ISO Commercial Articles Coverage Form

ISO COMMERCIAL ARTICLES COVERAGE FORM ANALYSIS

(August 2018)

 

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INTRODUCTION

The Insurance Services Office (ISO) Commercial Articles Coverage Form is used to insure cameras, projection machines, films and related equipment and accessories. It can also be used to insure musical instruments and related equipment and accessories. The property can be owned by the named insured or be owned by others but be in the named insured's care, custody, or control.

ELIGIBILITY

Professional photographers and musicians are usually the first types of commercial enterprises that come to mind as needing this coverage, but it is not limited to just them. Many other operations own and use such equipment. Schools especially need the coverage. Government entities, some kinds of contractors, newspapers, and other businesses with extensive audio and video equipment transported and used in a variety of settings are also candidates for this coverage.

This form cannot be used to insure any cameras insured under a dealer or manufacturers name. These should be covered under the Camera and Musical Instrument Dealers Coverage form.

Related Article: Camera and Musical Instrument Dealers Coverage Form Analysis

Television cameras, cameras that are part of a coin-operated device; aerial cameras, and radar cameras are also not eligible for coverage under this form.

POLICY CONSTRUCTION

ISO Commercial Articles 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: Commercial articles coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

CM DS 05–ADVISORY COMMERCIAL ARTICLES DECLARATIONS

CM DS 05–Advisory Commercial Articles 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.

Premium for This Coverage Form

The premium for Commercial Articles 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 if coverage on separately scheduled and described property is desired:

Note: Each item of property must be specifically listed with a limit. However, coverage can be written on a blanket basis or “per schedule on file with the company.”

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.

Rates and Premiums

Commercial Articles Coverage is written on a non-reporting basis. A rate per $100 and the annual premium must be entered in this section. There may be an entry for only the camera coverage or only the musical instrument coverage but in some cases, there may be entries in both.

Special Provisions

Any special provisions are entered in the space provided.


 

Examples of property this coverage form insures

CM 00 20–COMMERCIAL ARTICLES 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 20 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

Two distinctly different types of property are covered in this coverage form:

The above described equipment is covered if it is owned or if it belongs to others but is in the care, custody, or control of the named insured.

2. Property Not Covered

The only property that is specifically not covered is the following:

Contraband which 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 is 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. As a result 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.

 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. 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.

b. 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 fire. The exception applies only if the insurance provided by this coverage form covers the fire.

c. 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.

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. Delay, Loss of Use, and Loss of Market

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

 

Example: Phil's Photography at Hollywood and Vine sustains a serious fire loss that damages or destroys much of his equipment. Unfortunately, this occurs just before he is supposed to leave for a shoot of a high profile married actor and actress. Phil cannot obtain replacement equipment and must give up the lucrative contract. The income he had counted on did not materialize as one of his competitors takes advantage of the opportunity and lands the contract in his place. Phil's excluded "consequential" loss in this case is the loss of revenue from the shoot he cannot do.

 

b. 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 f.

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.

c. 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.

 

Example: Phil gets a phone call he thinks is a partial reprieve. The caller identifies himself as the competitor who landed the job after Phil's loss. He says he needs a few additional pieces of equipment and wonders if Phil could help, offering to cut Phil in on a piece of the action. Phil just happens to have serviceable equipment like the caller needs and the caller offers to come by to pick it up. Phil leaves to attend to another business matter and tells his assistant to give the equipment to the photographer when he comes by. The equipment is picked up but not by the party Phil thinks called and is never seen again. Because of this exclusion, Phil's loss is not covered.

 

d. 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.

 e. Neglect

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

 f. 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 b. 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, apart from 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.

 

Example: Paul found the perfect place to take a picture of a soaring hawk. He climbs the side of a mountain and is in perfect position to capture the hawk when his camera’s strap breaks and, because his hands are otherwise occupied, the camera falls from the cliff and is destroyed. The insurance company adjuster examines the strap and determines that the break was due to deterioration. As a result, there is no coverage for the camera that was destroyed.

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

These conditions apply 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

1. Coverage Territory

The insurance company insures covered property wherever it is located.

Note: This coverage territory is unique because coverage applies anywhere in the world. Coverage could theoretically apply to cameras in a satellite or spacecraft launched into outer space.

2. 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, prior to the application of the deductible, 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.  

 3. Additional Acquired Property

This is more of a coverage extension than a condition because it broadens coverage. Additional property similar to covered property that the named insured acquires is covered for up to 30 days but not past the expiration date. Coverage is limited to the lesser of $10,000 or 25% of the total limit of scheduled property of the same kind.

The named insured must report newly the acquired covered property to the insurance company within 30 days of the acquisition date and pay additional premium on it.

 

Example: Phil's brother Pete is also a photographer and offers to purchase a few of Phil's remaining items of equipment to improve his own business as well as to help his brother. The transaction and transfer of property happen late on a Friday. When the equipment is stolen from Pete’s that night, his commercial articles coverage form covers the newly acquired equipment even though he had not yet reported it to the insurance company.

ENDORSEMENTS

ISO has developed one endorsement to use with the Commercial Articles Coverage Form.

CM 20 02–List of Property on File

This endorsement lets the named insured develop and keep a list and values of all covered property at its premises in its files instead of listing and scheduling them on the declarations. Coverage applies to only property listed. The insurance company must sign and date the list.

Note: The insurance company usually retains a copy of this list for rating and underwriting purposes and to refer to if a claim occurs.

UNDERWRITING CONSIDERATIONS

Covered property is not restricted to specific locations and is literally covered anywhere in the world. A well-maintained log of equipment is important. If equipment is assigned to a specific individual that person should be responsible for its safe keeping. When equipment is used by multiple individuals there should be a controlled method of signing out the equipment when removed and signing it back in when it is returned.

All unassigned equipment should be stored in a secure location with limited access. The location should be locked and have appropriate protections for the types of property and the value. Guidelines should be established as to where items can be taken and how they can be used.