COMPARE: COMMERCIAL OUTPUT PROGRAM EDITION 3.0 TO AAIS COMMERCIAL OUTPUT PROGRAM EDITION 2.0

(August 2019)

INTRODUCTION

The purpose of this comparison is to provide a brief overview of the differences between the 2.0 and 3.0 editions of the American Association of Insurance Services, Inc. (AAIS) Commercial Output Program. The 3.0 edition was introduced in 2002 and is the most current edition.

Related Articles:

Commercial Output Program Coverage Analysis is a detailed analysis of the 3.0 edition

Commercial Output Program Archive includes a detailed analysis of the 2.0 edition

CHANGES

The style of the policy includes two important changes:

• The declarations form in Edition 2.0 has been replaced with a Schedule of Coverages in Edition 3.0. The Schedule of Coverages lists each coverage extension, supplemental coverage, and supplemental inland marine coverage. In order to change a default limit for a particular coverage, a new limit must be entered in the space next to the applicable coverage on the Schedule of Coverages. This new method provides a very visible listing of the broad nature of the coverage provided by this form.
• Many items that were part of endorsements and other coverage parts now are part of the coverage form itself. This change particularly impacts the definitions section.

AAIS COMMERCIAL OUTPUT PROGRAM CHANGES

Definitions

The definitions section increased from 16 to 36 terms. Some definitions were previously in other forms and now appear in CO 1000. Others are new and a few have slightly different definitions from the previous edition.

The new terms are:

• Accident
• Business
• Computer hacking
• Computer virus
• Covered equipment
• Data records
• Dependent locations
• Flood
• Media
• Money
• Off-site server
• One accident
• Perishable stock
• Programs and applications
• Proprietary programs
• Rents
• Restoration period
• Schedule of coverages
• Securities
• Spoilage
• Theft

The altered terms are:

• Covered locations
• Fine arts
• Hardware
• Software

Property Covered

Covered Building Property is expanded in two ways:

• Contractors’ material situated on the insured’s premises is covered. However, it is covered only if there is no other coverage available for it and the named insured has a contractual obligation to cover it. The material must be on the premises in connection with construction, repair or renovation activities.
• Foundations are covered. In the 2.0 edition, some foundation coverage had been available in the Supplemental Coverages Section.

Covered Business Personal Property is expanded to include the named insured’s loss of use of undamaged improvements caused when a building loss is sufficient to void the lease.

Building Property Not Covered and Business Personal Property Not Covered are two new parts of this section that remove coverage as described below:

• Building Property Not Covered lists retaining walls, underground pipes and bridges and other paved surfaces. Limited coverage is granted under Supplemental Coverages.

• Business Personal Property Not Covered lists off-site servers and six other items. The six items are covered later in the policy as Supplemental Marine Coverages. This change has no practical effect since in edition 2.0 off-site servers were not covered and the other six items also did not qualify for full coverage.

Property Not Covered

The following changes apply:

• Animal coverage restricts coverage for owned animals that are for sale by requiring them to be inside buildings.
• Manufactured automobiles or vehicles is further restricted by not being covered while held for lease, loan or rented in addition to not being covered while held for sale.
• Any type of computer checked as luggage is not covered if it is stolen or disappears.
• An exception is added to the cost of excavation as property not covered. When a covered loss occurs to underground property, the cost to excavate that property is covered.
• Coverage for outdoor trees, shrubs, plants or lawns is only available under Supplementary Coverages unless the trees, shrubs, plants and lawns represent stock held for sale.
• Growing crops are not covered.

Coverage Extensions

This section is renamed. It was previously known as ADDITIONAL COVERAGES, but the new title is more appropriate. As in the previous edition, the coverage limits in this section are included in the policy limits and are not additional limits. The language added at the beginning of this section explains how the limits apply. This section contains seven coverage extensions. Two of them, Debris Removal and Emergency Removal, are revisions. Fire Department Service Charge, Pollutant Cleanup and Removal and Recharge of Fire Protection Equipment, have been relocated to Supplemental Coverages in the new edition.

The new coverage extensions are:

• Consequential Loss was previously a supplemental coverage with a $10,000 limit. It is now a coverage extension without a separate limit.
• Emergency Removal Expenses–$5,000 limit
• Fraud and Deceit–$5,000 limit
• Damage From Theft to non-owned building–policy limit
• Off Premises Utility Service Interruption–$50,000 limit

The two original additional coverages that remain as coverage extensions are amended:

• Debris Removal limit is increased from $5,000 to $50,000.
• Emergency Removal number of days covered is increased from 10 days to 365 days.

Supplemental Coverages

The language added at the beginning of this section explains how the limits for these supplemental coverages can be changed on the Schedule of Coverages and how other elements of the coverage apply to all of the coverages.

The new supplemental coverages are:

• Expediting Expenses–$50,000 limit
• Sewer Backup and Water Below the Surface–$25,000 limit

The supplemental coverages changed or amended are:

• Fire Department Service Charge relocated here from additional coverages and the limit increased from $5,000 to $25,000.
• Inventory and Appraisal Expense now excludes both attorneys' fees and public adjusters' fees.
• Ordinance or Law coverage is restructured. Ordinance or Law for Undamaged Parts of a Building and Ordinance or Law for Increased Cost of Repair and Cost to Demolish and Clear Site are two separate coverages with the limit for the Undamaged Parts of the Building being the policy limits. The limit for the Increased Cost of Repair and Cost to Demolish is a combined limit of $100,000 instead of $50,000.
• Personal Effects limit increased from $10,000 to $15,000.
• Pollutant Cleanup and Removal coverage relocated here from additional coverages and the limit increased from $25,000 to $50,000.
• Recharge of Fire Extinguishing Equipment coverage is broadened, and the limit increased from $10,000 to $50,000.
• Rewards coverage is broadened to include theft and vandalism and the limit is increased from $5,000 to $10,000.

• Trees, Shrubs, and Plants coverage added the peril of vandalism.
• Underground pipes, pilings, bridges and roadways coverage is broadened to include bridges, walkways, roadways and similar paved surfaces.
• Newly acquired building and personal property coverage is removed from this section and relocated to the Scheduled Locations Endorsement.

Supplemental Marine Coverages

The language added at the beginning of this section explains how the coverages and limits in the section apply. This section contains 11 Supplemental Marine Coverages.

The five new coverages are:

• Electrical or Magnetic Disturbance of Computers
• Power Supply Disturbance of Computers
• Virus and Hacking Coverage is subject to a $25,000 limit for each occurrence and a $50,000 aggregate limit for each 12-month policy period.
• Off Premises Computers is subject to a $25,000 limit.

• Software Storage is subject to a $50,000 limit.

Two coverages have higher limits in addition to significant changes in coverage:

• Fine Arts limit was increased from $50,000 to $100,000 and coverage broadened to include covered property on display, at exhibitions and/or in transit.
• Valuable Papers limit was increased from $50,000 to $100,000 and electronic data coverage removed.

The remaining coverages had changes made to the coverage provided but the limits are the same:

• Accounts Receivable added the words "direct physical" before the word "loss."
• Property on Exhibition added the words "direct physical" before the word "loss."
• Sales Representative Samples added the words "direct physical" before the word "loss."
• Property in Transit was broadened to include additional property, but some limitations were also added.

Perils Covered

The word "external" before the word "risks" is removed.

Perils Excluded

The COP has two separate sets of exclusions. Each set has a number of subparts.

The first set of exclusions has eight subparts, compared to seven in the previous edition. Four of the seven subparts changed:

• Ordinance or Law clarifies what is excluded without any apparent change in intent.
• War was changed to War and Military Action and lists more actions that are excluded.
• Water was divided into two new exclusions. One is Flood and the other is Sewer Backup and Water Below the Surface. The new wording is virtually identical to that of the combined exclusion in the previous edition.
• Utility Failure was amended slightly to reflect that the Coverage Extension for Off Premises Utility Services Interruption applies.

The second set of exclusions has 21 subparts, compared to 20 in the previous edition. One exclusion, Freezing, was deleted. Two others were added and six were changed.

The added subparts are:

• Computer Virus or Computer Hacking
• Smog. This was part of Smoke, Vapor or Gas but is now a separate exclusion. The wording of the new exclusion is less restrictive than the language that applied to it in the previous edition.

The six changed subparts are:

• Animals changed to Animal Nesting, Infestation or Discharge and is less restrictive than in the previous edition.
• Electrical Current is revised to not apply to computers.
• Explosion changed to Steam Boiler Explosion with no change in content.
• Smog, Smoke, Vapor or Gas changed to Smoke, Vapor or Gas to reflect the separation of Smog into a separate exclusion.
• Temperature/Humidity changed significantly.
• Voluntary Parting includes additional clarifying wording.

Additional Property Not Covered or Subject to Limitations

This section contains 12 separate items compared to 13 in the previous edition. Two items in the previous edition were removed and one added to the new edition. Three others changed.

The two items removed are:

• Gutters and Downspouts are now covered for loss by weight of ice, sleet or snow.
• Interior of Buildings is now covered for loss or damage by rain, snow, sleet, ice, sand or dust without requiring that damage to the exterior of the structure occur first.

The one item added is Contamination of Perishable Stock Due to Release of Refrigerant.

The three items changed are:

• Glassware/Fragile Articles now includes a statement that damage to fine arts is not limited.
• Unauthorized or Fraudulent Transfer is the new title for what was previously Transferred Property. It now includes coverage for loss due to electronic transfer.
• Valuable Papers no longer has any exceptions.

Other Coverages

The policy’s Collapse coverage wording was changed in order to improve the hazard’s explanation. Buildings in imminent danger of collapse are not covered.

What Must Be Done In Case Of Loss

This section did not change.

Valuation

This section contains 13 separate items compared to 9 in the previous edition. Four items are added and five are revised.

The four items added are:

• Hardware
• Software
• Manufactured Stock
• Accounts Receivable

The five items revised are:

• Actual Cash Value must now be specifically selected on the Schedule of Coverages. This was the default settlement basis in the previous edition.
• Replacement Cost is the default valuation in the new edition.
• Fine Arts settlements are now based on fair market value instead of actual cash value.
• Tenants Improvements losses are settled on a replacement cost basis instead of actual cash value.
• Valuable Papers losses are now based on the actual cash value at the time of loss.

How Much We Pay

This section contains seven separate items compared to five in the previous edition.

The two new items are:

• Earthquake Period
• Automatic Increase

Loss Payment

The only change in this section is that the section on Our Options is expanded with no change in intent.

Other Conditions

Two items in this section are changed:

• Restoration of Limits is amended to clarify that the limits of insurance for Pollutant Cleanup and Virus and Hacking are not restored following a covered loss.
• Territorial Limits are expanded to include foreign shipments under Overseas Transit.