AAIS Physicians And Dentists Equipment Coverage

AAIS PHYSICIANS AND DENTISTS EQUIPMENT COVERAGE ANALYSIS

(August 2024)

 

Introduction

Eligibility

Policy Construction

IM 1405–Schedule of Coverages–Physicians and Dentists Equipment

IM 1400–Physicians and Dentists Equipment Coverage Analysis

   Agreement

   Definitions

   Property Covered

   Property Not Covered

   Coverage Extensions

   Perils Covered

   Other Coverages–Collapse

   Perils Excluded

   What Must Be Done in Case of Loss

   Valuation

   How Much We Pay

   Loss Payment

   Other Conditions

   Additional Coverage Limitation

Endorsements

Underwriting Considerations

INTRODUCTION

The American Association of Insurance Services (AAIS) Physicians and Dentists Equipment Coverage insures medical equipment, surgical instruments, tools, materials, supplies, equipment, and scientific books. Coverage is limited to those items the named insured actually uses in the medical profession. There are no location or premises restrictions to covered property. However, coverage can be limited by endorsement.

ELIGIBILITY

This coverage is for individuals who are engaged in the medical or dental professions. Doctors and dentists who share offices, equipment, and other facilities but are otherwise engaged in individual practices are also eligible.

This coverage form cannot be used to insure dealers, clinics, hospitals, medical schools, medical facilities, and similar organizations.

POLICY CONSTRUCTION

AAIS Physicians and Dentists Equipment Coverage requires at least these four forms:

Related Article: CL 0100 AAIS Commercial Lines Common Policy Conditions

IM 1405–SCHEDULE OF COVERAGES–PHYSICIANS AND DENTISTS EQUIPMENT

This Schedule of Coverages is used with IM 1400–Physicians and Dentists Equipment Coverage. IM 1405 contains the following information:

Medical Equipment

Editorial Note: The schedule of coverages includes a space to enter a limit for medical equipment. Medical equipment is not subject to a location limitation. If it belongs to the named insured, it is covered wherever it is. Any company that uses this coverage form should consider revising this schedule of coverage to include a space to list medical equipment without tying it to a specific location.

Schedule of Locations

This section is required only if furniture, fixtures and equipment, and tenants’ improvements are to be covered. The location number and a description of the premises are entered along with an applicable limit. It is important to note that a single limit applies to all the coverages. There is no separate limit for furniture, fixtures and equipment and another for tenants’ improvements. A single limit applies to all such property at the scheduled location.

In addition, a catastrophe limit for all locations in a single occurrence must be entered in the spaces provided. The words “void” or “not applicable” may be entered.

Editorial Note: None of the limits in this section apply to Medical Equipment because medical equipment is not location specific.

Deductible

The deductible amount the named insured retains for each covered loss must be entered in the space provided.

Optional Endorsements

Three optional endorsements are available.

This endorsement covers the following property for the very low limits contained in the endorsement:

The endorsement provides no option for increasing any of these limits.

This endorsement limits property covered to only medical equipment, tools, supplies, and scientific books the named insured normally carries. No space is provided to enter a limit.

This endorsement covers loss caused by artificially generated electric current at locations listed on the schedule of coverages. This is subject to the deductible that is also entered in the spaces provided on this schedule of coverages.

Rates and Premium

Physicians and Dentists Coverage is written on a non-reporting basis. This section has spaces to enter the annual premium, the non-reporting rate per $100, and any minimum premium that applies.

IM 1400–PHYSICIANS AND DENTISTS EQUIPMENT COVERAGE ANALYSIS

This analysis is of the 01 05 edition.

Agreement

This section states that the insurance company provides the coverage described in return for the named insured paying the required premium. This agreement is subject to all the terms of the coverage form, the schedule of coverages, and any additional conditions that apply. Endorsements or additional schedules identified on the schedule of coverages also apply.

A statement that certain words and phrases identified in bold print in the coverage form are defined in the Definitions section immediately following this Agreement.

Note: There is no clearly marked space on the schedule of coverages to list endorsements or additional schedules that apply at inception.

Definitions

Defined words are used throughout the coverage form. When these terms are used in the coverage form, the meaning provided in this section must be applied. Nine terms are defined:

1. You and your

The parties that are specifically named on the declarations as insureds.

2. We, us, and our

The insurance company that is providing the coverage.

3. Limit

The amount of coverage that applies.

Note: There is no reference as to what it applies; it just applies.

4. Pollutant

This is a broad and expansive term. It is solids, liquids, thermal or radioactive contaminants, and irritants. It includes, but is not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste 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.

5. Schedule of coverages

Any page labeled as such that contains coverage information, including declarations or supplemental declarations.

6. Sinkhole collapse

The earth’s surface suddenly settling or collapsing into an underground opening created by water acting on limestone or some other rock formation. Sinkhole collapse does not include the land’s value or the cost to fill sinkholes.

7. Specified perils

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, the weight of sleet, snow or ice and windstorm. Two terms need further explanation.

Falling objects does not include loss to personal property stored in the open. It also does not include damage to the interior of buildings or personal property stored in buildings unless a falling object first breaches the building's exterior.

Water damage is the sudden or accidental discharge or leakage of water or steam. However, it must directly result from a part of the system or appliance that holds the water or steam cracking or breaking.

8. Terms

These are all provisions, limitations, exclusions, conditions, and definitions that apply to this coverage.

9. Volcanic action

An airborne volcanic blast or shock wave. It is also ash, dust, particulate matter, and any lava flow. The term does not include the cost of removing dust, ash, or particulate matter from the covered property unless there is direct physical damage to the property.

 

PhysicianDentist_144

Example of dentist's equipment

Property Covered

The insurance company covers property listed and described unless it is excluded or subject to limitations.

 

100292142

1. Medical Equipment

a. Coverage

This is the primary coverage provided under this form. Direct physical loss that a covered peril causes to the named insured’s medical, surgical, or dental equipment, tools, supplies, scientific books, and similar and related property is covered. Such damage to similar property of others in the named insured’s care, custody, or control is also covered.

b. Coverage Limitation

Property described in item a. above is covered only if the named insured uses it as part of him or her practicing a medical or dental profession.

Note: There is no limitation as to where this property must be. It is not location or premises specific.

 

Example: Mabel works at three different offices. Rather than having duplicate items at each office, she carries her most valuable and comfortable equipment with her. She also carries her laptop and other electronic devices that are part of her profession. All are covered even when she carries the equipment to conferences and even on vacation when they are within the territorial limits of the coverage form. 

2. Furniture, Fixtures, and Equipment

a. Coverage

Direct physical loss a covered peril causes to office furniture, fixtures, and equipment the named insured owns is covered.

Note: Although it is not stated, this would appear to not include the Medical Equipment that is covered in item 2. above. An inventory of location-specific equipment vs medical equipment carried by the named insured should be maintained to prevent duplication of coverage and potential coinsurance concerns.

b. Coverage Limitation

Coverage applies at only locations that are listed on the schedule of coverages.

3. Tenants Improvements

a. Coverage

This coverage is available only when the named insured is a tenant. Direct physical loss a covered peril causes to improvements the named insured makes to the scheduled premises is covered. However, the named insured must have an insurable interest in those improvements.

b. Coverage Limitation

Coverage applies only to locations listed on the coverage schedule.

Note: Being able to include furniture, fixtures, equipment, and tenants improvements is the named insured's advantage. All such personal property in which it has an insurable interest can be insured under one coverage form. This helps it avoid potential problems if two or more coverage forms or policies are involved and a dispute arises over which policy provides coverage on each type of property when a loss occurs. When one insurance company writes all coverages, it responds to the loss and later figures how to allocate the costs internally.

Property Not Covered

There is no coverage for the following property:

1. Contraband

Property that is illegal to possess is not covered. Property that is legal to possess but being used as part of an illegal trade or being transported illegally is also not covered.

2. Property Owned By Dealers or Medical Institutions

Property owned by a clinic, hospital, medical school, or similar organizations own is not covered.

Note: This is a very important restriction if the named insured carries equipment provided for his or her use by others especially since coverage states that “similar property of others in the care, custody or control” is covered.

3. Radioactive Substances

This is anything that contains any amount of radium.

Note: Radium is found in many items in a variety of forms. For example, blood is frequently drawn to extract white blood cells. These cells are irradiated (exposed to radiation) and re-injected back into the body, where a body or bone scan can detect the flow and pooling of the irradiated cells to locate infection or bone deformities after surgery. Other similar procedures that involve radiation include the common x-ray. Coverage for radium is available through radioactive contamination insurance, formerly known as radium floaters.

Coverage Extensions

There are two coverage extensions. These limits 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. Theft Damage to Building

a. Coverage

Coverage applies to direct physical loss or damage thieves cause to the part of the building the insured occupies. Thief-caused damage to equipment that is used to maintain or service the building is also covered.

b. Coverage Condition

This coverage applies only if the named insured owns the building or if it is legally liable to the building owner for this type of damage. The covered property must be in a premises that is on the schedule of coverages.

c. We Do Not Cover

Damage or loss that is caused by fire is not covered. Damage to glass, glass lettering, or glass decorations is also not covered.

d. Coverage Limitation

This is not additional insurance. Any payment is part of the limit for covered property.

 

Example: Mabel’s primary office space is in a multi-tenant building. She is dismayed when she notices that the door to her office has been shattered, her computers removed, and cabinets ripped from the walls. The walls and door belong to the building owner. The damage to them is covered because Mabel is legally liable for the damage and the cause of the damage was due to theft.

 

2. Emergency Removal

a. Coverage

This covers direct physical loss to covered property removed from the scheduled location to avoid loss or damage from an impending covered peril. The loss can occur while in transit between the scheduled location and the sanctuary location. This coverage is unique in that the property that is being moved is not subject to any exclusion while in transit or at a sanctuary location. However, the reason for moving the property must be due to a covered peril.

b. Time Limitations

The named insured must notify the insurance company within ten days after it moves the property. Coverage does not extend past the expiration date. However, there is no other time limitation.

c. Coverage Limitation

This coverage is part of the applicable limit for coverage as Property Covered describes, not in addition to it.

Note: Coverage does not extend past the expiration date. If the named insured has property at an emergency location when coverage renews, the emergency location must be listed as a premises or coverage no longer applies.

Perils Covered

Coverage applies to risks of direct physical loss unless the loss is limited, or an excluded peril causes the loss.

Other Coverages–Collapse

1. Coverage

Loss to covered property when caused by a direct physical loss that involves collapse of a building or structure or any part of a building or structure containing covered property.

2. Covered Perils

The only collapse coverage provided is collapse caused by one or more of the following:

3. Collapse Means

Collapse is the sudden and unexpected falling in or caving in of a building or structure (or any part of it) that prevents the building from being occupied for its intended purpose.

4. Collapse Does Not Mean

The following buildings and structures are not considered to be in a state of collapse:

5. Coverage Limitation

This coverage does not provide any increase in the limit for covered property.

Perils Excluded

1. Primary Exclusions

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 that results from any of these events.

a. Civil Authority

There is no coverage for loss that results from an order any civil or government authority issues. These orders may include seizure, confiscation, destruction, or quarantine of property but this exclusion is not limited to only these. The only exception is when a civil authority destroying property as a means of controlling a fire causes the loss or damage. This exception applies only if the fire is the result of a covered peril.

b. Nuclear Hazard

The insurance company does not insure against loss or damage 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 that results from the nuclear hazard.

c. War and Military Action

The insurance company does not pay for loss or damage caused by any act of war. Undeclared and civil war or warlike action by a military force are all considered war. All 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 are also considered war and excluded. In addition, acts of insurrection, rebellion, revolution, or unlawful seizure of power and any action any government authority takes to prevent or defend against any such acts are excluded. 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.

Note: This means that the exception for resulting fire under the nuclear hazard is not covered when it is the result of war.

2. Secondary Exclusions

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

a. Acts or Decisions

There is no coverage for loss caused by or that results from any acts or decisions by any person, organization, or government entity. This also includes failing to act or decide.

This exclusion has an exception. The act or decision, or the failure to act or decide, may result in a covered peril. In that case, the loss or damage that peril causes is covered.

b. Animal Nesting, Infestation, or Discharge

Coverage does not apply to loss or damage due to nesting, infestation, discharge, or release of waste products or secretions by animals. The term animal includes birds, insects and vermin but is not limited to only these.

This exclusion has an exception. If any of these excluded events results in a covered peril, the loss or damage that peril causes is covered.

c. Breakage, Marring, Scratching, or Exposure to Light

Loss or damage that is caused by the breaking of glass objects or items made mostly of glass is excluded. When loss or damage is caused by property being marred, scratched, or exposed to light there is also no coverage.

This exclusion has three exceptions.

d. Collapse

Loss caused by collapse is excluded.

This exclusion has two exceptions.

e. Contamination or Deterioration

Loss or damage that is caused by contamination or deterioration is excluded. This applies to corrosion, decay, fungus, mildew, mold, rot, and rust. It also applies to any quality, fault, or weakness in covered property that causes it to damage or destroy itself. However, this exclusion is not limited to only the causes described above. This exclusion has an exception. When contamination or deterioration results in a covered peril, the loss or damage that covered peril causes is covered.

f. Criminal, Fraudulent, Dishonest, or Illegal Acts

Coverage does not apply to loss caused by, or that results from criminal, fraudulent, dishonest, or illegal acts, committed by any of the following alone or in collusion with another:

Coverage applies if employees destroy property. It does not apply if employees steal.

This exclusion does not apply to covered property in the custody of a carrier for hire.

g. Electrical Currents

There is no coverage for loss or damage due to artificially generated electrical currents damaging electrical apparatus or wiring inside the insured property. This exclusion applies only to the property that artificially generated the current.

This exclusion has an exception. Electrical currents may result in a fire or explosion. In that case, the loss or damage the fire or explosion causes is covered.

h. Fault, Defect, or Error

Loss or damage due to errors, faults, or defects in planning, zoning, surveying, site plans, grading, compacting, land use, or development is not covered. Loss or damage due to property related design, blueprint, specification, workmanship, building, maintaining, installing, renovating, remodeling, or repairing errors, faults, or defects are also excluded.

An important provision is that this exclusion applies both on and away from the designated premises, regardless of negligence.

i. Loss of Use

There is no coverage for loss that is the result of delay, loss of use, or loss of market.

j. Mechanical Breakdown

Loss that is due to mechanical breakdown is excluded. The only exception is when such an excluded loss causes a covered peril, the resulting loss from that covered peril is covered.

k. Pollutants

There is no coverage for loss caused by or resulting from any release, discharge, seepage, migration, dispersal, or escape of pollutants. There are two exceptions:

l. Process to Repair, Adjust, Service, or Maintain

There is no coverage when loss or damage results from a repair, adjustment, service, or maintenance of the covered property.

This exclusion has an exception. If any of the above actions result in a fire or explosion, the loss or damage caused by the fire or explosion is covered.

m. Temperature or Humidity

Coverage is not provided when dryness, dampness, humidity, or changes and extremes of temperature cause or result in loss or damage to covered property.

This exclusion has an exception. If any of the above result in a covered peril, the loss or damage from that peril is covered.

n. Unauthorized Instructions

Coverage does not apply if a loss occurs because the property was given to another person or sent to another place based on unauthorized instructions.

o. Voluntary Parting

There is no coverage for loss to covered property voluntarily given to others, even if the surrender was due to a fraudulent scheme, trick, or false pretense.

p. Wear and Tear

Loss or damage caused by wear and tear is excluded.

This exclusion has an exception. Wear and tear may result in a covered peril. In that case, the loss or damage that peril causes is covered.

q. Weather

Loss or damage due to weather conditions is excluded but only when the loss is caused by a weather condition combined with a cause of loss excluded in item 1. Primary Exclusion above.

This exclusion has an exception. The weather conditions may result in a covered peril. In that case, the loss that peril causes is covered.

What Must Be Done In Case Of Loss

1. Notice

The named insured must promptly notify the insurance company or its agent of a loss. The notice must include a description of the property lost or damaged. If a criminal act caused the loss, the appropriate law enforcement agency must also be notified. The insurance company has the right to require that any notice to it be in writing.

2. You Must Protect Property

During and after a loss, the named insured must take all reasonable steps to protect covered property from further loss. The insurance company pays reasonable costs the named insured incurs if the named insured maintains accurate records to substantiate the costs. Paying these costs is not in addition to the policy limits. There is no coverage for any repairs or emergency measures performed on property not already damaged by a covered peril.

Note: It is important to realize that any such costs incurred will reduce the amount available to pay the actual loss.

3. Proof of Loss

The named insured must complete and return the insurance company's prescribed proof of loss forms within 60 days after the company requests it. The information provided must include the time, place, and circumstances involved with the loss and information on any other insurance coverage that may apply. It must also include the named insured’s interest and the interest of others with respect to the property involved, including liens, and mortgage. Any changes in the title to the property during the policy period must be disclosed, in addition to providing any other reasonable information, including inventories, specifications, and estimates the company may require in settling the loss.

4. Examination

Examination of the named insured under oath may be required in matters that relate to the loss. The insurance company may request these examinations more than once, but such requests must be reasonable. If multiple persons are examined, the company has the right to examine each individual separately.

5. Records

The named insured must produce any records related to the loss. The insurance company must be allowed to make copies and take extracts of them as often as it reasonably requests. Records include tax returns and bank microfilms of all related canceled checks, but records are not limited to just these.

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 and to inspect it.

7. Volunteer Payments

The named insured has the right to make payments, assume obligations, pay or offer rewards, or incur other expenses. However, unless the insurance company has given written approval for such actions, the named insured cannot expect any reimbursement. The only exception is that the insurance company will pay for the costs incurred to protect property as described in item 2 above .

8. Abandonment

The insurance company decides when and if it will take ownership of the named insured’s property. The named insured is, therefore, not permitted to abandon damaged property to the insurance company until the insurance company agrees in writing to accept it.

9. Cooperation

The named insured must cooperate with the insurance company. Any actions required of the named insured within this policy must be performed.

Valuation

1. Actual Cash Value

The valuation of covered property is subject to 2., 3., and 4. below.

The value of covered property is its actual cash value at the time of loss. Actual cash is replacement cost new minus depreciation.

2. Tenants’ Improvements

Tenants’ improvements are valued at their actual cash value but only if the named insured repairs or replaces the damaged improvements at its own expense and within a reasonable amount of time.

a. Value Based on Portion of Original Cost

If the improvements are not repaired or replaced within a reasonable time, the value is based on only a portion of their original cost. That value is computed using the following formula:

Step 1: Determine the number of days between the lease’s expiration date and the date of loss.

Step 2: Determine the number of days from the date the improvement was installed to the lease’s expiration date.

Step 3: Divide Step 1 by Step 2.

Step 4: Multiply Step 3 by the improvement’s original cost.

b. Lease Renewal Option

The procedure above changes if the lease has a renewal option. Instead of the original lease's expiration date, the renewal option's expiration date is used in Step 1. c.

We Do Not Pay

No payment is made if another party repairs or replaces the lost or damaged property at its own expense.

 

Example: A fire in the office on December 1, 2018, convinces Mabel that is time to move. Although she enjoyed the improvements she had made in her office, she is not permitted to remove them. She requests a cash settlement for her loss. The company calculates it as follows:

  • Step 1: Mabel’s lease expires on January 1, 2023, so there are 1,491 days between the date of loss and the expiration date of the lease.
  • Step 2: The improvements were installed when she occupied the premises in January 2013. As a result, there are 3,650 days between the installation date and the lease's expiration date.
  • Step 3: 1,491/3,650 = .408
  • Step 4: The original cost of the improvements and betterments was $10,000. Mabel can expect to receive $4,080 ($10,000 X .408).

 

3. 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. However, the 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 individual parts but that the remaining parts still have value as separates.

4. Loss to Parts

The value of a lost or damaged part of the property that consists of several parts is the cost to repair or replace only the lost or damaged part.

How Much We Pay

1. Insurable Interest

The insurance company does not pay more than the named insured's insurable interest in the covered property at the time of loss.

2. Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount on the schedule of coverages.

3. Loss Settlement Terms

There is a problem with this item because of the lack of a limit on the schedule for property that is not location specific.

a. We Pay the Least of

The insurance company pays the least of the following, subject to items 1., 2., 4., and 5. in this section:

b. Catastrophe Limit

If there is a catastrophe limit on the schedule of coverages, and a covered peril causes loss or damage at more than one premises listed on the schedule, the most paid in a single occurrence is the lesser of the following:

Note: Again, a problem exists with property not associated with a single premises. The catastrophe limit does not stand alone. The maximum payment is the LOWER of either the sum of the location limits OR the catastrophe limit.

 

Example: Mabel works out of three different offices. While some equipment is at an office, some equipment moves with her to the various locations based on the scheduled procedures. She asks that no catastrophe limit be on the schedule of coverages because it really does not work with the mobile equipment.

4. Coinsurance

Note: There are many questions regarding how this coinsurance clause applies because of the conflicts in the schedule of coverages. Requesting that coinsurance be waived is recommended.

This provision applies to only losses that occur at a covered premises listed on the schedule of coverages.

The insurance company does not pay the full amount of any loss if the value, at the time of the loss, of all covered property (subject to coinsurance) multiplied by 80% exceeds the limit of insurance.

Note: What about the value of property not in transit but at a location that is not listed on the schedule of coverages? What about item 1. medical equipment that is covered regardless of the location.

The following are the steps the insurance company takes to determine the amount it pays:

Step 1: Determine the value of items, at the time of the loss, of all covered property at the loss premises subject to coinsurance.

Note: This differs from paragraph a., which refers to ALL covered property, not just covered property at the premises where the loss occurred. What about item 1. Medical equipment that happens to be at the location but is normally kept at that location?

Step 2: Multiply Step 1 by the coinsurance percentage of 80%.

Step 3. Divide the limit for the covered property at the premises subject to coinsurance by the result determined in Step 2.

Note: Stop here if the result is 1.00 or higher because no coinsurance penalty applies. Go to Step 4 only if the result is less than 1.00.

Step 4. Multiply the total amount of loss, prior to the application of a deductible, by the percentage determined in Step 3.

Step 5. Subtract the applicable deductible from Step 4.

The insurance company does not pay more than the amount determined in Step 5. or the limit of insurance, whichever is less. It does not pay any remaining part of the loss.

Note: The conflict within the wording of this condition could make it very difficult to enforce.

5. Insurance under More Than One Coverage

Two or more coverages in the coverage form may cover the same loss. In that case, the insurance company does not pay more than the actual value of the claim, loss, or damage sustained.

6. Insurance under More Than One Policy

a. Proportional Share

The named insured may have other coverage subject to the same terms as this coverage form. In that case, this coverage form 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 insurance that covers on the same basis.

b. Excess Amount

There may be other coverage available to pay for the loss other than as described in item 5. a. above. In that case, this coverage form pays on an excess basis. It pays only the amount of covered loss that exceeds the amount due from the other coverage, whether it can be collected or not. Any payment is subject to the insurance limit that applies.

Loss Payment

1. Loss Payment Options

a. Our Options

The insurance company has four loss payment options if a covered loss occurs.

b. Notice of Our Intent to Rebuild, Repair, or Replace

The insurance company must notify the named insured of its intent to rebuild, repair, or replace within 30 days of receiving a properly completed proof of loss.

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured. The only exception is when a loss payee is 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. The amount of loss is determined either through a written agreement between the company and the named insured or after an appraisal award is filed with the company.

3. Property of Others

a. Adjustment and Payment of Loss to Property of Others

The insurance company has the option to adjust and pay losses that involve property of others to either the named insured on the property owner’s behalf or to the property owner.

b. We Do Not Have to Pay You if We Pay the Owner

The insurance company is not obligated to pay the named insured when it pays the property owner. In addition, if the property owner sues the named insured, the company has the option to defend the named insured in that suit.

Other Conditions

1. Appraisal

The insurance company and the insured may not always agree on a covered claim’s value. This condition provides one method to resolve disputed claims.

Either party can request an appraisal to determine a disputed claim’s value. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their 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 that time period, 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 claim’s value. They submit any differences 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 umpire’s cost and other expenses equally.

2. Benefit to Others

The insurance provided does not directly or indirectly benefit any party that has custody of the named 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

The insurance company and the insured may not always agree on a covered claim’s value. This condition provides one method to resolve disputed claims.

Either party can request an appraisal to determine a disputed claim’s value. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their 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 that time period, 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 claim’s value. They submit any differences 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 umpire’s cost and other expenses equally.

5. Liberalization

A revision of this coverage form or an applicable endorsement that takes effect during the policy period or within six months of when this coverage takes effect may broaden coverage without an additional premium charge. In that case, the broadened coverage applies to this coverage.

6. Misrepresentation, Concealment, or Fraud

This coverage is void if any insured at any time willfully concealed or misrepresented a material fact that relates to the insurance provided, the property covered, or its interest in the property. It is also void if any insured engaged in fraud or false swearing with respect to the insurance provided or the property covered.

Note: The named insured must deal with the insurance company honestly. Its rights of recovery may be voided if it intentionally misrepresents or conceals a material fact or information. This means the insurance is treated as simply having never existed versus a particular claim being denied.

7. Policy Period

Only covered losses that occur during the policy period are paid.

8. Recoveries

Payment of the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply 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.

Either party that recovers property or payment must inform the other. Recovery expenses that either party incurs are reimbursed first. If the named insured keeps the recovered property, it must refund the amount of the claim the insurance company paid unless the company agrees to a different amount. If the claim paid is less than the agreed loss due to applying a deductible or other limitation, any recovery is prorated between the named insured and the insurance company, based on the company's respective interest in the loss.

9. Restoration of Limits

Payment of a claim does not reduce the limit available for future claims.

10. Subrogation

The insurance company acquires the named insured's rights of recovery from third parties after it pays a loss. The named insured must help the company secure those rights. The insurance company is not obligated to pay the loss if the named insured hinders or impairs its rights of subrogation.

The named insured has the right to agree in writing to waive recovery rights from any party when it does so before a loss occurs.

11. Suit against Us

The insurance company cannot be sued by anyone for any coverage until all the terms of the coverage form have been met. Suits must be brought within two years after the insured first knew about a loss. If a state law invalidates this condition, any suit brought must comply with that law’s provisions and begin within the shortest period of time allowed by law.

Note: It is normal for a basic coverage form to be modified by mandatory state-specific endorsements that address issues that relate to that state.

12. Territorial Limits

Covered property must be in the United States of America, its territories and possessions, Canada, or Puerto Rico for coverage to apply.

Additional Coverage Limitation

Premises Protection

The protective devices in operation as of the policy effective date must remain in proper working order throughout the policy term. Failure to have the device in place in working condition at the named premises results in automatic suspension of coverage at the location. Also, failure to place the device into operation when the business is closed will result in automatic suspension of coverage at the location where the device is not in operation. Coverage is automatically restored when the device is back in working condition or is in operation.

 

Example: When burglars broke into Mabel’s office, her operating premises burglar alarm system rang to the desk of the security attendant at the front desk. Unfortunately, the attendant was helping another tenant when the alarm rang. When the attendant returned to his post, the alarm had ceased, and the police were never notified. However, this was the alarm system and arrangement that had been warranted to be in place, and it operated properly when the burglars broke into the premises. As a result, the loss was paid in full.

ENDORSEMENTS

AAIS has developed four endorsements to use with Physicians and Dentists Equipment Coverage.

IM 1411–Additional Property Coverages

Coverage for five additional classes of property for relatively small limits are added. The added classes are Office Furniture Away From Premises, Money and Stamps, Personal Effects, Records, and Extra Expense.

IM 1412–Property Normally Carried By You

This endorsement restricts property covered to only medical equipment, tools, supplies, and scientific books the named insured normally carries. The schedule of coverages has no space for a limit to be entered for this option.

IM 1413–Artificially Generated Electric Current Coverage

This endorsement covers loss to covered property caused by artificially generated electric current. It amends the exclusion for Electric Currents under Perils Excluded to still apply except to the extent that this endorsement provides coverage. It also amends the provisions under How Much We Pay to state that coverage applies to only the amount of loss that exceeds the deductible amount on the schedule of coverages.

IM 1273–Coinsurance Provisions

This endorsement revises the coinsurance provision to be based on all premises instead of only one. All other terms and conditions remain the same.

Note: The problem with Medical Equipment continues.

 UNDERWRITING CONSIDERATIONS

The insurance this coverage form provides is underwritten as primarily an office exposure unless the off-premises exposure is significant or unusual. The equipment’s location when it is not at the main location is the most critical issue. The following are other prominent issues: