AAIS Installation Floater Coverage Forms

AAIS INSTALLATION FLOATER COVERAGE FORMS ANALYSIS

(February 2018)

 

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INTRODUCTION

The American Association of Insurance Services (AAIS) Installation Floater Coverage Forms insure personal property the named insured (usually a contractor) installs, fabricates, or erects in buildings being renovated, upgraded, or remodeled. Coverage applies to both owned property and property of others. Covered property consists of materials, supplies, machinery, fixtures, and equipment that will become a permanent part of an installation or construction project on the construction site. Coverage also applies while that property is at temporary locations and in transit.

 

AAIS has developed three installation floater coverage forms. Each has its own corresponding schedule of coverages. This analysis examines the IM 7100–Installation Floater first and then compares the other forms to it and analyzes the differences.

ELIGIBILITY

Various contractors usually purchase this coverage but there are no restrictions on who may do so. Any party with financial interest in covered property being installed in an existing building or structure is eligible.

 

POLICY CONSTRUCTION

AAIS Installation Floater coverage requires at least these four forms:

SCHEDULES OF COVERAGES

IM 7105–SCHEDULE OF COVERAGES–INSTALLATION FLOATER COVERAGE (01 12 changes)

This Schedule of Coverages is used with IM 7100–Installation Floater Coverage. IM 7105 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

Coverage can be on either a blanket or scheduled basis. The following entries are made based on which basis is selected:

Blanket Coverage

This is the most paid for loss at any one jobsite.

This is the most paid for loss in a single occurrence.

Scheduled Locations Coverage

Policy Number (01 12 addition)

The 01 12 edition added the word Limit (“Limit”) in three places because Limit is a defined word.

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

The limit is $5,000 unless a different limit is entered.

This applies for ten days unless a different number of days is entered.

The limit is $15,000 during each 12-month period unless a different limit is entered.

 

Supplemental Coverages

Each of these coverages provides additional limits and/or additional coverage. Required entries vary by type of coverage.

The limit is $10,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

Deductible

The occurrence deductible that applies is entered in the space provided.

Coinsurance

One of the following coinsurance options must be selected:

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7100–INSTALLATION FLOATER COVERAGE FORM ANALYSIS

This analysis is of the 08 10 edition. Changes from the previous edition are in bold print.

Introduction

The lead-in language states that the terms you and your mean the persons or parties named on the declarations as the insured. We, us, and our means the insurance company that provides coverage. It also refers to the Definitions section at the end of the coverage form.

Note: The definitions for you, your, we, us, and our were in the Definitions section in the previous edition. In addition, the Definitions section was after the Agreement in the previous edition. The 08 10 edition has the Definitions section at the end of the coverage form.

Agreement

The insurance company agrees to provide the coverage described in the coverage form and in the schedule of coverages in return for the named insured’s agreement to pay the premium. These agreements are subject to all the coverage form's terms, conditions, endorsements, and definitions.

Property Covered (08 10 changes)

Coverage applies to the property described below but this coverage is subject to any exclusions or limitations that apply.

1. Coverage (08 10 change)

Coverage applies to direct physical loss or damage that a covered peril causes to the following:

a. Materials, supplies, machinery, fixtures, and equipment that belong to the named insured.

b. Similar property described above but that belongs to other(s) and is in the named insured’s care, custody, or control

Coverage for this property applies while it is at the named insured’s jobsite where the named insured is performing construction, rigging, or installation operations. In order for coverage to apply, the property must be part of an installation project.

2. Coverage Limitations

a. The only property covered are those materials, supplies, machinery, fixtures, and equipment that are intended to become a permanent part of the named insured's installation project.

b. When the coverage is written on a scheduled basis this coverage is limited to only at an installation project taking place at a jobsite that is listed on the schedule of coverages.

3. We Do Not Cover (08 10 addition)

Coverage does not apply to materials, supplies, machinery, fixtures, and equipment that the named insured does not (and will not) install, construct, or rig.

Note: This is similar to the language in the previous edition but this provides more emphasis and clarity.

 

Example: Perfection Plumbing is the plumbing subcontractor on a major renovation of an older apartment building. Perfection is responsible for retrofitting and installing an automatic sprinkler system, domestic plumbing lines, and all plumbing fixtures, such as sinks, faucets, and toilets. Because of transportation cost efficiencies and pressure from its supplier, all property that Perfection will install arrives at the job site at one time. Because the sprinkler system installation is the first order of business and storage space is limited, the remaining property is stored at a location other than the job site until the time it is to be installed. Perfection separates the values at the job site from those at the storage location, enters them in the appropriate spaces on the schedule of coverages, enters a transit limit to cover the transit exposure between the two locations, and has all its exposures properly covered.

4. We Do Not Pay (08 10 addition)

The insurance company does not pay penalties that are imposed against it because:

a. A building or structure is completed late or not completed at all. This applies even if such penalties are agreed to by the named insured in the construction contract's conditions or provisions

b. The named insured has breached conditions or provisions in the construction contract.

5. Limit (08 10 addition)

a. When coverage is on a blanket basis, the most the insurance company pays for covered loss to covered property in any one occurrence is the Jobsite limit on the schedule of coverages.

b. When coverage is on a scheduled locations basis, the most the insurance company pays for covered loss to covered property in any one occurrence is the Jobsite limit on the schedule of coverages for that specific jobsite.

Property Not Covered

Six specific types of property are excluded:

1. Airborne Property

This property is not covered except when the property is in transit on regularly scheduled airline flights.

2. Buildings, Structures, and Land (08 10 change)

None of these items is covered. There are no exceptions.

Note: The previous edition had an exception for property that is part of the named insured’s installation or construction project that is in connection with any building or structure. This change narrows coverage.

3. Contraband

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

4. Machinery, Tools, and Equipment

This property and similar property that is not intended to become a permanent part of the named insured’s installation project is not covered.

5. Trees, Shrubs, or Plants

Lawns are also not covered property.

6. Waterborne Property

This property is not covered except when the property is in transit with a carrier for hire.

Note: The previous edition excluded Money and Securities. The 08 10 edition does not. However, money and securities are not properties that are installed at a jobsite.

Coverage Extensions

Provisions That Apply To Coverage Extensions (08 10 Change)

There are three coverage extensions. The limit for each is either the limit on the schedule of coverages or the default limit in the coverage form. This limit is part of the applicable limit for covered property and not in addition to it, unless otherwise indicated. This limit is not added to or combined with limits for any other coverage extension, supplemental coverage, or other coverage, and is not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Debris Removal (08 10 changes)

a. When a covered peril damages or destroys covered property, the cost to remove any created debris is covered under this extension. The 08 10 edition defines debris removal as the costs to demolish, clear, and remove debris.

b. Debris removal does not include any costs for removing, restoring, replacing polluted land or water, or to extract pollutants.

c. There are two parts of the Limit section. The first is restricting any debris removal payment to no more than 25% of the amount paid for the actual direct physical loss or damage. To calculate the 25%, only the direct physical damage loss is considered. This means any debris removal costs must be excluded before the calculation is made. (08 10 addition).

The second part is that when the debris removal and the physical damage loss are added together, no more than the limit of insurance is paid.

d. An additional $5,000 (or a higher amount entered on the schedule of coverages) is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property.

e. The named insured must report debris removal expenses to the insurance company within 180 days of the loss date in order for this coverage extension to apply.

2. Emergency Removal (08 10 change)

a. This covers direct physical loss or damage (08 10 addition) to covered property that was removed from the scheduled location in order 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 covered peril.

b. Coverage applies for up to ten days after the property is first moved but does not extend past the policy’s expiration date. An entry can be made on the schedule of coverages to increase the number of days.

Note: Coverage does not extend past the expiration date which means that if the insured has property at a sanctuary location when coverage renews, the sanctuary location must be listed as a premises or coverage no longer applies.

 

Example: Perfection Plumbing's owner becomes aware of an impending demonstration that could become a riot. He is very concerned, removes property kept in the storage facility to a different location, and keeps it there until the problem demonstration ends. He returns everything he removed to the jobsite five days later. On the trip back, the truck that transports the goods overturns. The damage the overturn causes is covered because the items were removed to protect them from loss or damage by a covered peril.

3. Limited Fungus Coverage (08 10 changes)

Note: This coverage extension is actually is a very limited give back to offset the coverage eliminated when the fungus exclusion was introduced.

a. Coverage

This coverage extension pays for the following:

·       Costs and expenses arising because fungus is on covered property but only if the fungus is a result of a covered peril

·       Direct physical loss or damage to covered property due to the existence or any activity of fungus

b. Coverage Limitation

c. Limited Fungus Coverage Limit (08 10 minor title change)

The most paid for all loss or damage at all jobsites is $15,000 during any 12-month period, regardless of the number of claims, locations, buildings, or structures. This limit can be increased.

d. If the Policy Period is Extended

The 12-month aggregate time period will follow any extension of a policy period that is less than 12 months.

 

Example: Jeremy’s Installation Floater policy period is 12/1 – 12/1. The job is almost complete but not quite, so he asks for it to be extended for an additional two months. The fungus aggregate time period is extended from being a 12 month aggregate to 14 month aggregate at that time.

 

e. Recurrence and Continuation of Fungus

A reoccurrence of a fungus event is considered a continuation of the initial fungus occurrence and does not provide any additional coverage and subject to the aggregate in place at the time of initial event. f. Cleanup, removal, and testing activities and costs related to a fungus incident are covered but are subject to the same aggregate limit.

f. Limited Fungus Coverage Limit Applies to Other Costs or Expenses (08 10 change)

This limit can be used to pay the following costs or expenses incurred to do any of the following:

g. Loss Not Caused By Fungus

This coverage does not limit coverage for otherwise covered loss or damage that fungus does not cause. When fungus damage increases an otherwise covered loss, any such increase because of that fungus is subject to this coverage extension’s limitations.

Supplemental Coverages

Provisions That Apply To Supplemental Coverages (08 10 Change)

There are four supplemental coverages. The limit for each is the limit for the supplemental coverage unless there is a limit for that coverage on the schedule of coverages. Limits for any supplemental coverage are separate from and not part of the applicable limit for covered property.

The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit for a supplemental coverage and the limit for covered property. The limits are not added to or combined with limits for any other supplemental coverage, coverage extension, or other coverage. They are also not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Pollutant Cleanup and Removal

a. The insurance company pays the named insured's expenses to extract pollutants from land or water if a covered peril that occurred during the policy period caused the pollutants to be released or discharged.

b. This is immediate coverage so any expenses to extract pollutants are paid only when reported to the insurance company within 180 days of the date of loss.

c. Costs related to testing, evaluating, observing, or recording pollutants are excluded except for those costs that are part of the extraction process.

d. The most paid at any one location is $10,000 for all such expenses that a covered peril that occurs at that location during each separate 12-month policy period causes. This limit can be increased.

2. Sewer Backup (08 10 changes)

a. Coverage applies to direct physical loss or damage to covered property caused by or that results from the following:

b. Coverage does not apply to loss or damage that result from any of the following:

c. $5,000 is the most paid in any one occurrence. This limit can be increased.

3. Temporary Storage Locations (08 10 changes)

a. Coverage

Coverage applies to direct physical loss or damage by a covered peril to covered property that is intended to become a permanent part of a covered installation project. This coverage applies only when the property is temporarily in storage away that is away from a covered installation jobsite. Covered property includes materials, supplies, fixtures, machinery, or equipment.

b. We Do Not Cover (08 10 addition)

Coverage does not apply to such property if it is not specifically destined for or identified with a covered installation jobsite.

Note: This could be a difficult provision to satisfy when multiple jobs are taking place and property that could be used at any of the jobs is in a central temporary storage facility. This property would be better covered under a commercial property coverage form.

c. Limit

The most paid in a single occurrence is $5,000. This limit can be increased.

4. Transit (08 10 change)

a. Coverage

Coverage applies to direct physical loss or damage by a covered peril to covered property while that property is in transit. This coverage applies only if the property is intended to become a permanent part of a covered installation project.

b. Limit

The most paid in a single occurrence is $5,000. This limit can be increased.

Note: The following Supplemental Coverages in the previous edition are not in the 08 10 edition:

Perils Covered (08 10 Change)

Coverage applies to risks of direct physical loss or damage unless the loss is limited or caused by an excluded peril.

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 the loss or damage is caused by a civil authority destroying property as a means of controlling a fire. This exception applies only if the fire is the result of a covered peril.

 

Example: Oscar’s client demanded a type of wood that was under trade embargo. Oscar had connections and was installing the wood at the jobsite when the FBI raided the site and removed all of the wood. Oscar is not covered for the value of the seized wood nor for the damage to other property that resulted from the raid.

 

b. Earth Movement (08 10 changes)

Earth movement is not covered except for the following four exceptions:

c. Flood (08 10 changes)

The insurance company does not pay for loss or damage that flood causes.

Loss or damage from waterborne material carried or moved by flood, whether driven by wind or not is excluded. Storm surge or material carried or moved by mudslide or mudflow is also excluded.

There are two exceptions:

d. Fungus

Coverage does not apply to loss or damage caused by or related to the existence or any activity of fungus.

There are four exceptions:

e. Nuclear Hazard

The insurance company does not cover loss or damage caused by or that results from any nuclear reaction, radiation, or contamination. This is absolute and applies whether the nuclear incident was controlled or not, and by whatever means caused. Any loss the nuclear hazard causes is not treated as a loss that fire, explosion, or smoke causes. The only exception is when a fire results from the nuclear fire, direct loss or damage from that fire is covered but the damage from the nuclear hazard remains excluded.

f. Ordinance or Law

There is no coverage for any loss or increased construction costs because of enforcing any government regulation that controls the use, construction, or repair of any property. Loss because of a requirement to demolish property and remove its debris is also excluded.

This exclusion also applies to enforcement that takes place even if the property was not damaged and to increased costs incurred as a result of complying with the regulation that could include construction, demolition, or debris removal activities.

g. Sewer, Septic Tank, Sump, or Drain Backup and Water below the Surface (08 10 changes)

This exclusion applies to the following except to the extent of the coverage that Supplemental Coverages 2. Sewer Backup provides.

Coverage does not apply to loss or damage that any of the following causes:

There are two exceptions:

 

Example: The carpet arrived before the house was completed so Jeremy stored it in the basement. Heavy rains came. The ground was already saturated and exerted pressure on the foundation, causing it to crack. The water that entered soaked and ruined the carpet. There is no coverage for the damage to the carpet.

 

h. 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.

Note: The Penalties exclusion in the previous edition is not in the 08 10 edition.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or that result 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. Contamination or Deterioration (08 10 change)

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 these described causes. There is an exception. When damage to property is due to a covered peril that resulted from any contamination or deterioration there is coverage for that resulting damage.

 b. Criminal, Fraudulent, Dishonest, or Illegal Acts (08 10 change)

Coverage does not apply to loss or damage caused by or that result from criminal, fraudulent, dishonest, or illegal acts that any of the following commit 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 a carrier for hire’s custody.

Note: Crime coverages should be used to cover this type of loss. Because client’s property is often being covered under an installation floater, the CR 04 01–Client’s Property should be considered in addition to standard employee dishonesty coverage.

Related Article: CR 04 01–Clients’ Property

c. Defect, Weakness, or Inadequacy in Materials (08 10 addition)

There is no coverage if defects, faults, inadequacies, unsoundness, or weakness in materials are the cause of the loss or damage. However, if any of these cause a covered peril to occur, the loss or damage form that covered peril is covered.

Note: This exclusion was previously part of the exclusion for Defects, Errors, or Omissions in Property.

 

Example: The design called for the floor joists to be a minimum of 2 X 10 but Kris’ measurements were incorrect and he installed 2 X 6 joists instead.

Scenario 1: As the build continued, the bow of the joists became noticeable. A check found the error and everything that had been installed had to be removed and the joists replaced. There is no coverage for any loss or damage to the joists or to the installed material that had to be removed.

Scenario 2: No one noticed the bow of the joints until one collapsed from the pressure. The property damage caused by the collapse is covered but the cost to replace the other problem joists remains uncovered.

 

d. Defects, Errors, and Omissions in Property (08 10 change)

There is no coverage for loss or damage caused by any act, defect, error, or omission that relates to specific construction activities regardless if due to acts of negligence or otherwise. The excluded acts, defect, error, or omission are excluded if they involve any of the following activities:

If any of the above result in a covered peril coverage does apply to the loss or damage from that resulting covered peril.

 

Example: The specifications called for 1/2 inch screws but Paul could not find any so he used the 1/4 inch ones he had. When the shelving crashed to the floor, Paul had to pay for the damaged shelving because he had altered the specifications and this exclusion applied. The shelving crashed down upon the salamander heating the building and a fire ensued. The damage caused by that fire was covered.

 

e. Delay in Completion and Increased Construction Costs (08 10 addition)

Direct or indirect loss or damage that is caused by either of the following:

This exclusion applies regardless of the reason for the delay or change in sequence. Increased construction costs that result from such delays or changes in sequence are also not paid. The following are examples of increased construction costs that are excluded:

 

Example: Kushing is scheduled to install an air conditioning unit at the Hightime building on 08/01. He pays a nonrefundable deposit to reserve the crane he needs for the time period 08/01 to 08/10. A windstorm damages the rooftop on 07/28 and the project manager reschedules Kushing’s work to install the unit on 08/20. Kushing loses his deposit and cannot rent the crane from his chosen equipment supplier. He ends up paying more to rent the crane from another supplier. He also must cancel another smaller job that he had on 08/20 in order to complete this job. None of his additional costs or expenses are covered.

 

f. Electrical Currents (08 10 changes)

Loss or damage caused by electrical currents or arcing is not covered unless the source of the electricity is lightning. The exception is that loss is covered when caused by a specified peril resulting from the electrical current or arcing.

 Notes:

This exclusion applies only to property that artificially generates the current.

The previous edition used covered peril. The 08 10 edition uses specified peril. This is a reduction in coverage. In addition, the Testing exception in the previous edition is not in the 08 10 edition. This further reduces coverage.

g. Loss of Use and Consequential Loss (08 10 changes)

Loss or damage caused by or that results from loss of use, delay, loss of market, or any consequential loss or damage of any kind is excluded.

Note: This was the Loss of Use exclusion in the previous edition. The words added potentially reduce coverage.

h. Mechanical Breakdown (08 10 change)

There is no coverage for loss or damage that is due to mechanical breakdown or the rupture or bursting of machinery’s moving parts that centrifugal force causes. If one of these events results in a specified peril occurring coverage applies to the loss or damage because of that specified peril.

Note: The Testing exception in the previous edition is not in the 08 10 edition. This reduces coverage.

i. Missing Property

Unexplained or mysterious disappearance of covered property is excluded when there is no physical evidence to suggest what happened to it and the only proof that a loss occurred is based on an audit or physical inventory.

The one exception is that this does not apply to covered property while it is in the custody of carriers for hire.

j. Pollutants (08 10 change)

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

k. Steam Boiler Explosion (08 10 addition)

The insurance company does not pay for loss or damage caused by or that results from explosions of steam boilers, pipes, turbines, or engines. There are two exceptions:

Note: Equipment Breakdown Protection Coverage can be purchased to cover this gap.

Related Article: EB 00 20–Equipment Breakdown Protection Coverage Form Analysis

l. Temperature/Humidity (08 10 change)

Loss or damage that dryness, dampness, humidity, changes in, or extremes of temperature cause is excluded. The one exception is that if any of these events result in a covered peril then the loss or damage because that covered peril is covered.

m. Voluntary Parting (08 10 change)

Loss or damage that occurs because covered property is voluntarily given to others is excluded. There is no coverage even if the surrender was due to a fraudulent scheme, trick, or false pretense.

 

Example: James was surprised when Larry, a new employee, showed up at the site and explained that the president wanted some high-end electronics moved from James jobsite to another jobsite. Larry was very apologetic but insisted that the president was adamant that the transfer happen and happen quickly. James knew the president was rather unreasonable and would be rough on Larry if James did not comply immediately so James helped Larry load the equipment in his truck but only after he signed a receipt. The president was incredibly vocal when James told this story because Larry was not an employee and the president had made no such demand. The equipment was never seen again and its loss was not covered.

 

n. Wear And Tear (08 10 change)

Loss or damage that is caused by wear, tear, marring, or scratching is excluded.

Note: The Explosion, Bursting, or Rupture exclusion in the previous edition is not in the 08 10 edition.

What Must Be Done In Case Of Loss

1. Notice

The named insured must give prompt notice of a loss to the insurance company or its agent. 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 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 to do so 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 lienholders, loss payees, and mortgagees. Any changes in title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require to adjust and settle the loss.

4. Examination

Examination under oath may be required in matters 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 cancelled 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 to the extent necessary to adjust and settle the loss.

7. Volunteer Payments

The named insured may not voluntarily make payments, assume obligations, pay or offer rewards, or incur other expenses without the insurance company's express approval. If it does, it does so at its own expense. The only exceptions are those costs incurred to protect property as item 2. above describes.

8. Abandonment

The named insured may not abandon damaged property to the insurance company without its written consent.

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. Cost to Repair, Replace, or Rebuild (08 10 changes)

a. If Property Is Repaired, Replaced or Rebuilt

Covered property that is actually repaired, replaced, or rebuilt is based on the named insured's reasonable and necessary costs and expenses to do so with similar materials to what was used in the damaged installation project. The insurance company does not pay anything until the named insured actually incurs the costs and expenses. Examples of covered costs and expenses are material, delivery charges, labor, and reasonable overhead and profit.

b. If Property Is Not Repaired, Replaced, or Rebuilt

The valuation of covered property that is not repaired, replaced, or rebuilt is based on an estimate. The reasonable and necessary costs and expenses considered are those that would have been necessary to repair, replace, or rebuild the property using similar materials to what was used in the damaged installation project. Overhead, profit, and delivery charges are not included because they will not be incurred.

c. Payment Limitation

The insurance company will pay no more than the limit on the schedule of coverages.

 

Example: Isaac's Installations sustains a loss and estimates that the repair costs, excluding overhead, profit, and delivery will be $10,000. The insurance company approves and pays this amount. When the actual work is completed, Isaac itemizes and files a claim that includes the $10,000 incurred in the repair plus the profit, delivery costs, and overhead for a total of $14,000. The insurance company pays the additional $4,000 of the claim.

2. Pair or Set

The value of a loss to part of a pair or set is not the entire value of the pair or set but it is also not merely the value of the individual item. Instead, it is a reasonable proportion of the value loss of the entire pair or set because that one part is lost.

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.

3. Loss to Parts

The value of a lost or damaged part of 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.

Note: One concern is the way personal property of others claims are adjusted because the named insured has a minimal amount of financial interest in property of others.

 

Example: Jake installs cabinets for Kelly Primary. Kelly owns the cabinets but Jake has control of them. Jake’s vehicle overturns as he is transporting them to the project site and the cabinets are destroyed. Jake never owned the cabinets but they were delivered to his location for temporary storage until the project started. Could Jake’s loss be denied because Jake does not have a financial interest in the cabinets?

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

Subject to other items in this section, the insurance company pays the least of the following:

4. Coinsurance

a. When Coinsurance Applies

The insurance company pays only part of the loss if the limit is less than 100% of the estimated completed value of the covered property at the time of loss.

b. How We Determine Our Part of the Loss

There are three steps to determine the amount of the loss to be paid:

Step 1. Multiply the percentage on the schedule of coverages by the value of the covered property at the time of loss.

Step 2. Divide the limit for covered property by the result determined in step 1.

Note: There is no coinsurance penalty if the result is1.00 or higher.

Step 3. When step 2. is less than 1.00 a coinsurance penalty applies. Subtract the deductible from the amount of loss and then multiply the total amount of loss by the percentage determined in step 2.

The insurance company does not pay more than the amount determined in step 3. or the limit, whichever is less. It does not pay any remaining part of the loss.

c. If There is More Than One Limit

If there is more than one limit on the schedule of coverages, this procedure applies separately to each limit.

d. If There is Only One Limit

If there is only one limit on the schedule of coverages, this procedure applies to the total of all covered property to which that limit applies.

e. When Coinsurance Does Not Apply

Coinsurance does not apply when coinsurance provisions are waived by an entry on the schedule of coverages.

5. Catastrophe Limit (08 10 addition)

The most the insurance company pays in any one occurrence or loss is the Catastrophe Limit on the schedule of coverages. This limit applies regardless of the number of installation projects, jobsites, or any combination of them, as well as coverages under Coverage Extensions or Supplemental Coverages.

Note: It is very important to adjust this limit whenever jobsites are added or other limits are increased.

 

Example: Miller’s had HVAC jobs at 10 locations and coverage was on a blanket basis. The jobsite limit was $50,000 so a catastrophe limit of $500,000 was scheduled.  Miller increased the temporary storage location limit to $150,000 because that location was convenient for five of the jobs so that separate storage was not needed on each site. When a tornado came through all of the jobsites were damaged, as was the temporary location. Miller was very unhappy when he learned that his loss was capped at $500,000 and he would not receive the $650,000 he thought he should.

 

6. Insurance under More Than One Coverage

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

7. 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 of 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 7. 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 collectible or not. Any payment is subject to the limit of insurance that applies.

 

Loss Payment

1. Loss Payment Options

a. Our Options

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

The insurance company has 30 days from the date it receives a properly completed proof of loss to notify the insured of its intent to rebuild, repair, or replace the damaged property.

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured unless another loss payee named in the policy is involved.

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. Either the amount of loss is determined 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 either to the named insured acting on the property owner’s behalf or to the property owner.

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

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

Note: Installation Floaters often involve significant amounts of property of others that are in the named insured’s care, custody, and control. The property owner is the named insured’s customer so a smooth claims settlement is very important to the named insured.

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

Note: This condition applies only if the named insured is an individual.

a. Your Death

This applies only when the named insured is an individual. When a named insured dies, the person who has custody of the named insured's property is an insured for that property until a qualified legal representative is appointed. Once the named insured’s legal representative is named, that person but only for the property covered under this policy.

b. Policy Period is not Extended

This coverage does not extend past the policy’s expiration date.

5. 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 fraud or false swearing by any insured took place concerning 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 that the insurance is treated as simply having never existed versus denying a particular claim.

6. Policy Period

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

7. Recoveries

Paying 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 incurred 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 another limitation, any recovery is prorated between the named insured and the insurance company based on the company's respective interest in the loss.

8. Restoration of Limits

Payment of a claim does not reduce the applicable limits that are available to pay future claims. The only exception is Coverage Extensions 3. Limited Fungus Coverage provides that the coverage is subject to an aggregate limit.

9. 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 insurance company secure those rights. The company is not obligated to pay a loss if the named insured hinders or impairs the company's rights of subrogation. However, the named insured can agree in writing to waive recovery rights from others before a loss occurs.

Note: Construction contracts often include a mutual waiver of subrogation between the parties. This waiver would be honored as long as the contract was signed prior to the loss.

10. Suit against Us

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

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

11. Territorial Limits

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

12. Carriers for Hire

Many carriers for hire limit their liability through shipping documents for less than the shipped property’s actual cash value. The insurance company grants permission to the named insured to accept those shipping documents.

Additional Coverage Limitations

When Coverage Ceases

Coverage at the earliest of the following events:

Note: This could be a problem because the coverage includes property of others in the care, custody, and control of the named insured. The named insured never has an insurable interest in such property so does that mean there is never any coverage?

Note: Because coverage ends on the earliest date that one of these events occurs, it is extremely important to inform the named insured of that fact. This is so that coverage being in force is not automatically or incorrectly assumed.

Definitions

Defined terms are used throughout the coverage form. Restricting their meaning to the definition in it is how all parties have a clearer understanding of the coverage intended. Twelve terms are defined:

1. Earth movement (08 10 changes)

Note: Earth movement does not include sinkhole collapse.

2. Flood (08 10 changes)

Water that overflows or inundates usually dry areas, whether caused naturally or artificially is flood. It may be caused by human or animal forces or other acts of nature. All of the following are examples of flood but the definition is not limited to only them:

3. Fungus

This is a very far-reaching definition that includes the following but is not limited to just them:

4. Installation project (08 10 addition)

An installation or construction project. A repair or maintenance project requires installation, construction or rigging of materials, equipment, supplies, machinery, or fixtures is an example but the term is not limited to only this.

5. Jobsite (08 10 change)

This is any location, project, or work site where the named insured is conducting an installation project that requires installation,  construction, or the rigging of materials, equipment, supplies, machinery, or fixtures.

6. Limit

This is the amount of coverage that applies to the insured property.

7. 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.

8. Schedule of coverages

This is any page labeled as such that contains coverage information, including declarations or supplemental declarations.

9. Sinkhole collapse

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

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

Falling objects does not include loss to personal property that is stored in the open. Damage to the interior of buildings or personal property stored in buildings by a falling object is included in this definition only if the falling object first breaches the building's exterior.

Water damage starts with a crack or break in a water or steam holding system or appliance and then a sudden or accidental discharge or leakage of water or steam occurs.

11. Terms

All policy provisions, limitations, exclusions, conditions, and definitions that apply to this coverage.

12. Volcanic action

An airborne volcanic blast or shock waves, ash, dust, and particulate matter but does not include the cost to remove that dust, ash or particulate matter unless the covered property is first directly damaged. Lava flow is also considered volcanic action.

IM 7106–SCHEDULE OF COVERAGES–INSTALLATION FLOATER COVERAGE–REPORTING FORM (01 12 changes)

This Schedule of Coverages is used with IM 7101–Installation Floater Coverage–Reporting Form. IM 7106 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Property Covered

The 01 12 edition added “Limit” at the top of this section.

This is the most paid for loss at any one jobsite.

This is the most paid for loss in a single occurrence.

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

The limit is $5,000 unless a different limit is entered.

The number of days is ten unless a different number of days is entered.

The limit is $10,000 unless a different limit is entered.

The limit is $50,000 unless a different limit is entered.

The limit is $15,000 during each 12-month period unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

The limit is $10,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

The limit is $10,000 during each 12-month period unless a different limit is entered.

The limit is $1,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

Reporting Conditions

The reporting condition applies if the box is checked. The reporting rate must be entered and a monthly, quarterly, or annual reporting option must be selected.

Any Additional Premium Due after Expiration explains that additional premium developed is due when it is billed. The reporting condition deposit and minimum premiums are entered in this area.

Deductible

The deductible that applies to covered property is entered in the space provided.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7101–INSTALLATION FLOATER COVERAGE–REPORTING FORM ANALYSIS

This analysis is of the 08 10 edition.

This coverage form is similar to IM 7100–Installation Floater Coverage analyzed above except for six sections. This analysis addresses only the differences in the six sections.

Property Covered

The option for coverage at only scheduled locations provided in the IM 7100 is removed. This coverage is blanket over all of the named insured’s jobsites, installations, or construction project.

Coverage Extensions

The following three coverage extensions added:

3. Emergency Removal Expenses

This coverage extension pays the expenses for the named insured to move covered property away from a covered location threatened by a covered peril. It also pays for storage fees incurred to keep it at a sanctuary location up to ten days after the property is initially moved. The most paid for such expenses in a single occurrence is $10,000. Coverage ends when the policy expires, even if the property is still at the sanctuary location.

Note: This is additional coverage. As a result, all such expenses paid are in addition to the property’s limit of insurance.

4. Fraud and Deceit

Theft of covered property due to any of the following is covered:

. The most paid in a single occurrence is $50,000.

6. Waterborne Property

The insurance company pays up to $10,000 in any one occurrence for direct physical loss or damage to covered property that is waterborne but only if the loss or damage is caused by or results from a covered peril. This limit can be increased.

Supplemental Coverages

Three supplemental coverages are added and the limits for three others are changed.

The following are the three supplemental coverages added:

1. Business Personal Property

Business personal property that is on the named insured’s jobsite but is not intended to become a permanent part of the installation. The most paid in a single occurrence is $10,000.

Note: The coverage does not limit this to property owned by the named insured but does not specifically state that is applies to such property in the care, custody, or control of the named insured.

 

Example: Jack sets up his scaffolding at Buzzy’s jobsite. One evening the scaffolding disappears. Jack has no insurance coverage for the scaffolding so demands that Buzzy compensate him for the loss. Could this coverage apply to Jack’s loss?

 

2. Expediting Expenses

A covered loss may cause a job to fall behind schedule. In that case, the insurance company pays up to $10,000 in a single occurrence for expenses the named insured incurs to meet the construction contract's specified timetable. Examples of covered expenses are overtime pay, hiring additional labor, transportation costs, storage expenses, and costs to rent additional equipment.

Note: The only expediting expenses paid are those needed to speed up delays that result from the covered loss. If delays because of other perils or for other reasons have also occurred, this coverage will not pay for those.

4. Rewards

The insurance company pays a reward for information leading to a conviction for arson, theft, or vandalism when the conviction involves a covered loss caused by arson, theft, or vandalism. The most paid in a single occurrence for a reward for information is $1,000, regardless of the number of persons who provide information.

The following are the three supplemental coverages with limits that changed:

5. Sewer Backup

The limit is increased to $10,000 from $5,000.

6. Temporary Storage Locations

The limit is increased to $10,000 from $5,000.

7. Transit

The limit is increased to $10,000 from $5,000.

Perils Excluded

The only difference is that Exclusion 2. k. Voluntary Parting in IM 7101 has an exception that provides coverage under Coverage Extensions 4. Fraud and Deceit.

How Much We Pay

IM 7101 does not contain a coinsurance condition.

REPORTING CONDITIONS

This section in IM 7101 is not in IM 7100. It is activated by entries on the schedule of coverages, including the reporting rate or rates, deposit premium, and minimum premium. This condition outlines the detailed steps in the reporting process, how premium is determined and adjusted, and the penalties that result from failing to submit reports on time or reporting inaccurate proper values.

IM 7107–SCHEDULE OF COVERAGES–INSTALLATION FLOATER COVERAGE–CONTRACTORS' FORM (01 12 changes)

This Schedule of Coverages is used with IM 7102–Installation Floater Coverage–Contractors' Form. IM 7107 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Catastrophe Limit

This is the most paid for loss in a single occurrence.

Property Covered

This section has five coverages available:

If this coverage is checked, a limit is entered in the space provided for Unscheduled Jobsite Coverage.

If this coverage is checked, a limit is entered in the space provided for All Scheduled Contractors' Equipment. IM 7130–Equipment Schedule-Installation Floater Coverage-Contractors’ Form must also be attached to provide limits for each item.

If Schedule on File is checked, a limit is entered in the space provided for All Scheduled Contractors' Equipment. The Schedule on File has the limits for each scheduled item.

If this coverage is checked:

If this coverage is checked:

This is Unscheduled Tools Coverage. If it is checked:

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations.

Coverage Extensions That Apply To All Covered Property:

The limit is $5,000 unless a different limit is entered.

The number of days is ten unless a different number of days is entered.

The limit is $15,000 during each 12-month period unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Supplemental Coverage That Applies To All Covered Property:

The limit is $10,000 unless a different limit is entered.

These Supplemental Coverages apply when Installation Floater is checked:

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

This Supplemental Coverage applies when Scheduled Contractors' Equipment is checked:

The limit is $5,000 unless a different limit is entered.

Deductible

Two deductible options are available:

If this deductible is checked, a single deductible that applies to all coverages is entered in the space provided.

If this deductible is checked, separate deductibles are entered in the spaces provided that apply to each coverage provided. The coverages are:

Coinsurance

One of the following coinsurance options must be selected:

Valuation

Actual Cash Value or Replacement Cost must be checked for each coverage provided. The Coverages are:

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7102–INSTALLATION FLOATER COVERAGE–CONTRACTORS' FORM ANALYSIS

This coverage form that was introduced in 08 10 is a combination of the installation floater and contractors equipment coverages. The Installation Floater portion is very similar to the IM 7100. The major change is the addition of the contractors’ equipment coverage.

This analysis addresses only the differences between the two forms.

Property Covered

Five coverage options are provided. The first is the Installation Floater which is similar to the IM 7100 but contains important differences.

1. Installation Floater

This section in IM 7102 provides coverage only at Unscheduled Jobsites and only when selected on the schedule of coverages. This eliminates the blanket and scheduled locations coverages in the IM 7100 The limit for this coverage cannot be combined with or added to the limit of any other coverage under Property Covered.

2. Scheduled Contractors' Equipment

a. Coverage

Coverage applies to covered direct physical loss or damage to the named insured's contractors' equipment and to contractors' equipment that belongs to others in its care, custody, and control.

b. Covered Equipment

c. Coverage Limitation

d. Limit

3. Contractors' Equipment Leased or Rented from Others

a. Unscheduled Equipment Coverage

Coverage applies to covered direct physical loss or damage to contractors' equipment the named insured leased or rented from others. Any such equipment not scheduled on the named insured’s equipment schedule is not covered.

b. Coverage Limitation

c. Limit

4. Owned, Leased, or Rented Tools

a. Unscheduled Tools Coverage

Coverage applies to covered direct physical loss or damage to the named insured's tools and to tools that it leases or rents from others.

b. Coverage Limitation

c. Limit

5. Employee Tools

a. Unscheduled Tools Coverage

Coverage applies to covered direct physical loss or damage to tools the named insured’s employees own.

b. Coverage Limitation

c. Limit

Property Not Covered

Five types of property not covered in IM 7100 are added deleted and one is eliminated.

Added property not covered

The following property is added to the property not covered section:

Eliminated property not covered

The following property is eliminated from the property not covered section:

Machinery, Tools, or Equipment.

Supplemental Coverages

Newly Purchased Equipment is added for only Scheduled Contractors' Equipment coverage.

Perils Excluded

The following exclusions in the IM 7100 remain in the IM 7102 but do not apply to contractors’ equipment or tools:

The following exclusion is added and applies to all coverages:

Valuation

Contractors' Equipment and Tools is valued at Actual Cash Value or Replacement Cost, based on the selection on the schedule of coverages. Installation Floater valuation is unchanged.

How Much We Pay

Additional Coverage Limitations

This provision in IM 7102 applies to only Installation Floater coverage.

Definitions

IM 7102 has these additional definitions:

ENDORSEMENTS AND SCHEDULES

AAIS has developed the following endorsements and schedules to use with the various Installation Floater Coverage Forms.

IM 7111–Business Personal Property Endorsement (01 12 change)

This endorsement covers the named insured's business personal property that is not intended to become a permanent part of the installation or construction project at installation jobsites or construction projects. The 01 12 edition added a space to enter the policy number.

IM 7112–Reporting Conditions Endorsement

(Use with IM 7100)

This endorsement is used to change IM 7100–Installation Floater Coverage to a reporting form.

IM 7113–Reporting Conditions Schedule–Installation Floater (01 12 change)

(Use with IM 7100)

This schedule is used with IM 7112–Reporting Conditions Endorsement when changing IM 7100–Installation Floater Coverage to a reporting form. It has spaces to enter the reporting and adjustment periods, the rates per project or installation, and the deposit and minimum premiums. The 01 12 edition added a space to enter the policy number.

IM 7114–Testing and Commissioning Coverage

This endorsement adds coverage to the Installation Floater Coverage Forms for direct physical loss or damage to covered property caused by or that results from testing. This endorsement defines three types of testing: Cold testing, hot testing, and commissioning.

IM 7115–Testing and Commissioning Coverage Schedule–Installation Floater (01 12 change)

This schedule is used with IM 7114–Testing and Commissioning Coverage endorsement. It has spaces to enter the testing limit, deductible, and period, the type of testing, a description of the covered jobsite or project, and any protective safeguards that apply. The 01 12 edition added a space to enter the policy number.

IM 7117–Waterborne Endorsement (01 12 change)

This endorsement extends the insurance on covered property to apply when the property is waterborne, subject to the limit and deductible entered in the spaces provided. The 01 12 edition added a space to enter the policy number.

IM 7118–Fraud and Deceit Coverage (01 12 change)

This endorsement adds coverage for loss due to theft of covered property caused by acts of fraud and/or deceit. These acts include false representations, fraudulent bills of lading, or because of electronic data processing hardware or software. The 01 12 edition added a space to enter the policy number.

IM 7119–Equipment Breakdown and Testing Coverage

This endorsement adds coverage for loss or damage to covered property caused by or that results from explosion, rupture, or bursting of steam boilers, mechanical breakdown, or electrical currents.

IM 7120–Contract Penalty Endorsement (01 12 change)

This endorsement provides coverage for contractual penalties when a project is not completed. The 01 12 edition added a space to enter the policy number.

IM 7121–Earthquake and Flood Coverage Endorsement

This endorsement provides earthquake and/or flood coverage. Separate limits per project, per occurrence, and per catastrophe are available. It can also be used to provide Delay in Completion coverage.

IM 7122–Earthquake and Flood Schedule–Installation Floater Coverage (01 12 changes)

This endorsement is used with IM 7122–Earthquake and Flood Coverage Endorsement to indicate the coverages, limits, and deductible amounts provided or not provided. The 01 12 edition added a space to enter the policy number. It also added the word “Limit” in three places because Limit is a defined word.

IM 7124–Equipment Breakdown and Testing Schedule–Installation Floater Coverage (01 12 change)

This schedule is used with IM 7119–Equipment Breakdown and Testing Coverage to list the coverages, limits, deductible amounts, and waiting periods that apply. The 01 12 edition added a space to enter the policy number.

IM 7125–Delay in Completion Coverage Part–Installation Floater Coverage

This is a coverage form. It covers Additional Installation Expenses, subject to the Installation Floater deductible, and Additional Soft Costs, subject to the Delay in Completion waiting period. It includes Coverage Extensions for Expenses to Reduce a Loss, Interruption by Civil Authority, and Limited Fungus Coverage. It includes Supplemental Coverage for General Administration Expenses. Sewer Backup is an Optional Coverage in the Delay in Completion Coverage Part.

IM 7126–Delay in Completion Schedule–Installation Floater Coverage (01 12 changes)

This schedule is used with IM 7126–Delay in Completion Schedule–Installation Floater Coverage with any of the Installation Floater Coverage Forms. It is used to indicate the coverages, limits, and waiting periods that apply. The 01 12 edition added a space to enter the policy number. It also added the word “Limit” in one place because Limit is a defined word.

IM 7127–Additional Coverages Endorsement–Contractors' Form

(Use with IM 7102)

This endorsement extends coverage to apply to Construction Trailers, Continuing Rental or Lease Payments, Equipment and Tools Leased or Rented to Others, Equipment Hauling, Reward for Recovery of Stolen Property, Spare Parts, Fuel, and Lubricants, Waterborne Contractors' Equipment and Tools, and Waterborne Property.

IM 7128–Additional Coverages Schedule–Contractors' Form (01 12 change)

This schedule is used with IM 7127–Additional Coverages Endorsement–Contractors' Form to enter the limits for the coverages selected. The 01 12 edition added a space to enter the policy number.

IM 7129–Blueprints and Construction Documents Coverage (01 12 change)

This endorsement is used with any of the Installation Floater Coverage Forms to cover blueprints, construction documents, specifications, drawings, contracts, maps, deeds, abstracts, models, and similar property. The 01 12 edition added a space to enter the policy number.

IM 7130–Equipment Schedule–Installation Floater Coverage–Contractors' Form (01 12 change)

(Use with IM 7102)

This schedule is used to list, describe, and enter a limit for each item of covered equipment. The 01 12 edition added a space to enter the policy number.

UNDERWRITING CONSIDERATIONS

Installation coverage forms insure building materials and supplies at the construction site, in transit to the site, and similar property intended for the construction project at other locations as necessary or due to lack of storage space at the construction site. The principal exposures and causes of loss are fire, theft, vandalism, windstorm, collapse, and transit. The underwriting process involves evaluating the location and transit exposures and the protective services and arrangements incorporated at the project to eliminate or reduce the possibility of loss.

The key factors to effectively underwrite installation coverage are to evaluate the contractors doing the work, the project's controls and specific features, and the contracts that dictate each party's responsibilities when they are at work at the jobsite.

The contractor should have experience doing the work called for in a specific installation project. It is unlikely that a contractor that usually works in residential settings will be similarly successful on commercial installation or construction jobs. A contractor excels only by doing the same or similar work repeatedly and well. Similarly, a contractor should not do work beyond its area of expertise. For example, a plumbing contractor is not likely to do a good job setting dry wall in place. A qualified contractor should be able to produce a list of references and jobs successfully completed during the previous three to five years, so its experience can be evaluated relative to the work that must be done on the prospective job.

Controls and security at the jobsite should be adequate to eliminate or at least reduce the chances of fire, theft, and other similar intrusions. In most cases, the general contractor is responsible for site security and directs how the various subcontractors are to work within those security arrangements. At some times and in some cases, the insured subcontractor is actively involved in project oversight and might be responsible for arranging security. In a few rare cases, only a single subcontractor is on the site at a given time and it assumes responsibility for security. Arrangements for and advance notice of deliveries and vendors on the premises should be required and others coming on the premises must be challenged and denied access unless they can prove their need or reason to be there.

The nature and content of the contracts the insured executes are extremely important. They should clearly define subjects such as ownership of covered property, the responsibilities of each party, and the obligations to purchase and deliver materials intended to be a permanent part of the installation. The arrangement and timing of subcontractors and their work must be scheduled and in writing. If subcontractors in turn subcontract part of their work, that relationship and detail must also be addressed. Evidence of insurance on the part of all contractors that work on the job must be produced and filed for future reference if a loss occurs and responsibility must be established.

The project’s duration is a concern because security is more of an issue on a long-term job than for shorter ones. The same concern applies to goods in transit, because losses are more likely to occur in cases with many deliveries of materials and supplies. The nature of the property being installed is also a concern, since high valued items require extra care in handling to reduce the chance of damage. Many of these items may also be subject to additional exposure to loss or damage through extra hazardous operations such as rigging and installation at extreme heights where cranes are involved.

The best way to evaluate, underwrite, and understand an installation project is to take these factors into consideration and to have some security arrangement, contractual, or risk management technique in place to address it. This results in a more efficient, safe, and properly completed installation or construction project.

Related Article: AAIS Builders' Risk Coverage Forms