies since the supplies were all intended to become part of the dwelling.
Six types of property are specifically listed as not covered:
1. Aircraft Or Watercraft are excluded. This property is more correctly insured under aircraft and watercraft coverage forms and policies.
2. Contraband is goods prohibited by law or treaty from
being imported or exported. It also includes legal property in the course of
illegal transportation or trade.
3. Land of any kind, including the land on which the covered property is located.
4. Money And Securities means a number of different types of property. It includes accounts, bills, currency, food stamps, evidence of debt and lottery tickets not held for sale, in addition to money, notes or securities.
Note: This property is more correctly insured under commercial crime coverage forms.
5. Standing Building
Or Structures or any parts of them are
not covered. A standing building or structure being repaired or altered is not
covered.
Note: A standing building
is also one that is totally or partially constructed. It includes all buildings
already being built as of the inception date of this particular policy. This is
very important because this policy is designed for buildings on which
construction commences on or after the policy inception date.
6. Vehicles are excluded. This includes automobiles or self-propelled vehicles intended for use on public highways.
Note: This property is more correctly insured under commercial automobile or truckers coverage forms.
Provisions That Apply To Coverage Extensions
There are six coverage extensions. The limit for each is either the limit indicated on the schedule of coverages or the default limit included in the coverage form if no limit is entered on the schedule of coverages. These coverages are part of the applicable limit for covered property and not in addition to it, unless otherwise indicated. These limits are not added to or combined with limits for any other coverage extension or supplemental coverage and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.
1. Debris Removal
The insurance company pays costs incurred to remove debris caused by the occurrence of a covered peril but the amount is limited to 25% of the amount paid for the actual direct physical loss or damage. The combined value of the direct loss or damage and the debris removal cannot exceed the limit of insurance for the covered property. An additional $5,000 is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property. Debris removal expenses must be reported to the insurance company within 180 days of the loss date in order for this extension to apply.
Note: This coverage extension does not apply to any pollutant cleanup, extraction, removal, restoration or replacement involving either land or water.
Note: Debris removal costs are part of the limit of insurance and the full limit of insurance is available to pay these costs, subject to the limitations indicated above. If a limit is indicated on the schedule of coverages, it is a sub-limit to the premises limit and is not in addition to that limit. This means increasing the limit on the schedule of coverages increases the $5,000 sub-limit but the total claim remains limited to the premises limit of insurance.
2. Emergency Removal
This covers direct physical loss or damage to covered property while
being moved or stored elsewhere to avoid loss or damage caused by a covered
peril. Coverage applies for up to ten days after the property is first moved
but does not extend past the expiration date.
Note: Coverage does not extend past the expiration date. If the insured has
property at an emergency location when coverage renews, the emergency location
must be indicated as a premises or coverage no longer applies.
Example: Cutting Corners Contractors' owner knows that tomorrow's predicted
tornado watches and warnings might wreak havoc on the incomplete apartment
building under construction as well as the assortment of building materials and
supplies scattered around the jobsite. Since the storage facility on the
jobsite is in generally poor condition, he packs up as much of it as he can fit
on a 26-foot box truck and drives it to a fellow contractor's warehouse that he
simply drives the vehicle into and keeps there until the watches and warnings
expire. Because of this coverage extension and his quick action, coverage
applies on his building materials and supplies at the temporary storage
location until the storm passes and he gets everything back to the jobsite the
next day. Amazingly, the building under construction sustained no damage.
3. Emergency Removal
Expenses
If the insured moves covered property to another location to protect it from loss or damage by a covered peril, this coverage extension pays the expenses to do so for up to ten days after the property is first moved, but not past the expiration date. The most paid for such expenses in any one occurrence is $10,000.
Note: This is additional coverage. As a result, all such expenses are paid in addition to the limit of insurance for this property.
4. Fraud And Deceit
The insurance company covers theft of covered property when the insured or its agents, consignees or customers part with it because of the fraudulent actions of persons falsely representing themselves as the proper persons to receive it. This includes accepting fraudulent bills of lading or other shipping receipts and such losses resulting from or directly related to use of any electronic data processing hardware or software. The most paid in any one occurrence is $50,000.
Note: This is a sub-limit. If the property limit at the location is less than $50,000, the property limit caps the amount available. The limit can be increased on the schedule of coverages but remains a sub-limit to the property limit.
Example: Ron is notified via email that the cabinets he just received are faulty and should be returned immediately. He dutifully sends the cabinets to the “Return Center” referred to in the notice and waits for the replacement cabinets. When Ron contacts the cabinetmaker ten days later, he discovers that he did not send the notice. By then, the cabinets are long gone and Ron sadly realizes that he has been swindled.
5. Limited Fungus
Coverage
This coverage extension applies to direct physical loss or damage to covered property caused by or resulting from the existence or any activity of fungus. Loss or damage caused by or resulting from fungus is covered only when it results form a covered peril, other than fire, lightning or flood that occurs during the coverage period. This is subject to the insured having taken all reasonable steps to protect the property from additional loss or damage at and after the time of loss. The limit can be increased on the schedule of coverages.
The most paid for all loss or damage at all buildings or structures is $15,000, regardless of the number of claims, locations, buildings or structures during any 12-month policy period or extensions of the policy period of less than 12 months, unless a different limit is indicated on the schedule of coverages. This limit also applies with respect to a specific occurrence of a loss that results in fungus, even if such fungus recurs or continues to exist during the current or future policy periods. The same limit also applies to cleanup, removal and testing activities and costs related to a fungus incident.
Note: If a covered loss or damage not caused by fungus occurs, that loss payment is not limited by the terms of this coverage extension. If fungus increases such losses, the increase is subject to the terms of this coverage extension.
6. Waterborne Property
The insurance company pays up to $10,000 in any one occurrence for direct physical loss or damage to covered property caused by or resulting from a covered peril while waterborne. The limit can be increased on the schedule of coverages.
Provisions That Apply To Supplemental
Coverages
There are 15 supplemental coverages. The limit for each is either the limit indicated on the schedule of coverages or the default limit included in the coverage form if no limit is entered on the schedule of coverages. If there is no limit for a supplemental coverage, coverage is provided up to the full limit for the applicable covered property unless a different limit is indicated on the schedule of coverages. Limits indicated for any supplemental coverage are separate from and not part of the applicable limit for coverage as indicated for covered property.
The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit indicated for a supplemental coverage and the limit for coverage described under property covered. The limits are not added to or combined with limits for any other supplemental coverage or coverage extension and are not subject to any coinsurance provisions that apply elsewhere in the policy.
1. Contract Penalty
The insurance company pays up to $10,000, or a different limit if indicated on the schedule of coverages, for the costs of contractual penalties the insured must pay because it cannot complete construction of a covered building or structure due to direct physical loss or damage to it caused by or resulting from a covered peril.
Example: A building contract calls for building construction to be finished by January 1st or a $500 per day penalty will be assessed. A hailstorm destroys the roof and delays construction completion by nearly three weeks. This supplemental coverage pays up to $10,000 for the penalty assessed.
2. Earthquake Coverage
The insurance company covers direct physical loss or damage to covered property caused by earthquake and volcanic eruption but only if the box indicating that coverage applies is checked and a limit indicated on the schedule of coverages, subject to that limit and any deductible amount indicated.
Note: Since there is
no default limit for this coverage, coverage applies only if a limit is
indicated on the schedule of coverages. Because this could be confusing, if
earthquake coverage is not provided, the word "none" should be
entered in the limits space on the schedule of coverages.
3. Expediting Expenses
When a covered loss causes a job to fall behind schedule, the insurance company pays up to $10,000, or a different limit if indicated on the schedule of coverages, in any one occurrence under this supplemental coverage for expenses the insured incurs to meet the construction timetable specified in the construction contract. These costs include, but are not limited to, overtime pay, hiring additional labor, transportation costs, storage expenses and costs of renting additional equipment.
Example: A windstorm blows down the framing for a building and forces construction to start all over again. This puts the project two weeks behind schedule and results in enforcement of the $1,000 per day penalty clause in the construction contract. The contractor must also hire three additional workers to get caught up. This supplemental coverage applies to the wages of the additional workers but not the penalty.
4. Fire Department
Service Charges
Coverage applies to the liability the insured assumed under a written contract or agreement before a loss for fire department service charges. However, the coverage provided is limited to such charges incurred that relate to covered property to save or protect it from a covered peril. Payment is limited to $1,000 or the limit for this coverage indicated on the schedule of coverages.
Note: This supplemental coverage is not subject to a deductible.
5. Flood Coverage
The insurance company covers direct physical loss or damage to covered property caused by flood but only if the box indicating that coverage applies is checked and a limit indicated on the schedule of coverages, subject to that limit and any deductible amount indicated.
Note: Since there is
no default limit for this coverage, coverage applies only if a limit is
indicated on the schedule of coverages. Because this could be confusing, if
flood coverage is not provided, the word "none" should be entered in
the limits space on the schedule of coverages.
6. Ordinance Or Law
(Undamaged Parts Of A Building)
When a covered building or structure sustains direct physical loss or damage from a covered peril and a governmental entity requires that the rest of it be demolished because of enforcement of an ordinance, law or decree, the insurance company pays for the value of any undamaged portions. Coverage applies only if the regulation requires demolition of the undamaged parts, regulates the construction or repair of the property or establishes specific requirements for zoning or land use at the covered location.
Note: The ordinance, law or decree must be in force at the time of loss.
However, there is no coverage for:
Note: A separate limit does not apply to this coverage.
7. Ordinance Or Law
(Increased Cost To Repair And Cost To Demolish/Clear Site)
When a covered building or structure sustains direct physical loss or damage from a covered peril, the insurance company pays the increased cost to repair, rebuild or reconstruct damaged portions of a building or structure as well as undamaged portions, whether they must be demolished or not, resulting from enforcement of building, zoning or land use laws in effect at the time of loss. If the property is repaired or rebuilt, it must be for a similar occupancy or purpose as before, unless regulations require otherwise. Increased costs of construction are not covered until the construction is actually done and completed within two years after the date of loss.
The insurance company also pays the costs to demolish and clear the undamaged portions of the covered building or structure on the site of the covered loss if required by a government regulation in force at the time of the covered loss or damage.
However, there is no coverage for:
If the covered property is repaired or replaced, the insurance company pays the amount spent to demolish and clear the site plus the actual increased cost to rebuild with like kind and quality for the same purpose, but not more than $50,000 or the limit for this coverage indicated on the schedule of coverages.
If the covered property is not repaired or replaced, the insurance company pays the amount actually spent to demolish and clear the site plus the cost that would have been incurred if the property was rebuilt with other property of like kind and quality and for the same purpose, but not more than $50,000 or the limit for this coverage indicated on the schedule of coverages.
8.
Personal Property
Business personal property at a covered location not intended to be installed in or become a permanent part of the covered building or structure is covered for loss or damage caused by a covered peril but only when the property is in a covered building or structure. Payment is limited to $10,000 or the limit shown for this coverage indicated on the schedule of coverages.
Example: A contractor sets up a small office area, from which it directs continuing construction activities, as well as a break room/lunch room area for its employees inside and on the ground floor of a covered building under construction. Loss or damage by a covered peril to the business personal property in this area is covered.
9.
Pollutant Cleanup And Removal
The
insurance company pays the insured's expenses to extract pollutants from land
or water if their release or discharge in any manner was caused by a covered
peril that occurred during the policy period. The expenses to extract
pollutants are paid only if reported to the insurance company within 180 days of
the date of loss. Costs related to testing, evaluating, observing or recording
pollutants are not covered but the costs of testing necessary to extract
pollutants from land or water are covered. The most paid is $25,000, unless a
different limit is indicated on the schedule of coverages, at each location for
all such expenses caused by a covered peril that occurs during each separate
12-month policy period.
10. Rewards
If the insured has a
covered arson, theft or vandalism loss, this coverage provides a reward for
information leading to the conviction of whoever caused the loss. The payment
limit of $1,000 is based on the occurrence, not the number of persons who
provide information. The limit can be increased on the schedule of coverages.
11. Sewer Backup
Coverage
Coverage applies to direct physical loss or damage to covered property caused by water that backs up from a sewer or drain or from the sub-surface water pressure on or leakage through or into a covered building or structure. Payment is limited to $10,000 or the limit for this coverage indicated on the schedule of coverages.
12.
Storage Locations
The following items are covered while in storage if damaged by a covered peril:
Payment is limited to $10,000 or the limit for this coverage indicated on the schedule of coverages.
Example: Since the valuable plants, shrubs and trees delivered from out of state arrive before the siding on the building is installed, they are stored at a nearby greenhouse until the jobsite is ready. A sudden violent windstorm destroys the greenhouse and all the plants. Since windstorm is not a covered peril in the supplemental coverages for this type of property, the loss is not covered.
13. Testing
Coverage applies to direct physical loss or damage to a covered building or structure caused by a covered peril resulting from testing of machinery, equipment and other objects intended to become a permanent part of it. Payment is limited to $10,000 or the limit for this coverage indicated on the schedule of coverages.
Example: The purchaser of a building under construction requests that the pressure on all gas lines be checked. The builder arranges for the testing but high pressure is applied instead of standard pressure and the pipes burst. Coverage applies to the resulting damage up to the $10,000 limit.
14. Transit
Coverage applies to direct physical loss or damage caused by or resulting from a covered peril to covered property consisting of following while in transit.
Payment is limited to
$10,000 or the limit for this coverage indicated on the schedule of coverages.
15. Trees, Shrubs And
Plants
Outdoor trees, shrubs, plants and lawns are covered for direct physical loss or damage caused by a covered peril, including debris removal expense, at covered construction project locations. Covered perils consist of fire, lightning, explosion, riot, civil commotion, falling objects and vandalism. Payment is limited to $10,000 or the limit for this coverage indicated on the schedule of coverages.
Coverage applies to risks of direct physical loss or damage unless the loss is limited or caused by an excluded peril.
1. The first group of exclusions is essentially absolute. Subject to
specific exceptions, loss or damage by each is totally excluded, regardless of
any other cause or event that contributes to a loss, either concurrently or in
any other sequence. The insurance company does not pay for any direct or
indirect loss or damage caused by or resulting from any of these events.
a. Civil Authority
There is no coverage for loss resulting from the order of any civil or
government authority, including seizure, confiscation, destruction or
quarantine of property. Coverage does apply for loss or damage resulting from
such acts when done to prevent the spread of fire, as long as the fire resulted
from a covered peril.
b. Earth Movement Or Volcanic Eruption
Coverage does not apply to loss or damage caused by earth movement or
eruption, explosion or effusion of a volcano. Coverage does apply to direct
loss or damage by fire, explosion or volcanic action resulting from any of
these events.
Note: Earthquake coverage applies
if a limit is entered on the schedule of coverages for the Supplemental
Coverages–Earthquake Coverage. Coverage also applies for loss or damage caused by sinkhole collapse and to covered property
in transit.
c. Flood
The insurance company does not pay for loss or damage caused by flood.
It does cover direct loss or damage caused by fire, explosion or sprinkler
leakage resulting from a flood occurrence.
Note: Flood coverage applies if a limit
is entered on the schedule of coverages for the Supplemental Coverages–Flood
Coverage. However, this exclusion does
not apply to covered property in transit.
d. Fungus
Coverage does not apply to loss, damage, cost or expense caused by or related to the existence or any activity of fungus, except as provided under Coverage Extensions–Limited Fungus Coverage. However, if fungus results in a specified peril, coverage applies to the loss or damage caused by that specified peril.
Note: This exclusion does not apply to loss or damage resulting from fire, lightning or collapse caused by hidden decay.
e. Nuclear Hazard
The insurance company does not insure against loss or damage caused by
or resulting from any nuclear reaction, radiation or contamination, whether the
nuclear incident was controlled or not or was caused by any means. Any loss
caused by the nuclear hazard is not treated as a loss caused by fire, explosion
or smoke. However, coverage applies to direct loss or damage caused by fire
resulting from the nuclear hazard.
f. Ordinance Or Law
There is no coverage for any loss or increased construction costs because of the enforcement of any government regulation that controls the use, construction or repair of any property. This includes demolition of that property and the removal of its debris. This exclusion also applies to enforcement that occurs even if the property has not been damaged and to increased costs incurred as a result of complying with the regulation, including any construction, demolition or debris removal activities.
Note: Limited coverage is available under Supplemental Coverages–Ordinance Or Law (Increased Cost To Repair And Cost To Demolish/Clear Site).
g. Penalties
Other than as provided under Supplemental Coverages–Contract Penalty, there is no coverage for penalties an insured incurs because it cannot complete a project according to the terms of a contract.
h. Sewer Backup And Water Below The Surface
Coverage does not apply to loss or damage caused by water backup from a
sewer or drain or from water below the surface of the ground that exerts
pressure on covered buildings or structures. However, fire, explosion and theft
losses that result from such backup or hydrostatic pressure are covered.
Note: Sewer backup coverage applies if
a limit is entered on the schedule of coverages for the
Supplemental Coverages–Sewer Backup Coverage. However, this exclusion does not apply to covered
property in transit.
i. War And Military Action
The insurance company does not pay for loss or damage caused by any act
of war, including undeclared and civil war or warlike action by a military
force. It includes actions taken to hinder or defend against an actual or
expected attack by any government or sovereign authority that uses military
personnel or other agents. It also includes acts of insurrection, rebellion,
revolution, or unlawful seizure of power taken by any government authority to
prevent or defend against any of these. If any action within the terms of this
exclusion involves nuclear reaction, radiation or contamination, this exclusion
applies in place of the nuclear hazard exclusion.
2. 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. Contamination Or Deterioration
Loss or damage caused by contamination or deterioration is excluded. This
includes corrosion, decay, rust or any quality, fault or weakness in covered
property that causes it to damage or destroy itself.
Note: If contamination or deterioration results in the occurrence of a covered
peril, coverage applies to the loss or damage caused by that peril.
b. Criminal, Fraudulent, Dishonest Or
Illegal Acts
Coverage does not apply to loss caused by or resulting from criminal,
fraudulent, dishonest or illegal acts, committed alone or in collusion with
another, by any of the following:
Note: If the covered property is in the custody of carriers for hire, this
exclusion does not apply.
Note: Coverage applies if employees
destroy property. It does not apply to acts of theft done by employees.
c. Defects, Errors And
Omissions
There is no coverage for loss or damage caused by any act, defect, error or omission relating to any construction activities due to acts of negligence or otherwise. Examples of such activities include design, specifications, construction, materials and workmanship, as well as maintenance, installation, renovation, remodeling or repair. It also includes planning, zoning, development, siting, surveying, grading or compaction activities.
Note: If any of these activities results in the occurrence of a covered peril, coverage applies to the resulting loss or damage caused by that covered peril.
d. Electrical Currents
Loss or damage caused by electrical arcing or currents is excluded, unless caused by lightning. However, if the excluded arcing or currents results in the occurrence of a covered peril, the resulting loss or damage is covered.
Note: This exclusion does not apply to losses due to testing as provided under Supplemental Coverages–Testing.
e. Explosion, Rupture
Or Bursting
The insurance company does not pay for loss or damage caused by explosion, rupture or other bursting of steam boilers, pipes and engines or steam and gas turbines.
Note: This exclusion applies only to loss or damage to the steam object or gas turbine in which the loss occurred.
f. Loss Of Use
There is no coverage for loss caused by or resulting from delay, loss of use or loss of market.
g. Mechanical
Breakdown
Loss or damage due to mechanical breakdown is not covered. This includes damage to moving parts of machinery because of centrifugal force. However, if such a loss results in the occurrence of a covered peril, the resulting loss or damage is covered.
Note: This exclusion does not apply to losses due to testing as provided under Supplemental Coverages–Testing.
h. Missing Property
Unexplained or mysterious disappearance of covered property is not
covered if the only proof that a loss occurred is based on an audit or physical
inventory and there is no physical evidence to indicate what happened to it.
Note: This exclusion does not apply to covered property in the custody of
carriers for hire.
i. Pollutants
There is no coverage for loss or damage caused by or resulting from any
release, discharge, seepage, migration, dispersal or escape of pollutants.
However, coverage applies if a specified peril causes the pollutant release. In
addition, limited coverage is provided under Supplemental Coverages–Pollutant
Cleanup And Removal.
j.
Temperature/Humidity
Loss or damage caused by dryness, dampness, humidity, changes in or extremes of temperature is not covered.
Note: If any of these events results in the occurrence of a covered peril, the resulting loss or damage caused by that peril is covered.
k. Voluntary Parting
Loss or damage caused by or resulting from the insured voluntarily
parting with either title to or possession of any covered property because of a
fraudulent scheme, trick or false pretense is not covered, except as provided
under Coverage Extensions–Fraud Or Deceit.
l. Wear And Tear
Loss or damage caused by wear and tear, marring or scratching is
excluded.
Note: If any of these events results in the occurrence of a covered peril, the
resulting loss or damage caused by that peril is covered.
Note: Wear and tear is damage, diminishment in value or erosion due to long or
hard use or exposure, including breakdown over time and eventually becoming unusable
because of previous use. This includes the tendency of property to pull apart
or break down into pieces because of forces applied to it.
1. Notice
The insured must give prompt notice of a loss to the insurance company
or its agent and include a description of the property lost or damaged. In
addition, the appropriate law enforcement agency must be notified if the event
causing the loss is a crime.
Note: The insurance company may also require that the notice be in writing.
2. You Must Protect Property
During and after a loss, all reasonable steps must be taken to protect
covered property from further loss. The insurance company pays reasonable costs
the insured incurs to do so, subject to the insured keeping records of such
costs incurred, but payment of these costs does not increase the limit.
However, coverage does not apply for any repairs or emergency measures
performed on property not already damaged by a covered peril.
3. Proof Of Loss
The insured must send the insurance company its prescribed proof of loss
forms within 60 days of its request to do so. The information provided must
include the time, place and circumstances surrounding the loss and information
on any other insurance coverage that may apply. It must also include the
interest of the insured and others with respect to the property involved,
including lienholders, loss payees and mortgages. Any changes in title to the
property during the policy period must be disclosed, in addition to providing
any other reasonable information the company may require to adjust and settle
the loss.
4. Examination
Examination under oath may be required in matters relating to the loss
as often as reasonably requested by the insurance company. The company has the
right to examine each individual and receive statements separately and not in
the presence of others, if more than one person is examined.
5. Records
The insured must maintain and produce any records relating to the loss
and allow the insurance company to make copies and take extracts of them as
often as it reasonably requests. Records include, but are not limited to, tax
returns and bank microfilms of all cancelled checks.
6. Damaged Property
Both damaged and undamaged property must be made available for the
insurance company's inspection as often as reasonably necessary. It must also
be allowed to take samples of the property to the extent necessary to adjust
and settle the loss.
7. Volunteer Payments
If the insured voluntarily makes any payments, assumes any obligations,
pays or offers rewards or incurs any other expenses without the insurance
company's express approval, except to protect covered property from further
damage, it does so at its own expense.
8. Abandonment
Abandoning damaged property to the insurance company without its written
consent is prohibited.
9. Cooperation
The insured must cooperate with the insurance company in all matters and
in performing all acts required.
1. Replacement Cost
The value of covered
property is based on its replacement cost without a deduction for depreciation.
The value includes labor, appropriate overhead and profit margins, and delivery
charges. However a limitation states that the value is limited to use of
similar materials on the same site or location and for essentially the same
purpose and cannot exceed the actual amount spent to repair or replace the lost
or damaged property.
2. Pair Or Set
The value of a loss that involves damage or loss of one part of a pair
or set is based on a reasonable proportion of the value of the entire pair or
set. Loss of one part of a pair or set is not considered a total loss.
Note: This recognizes that the value of the whole is greater than the value of
the individual parts.
3. Loss To Parts
The value of a lost or damaged part of property consisting of several
parts is the cost to repair or replace only the lost or damaged part.
1. Insurable Interest
The insurance company does not pay more than the insured's insurable
interest in the covered property at the time of loss.
Note: Insurance is meant to
restore a person’s pre-loss financial position, not to improve or enhance it.
2. Deductible
The insurance company pays only the amount of loss that exceeds the
deductible amount indicated on the schedule of coverages.
3. Earthquake Period
All earthquakes, tremors or volcanic eruptions that occur within a
168-consecutive hour period are considered a single loss. This time period is
not limited by the policy expiration date.
4. Loss Settlement Terms
The insurance company pays the lesser of the amount determined under
Valuation, the cost to repair, replace or rebuild the property with material of
similar kind and quality to the extent possible, or the limit of insurance that
applies to the covered property. If the schedule of coverages indicates a
catastrophe limit, and a covered peril causes loss at more than one premises
listed on the schedule, the most the insurance company pays in any one
occurrence is either the sum of the limits for covered property at all
locations where the loss occurred or the catastrophe limit, whichever is less.
5. Coinsurance
When coinsurance applies to a coverage provided, the insurance company pays only part of the loss if the limit is less than 100% of the estimated completed value of the covered property as determined at the time of loss. The three steps in determining the amount of the loss to be paid are:
a. Determine the full 100% value of the property if it had been completed and as if no loss had occurred.
b. Divide the coverage limit for that property by the figure obtained in step a.
c. If step b. is less than 1.00, multiply the amount of loss after application of any deductible by the percentage determined in step b, if the limit is less than the full value of the property.
The insurance company pays no more than the amount determined in step c or the policy limit, whichever is less. If more than one limit is indicated on the schedule of coverages, this procedure applies separately to each limit. If only one limit is indicated on the schedule of coverages, this procedure applies to the total of all covered property to which that limit applies.
Example: The estimated completed value of a building indicated on the schedule of coverages is $300,000. Construction is almost 90% complete when a fire amounting to a loss of $275,000 occurs. After a review of the changes made as construction progressed, the actual completed value should have been $325,000, had no loss occurred. As a result, the loss is paid as follows:
a. The estimated completed value is $325,000.
b. $300,000 divided by $325,000 = .923. This is the coinsurance penalty factor.
c. $275,000 multiplied by .923 = $253.825.
In this example, the insurance company pays $253,825 and the insured is responsible for the remaining $21,175.
6. Insurance Under More Than One Coverage
If two or more coverages in the coverage form apply to the same loss,
the insurance company pays no more than the value of the actual claim, loss or
damage sustained.
7. Insurance
Under More Than One Policy
a. Proportional Share
If the insured has another policy subject to the same terms as this coverage,
it pays only its share of the covered loss. That share is the proportion that
its limit of insurance bears to the limits of insurance on all policies that
cover on the same basis.
b. Excess Amount
If the insured has another policy covering the loss other than as
described above, this coverage form pays only the amount of covered loss that
exceeds the amount due from that other policy, whether collectible or not,
subject to the applicable limit of insurance.
1. Loss Payment Options
a. Our Options
The insurance company has four loss payment options if a covered loss
occurs. It can pay the value of the lost or damaged property, pay the cost of
repairing or replacing the lost or damaged property, rebuild, repair or replace
the property with similar property, to the extent possible and within a
reasonable period of time, or take any part or all of the property at the
agreed on or appraised amount.
b. Notice Of Our Intent To Rebuild, Repair
Or Replace
The insurer must notify the insured of its intent to rebuild, repair or
replace within 30 days after receiving a properly completed proof of loss.
2. Your Losses
a. Adjustment And Payment Of Loss
The insurance company adjusts all losses with the insured and pays the
insured, unless another loss payee is included on the policy.
b. Conditions For Payment Of Loss
The insurance company pays a covered loss within 30 days after it
receives a properly prepared proof of loss and the amount of loss is
established. This is done through either a written agreement between the
insurer and the insured or after an appraisal award is filed with the insurer.
3. Property Of Others
a. Adjustment And Payment Of Loss To
Property Of Others
The insurance company can adjust and pay losses involving property of
others with either the insured acting on behalf of the property owner or with
the property owner, at its discretion.
b. We Do Not Have To Pay You If We Pay The
Owner
When the insurer pays the property owner, it is not obligated to pay the
insured. In addition, if the property owner sues the insured, the company has
the option of defending the insured in that suit.
1. Appraisal
The insurance company and the insured may not always agree on the value
of a covered claim. This condition provides one method to solve disputed
claims.
Either party can request an appraisal to determine the value of a
disputed claim. Once requested, the parties have 20 days to obtain their own
independent and competent appraisers and supply the appraiser's name to the
other party. The two appraisers then have 15 days to select a competent
impartial umpire. If they cannot agree on an umpire within 15 days, either can
request that a judge in the court of record in the state where the property is
located appoint one.
The appraisers then determine the value of the claim. Any differences
are submitted to the umpire. Once any two of the three parties agree, the
amount of loss is set.
Each party pays its own appraiser. Both parties share the cost of the
umpire and other expenses.
2. Benefit To Others
The insurance provided does not directly or indirectly benefit any other
party having custody of the insured's property.
3. Conformity With Statute
Any condition in this coverage form that conflicts with any applicable
law is amended to conform to that law.
4. Estates
Note: This condition applies only if the insured is an individual.
a. Your Death
If the insured dies, the person having custody of the insured's property
is an insured until a qualified legal representative is appointed. At that
point, the insured’s legal representative becomes an insured. Both are insureds
but only with respect to the property insured under this coverage form.
b. Policy Period Is Not Extended
This coverage does not extend past the coverage expiration date.
5. Misrepresentation, Concealment Or Fraud
This coverage is void if any insured at any time willfully concealed or
misrepresented a material fact relating to the insurance provided, the property
covered or its interest in the property, or if fraud or false swearing by any
insured took place concerning the insurance provided or the property covered.
Note: The insured must deal with the insurance company honestly. If the
insured intentionally misrepresents or conceals a material fact or information,
its rights of recovery may be voided. This means that the insurance contract is
treated as simply having never existed versus a particular claim being denied.
6. Policy Period
Only covered losses that occur during the policy period are paid.
7. Recoveries
Payment of the loss does not end the obligations of the insured and the
insurance company toward one another. If the insurance company pays a loss and
the lost or damaged property is subsequently recovered or the parties
responsible for the loss pay for it, additional provisions apply.
Either party recovering property or payment must inform the other.
Recovery expenses incurred by either party are reimbursed first. If the insured
keeps the recovered property, it must refund the amount of the claim the
insurance company paid, unless a different amount is agreed to. If the claim
paid is less than the agreed loss due to application of a deductible or other
limitations, any recovery is prorated between the insured and the insurer based
on the insurer's respective interest in the loss.
8. Restoration Of Limits
Payment of a claim does not reduce the policy limit available for future
claims except as indicated under Limited Fungus Coverage.
9. Subrogation
The insurance company acquires the insured's rights of recovery from
third parties after it pays a loss. The insured must assist the insurance
company in securing those rights. If it hinders or impairs those rights, the
insurer is not obligated to pay the loss.
Note: The insured can agree in writing to waive recovery rights from others
before a loss occurs.
10. Suit Against Us
The insurance company cannot be sued by anyone for any coverage until
all the terms of the coverage form have been met. Suits must be brought within
two years after the insured first had knowledge of a loss. If a state law
invalidates this condition, any suit brought must comply with the provisions of
that law and begin within the shortest period of time allowed by law.
Note: It is normal
for a basic coverage form to be modified by mandatory state-specific
endorsements addressing issues that relate to that specific state.
11. Territorial Limits
Covered property must be located in the United States, its territories
and possessions, Canada or Puerto Rico in order for coverage to apply.
12. Carriers For Hire
The insured may accept shipping documents from transportation companies that limit their liability to amounts less than the replacement cost or actual cash value of the covered property.
1. Coverage Not
Provided During Occupancy And Use
Coverage does not apply if a covered building or structure is partially or completely occupied or put to its intended use without the insurance company's written consent and agreement.
Note: This provision does not apply if permission to occupy is granted based on an entry on the schedule of coverages.
Example: ABC Construction builds four-unit condominium buildings. The entire building is constructed first and then each unit is finished one at a time. Once a unit is finished out, ABC attempts to sell it and transfer the title in order to free up capital. The insurance company agrees to this partial occupancy situation and verifies it by the appropriate entry on the schedule of coverages.
2. When Coverage
Ceases
Coverage ends when the first of the following events occurs:
Note: This is an important area that could cause the insured problems. Even though coverage extends up to 90 days after construction is complete, this becomes only two days in the case of construction being completed only two days before the expiration date. In other words, 90 days of coverage is available after construction is complete but only if 90 or more days remain until expiration. This coverage limitation is subject to a number of variations, since insurance companies recognize the problems that can arise, particularly with coverage forms written on a reporting basis. This coverage limitation must be reviewed carefully and discussed with the client, with particular care taken to point out the potential problems.
This Schedule Of Coverages is used with IM 7051–Builders' Risk Coverage–Scheduled Jobsite Form.
Note: IM 7056–Schedule Of Coverages–Builders' Risk does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7056 contains the following information:
Scheduled Locations
All covered locations
must be listed. Unlisted locations are not covered. IM 7087–Additional
Builders' Risk Schedule is used to indicate locations that cannot fit on IM
7055 because of space considerations.
Note: Do not list a location without indicating either a limit or the word "none."
Coverage Extensions
The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:
Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.
Supplemental Coverages
Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.
Note: The coverage form provides this coverage. The advisory schedule of coverages does not list it.
Deductible
One deductible is entered that applies to all covered premises.
Optional Coverages And
Endorsements
This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.
This coverage form is identical to IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form analyzed above except for five sections. This analysis addresses only the five sections that are different.
Two additional property items are not covered. This coverage form does not insure Trees, Shrubs And Plants or Waterborne Property.
Emergency Removal Expenses, Fraud And Deceit and Waterborne Property Extensions are not included in this coverage form. The language in Limited Fungus Coverage, paragraph g. is worded slightly differently but has the same coverage intent.
The only Supplemental Coverages provided under IM 7051 are Fire Department Service Charges, Pollutant Cleanup And Removal, Storage Locations and Transit. As a result, the Supplemental Coverages for Contract Penalty, Earthquake Coverage, Expediting Expenses, Flood Coverage, Ordinance Or Law (Undamaged Parts Of A Building), Ordinance Or Law (Increased Cost To Repair And Cost To Demolish/Clear Site), Personal Property, Rewards, Sewer Backup Coverage, Testing and Trees, Shrubs And Plants are not included.
The only difference is the definition of the earthquake period is deleted because coverage is not provided in this coverage form.
This Schedule Of Coverages is used with IM 7052–Builders' Risk Coverage–Contractors' Reporting Form.
Note: IM 7057–Schedule Of Coverages–Builders' Risk–Contractors' Reporting Form does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7057 contains the following information:
Limits
A limit of insurance is indicated for each of the following:
Coverage Extensions
The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:
Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.
Supplemental Coverages
Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.
Note: It must be noted that Earthquake and Flood coverages have no default coverage. Coverage applies only when the box is checked and a limit is entered.
Reporting Conditions
The estimated completed value of each covered building or structure are reported monthly, quarterly, annually or any other specified period. Premiums are adjusted monthly, quarterly, annually or any other specified period.
Note: Reporting conditions may be waived.
Additional Premium Due After
Expiration
When the premium is based on reports of value,
any additional premium the insured owes is due and payable on the date
indicated on the billing statement.
Premiums
Spaces are provided in which to enter the deposit and minimum premiums.
Deductible
One deductible is entered that applies to all covered premises.
Note: Under
Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage is
provided, a deductible that applies specifically to that selected coverage must
be entered. This deductible applies instead of the deductible that applies to
all covered premises.
Permission To Occupy
The permission to occupy granted box or the permission to occupy not granted box must be checked. If permission to occupy is granted, the date that the building or structure can be occupied is indicated in the spaces provided.
Optional Coverages And
Endorsements
This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.
This coverage form is identical to IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form analyzed above except for four sections. This analysis addresses only the four sections that are different.
1. Course Of Construction, b. Coverage Limitation is revised to reflect the addition of the two following items of covered property under this coverage form.
2. Contingent Coverage
Buildings and structures in the course of construction, erection or fabrication are covered under this coverage form subject to all of the following conditions:
This property is covered only if a limit of insurance for contingent coverage is entered on the schedule of coverages and the property is at the named insured’s jobsite.
Example: Paul is a custom homebuilder. He allows his customers to purchase their own builders risk policies. If they choose that option, they sign an agreement that they will provide the coverage so that Paul's interest is also protected. Maxine signed the construction contract and the agreement but neglected to contact her agent to purchase the coverage. A loss occurred and Paul discovered that there was no coverage on the project. Paul's insurance company paid based on this Contingent Coverage and then subrogated against Maxine because of her breach of contract.
3. Difference in Conditions Coverage
Buildings and structures in the course of construction, erection or fabrication are covered under this coverage form only if all named insureds are contractually obligated to provide difference in conditions coverage on buildings under construction. Under this coverage form, difference in conditions coverage is defined as coverage for all physical loss except those caused by an excluded or a specified peril.
This property is covered only if a limit of insurance for difference in conditions coverage is entered on the schedule of coverages and the property is at the named insured’s jobsite.
Example: Paul’s latest client agrees to provide basic coverage for his new home but requires that Paul obtain difference in conditions coverage for other potential perils. When Paul discovers that $10,000 in copper stolen from the jobsite, the loss is covered. However, Paul's coverage does not respond when windstorm destroys the building. Instead, the purchaser has coverage under his basic perils policy.
Under Limited Fungus Coverage, paragraph g. Loss Caused In Total Or In Part By Fungus replaces paragraph g. Loss Not Caused By Fungus in IM 7050.
IM 7050 contains coinsurance provisions. IM 7052 does not because it is a reporting form.
This provision in IM 7052 does not appear in IM 7050. It outlines the detailed steps in the reporting process and the consequences for failure to submit reports or to report proper values.
This Schedule Of Coverages is used with IM 7053–Builders' Risk Coverage–Builders' Risk And Installation Floater Form.
Note: IM 7058–Schedule Of Coverages–Builders' Risk And Installation Floater does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7058 contains the following information:
Builders' Risk Coverages
A limit of insurance is indicated for each of the following:
Installation Floater Coverage
A limit if insurance is indicated for the most paid for loss to any one
installation project.
Catastrophe Limit
A limit of insurance is entered for the most paid for loss in any one
occurrence.
Coverage Extensions
The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:
Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.
Supplemental Coverages
Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.
Note: It must be noted that Earthquake and Flood coverages have no default coverage. Coverage applies only when the box is checked and a limit is entered.
Reporting Conditions
The estimated completed value of each covered building or structure are reported monthly, quarterly, annually or any other specified period. Premiums are adjusted monthly, quarterly, annually or any other specified period.
Note: Reporting conditions may be waived.
Additional Premium Due After
Expiration
When the premium is based on reports of value,
any additional premium the insured owes is due and payable on the date
indicated on the billing statement.
Premiums
Spaces are provided in which to enter the deposit and minimum premiums.
Deductible
One deductible is entered that applies to all covered premises.
Note: Under
Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage is
provided, a deductible that applies specifically to that selected coverage must
be entered. This deductible applies instead of the deductible that applies to
all covered premises.
Permission To Occupy,
Builders' Risk Coverage
The permission to occupy granted box or the permission to occupy not granted box must be checked. If permission to occupy is granted, the date that the building or structure can be occupied is indicated in the spaces provided.
Optional Coverages And
Endorsements
This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.
This coverage form is identical to IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form analyzed above except for seven sections. This analysis addresses only the seven sections that are different.
The definition of jobsite includes locations where the insured is
engaged in an installation or construction project. The same definition in IM
7050 does not include this language.
Two types of coverages are provided since this is a combination form.
1. a. The first is Builders Risk coverage. This is similar to the
coverage provided under IM 7050 but Course Of Construction, b. Coverage
Limitation is revised to reflect the addition of the two following items of
covered property under this coverage form.
1.b. Contingent
Coverage
Buildings and structures in the course of construction, erection or fabrication are covered under this coverage form subject to all of the following conditions:
This property is covered only if a limit of insurance for contingent coverage is entered on the schedule of coverages and the property is at the named insured’s jobsite.
1.c. Difference in Conditions Coverage
Buildings and structures in the course of construction, erection or fabrication are covered under this coverage form only if all named insureds are contractually obligated to provide difference in conditions coverage on buildings under construction. Under this coverage form, difference in conditions coverage is defined as coverage for all physical loss except those caused by an excluded or a specified peril.
This property is covered only if a limit of insurance for difference in conditions coverage is entered on the schedule of coverages and the property is at the named insured’s jobsite.
2. Installation Floater Coverage is added. It covers physical loss to property the named insured is installing on or at a project. Coverage applies to owned property and non-owned property in the named insured's care, custody and control. Only property intended to become part of the completed installation is covered.
In addition to the six types of property not covered items under IM 7050, airborne property is also not covered, except for property in transit on regularly scheduled airline flights. In addition, under Standing Building Or Structure, coverage applies to materials, supplies, machinery, fixtures and equipment the insured installs, constructs or lifts in conjunction with any installation or construction project in a building or structure. IM 7050 does not contain this language.
The Limited Fungus Coverage Extension limit is amended to apply to buildings or structures in the course of construction and all installation or construction projects. This means that the aggregate amount of coverage available over all projects and buildings under construction for an entire year is limited to $15,000 or the limit indicated on schedule of coverages.
The supplemental coverages in both forms are identical but IM 7053 has words added to extend coverage to the installation coverage.
IM 7050 contains coinsurance provisions. IM 7053 does not because it is a reporting form.
This provision in IM 7053 does not appear in IM 7050. It outlines the detailed steps in the reporting process and the consequences for failure to submit reports or to report proper values. It separates the requirements for installation floater and states them separately from those for builders risk.
This Schedule Of Coverages is used with IM 7054–Builders' Risk Coverage–Rehabilitation And Renovation Form.
Note: IM 7059–Schedule Of Coverages–Builders' Risk–Rehabilitation And Renovation does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7059 contains the following information:
Scheduled Jobsite
All covered jobsites must be listed, described and have a job number and/or jobsite location entered. Unlisted locations are not covered. IM 7090–Additional Scheduled Jobsite Locations is used to indicate jobsites that cannot fit on IM 7059 because of space considerations.
A Building Materials
Limit and an Existing Building Limit must be indicated. If existing building
coverage is provided, the valuation that applies to it must also be indicated.
The valuation options are Stated Value or Actual Cash Value.
Coverage Extensions
The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:
Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage.
Supplemental Coverages
Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.
Deductible
One deductible is entered that applies to all covered premises.
Coverage Limitation
Coverage applies to a vacant existing building for up to the indicated number of consecutive days from the coverage inception date unless building permits have been obtained and rehabilitation work or renovation has begun on the existing building.
Note: The Vacant Building Limitation may be waived.
When Coverage Ceases
Coverage ends when one of the following first occurs:
1. At expiration or when coverage is cancelled
2. The purchaser accepts a covered building or structure
3. The insured's insurable interest in the covered property ends
4. The insured abandons construction without intending to complete it
5. A covered building or structure is completed more than 30 days or the number of days indicated in the space provided.
Optional Coverages And
Endorsements
This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.
This coverage form is identical to IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form analyzed above except for ten sections. This analysis addresses only the ten sections that are different.
Note: The current edition of this form has numerous minor editorial
and format changes compared to the previous edition, to emphasize coverages and
limitations, with no change in intent. Those changes are not addressed in this
analysis.
Two definitions are added:
Three definitions are changed:
Note: The Definitions section in IM 7054 is at the end of the coverage form
instead of at the beginning.
IM 7054's description of property covered is completely different compared to the definition in IM 7050 because the nature of the work insured is that of rehabilitation and renovation of existing buildings or structures instead of new construction.
Coverage applies to:
Coverage is limited to the jobsite indicated on the schedule of coverages. Vacant buildings may be covered if so indicated on the schedule of coverages. The vacant building coverage selected on the schedule of coverage determines the length of time that coverage continues.
Separate limits of insurance must be indicated on the schedule of coverages for Building Materials and Existing Buildings. These limits are the most paid for loss in any one occurrence.
Four types of property are added as property not covered and one type of property is changed. The four types of property added are:
The one type of property changed is Standing Building Or Structure. It
is amended so that coverage for existing buildings can be provided.
The Coverage Extensions for Emergency Removal, Emergency Removal Expenses, Fraud And Deceit and Waterborne Property in IM 7050 are not in IM 7054.
The only Supplemental Coverages provided are Pollutant Cleanup And
Removal, Temporary Storage Locations and Transit. The Pollutant Cleanup And
Removal Limit is $10,000 instead of $25,000 in IM 7050 but can be increased on
the schedule of coverages. Temporary Storage Locations and Transit are slightly
different than the corresponding supplemental coverage in IM 7050.
This means the Supplemental Coverages for Contract Penalty, Earthquake Coverage, Expediting Expenses, Fire Department Service Charges, Flood Coverage, Ordinance Or Law (Undamaged Parts Of A Building), Ordinance Or Law (Increased Cost To Repair And Cost To Demolish/Clear Site), Personal Property, Rewards, Sewer Backup Coverage, Testing and Trees, Shrubs and Plants in IM 7050 do not apply.
This provision in IM 7054 does not appear in IM 7050. The only coverage added is Collapse and it is defined in terms of what it means as well as what it does not mean. Coverage is only for loss or damage caused by or resulting from the specified perils, hidden decay, hidden insect or vermin damage, weight of people, personal property or rain that collects on a roof, or use of defective materials. The Limited Fungus Coverage provided under Coverage Extensions does not increase or decrease the coverage for Collapse.
IM 7054 does not have the provision for replacement cost valuation found in IM 7050. The value of existing buildings or structures being rehabilitated or renovated is the limit indicated on the schedule of coverages. Materials and supplies, attachments and fixtures intended to become a permanent part of these buildings or structures are valued at their actual cash value at the time of loss.
Earthquake Period as provided for in IM 7050 does not appear in this section of IM 7054 since that coverage is not available.
This section is not in IM 7050.
AAIS has developed the following endorsements and schedules for use with the various Builders' Risk coverage forms.
This endorsement can be used with any of the builders' risk coverage forms. It adds coverage for soft costs, defined as advertising expenses, design fees, professional fees, interest, lease administration and realty taxes, as well as loss of rental income.
IM 7062–Soft Cost Schedule–Soft Cost And Rental Income
This schedule is used with IM 7061–Soft Cost And Rental Income Endorsement and together they can be used with any of the builders' risk coverage forms. It indicates the locations or descriptions of covered buildings or structures, the limits for soft costs and rental income and the applicable waiting period, if any.
IM 7063–Permission To Occupy Endorsement
This endorsement extends coverage and permits occupancy of the finished part of the building or structure before construction of the entire project is complete.
IM 7064–Reporting Conditions Endorsement
When attached to a builders' risk coverage form, this endorsement puts it on a reporting basis.
IM 7066–Reporting Conditions Schedule–Builders Risk
This schedule is used with IM 7064–Reporting Conditions Endorsement. It has spaces in which to indicate the reporting and adjustment periods and the premium adjustment basis, along with the applicable rates and premium for the coverage involved.
IM 7068–Trees, Shrubs And Plants Endorsement
This endorsement provides coverage for direct physical loss or damage to trees, shrubs, plants and lawns at designated jobsites or construction projects caused by six designated perils on a per occurrence basis.
IM 7070–Rehabilitation And Renovation Endorsement
This endorsement covers existing buildings or structures for direct physical loss or damage caused by or resulting from a covered peril when the building or structure is being rehabilitated or renovated.
IM 7071–Business Personal Property Endorsement
This endorsement covers business personal property other than that intended to become a permanent part of the building or structure under construction.
IM 7072–Ordinance Or Law Coverage
This endorsement is used with IM 7051–Builders' Risk Coverage–Scheduled Jobsite Form. It applies when a covered peril causes direct physical loss or damage to a covered building or structure. It extends coverage for the additional loss due to the enforcement of a government regulation that requires demolition of undamaged parts of the property or establishes use requirements and regulations that apply to the property. The coverage can also apply to increased costs of construction or reconstruction and any costs to demolish and clear debris from the location or jobsite.
IM 7073–Contract Penalty Endorsement
This endorsement covers loss due to contractual penalties imposed on the insured because of a delay in completing an insured construction project within the defined contract terms as a result of a covered loss.
IM 7075–Expediting Expenses Endorsement
Expediting expenses include the costs for additional labor, overtime labor, transportation, equipment rental and storage. This endorsement covers these costs or expenses when incurred to complete the construction project by the date or within the period of time specified in the construction contract.
IM 7076–Testing Coverage
Testing includes the start-up or commencement of normal occupancy. It evaluates and measures the performance, stress, pressure and overload abilities of materials, supplies, machinery, fixtures and equipment intended to be a permanent part of a covered building or structure under construction. This endorsement covers direct physical loss or damage to a covered building or structure by a covered peril resulting from testing.
IM 7077–Fraud And Deceit Coverage
This endorsement covers losses due to theft if the insured is falsely influenced to part with covered property. However, the coverage provided does not apply to the insured voluntarily parting with covered property.
IM 7079–Soft Cost, Extra Expense And Rental Income Endorsement
This endorsement is used with builders' risk coverage forms to add soft costs. These include fees for advertising, professional, design and permit activities, financing, lease and general administration costs, realty taxes, lease expenses and insurance premiums. It is also used to add any extra expenses incurred and necessary to resume or continue construction work on the project. It can cover the loss of rental revenue that occurs due to a delay in completing the project because of loss or damage caused by or resulting from a covered peril. It also includes construction delays caused by enforcement of an ordinance or law.
IM 7080–Soft Cost Schedule–Soft Cost, Extra Expense And Rental Income
This schedule is used with IM 7079–Soft Cost, Extra Expense And Rental Income Endorsement and can be used with any builders' risk coverage form. It has spaces in which to indicate the locations and descriptions of covered property and the limits for soft costs, extra expense and rental income, as well as any applicable waiting periods.
IM 7082–Freezing Exclusion
This endorsement excludes the peril of freezing unless the insured takes certain steps and precautions to prevent against such losses.
IM 7083–Equipment Breakdown Endorsement
Subject to entries made on the Equipment Breakdown Schedule making up part of this endorsement, it provides coverage for Explosion, Rupture or Bursting, Mechanical Breakdown or Electrical Currents otherwise excluded in builders' risk coverage forms. Coverage applies to losses from the bursting of steam boilers, steam or gas turbines, steam pipes or steam engines, mechanical breakdown and arcing by electrical currents, other than lightning.
IM 7084–Mortgageholders Endorsement
This endorsement is used with any of the builders' risk coverage forms. It includes mortgage provisions for mortgagees named on the policy and also includes details on the notice periods for policy cancellation or non-renewal and information on premium payments and loss payments.
IM 7085–Earthquake, Flood And Sewer Backup Endorsement
This endorsement is only used with IM 7051–Builders' Risk Coverage–Scheduled Jobsite Form to provide coverage for any or all of these perils, as indicated on IM 7086–Earthquake, Flood And Sewer Backup Schedule.
IM 7086–Earthquake, Flood And Sewer Backup Schedule
This schedule is used with IM 7086–Earthquake, Flood And Sewer Backup Endorsement to indicate the coverages, limits and deductibles that apply. It is only used with IM 7051–Builders' Risk Coverage–Scheduled Jobsite Form.
IM 7087–Additional Builders' Risk Schedule
This schedule is used to list additional covered locations when the space provided on the schedule of coverages is inadequate.
IM 7088–Windstorm Deductible
This endorsement provides the means to indicate separate deductibles for the perils of Windstorm and Hail. The deductible can be expressed as either a flat amount or as a percentage, using percentages of 1%, 2% or 5%.
IM 7090–Additional
Scheduled Jobsite Locations
This schedule is used with IM 7054–Builders' Risk Coverage–Rehabilitation And Renovation Form to list and describe additional buildings being rehabilitated or renovated.
Builders' risk and installation coverage forms both provide coverage for
building materials and supplies at the construction site, in transit to the
site and similar property intended for the construction project at other
locations as necessary or because of lack of storage space at the construction
site. The principal 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 at the project to eliminate or reduce the possibility of loss.
The most important element in underwriting builders risk insurance lies
in understanding the nature of the contractor involved. The contractor should
have experience in building the type of structure being considered. A
residential contractor may be very successful building one and two family homes
but that does not mean it will be similarly successful building a six-family
condominium building or some other kind of commercial property. In the same
manner, a commercial building contractor may not be aware of all of the aspects
and pitfalls involved in residential construction. Simply being a contractor is
not sufficient. A good contractor is aware of all aspects and hazards of a
particular job and takes the appropriate steps to address them all, both in
advance planning and as they come up during the course of the construction project.
Another major issue is job site supervision. Some contractors are
"paper contractors." These contractors bring together the various
subcontractors to handle the job but do not regularly have any of their own
employees on the job site. In situations like these, relationships are
extremely important. A good "paper contractor" will, to the extent
possible, use the same subcontractors on as many jobs as possible. This makes
it more likely that the different crews will work well together. The contractor
should have a detailed checklist and an established timetable for checking the
work. The general contractor is usually responsible for all functional aspects
at the job site and should be aware of all elements of job site safety and the
normal arrangements that should apply.
The number of jobs being worked on at the same time is also important.
In the case of multiple job sites, the contractor should have sufficient
supervision at all sites on a regular basis. The job site that is not visited
regularly by the contractor having authority can quickly become disorderly and
fall behind schedule. Inferior workmanship in plumbing, electrical and framing
is quickly covered up and hidden if not observed regularly and frequently.
If the building is being constructed in areas subject to high winds, the
walls should be properly shored up and braced before the roof is added to
eliminate or reduce the chance of wind losses. Any other similar atmospheric or
geographic issues that can affect construction need to be evaluated and
adequate protection or needed safeguards implemented to reduce loss potential.
Written contracts and agreements are as important in the construction
field as they are anywhere else. Contracts should be in place to establish
ownership and responsibility and to reduce the chances of ambiguity and
disagreement if a loss occurs. Ownership of building materials needs to be
established, since the contractor in many cases is simply installing the goods
and does not actually own them during the construction or installation process.
Attention to details early in the process pays benefits later. Small and
insignificant details may not seem important until a loss occurs. The nature
and details of the transit exposure should be analyzed and understood by all
affected parties. Paper contractors usually have little or no exposure in this
area compared to contractors that are more active and involved on the job site.
Workers’ tools, scaffolding and related equipment are frequently overlooked but
are subject to transit exposures and losses as much as building materials. Some
types of property should be insured under contractors' equipment coverage.
Others should be insured under builders' risk coverage. It is important to be
certain that the transit limit is sufficient to cover the values exposed to the
variety of transportation hazards.
The type of construction is a major factor in both underwriting and
rating. Construction methods vary greatly, as do wind and fire exposures. Frame
construction is by far the most common construction type and is also most
subject to wind and fire losses. Brick veneer construction has little impact on
loss potential, since it is simply a layer of masonry veneer attached to the
wood frame and the basic construction must still be considered frame. Solid
brick or masonry bearing walls construction stand up better to wind and fire
but require greater construction time and damage can be more expensive to
repair. Metal buildings are similar to frame with respect to the wind exposure.
Metal building construction is vulnerable to a number of issues until the roof
is securely attached but fire is not ordinarily one of them.
Masonry-non-combustible and fire-resistive are the best types of construction
but building using these materials takes more time and is considerably more
expensive.
Any type of construction has its own issues relating to job site
security against vandalism and theft. The more involved, elaborate and
expensive types of construction require use of a variety of heavier equipment
and this element affects the job site security issue more than anything else.
As a result, these job sites require more security measures than those of
lesser quality and having less equipment on the site whether occupied and
operating or not.
It is important to understand the financial interests of all the parties
in the property under construction and any contractual obligations that they
have to one another. The worse case scenario is where each party believes the
other is responsible for purchasing the builders’ risk coverage and nobody
purchases it at all. If more than one policy is purchased, the only damage done
is the amount of extra premium paid. If nobody arranges for coverage, it means
the entire project is unprotected.
The coverage form to be used must be considered, since reporting forms
are available in addition to scheduled and non-reporting forms. Each approach
has advantages, disadvantages and responsibilities that the insured needs to
understand. The reporting form is flexible and leads to a greater feeling of
security but improper or inadequate reporting can diminish those advantages and
spell disaster in the event of a loss.
Editor's Note: The coverages provided under IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form are included in IM 8000–Contractor's Combination Form–Scheduled Coverage. This form combines the coverages provided by four separate coverage forms into a single combination coverage form. The separate forms are IM 7050–Builders' Risk Coverage–Scheduled Jobsite Form–Broad Form, IM 7000–Contractors' Equipment Coverage, IM 7203–Business Computer Coverage and IM 7100–Installation Floater Coverage.
IM 8000 is not analyzed or evaluated because the coverages provided are analyzed under the other coverage forms indicated.