ISO Camera And Musical Instrument Dealers Coverage Form

ISO CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE FORM ANALYSIS

(August 2018)

 

Menu (click here to expand or to collapse)

INTRODUCTION

The Insurance Services Office (ISO) Camera and Musical Instrument Dealers Coverage Form insures camera dealers’ stock and similar or related equipment and accessories. It also covers musical instrument dealers’ stock of musical instruments and similar or related equipment and accessories. Similar property of others that is in the named insured’s care, custody, or control is also covered. It may be written on a reporting or a non-reporting basis and covers the named insured's premises, while in transit and at other locations.

ELIGIBILITY

Camera dealers and musical instrument dealers are eligible. If retail, discount, or department stores purchase this coverage, it applies to only merchandise and equipment in the camera or musical instrument departments. Other merchandise held for sale is excluded. Radios, televisions, and sound recording and playing devices are not considered musical instruments, but they may be covered as other stock.

This coverage form cannot be used to insure cameras or musical instruments manufacturers.

 

POLICY CONSTRUCTION

ISO Camera and Musical Instrument Dealers Coverage requires at least these five forms:

Related Article: IL 00 17–Common Policy Conditions

Related Article: CM 00 01–Commercial Inland Marine Conditions

Note: Camera and musical instrument dealers coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

CM DS 04–ADVISORY CAMERA AND MUSICAL INSTRUMENT DEALERS DECLARATIONS

CM DS 04–Advisory Camera and Musical Instrument Dealers Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

In addition, an entry is required to indicate if coverage applies to a camera dealer or a musical instrument dealer.

Premium for This Coverage Form

The premium for Camera and Musical Instrument Dealers Coverage is entered in the space provided.

Limits of Insurance

Separate limits of insurance must be entered for each of the following in the spaces provided:

The address of the premises must be entered.

This is actually a catastrophe limit for all losses regardless of location. This limit must be closely monitored when changes are made to the limits above. If those limits are increased and this limit is not, this limit will be a secondary cap reducing coverage for the policyholder.

Rates and Premiums

The following is entered in the spaces provided when coverage is written on a non-reporting basis:

The following is entered in the spaces provided when coverage is written on a reporting basis:

Deductible

The deductible is $500 unless a different amount is entered in the space provided.

Coinsurance

A coinsurance percentage or the words “No Coinsurance” must be entered in the space provided. The coinsurance percentage is 80% unless a different percentage is entered in the space provided.

Additionally Covered Property

Four additional types of property may be covered by entering a limit of insurance at the appropriate address for any or all of the following:

Note: CM 99 01–Additionally Covered Property must be attached when entries are made in this section.

Special Provisions

Any special provisions are entered in the space provided.

 

Example of property this coverage form can insure

CM 00 21–CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE FORM ANALYSIS

Note: This analysis is of the 01 13 edition. Changes from the 03 10 edition are in bold print.

Introduction

CM 00 21 opens by stating that certain provisions restrict coverage and encourages the named insured to carefully read the policy to understand what is covered, what is not covered, and to determine its rights and duties. It highlights that the insurance company uses the terms you and your to refer to the named insured that is shown on the declarations and the terms we, us, and our to refer to the insurance company that provides coverage.

A. Coverage

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

The following property is covered:

a. Cameras, musical instruments, and related equipment and accessories that make up the named insured's principal stock in trade

b. Related and similar property of others that is in the named insured's care, custody, or control

2. Property Not Covered

There is no coverage for the following property:

a. Property that has been sold and delivered to customers and in which the named insured no longer has an ownership interest. Property that has been sold under sales arrangements that involve deferred payments are not covered.

 

Example: Gene's Guitars Sales and Service sells Eric a vintage Gibson guitar with payments to be made over a period of 36 months. Eric faithfully makes payments for almost two years until the guitar is stolen from a gig in Los Angeles. Eric did not insure it, a decision he regretted for the rest of his life. Gene also regrets it because his sales contract with Eric does not provide any relief for the unpaid amounts and he cannot recover the remaining balance from this coverage because this category of property is excluded.

 

b. Accounts, bills, currency, documents, records, deeds, evidence of debt, money, notes, securities, or stamps

Note: This property is primarily money or substitutes for money. It should be insured under commercial crime coverage forms.

Related Article: Commercial Crime Coverage Analysis

c. The following property:

However, this property can be covered by entering the information needed on the declarations and attaching
CM 99 01–Additionally Covered Property.

d. Property that is sent by mail. The only exception is that property sent by Registered Mail or Government Insured Mail is covered.

 

Example: Gene figures his luck has to change soon, and it does…for the worse! He finds a collector who will pay any price for a Fender Stratoliner guitar he advertises on the Internet. Gene intentionally inflates the price to test the waters and see what will happen and the collector is glad to pay the inflated price. Gene has the guitar professionally packaged and mailed by First Class Mail and forgets all about insuring it. The collector never receives it, Gene is out both its actual value and the inflated value, and the world must wait for the next guitar prodigy to find out where the guitar actually went.

 

e. Contraband. These are goods that are illegal to possess or that are legal but are in the course of illegal transportation.

3. Covered Causes of Loss

The covered causes of loss under this policy is direct physical loss or damage to the named insured's covered property. The only exceptions are those causes of loss that are listed and described in Section B.  Exclusions.

4. Additional Coverage–Collapse

Only abrupt collapse is covered under this coverage. What abrupt collapse is and is not as described below. 

a. As used in this coverage, abrupt collapse means that the building or part of the building must abruptly fall down or cave in. Because of such falling down or caving in, the building or part of the building cannot be occupied for its intended purpose.

b. Payment for such abrupt collapse as described in paragraph item a. is for only direct physical damage to the covered property that is inside the building. However, payment is made only if one or more of the following cause the collapse:

·         Hidden decay. This applies only if the insured was not aware of the hidden decay prior to the collapse.

·         Hidden insect or vermin damage. This applies only if the insured was not aware of the hidden insect or vermin damage prior to the collapse.

·         Defective construction material or construction methods. This applies only if the collapse occurs after a building has been built, remodeled, or renovated and depends on one of the following contributing to the collapse:

o    Hidden decay or hidden insect or vermin damage as described above

o    One or more of any of the following listed causes of loss. However, loss by them applies only if they are insured against in this coverage form and only to the manner in which they are. Fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet, or snow, water damage, and earthquake are the causes of loss.

o    Weight of people or personal property

o    Weight of rain that accumulates on a roof

c. While this is additional coverage, it does not increase the coverage form's limits of insurance.

5. Coverage Extension

Theft Damage to Buildings

a. The named insured’s lease may make it legally responsible for theft damage to a building it occupies, or the named insured may be the building owner. In these situations, this coverage form provides coverage for the theft damage to the part of the building the named insured occupies and to building service equipment that is inside the building. Such damage resulting from attempted theft is also covered.

b. Coverage does not apply to loss or damage due to fire. It also does not apply to damage to glass or to any lettering or artwork on the glass.

This coverage extension is included in the limit of insurance for the property at the covered location where the damage occurs. It is not in addition to it.

 

Example: The building Goomba Nick’s Music owns and occupies is badly damaged when a would-be thief decides that the best way to break in and steal merchandise is by crashing into it with a beat-up car.

The damage to the building, other than the glass, is covered.

B. Exclusions

1. Primary Exclusions

The causes of loss in this exclusion do not apply to loss or damage caused directly, indirectly, or in any sequence in a chain of events that contribute to the loss. Exceptions to the chain of events condition are stated in the specific exclusion subpart. Coverage form wording emphasizes that coverage for any loss event described in these exclusions does not apply even if the event is widespread.

a. Earthquake

Loss or damage caused by or that results from earthquake is excluded.

This is a very limited exclusion. This is not earth movement exclusion, so all other types of earth movement remain covered. Also, if a fire results that damage due to the fire is covered. Finally, this exclusion applies only to property that is on the named insured’s premises. This means that property in transit and off premises is covered for earthquake.

b. Governmental Action

Coverage does not apply if the government seizes or destroys property. This exclusion has an exception. Coverage applies to loss or damage due to such ordered acts of destruction at the time of a fire to prevent the fire's spread. The exception applies only if the insurance provided by this coverage form covers the fire.

c. Nuclear Hazard

There is no coverage for loss or damage for anything related to nuclear hazards. Reactions, radiation, and contamination are not covered. This exclusion has an exception. There is coverage if the nuclear reaction, radiation, or radioactive contamination results in a fire. The exception applies only if the insurance provided by this coverage form covers the fire.

d. War and Military Action

This exclusion lists three specific warlike activities that are excluded.

Any government action taken to respond to such actions is also considered war.

e. Water

Loss or damage caused by water is excluded but not all types of water. Water, as used in this exclusion, is only   flood, surface water, waves, tides, tidal waves, tsunamis, or overflow of any body of water or their spray, all whether driven by wind or not. Storm surge and material that is waterborne, moved, or carried by water in any way is also water. Coverage is excluded, regardless of whether the damage is due to an act of nature or otherwise.

This exclusion has an exception. If water, as described above, causes a fire, explosion, or theft and this coverage form would otherwise cover that fire, explosion, or theft, that fire, explosion or theft loss or damage is covered.

This exclusion applies to only property at the named insured's premises.

2. Secondary Exclusions

There is no coverage for loss or damage caused by the following exclusions. Note that the lead-in language is not as strong or inclusive for these exclusions as the language in 1. Broad Exclusions.

Editorial note: ISO does not give titles to these exclusions. To assist in the analysis, we have provided a title to help identify the exclusion’s main intent.

a. Theft from Any Unattended Vehicle

Loss due to theft from an unattended vehicle is excluded. There are two exceptions.

 

Example: Gene's bad luck continues. He purchases several musical instruments for some really good prices at an auction. They are all serviceable and Gene figures he can clean up and refurbish them and sell them for a tidy profit. He stops for lunch and to celebrate his good fortune at a little diner with great food. Gene forgets to lock his van and all the instruments are gone when he returns from lunch. Coverage does not apply because there is no evidence of forced entry into the vehicle.

 

b. Marring, Scratching, or Exposure to Light

There are two different types of exclusion in this item.

An exception that applies to both exclusions is that if fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft, attempted theft, or accident to vehicles that carry such property directly causes the loss, the loss is covered. This exception applies only if this coverage form would otherwise cover those causes of loss.

c. Delay, Loss of Use, and Loss of Market

Coverage under this form is direct damage coverage. Therefore, a delay, loss of use, loss of market, or any other consequential loss is not covered.

d. Unexplained Disappearance

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

e. Shortage Found Upon Taking Inventory

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

f. Dishonest or Criminal Acts (01 13 changes)

There is no coverage for loss or damage that is due to dishonest or criminal acts (including theft) from any of the following:

(1) Acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes such acts that leased workers and temporary employees commit.

(2) Acts of managers or members of a limited liability company, if the named insured is a limited liability company

(3) Acts by anyone with an interest in the property, their employees, or their authorized representatives. This also includes such acts that their leased workers and temporary employees commit.

Note: This edition removes item (4) in the previous edition that addressed others entrusted with property for any reason. It is re-introduced in newly added exclusion i.

This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours.

This exclusion does not apply to acts of destruction by the named insured’s employees, leased workers, or temporary workers. However, loss due to theft of covered property by employees, leased workers, or temporary workers is excluded.

g. Processing or Work Upon the Property

Loss or damage that is caused by or that results from the actual processing or work being done on the covered property is excluded. There is an exception. When the processing or work being done results in a fire or explosion coverage applies to the loss or damage that fire or explosion causes but only if the fire or explosion are considered covered causes of loss under this coverage form.

 

Example: Gene's luck finally gets better. He uses a highly flammable solvent to clean the bodies of some vintage accordions but does not notice that it is the wrong kind and is deeply etching their surfaces. While doing this during a severe cold snap, the space heater at his feet overheats and ignites the solvent’s fumes. Gene flees and calls the fire department. The adjuster has a mess to sort through but determines that the damage the solvent caused to the accordions is minor and far less than the fire that consumed nearly all the stock he had for repair. Most of his loss is covered by this exclusion’s exception.

 

h. Artificially Generated Current

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

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

i. Voluntary Parting

There is no coverage if the named insured or someone the named insured entrusts property to is tricked or deceived into giving property away.

j. Unauthorized Instructions

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

k. Neglect

There is no coverage if an insured does not use reasonable measures to save and preserve the property from further damage during and after the time of loss.

l. Theft (01 13 addition)

There is also no coverage for theft committed by anyone else entrusted with property. This exclusion applies whether a person is acting alone or is in collusion with others who committed the theft.

This exclusion applies 24 hours a day. This means that acts that occur during business hours are excluded as well as acts committed after hours.

This exclusion does not apply to covered property entrusted to carriers for hire.

Note: This exclusion was previously part of exclusion f. above. This change does not affect coverage. It makes the exclusion more visible.

3. Other Exclusions

The subparts of this exclusion are sometimes referred to as the anti-concurrent causation exclusions. These exclusions are unique in that, if a loss is covered as a covered cause of loss, with the exception of these exclusions, it is still covered. On the other hand, if the loss would have been excluded anyway, it is still excluded.

Editorial Note: This coverage form does not title these exclusions. The titles given suggest the exclusion’s content.

a. Weather Conditions

Coverage does not apply to loss or damage that weather conditions cause. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event in 1. Primary Exclusions above that produces the loss or damage.

b. Acts or Decisions

Governmental entities and related groups make decisions and take actions that not only affect others but may also cause loss or damage. Loss or damage that results from such acts or decisions is excluded.

c. Faulty, Inadequate, or Defective Planning

Loss or damage that is due to faulty, inadequate, or defective planning, design, materials, and maintenance is excluded. An important provision is that it applies both on and away from the designated premises.

d. Collapse

Note: Collapse is initially totally excluded here but limited coverage is added back in Section 4. as Additional Coverage–Collapse.

Collapse is excluded. This means the following property conditions are also excluded:

(1) Any type of sudden caving in or falling down

(2) When the structural integrity of the building is lost or compromised. The evidence of this could be parts of the property that separate from the rest of the building or the building appearing to be in danger of caving in or falling down.

(3) Cracking, sagging, expanding, settling, shrinking, bulging, or bending, but only as they relate to items (1) and (2) above

There are two exceptions to this exclusion.

e. Wear, Tear, and Other

Loss or damage caused by wear and tear is excluded. Damage caused by qualities in covered property that causes it to damage or destroy itself is excluded. Damage due to latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat, or cold is also excluded.

C. Limits of Insurance

The limits on the declarations are the most paid for loss or damage in a single occurrence.

D. Deductible

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

E. Additional Conditions

1. Valuation

This valuation clause replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions.

Related Article: CM 00 01–Commercial Inland Marine Conditions

The value of property is determined when the loss or damage occurs not when the policy is issued.

a. Unsold Property

This property is valued at the lowest of the following:

b. Sold Property

Property sold but that has not yet been delivered is valued at its net selling price after adjustments for allowances and discounts.

c. Property of Others

Property of others in the named insured's care, custody, or control is valued at the lowest of the following:

d. Negatives, Positives, or Prints

This property is valued differently than in a., b., and c. above. Its value is the total cost of unexposed film or developing paper PLUS the cost of labor and materials that the named insured actually incurs in developing.

2. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

Related Articles:

IL 00 17–Common Policy Conditions

CM 00 01–Commercial Inland Marine Conditions

a. Coverage Territory

The insurance company insures covered property anywhere in the United States of America, its territories and possessions, Puerto Rico, and Canada.

b. Coinsurance

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

The insurance company does not pay the full amount of any loss if the value of all covered property (subject to coinsurance) at the time of loss multiplied by the coinsurance percentage on the declarations exceeds the limit of insurance at all locations. 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 accounts receivable. Exclude values that are in transit.

Step 2: Multiply Step 1 by the coinsurance percentage on the declarations.  

Step 3. Divide the limit for the accounts receivable 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, before the deductible is applied, by the percentage determined in Step 3.

Step 5. Subtract the 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.  

c. Records and Inventory

The named insured is required to maintain accurate records of its business and to keep them for at least three years after the policy expires or is cancelled. As a minimum, records must include the following:

In addition, the named insured must conduct a physical inventory of its stock-in-trade at least once a year.

d. Protective Safeguards

When the named insured lists protective safeguards at a premises as being in place, those safeguards must be maintained in proper working order throughout the policy term. This applies only whenever the business is closed though. If the named insured fails to maintain the protective safeguards as required coverage is suspended until the equipment or service is restored to proper working order.

 

Example: Gene’s burglar alarm goes down because of a bad rainstorm. He is notified by his alarm company but chooses to do nothing and stay home where power is on and he is watching the NCAA finals. When he arrives at the store the next day and discovers that a break-in occurred, he is very disappointed to discover that he has no coverage because of his lack of action.

ENDORSEMENTS

ISO has developed two endorsements to use with the Camera and Musical Instrument Dealers Coverage Form.

CM 99 01–Additionally Covered Property

This endorsement extends coverage to other property that consists of furniture, fixtures, office supplies, machinery, tools, fittings, patterns, dies, molds, models, improvements, and betterments. It has its own coinsurance provisions because of the number and types of additional property that can be covered. When this endorsement is attached, an entry must be made on the Declarations to show the limit of insurance, the type of property and the premises where coverage is to apply.

CM 99 02–Reporting

This endorsement is used when the named insured select coverage on a value-reporting basis. It provides details on when reports are to be submitted, how premium is calculated and adjusted, and the minimum premium. It also includes details on a final premium adjustment if the policy is cancelled, how coinsurance terms are re-introduced if reports are not submitted at all, and how losses are adjusted if reports are late. It provides for annual re-rating if coverage is written for more than a one-year term.

UNDERWRITING CONSIDERATIONS

Fire and theft are the primary loss exposures for camera and musical instrument dealers. The security measures provided, and their adequacy must be evaluated. Access to stock should be limited and controlled. If the named insured removes or takes property to another location, the security arrangements there must also be evaluated. For property transported by motor vehicles, the vehicles should be locked at all times when unattended and alarms activated when covered property is inside them. The loss potential increases if the named insured provides repair and service. The types of merchandise carried, and their value primarily determines the extent and nature of security and the extent of protection against theft required.

The fire exposure is significant because of the value of each item and both cameras and musical instruments’ extreme susceptibility to damage. Even a small or brief fire can cause considerable damage. Fire prevention, appropriate suppression systems, and segregating high valued items are all important considerations.