AAIS Camera And Musical Instrument Dealers Coverage

AAIS CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE ANALYSIS

(August 2018)

 

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INTRODUCTION

The American Association of Insurance Services (AAIS) Camera and Musical Instrument Dealers Coverage insures camera dealers’ stock and similar or related equipment, such as lenses, projection machines, or sound equipment. It also covers musical instrument dealers’ stock of musical instruments and similar or related accessories and supplies, such as sheet music, instrument cases, and music stands. In both cases, it covers similar property of others in the named insured’s care, custody, or control.

ELIGIBILITY

This coverage is for dealers, not individuals or businesses that use this equipment. Only dealers of musical instruments or cameras are eligible for this coverage form. The following are the types of equipment that this coverage form can insure:

Radios, television, disc players, and other similar audio players and recorders are not considered musical instruments and cannot be covered under this coverage form.

 

The jukebox is not considered a musical instrument.

 

POLICY CONSTRUCTION

AAIS Camera and Musical Instrument Dealers Coverage requires at least these four forms:

Related Article: CL 0100 AAIS Commercial Lines Common Policy Conditions

IM 1055–SCHEDULE OF COVERAGES–CAMERA AND MUSICAL INSTRUMENT DEALERS

This Schedule of Coverages is used with IM 1050–Camera and Musical Instrument Dealers Coverage. IM 1055 contains the following information:

Type of Dealer

A box must be checked to indicate if coverage applies to a camera dealer or a musical instrument dealer.

Schedule of Locations

Spaces are available to enter limits of insurance for the following:

·        Property Away from Premises in Custody of You or Your Employees

·        Property at Premises Not Described

·        Property in Transit

·        Catastrophe Limit for all coverages at all locations in a single occurrence

Note: The Catastrophe Limit caps the limit for all coverages at all locations. It is important to adjust this limit when changes are made in the other limits to prevent an unanticipated capping following a catastrophe.

Deductible

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

Optional Coverages

The only optional coverage that is available without attaching an endorsement is Peak Season Coverage.

The peak season limit that is to be entered is the sum of the schedule of location limit above PLUS the peak season increase. This limit replaces the schedule of location limit during the peak season time period. 

The inclusive dates during which the coverage applies and the location number where coverage applies are entered in the spaces provided.

Note: The dates are very important because the peak season limit applies during only the scheduled dates. Once the dates are over, the schedule of location limit for the entered location applies.  

Optional Endorsements

When entries are made in this area for either of the following, the appropriate endorsement must be attached.

This endorsement deletes the coinsurance provisions in the coverage form.

This endorsement extends coverage to additional classes of business personal property. Coverage applies if a limit of insurance is entered in one or more of the following spaces provided:

Replacement cost applies if a checkmark is entered in the space provided.

Rates and Premium

Camera and Musical Instrument Dealers Coverage is usually written on a non-reporting basis. This section has spaces to enter the annual premium and the non-reporting rate per $100 that applies.

Rates and Premium–Optional Endorsements

IM 1264–Reporting Conditions is an optional endorsement that deletes the coinsurance provision and provides coverage on a reporting basis. If it is attached, the selection for this endorsement must be checked and a reporting and adjustment period selected.

Note: The named insured can select a different period for reporting than the period it selects for premium adjustment.

Values must be reported for each location on the schedule of coverages. This section includes a provision that any additional premium developed after expiration based on reports of value submitted is due on the date on the billing invoice.

IM 1050–CAMERA AND MUSICAL INSTRUMENT DEALERS COVERAGE ANALYSIS

This analysis is of the 01 05 edition.

Agreement

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

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

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

Definitions

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

1. You and your

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

2. We, us, and our

The insurance company that is providing the coverage.

3. Earth movement

Movement of the earth’s surface. It is also a vibration of the earth’s surface. Examples of such movement and vibration are earthquake, landslide, mudflow, mudslide, mine subsidence, and other types of earth sinking, rising, or shifting. The only exception is for sinkhole collapse.

4. Flood

Flood is flood, but it also is surface water, waves, tidal water, and other overflow of bodies of water. It may or may not be wind driven. Spray from any of these is also flood regardless if driven by wind or not.

5. Limit

The amount of coverage that applies.

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

6. 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.

7. Schedule of coverages

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

8. Sinkhole collapse

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

9. Specified perils

The named perils of aircraft, civil commotion, explosion, falling objects, fire, hail, fire extinguishing equipment leakage, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action, water damage, the weight of sleet, snow or ice and windstorm. Two terms need further explanation.

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

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

10. Terms

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

11. Volcanic action

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

 

Example of a camera dealer's stock held for sale

Property Covered

The insurance company covers property that is described below unless it is excluded or subject to limitations.

1. On Premises

a. Coverage

The named insured’s stock and similar property that belongs to others but in the named insured’s care, custody, and control is covered for direct physical loss or damage caused by a covered peril.

b. Coverage Limitation

Covered property is either of the following at locations on the schedule of coverages:

 

Example of a musical instrument dealer's stock held for sale

2. Off Premises

a. Coverage

When a limit is entered on the schedule of coverage for off premises, coverage applies for loss or damage by a covered peril to owned stock and similar property of others in the named insured's care, custody, or control that is away from locations on the schedule of coverages.

b. Coverage Limitation

Coverage applies only when covered property is at any of the following:

Property Not Covered

There is no coverage for the following property:

1. Contraband

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

2. Furniture, Fixtures, and Other Property

Office supplies, improvements and betterments, machines, tools, fittings, patterns, dies, molds, and models are not covered as well as furniture and fixtures.

Note: IM 1263–Personal Property Coverage can be attached to this coverage form to insure most of this property as well as other property not listed here.

3. Manufactured Property

Property that is being manufactured or assembled is not covered.

Note: Once it has been manufactured it can become covered property.

 

Example: Francesco builds unique one of a kind drums. Some are customized for a particular customer; many are built to be sold in his shop. The stock of completed drums is considered covered property but the raw materials and partially built drums are not covered property.

 

4. Money and Securities

A number of types of property are not covered under this item. Accounts, bills, currency, food stamps, evidence of debt, and lottery tickets not held for sale, in addition to money, notes, or securities are all not covered.

 Note: This property is more correctly insured under commercial crime coverage forms.

Related Article: Commercial Crime Coverage Analysis

5. Property Shipped By Mail

Property that is shipped by mail is excluded. The exception is that shipments sent by registered mail or government insured mail are covered.

 

Example: Francesco sold five small drums to an out of state customer. He packaged and mailed them by first class mail. Unfortunately, they never arrived. Francesco has no coverage under this policy for the loss.

 

6. Sold Property

Property that has been sold remains covered until it is delivered. Coverage ceases upon delivery even if the property has been sold under an installation agreement.

 

Example: Francesco sold a drum set to Mary and Minettes. Mary’s credit was not great, so Francesco agreed to accept three installments. He delivered the drums to her when she made the first payment. Unfortunately, before she made the second installment the drums were destroyed in a car accident. The drums are not covered under this policy, but Mary is hoping to get coverage under her insurance policy.

Coverage Extensions

There are two coverage extensions. These limits are part of the applicable limit for covered property and not in addition to it unless otherwise indicated. These limits are not added to or combined with limits for any other coverage extension or supplemental coverage and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Emergency Removal

a. Coverage

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

 b. Time Limitations

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

c. Coverage Limitation

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

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

 

Example: Mike owns Mike's Music and knows the enormous summer storm forecast for the next day could very well wipe out his less than well-kept building. If that happens, and he cannot get to the premises promptly after the storm passes, he can just imagine how much of his stock will be left after looters have their way. Mike packs up as much of his stock as he can, places it in a box truck, and drives to a storage facility he knows he can simply drive into and use until the storm passes. Because of this coverage extension and Mike's quick action, coverage applies to his stock at the temporary storage location until the storm blows over.

2. Theft Damage to Building

a. Coverage

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

b. Coverage Condition

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

c. We Do Not Cover

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

d. Coverage Limitation

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

 

Example: Pauly has quite an original idea. He will wiggle down the chimney and into Clyde’s Cameras. He succeeds in getting down the chimney but is trapped in the basement. He kicks his way through drywall and damages the furnace room as he makes his very dirty exit. He achieves his goal of stealing the camera equipment but then must exit. In order to bypass the perimeter alarm, he exits through the drywall separating Clyde’s from its neighbor that does not have an alarm system. The stolen merchandise is covered. The damages Pauly caused to the building and the furnace room are all covered too. However, the total theft loss and damage loss paid will not exceed the limit of insurance for this premises.

Optional Coverage

This optional coverage applies only if the required entries are on the schedule of coverages.

Peak Season

This coverage applies only when a location number, limit, and period of coverage are entered on the schedule of coverages for peak season. The limit entered replaces the regular limit for the described premises, but it applies only during the inclusive dates entered on the schedule of coverages.

 

Example: Clyde is in a tourist area and 80% of his sales are to those tourists. He keeps a minimal amount of stock during the off season and then increases it just before the season begins. His premises limit is $50,000 but his peak season limit is $150,000. He sets the dates as 10/1 – 4/1 based on his experience and his ordering pattern.

Perils Covered

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

Other Coverages–Collapse

1. Coverage

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

2. Covered Perils

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

3. Collapse Means

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

4. Collapse Does Not Mean

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

5. Coverage Limitation

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

Perils Excluded

1. Primary Exclusions

The first group of exclusions is essentially absolute. Subject to specific exceptions, loss or damage by each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or that results from any of these events.

a. Civil Authority

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

b. Earth Movement or Volcanic Eruption

Earth movement and volcanic eruption, explosion or effusion is not covered except for the following five exceptions:

Note: This means that coverage applies to covered property in transit and at unlisted premises.

c. Flood

The insurance company does not pay for loss or damage caused by flood.

There are two exceptions:

Note: This means that coverage applies to covered property in transit and at unlisted premises.

d. Nuclear Hazard

The insurance company does not insure against loss or damage from any nuclear reaction, radiation, or contamination, whether the nuclear incident was controlled or not, or was caused by any means. Any loss caused by the nuclear hazard is not treated as a loss caused by fire, explosion, or smoke. However, coverage applies to direct loss or damage caused by fire that results from the nuclear hazard.

 e. Sewer Backup and Water below the Surface

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

There are two exceptions:

Note: This means that coverage applies to covered property in transit and at unlisted premises.

 f. The insurance company does not pay for loss or damage caused by any act of war. Undeclared and civil war or warlike action by a military force are all considered war. All actions taken to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents are also considered war and excluded. In addition, acts of insurrection, rebellion, revolution, or unlawful seizure of power and any action any government authority takes to prevent or defend against any such acts are excluded. If any action within the terms of this exclusion involves nuclear reaction, radiation, or contamination, this exclusion applies in place of the nuclear hazard exclusion.

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

2. Secondary Exclusions

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

a. Acts or Decisions

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

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

b. Animal Nesting, Infestation, or Discharge

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

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

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

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

This exclusion has three exceptions.

d. Collapse

Loss caused by collapse is excluded.  

This exclusion has two exceptions.

 e. Contamination or Deterioration

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

f. Criminal, Fraudulent, Dishonest, or Illegal Acts

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

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

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

g. Electrical Currents

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

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

 

Example: Kasey’s Camera Shop plastic electric display starts to melt due to overheating from the electrical current. The melting plastic drips on the cameras on the shelf underneath the display. The damage to the display is not covered but the damage to the cameras is covered. 

 

h. Fault, Defect, or Error

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

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

This exclusion has an exception. One of these events may result in a covered peril. In that case, the loss or damage that peril causes is covered.

i. Loss of Use

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

j. Mechanical Breakdown

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

k. Missing Property

The 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. This exclusion has an exception. It does not apply to covered property that is in the custody of carriers for hire.

l. Pollutants

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

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

When loss or damage is the result of a repair to, adjustment of, service of, or maintenance of covered property is excluded.

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

 

Example:  

Clyde knows that his customers do not have time to wait for a damaged camera to be sent to the manufacturer, so he offers to repair common minor problems with cameras, provided they had been purchased from him.

Scenario 1: Clyde is repairing a customer’s camera when he is startled and drops the camera. There is no coverage for the damage because it occurred when Clyde was repairing it.

Scenario 2: Clyde is working on a camera with a lithium battery. The battery unexpectedly bursts into flames and destroys the camera. The damage from the fire is covered.

 

n. Temperature or Humidity

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

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

o. Theft from an Unattended Vehicle

Coverage does not apply to theft of covered property from an unattended vehicle unless the vehicle was locked, its windows securely closed, and there was visible evidence of forced entry into the vehicle.

This exclusion has an exception. It does not apply to covered property in the custody of carriers for hire.

 

Example: Tom is delivering several drums to shops around town that sell his drums under a consignment arrangement. He plans on just a quick stop at Harry’s but is delayed due to an invoice issue. When he finally gets out to his car, all the remaining drums have disappeared. Because the vehicle was not locked at the time of the loss, Tom has no coverage for the drums.

 

p. Unauthorized Instructions

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

q. Voluntary Parting

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

r. Wear and Tear

Loss or damage caused by wear and tear is excluded.

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

s. Weather

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

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

What Must Be Done In Case Of Loss

1. Notice

The named insured must 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 to it be in writing.

2. You Must Protect Property

During and after a loss, the named insured must take all reasonable steps to protect covered property from further loss. The insurance company pays reasonable costs the named insured incurs 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 liens, and mortgage. Any changes in the title to the property during the policy period must be disclosed, in addition to providing any other reasonable information including inventories, specification and estimates the company may require in settling the loss.

 4. Examination

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

5. Records

The named insured must produce any records related to the loss. The insurance company must be allowed to make copies and take extracts of them as often as it reasonably requests. Records include tax returns and bank microfilms of all related 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 and to inspect it.

 7. Volunteer Payments

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

 8. Abandonment

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

 9. Cooperation

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

Valuation

1. Property Valuation

The valuation of covered property is as follows, subject to 2. Pair or Set and 3. Loss to Parts below:

a. Property That Is Sold

Property that has been sold but has not yet been delivered is valued at its selling price. The selling price is then reduced by all standard discounts and allowances.

b. Films or Prints

Film and prints are valued at the cost of unexposed film or the developing paper plus the cost of labor and materials that the named insured added to develop the film and prints. This valuation applies to both negative and positive film and prints.

c. Property of Others

The value of property of others, excluding film and prints, has two parts to it. The first part is the amount for which the named insured is liable to the owner. The second part is the value of the named insured labor and material that have been invested into that property. These two parts are added together.

If the valuation determined above is more than the actual cash value of the damaged property, the valuation is limited to only the actual cash value.

d. All Other Property

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

2. Pair or Set

The value of a loss that involves damage or loss of one part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. However, the loss of one part of a pair or set is not considered a total loss.

Note: This recognizes that the value of the whole is greater than the value of individual parts but that the remaining parts still have value as separates.

3. Loss to Parts

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

How Much We Pay

1. Insurable Interest

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

2. Deductible

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

3. Earthquake Period

All loss or damage from earthquakes, tremors, or volcanic eruptions that occur within a 168-consecutive hour period is considered a single loss. This time period is not limited by the policy’s expiration date.

4. Loss Settlement Terms

a. The insurance company pays the least of the following, subject to items 1., 2., 3., 5., 6., and 7. in this section:

 b. Catastrophe Limit

This applies only if a catastrophe limit is entered on the schedule of coverages.

When a covered peril causes loss or damage at more than one premises that is listed on the schedule, the most paid in a single occurrence is the lowest of either of the following:

Note: Whenever a catastrophe limit is entered it is very important to adjust it any time the other limits on the declarations are increased in order to prevent an inadvertent capping.

5. Coinsurance

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

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

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

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

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

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

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

Step 5. Subtract the applicable deductible from Step 4.

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

Note: This coinsurance applies per premises. If coinsurance is to apply over all premises, attach IM 1273–Coinsurance Provisions.

Coinsurance can be waived entirely by attaching IM 1261–Coinsurance Waiver.

6. Insurance under More Than One Coverage

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

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 on all insurance that covers on the same basis.

b. Excess Amount

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

Loss Payment

1. Loss Payment Options

a. Our Options

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

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

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

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured. The only exception is when a loss payee is on the policy.

b. Conditions for Payment of Loss

The insurance company pays a covered loss within 30 days after it receives a properly prepared proof of loss and the amount of loss is established. The amount of loss is determined either through a written agreement between the company and the named insured or after an appraisal award is filed with the company.

3. Property of Others

a. Adjustment and Payment of Loss to Property of Others

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

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

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

Other Conditions

1. Appraisal

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

Either party can request an appraisal to determine a disputed claim’s value. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their appraiser's name to the other party. The two appraisers then have 15 days to select a competent impartial umpire. If they cannot agree on an umpire within that time period, either can request that a judge in the court of record in the state where the property is located appoint one.

The appraisers then determine the claim’s value. They submit any differences to the umpire. Once any two of the three parties agree, the amount of loss is set.

Each party pays its own appraiser. Both parties share the umpire’s cost and other expenses equally.

 2. Benefit to Others

The insurance provided does not directly or indirectly benefit any party that has custody of the named insured's property.

3. Conformity with Statute

Any condition in this coverage form that conflicts with any applicable law is amended to conform to that law.

4. Estates

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. Liberalization

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

6. Misrepresentation, Concealment, or Fraud

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

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

7. Policy Period

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

8. Recoveries

Payment of the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply if the insurance company pays a loss and the lost or damaged property is subsequently recovered or the parties responsible for the loss pay for it.

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

9. Restoration of Limits

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

10. Subrogation

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

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

11. Suit against Us

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

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

12. Territorial Limits

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

13. Business Records

The named insured is required to maintain business records throughout the policy period and keep them no less than three years after the policy expires. An itemized inventory of stock that is updated annually through a physical inventory is also required.

The business records the named insured is required to maintain must include all of the following:

The insurance company has the right to request access to the business records and inventory as often as it chooses, and the named insured is required to comply. However, such requests must be considered reasonable.

Note: This condition is very unusual because it requires the named insured to maintain records in a prescribed way. It is common in all Inland Marine dealer coverage forms but not in commercial property coverage forms.

Additional Coverage Limitation

Premises Protection

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

 

Example:  The local team won the state title and all the employees at Cameras R Us are heading to the center of town for the parade. Mandy thought Peter was turning on the alarm and Peter than Felix was turning on the alarm and Felix did not know he was responsible. Mandy arrives the next morning to discover the front door smashed open and most of the cameras gone. She contacts her alarm company to find out why they had not responded and discovered that the alarm had not been set. Mandy is even more upset when she discovers that, because the alarm had not been set, her loss was not covered.

ENDORSEMENTS

AAIS has developed four endorsements to use with Camera and Musical Instrument Dealers Coverage.

IM 1261–Coinsurance Waiver

This endorsement deletes the coinsurance provisions from How Much We Pay.

IM 1263–Personal Property Coverage

This endorsement extends coverage to other personal property. This property consists of furniture, fixtures, office equipment and supplies; machinery, tools (and their parts), patterns, molds, models, and dies. It also covers the named insured's interest as a tenant in improvements and betterments it makes to the premises it occupies. Entries must be made on the schedule of coverages.

IM 1264–Reporting Conditions

This endorsement adds reporting requirements and conditions to Additional Conditions and deletes the coinsurance provisions under How Much We Pay. Entries must entered on the schedule of coinsurance.

IM 1273–Coinsurance Provisions

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

UNDERWRITING CONSIDERATIONS

The primary loss exposures for camera and musical instrument dealers are fire and theft.

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

The types of merchandise carried, and their value, primarily determine the extent and nature of security and the extent of protection against theft required. The security measures provided, and their adequacy must be evaluated. Access to stock should be limited and controlled. If the named insured removes or takes property to another location, the security arrangements at that location must also be evaluated. For property transported by motor vehicles, the vehicles should be locked at all times when unattended and alarms activated when covered property is inside.

The loss potential increases if the named insured provides repair and service.