ISO Physicians And Surgeons Equipment Coverage Form

ISO PHYSICIANS AND SURGEONS EQUIPMENT COVERAGE FORM ANALYSIS

(August 2018)

 

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INTRODUCTION

The Insurance Services Office (ISO) Physicians and Surgeons Equipment Coverage Form insures medical, surgical, and dental equipment and instruments, business furniture and fixtures, and tenant's improvements and betterments.

ELIGIBILITY

 

Professionals engaged in the medical and dental professions are eligible. This includes doctors that share offices, equipment, and general facilities while engaged in their individual practices and not operating as a unit. Equipment that is jointly owned cannot be insured using this coverage form.

Dealers, clinics, hospitals, medical schools, and similar or related risks are not eligible.

POLICY CONSTRUCTION

ISO Physicians and Surgeons Equipment 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: Physicians and surgeons equipment coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

CM DS 12–ADVISORY PHYSICIANS AND SURGEONS EQUIPMENT DECLARATIONS

CM DS 12–Advisory Physicians and Surgeons Equipment 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 Physicians and Surgeons Equipment Coverage is entered in the space provided.

Rates

The rate or rates that apply are entered in the space provided.

Limits of Insurance

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

An address must be provided for each premises where coverage applies.

This is a catastrophe limit. It is the most paid in a single occurrence.

Deductible

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.

Special Provisions

Any special provisions are entered in the space provided.

 

Examples of professionals who might purchase this coverage

CM 00 26–PHYSICIANS AND SURGEONS EQUIPMENT 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 26 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. It also directs attention to Section F–Definitions because understanding the specific terms in the policy is critical to understanding the coverage and exclusions that apply.

 

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. Medical or dental equipment, supplies, materials, and books that dental or medical professionals use. Property of others that is similar is also covered if the named insured uses it in his or her profession and the named insured chooses to cover it.

Note: There is no premises requirement, so this property is covered anywhere, subject to this coverage form’s territorial limits.

 

Example: Doctor Roberts always has his "little black bag" with him when he is away from the office. While he no longer makes house calls, he periodically encounters situations where his assistance is needed, and his bag always has just what he needs to do the job. He is understandably upset when he finds the side window of his vehicle broken and his bag missing. Fortunately, he keeps up with his insurance coverage as much as with his patients, is quickly reimbursed for his loss, and soon has a new, fully stocked "little black bag."

 

b. Office equipment the named insured owns that is at the described premises. This also includes furniture and fixtures.

c. The named insured's interest in improvements and betterments that are made at his or her expense to premises he or she leases or rents and that cannot be removed. Fixtures, alterations, installations, and additions are improvements and betterments.

Note: Being able to include office equipment, improvements, and betterments is to the named insured's advantage. All property is subject to the same broad inland marine cause of loss coverage. This helps the named insured avoid potential problems when two or more coverage forms or policies (possibly with different insurance companies) are involved and a dispute arises over what each covers when a loss occurs.

2. Property Not Covered

There is no coverage for the following property:

a. Radium

Note: Radium is common and present in many 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 the flow and pooling of the irradiated cells can be detected by a body or bone scan to locate infection or bone deformities after surgery. An example that involves radiation is the common x-ray. Coverage for radium is available through radioactive contamination insurance coverage forms or policies.

b. 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 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.

 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 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 property at the covered location where the damage occurs. It is not in addition to it.

 

Example: Burglars looking for controlled narcotics break into Doctor Roberts’ office overnight. His landlord unexpectedly demands reimbursement for the damage the burglars did to the building. The lease contains some fine print that obligates him to reimburse the landlord for certain damage to the building that would not have occurred except for his occupying the premises. This extension pays for that damage.

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. Marring, Scratching, Exposure to Light

There are two different types of exclusions 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.

 

Example: A 7.4 magnitude earthquake strikes the area where Doctor Roberts’ office is located. The frame building survives the shake fairly well but the force of the quake “rearranges” most of his office furnishings. Unfortunately, several glass objects are broken when the shake knocks them to the floor. He is reimbursed for the damage to his other property but the loss and damage to the broken glass objects is excluded because of this exclusion.

 

b. 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.

c. 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.

d. 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 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.

e. 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 electrical current, charges a magnetic or electromagnetic field produces, and microwaves but is not limited to just these. There are two exceptions:

f. 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.

g. 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.

h. 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.

i. 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 c. 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, except for 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

a. Improvements and Betterments

This property is valued at its actual cash value at the time of loss or damage but only if the named insured repairs or replaces them at its expense within a reasonable amount of time. If is not repaired or replaced, the value is based on the percentage of the property’s original cost and the proportion of time left on the lease multiplied by the amount of loss.

The insurance company does not pay anything if another party repairs or replaces the property at its expense.

b. All Property Other Than Improvements and Betterments

This property is valued at the lowest of the following:

Note: This valuation clause is particularly important because of the potential range of the property involved.

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. 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: Dr. Roberts’ properly operating premises burglar alarm system only rings to an outside alarm at the premises and not to a central station. Because the police did not receive the immediate notice that central station arrangements offer, they were delayed in reaching the premises and the burglars had more time to do damage. The good news for Dr. Roberts is that this alarm system is what was supposed to be in place and it operated properly when the burglars broke into the premises. As a result, the loss is paid in full.

F. Definitions

There is one definition.

Premises

Only the part of the building that the named insured occupies for the professional medical or dental practice at the address on the declarations is the premises.

Note: This means that if the named insured is a tenant in a multistory office building, premises is considered only the office suite the named insured actually occupies.

ENDORSEMENTS

ISO has developed three endorsements to use with the Physicians and Surgeons Coverage Form.

CM 26 01–Property Usually Carried By You

This endorsement deletes Paragraph A. 1. Covered Property and replaces it. It adds language that includes covered property that consists of medical and dental equipment, materials, supplies, and books that the named insured normally carries that are usual to its specific profession. It also deletes the Theft Damage to Buildings extension of coverage and the Coinsurance Additional Condition.

Note: This endorsement should be examined carefully because it both adds and deletes coverage and conditions. It should be considered only when all other business personal property is on another commercial property coverage form and the only coverage needed is that which the named insured carries with him.

CM 26 02–Additionally Covered Property

This endorsement adds limits and coverage for several types of property to Paragraph a.5. Coverage Extension.

CM 26 03–Artificially Generated Electric, Magnetic, or Electromagnetic Energy Coverage

This endorsement covers damage that artificially generated current causes. It describes the coverage provided. The description includes eliminating exclusion B. 2. e. Artificially Generated Current. Coverage does not extend to computers except ones used to control medical and dental equipment. It is subject to a separate deductible.

UNDERWRITING CONSIDERATIONS

The insurance this coverage form provides are underwritten as a primary 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: