COMMERCIAL OUTPUT PROGRAM DECLARATIONS AND SCHEDULES OF COVERAGES
(August 2019)
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BACKGROUND
The Commercial Output Program has a split declarations. The first part of the declaration is the CO
1100–Commercial Output Program–Declarations which provides identifying
information. The second part is either the
CO 1050-Schedule of Coverages or the CO1051–Schedule of Coverages. The
schedules are identical except that the CO 1051 includes spaces to enter the necessary information for the equipment
breakdown and spoilage coverage parts.
CO 1100–COMMERCIAL OUTPUT PROGRAM–DECLARATIONS
The CO 1100 is an advisory declarations that is used to display vital identifying information. The required entries are:
- Policy number
- Insurance carrier name and address
- Producer name and address
- Named insured
- Named insured mailing address
- Policy period
- A coverage statement
- Business Description
- Mortgage holder name and address and the location to which it holds the mortgage
- A listing of endorsements or forms that are attached and apply to all coverages
- The premium and how it is
This declarations is not a filed form because most insurance carriers develop their own versions. Additional information may be displayed on those other versions, but the minimum items described above must be provided.
CO 1051–SCHEDULE OF COVERAGES
The Schedule of Coverages used with the AAIS Commercial Output Program Edition 3.0 is used to display coverages and limits provided by the following coverage parts.
- Property
- Income
- Flood
- Earthquake
- Equipment Breakdown
- Spoilage
Catastrophe Limit
The first limit shown is the Catastrophe Limit. This is the most paid for all losses involving all coverages in any one occurrence. This caps the amount of loss for all coverages provided on the Schedule of Coverages. This limit should be adjusted every time an individual coverage limit is changed. If this is not done, the overall limits protection provided under the COP could be inadequate.
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Example: Zebra Stripes has one location covered by the COP and a
catastrophe limit of $500,000. A second location with total property values
of $450,000 situated a mile away is added during the policy period. The
Building, Personal Property and Business Income limits are all increased to
reflect this addition, but the catastrophe limit is not changed. A tornado
seriously damages both locations and the combined total loss is $750,000.
Because the catastrophe limit was not changed and remained at $500,000, the
total loss payment is capped at the $500,000 catastrophe limit. |
Property Coverage Part
LIMITS
The limit for building is the most available to pay for all buildings damaged at a single location. The limit for building is developed by adding the values together of all buildings at each separate location. Once all locations have been evaluated, the limit representing the highest exposure at a single location is entered.
The limit for business personal property is determined in a manner similar to that used to determine the building limit. The values of all business personal property in each a building at a covered location plus business personal property within 1000 feet of the covered location that is either stored in the open or in or on a vehicle must be added together to develop a per location business personal property for each covered location. Once all locations have been evaluated, the limit representing the highest exposure at a single location is entered.
A combined blanket limit for buildings and business personal property can be used instead of the separate limits for buildings and business personal property. The blanket limit is the most paid for a loss at a location for building and business personal property combined.
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Example: Dollops has five locations with the following values: |
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Location |
Building |
Business Personal Property |
Total Combined |
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1 |
$250,000 |
$750,000 |
$1,000,000 |
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2 |
$150,000 |
$100,000 |
$250,000 |
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3 |
$500,000 |
$1,250,000 |
$1,750,000 |
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4 |
0 |
$1,500,000 |
$1,500,000 |
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5 |
$600,000 |
0 |
$600,000 |
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If building and business personal property limits are scheduled separately, the highest building limit is $600,000 and the highest business personal property limit is $1,500,000. If the limits are written on a combined basis, the highest limit is $1,750,000. |
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This approach is very wide open because no individual locations are listed. This means that buildings are covered wherever they may be within the defined territory provided they meet the coverage form’s definition of building. It also means that all business personal property located in buildings or within 1,000 feet of a building in the open or within a vehicle is covered if located within the covered territory and meeting the definition of covered property.
This very broad approach can be restricted by placing a check in the “refer to scheduled locations” box on this schedule and attaching a completed CO 1052–Location Schedule to the policy.
COVERAGE EXTENSIONS
Seven Coverage Extensions are listed. The defaults in the coverage form and the items and/or values that can be entered are below. All limits are occurrence unless marked as aggregate. When an entry is made it replaces the default amount.
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Coverage |
Default in Coverage Form |
Entry |
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Consequential Loss |
Not a separate limit |
No entry can be made |
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Debris Removal, Additional Expense |
$50,000 |
$50,000 or higher |
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Emergency Removal |
365 Days |
365 or higher |
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Emergency Removal Expense |
$5,000 |
$5,000 or higher |
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Fraud and Deceit |
$5,000 |
$5,000 or higher |
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Damage From Theft |
Not a separate limit |
No entry can be made |
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Off Premises Utility Service Interruption |
$50,000 |
$50,000 or higher Overhead Transmission Lines can be excluded |
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Example: Dollops determines that the cost to remove its business
personal property in the event of an emergency evacuation is $25,000 and it
is entered on the Schedule of Coverages. If an emergency requiring removal
occurs, the insured has $25,000 available in place of the $5,000 limit
provided by the policy, not in addition to it. |
SUPPLEMENTAL
COVERAGES
Thirteen Supplemental Coverages are listed. The defaults in the coverage form and the items and/or values that can be entered are below. All limits are per occurrence unless marked as aggregate. When an entry is made it replaces the default amount.
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Coverage |
Default in Coverage Form |
Entry |
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Brands and Labels Expense |
$50,000 |
$50,000 or higher |
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Expediting expenses |
$50,000 |
$50,000 or higher |
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Fire Department Service Charges |
$25,000 |
$25,000 or higher |
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Inventory and Appraisal Expense |
$50,000 |
$50,000 or higher |
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Ordinance or Law (Undamaged) |
Not a separate limit |
No entry can be made |
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Ordinance or Law (Increased Cost of Construction plus Cost to Demolish) |
$100,000 |
$100,000 or higher |
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Personal Effects |
$15,000 |
$15,000 or higher |
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Pollutant Cleanup and Removal |
$50,000 aggregate |
$50,000 or higher |
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Recharge of Fire Extinguishing Equipment |
$50,000 |
$50,000 or higher |
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Rewards |
$10,000 |
$10,000 or higher |
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Sewer Backup and Water Below the Surface |
$25,000 |
$25,000 or higher |
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Trees, Shrubs and Plants |
$50,000 |
$50,000 or higher |
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Underground Pipes, Pilings, Bridges or Roadways |
$250,000 |
$250,000 or higher |
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Example: Dollops
increases Rewards coverage from $10,000 to $50,000. When a loss
occurs, Dollops offers a $60,000 reward. When the time comes to pay the
reward, the insurance company pays only the $50,000 limit shown on the
Schedule of Coverages. Dollops must pay the additional $10,000 from its own
funds. |
SUPPLEMENTAL MARINE
COVERAGES
Eleven Supplemental Marine Coverages are listed. The defaults in the coverage form and the items and/or values that can be entered are below. All limits are per occurrence unless marked as aggregate. When an entry is made it replaces the default amount.
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Coverage |
Default in Coverage
Form |
Entry |
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Accounts Receivable |
$50,000 |
$50,000 or higher |
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Electrical or Magnetic Disturbance of Computers |
Not a separate limit |
No entry can be made |
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Power Supply Disturbance of Computers |
Not a separate limit |
No entry can be made |
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Virus and Hacking Coverage |
$25,000 occurrence subject to $50,000 12-month aggregate |
$25,000 occurrence
or higher $50,000 aggregate
or higher |
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Fine Arts |
$100,000 |
$100,000 or higher |
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Off Premises
Computers |
$25,000 |
$25,000 or higher |
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Property On
Exhibition |
$50,000 |
$50,000 or higher |
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Property in
Transit |
$50,000 |
$50,000 or higher |
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Sales Rep Samples |
$50,000 |
$50,000 or higher |
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Software Storage |
$50,000 |
$50,000 or higher |
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Valuable Papers |
$100,000 |
$100,000 or higher |
ADDITIONAL PROPERTY
SUBJECT TO LIMITATIONS
Furs and jewelry are each subject to a $10,000 theft limitation and are shown on the schedule for informational purposes. The limits cannot be changed. In addition, stamps, tickets, and letters of credit are subject to an overall limit of $5,000 that is also informational and cannot be changed.
COVERAGE OPTIONS
This section of the Schedule of Coverages has three coverage options that can be selected:
- Actual Cash Value
The policy automatic default valuation is replacement cost. That valuation can be changed to actual cash value by checking the box.
- Automatic Increase
Automatic Increase is explained in the policy section titled “How Much We Pay.” If a percentage increase is shown on the Schedule of Coverages in the space provided, the limits on the Schedule of Coverages or the Scheduled Locations endorsement are increased by that percentage.
- Scheduled Locations
When coverage is changed from a blanket to a scheduled location basis CO 1227–Scheduled Locations Endorsement must be added, and this substantially changes the coverage. Instead of all locations being covered, only the locations scheduled on the CO 1052–Location Schedule are covered. In an attempt to provide some cushion for errors, three coverages are added:
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Coverage |
Default in CO 1227 |
Entry |
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Newly Built or Acquired Buildings |
$500,000 |
$500,000 or higher |
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Personal Property at Acquired Locations |
$250,000 |
$250,000 or higher |
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Locations Not Described |
$50,000 |
$50,000 or higher |
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Coinsurance |
No default |
80, 90 or 100 are the most common |
Deductible
A single deductible amount that applies for each occurrence can be entered in the space provided. Otherwise, the box next to “Refer to Deductible Endorsements” must be checked and CO 1234–Multiple Deductible–Scheduled Perils or CO 1235–Multiple Deductible–Scheduled Locations and Property completed and attached to the policy.
Related Article: AAIS Commercial Output Program Deductible Options
Income Coverage Part
This section must be completed in full and the CO 1001–Commercial Output Program–Income Coverage Part attached unless the “Income Coverage Does Not Apply” box is selected.
COVERAGE
Four coverage options are provided and only one can be selected. They are:
· Earnings, Rents and Extra Expense
· Earnings and Extra Expense
· Rents and Extra Expense
· Extra Expense Only
LIMIT
A selection must be made whether coverage applies to all locations or is scheduled. If coverage is for all locations, an income coverage limit for the highest loss amount at any one covered location must be entered in the space provided.
If the "Refer to Scheduled Locations" box is selected, CO 1052–Location Schedule must be attached where specific limits must be listed for each location. CO 1227–Scheduled Location Endorsement must also be attached to explain how scheduled coverage operates.
COVERAGE EXTENSIONS
Two Coverages Extensions are listed. The defaults in the coverage form and the number of days that can be entered are below. No matter how many days are entered, the coverage remains subject to the loss of income limit of insurance. All entries are replacements, not additions.
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Coverage |
Default in Coverage Form |
Entry |
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Interruption By Civil Authority |
30 days |
30 days or higher |
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Period of Loss Extension |
90 days |
90 days or higher |
SUPPLEMENTAL
COVERAGES
Six Supplemental Coverages are listed. The defaults in the coverage form and the values or items that can be entered are below. All entries are replacements not additions.
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Coverage |
Default in Coverage Form |
Entry |
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Computer Virus and Hacking |
$25,000 occurrence subject to $75,000 12-month aggregate 12-hour waiting period |
$25,000 occurrence
or higher $75,000 aggregate or higher 0 hours or higher |
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Dependent Locations |
$100,000 |
$100,000 or higher |
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Off Premises Utility Service Interruption |
$10,000 12-hour waiting period |
$10,000 or higher 0 hours or higher Overhead Transmission Lines can be excluded |
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Contract Penalty |
$25,000 occurrence subject to $100,000 12-month aggregate |
$25,000 occurrence
or higher $100,000 aggregate or higher |
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Pollutants Cleanup and Removal |
$25,000 |
$25,000 or higher |
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Property in Transit, On Exhibition or Custody of Sales Rep |
$10,000 |
$10,000 or higher |
COVERAGE OPTIONS
This section of the Schedule of Coverages has three coverage options that can be selected:
- Scheduled Locations
When coverage is changed from a blanket to a scheduled location basis, CO 1227–Scheduled Locations Endorsement must be added and substantially changes the coverage. Instead of all locations being covered, only the locations scheduled are covered. In an attempt to provide some cushion for errors, two coverages are added.
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Coverage |
Default in CO 1227 |
Entry |
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Newly Built or Acquired Buildings |
$250,000 |
$250,000 or higher |
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Coinsurance |
No default |
0-100 are available |
- Waiting Period
When the box for Waiting Period is checked, CO 1281–Waiting Period–Income Coverage must be added to the policy. The waiting period is 72 hours unless another entry is made on the schedule for waiting period.
- Monthly Limitation
When the box for Monthly Limitation is checked, CO 1271–Monthly Limitation–Income Coverage must be added to the policy. This form states that the insurance company does not pay more during any consecutive 30-day period than the loss of income limit multiplied by the monthly limitation fraction or percentage entered in this section. The most common fractions used are 1/3, 1/4 or 1/6.
Flood Coverage
If one of the flood coverage options is selected, CO 1223–Flood Endorsement must be attached to the policy.
This section of the Schedule of Coverages has three coverage options and one must be selected:
- Not Covered
This box is checked if flood coverage is not provided. - Scheduled Flood Coverage
If flood coverage is provided on a scheduled basis, entries are required for the Catastrophe Limit and the Flood Deductible. The flood deductible can be expressed as either a percentage or a flat dollar amount. CO 1063–Flood Schedule must be attached so that the scheduled locations and coverage limits can be entered. - Blanket Flood Coverage
If flood coverage is provided on a blanket basis, entries are required for the Occurrence, Aggregate, and Catastrophe Limits. The flood deductible expressed as either a percentage or a flat dollar amount must also be entered.
Earthquake Coverage
If one of the earthquake coverage options is selected CO 1221–Earthquake Endorsement must be attached to the policy.
This section of the Schedule of Coverages has three coverage options and one must be selected:
- Not Covered
This box is checked if earthquake coverage is not provided. - Scheduled Earthquake Coverage
If earthquake coverage is provided on a scheduled basis, entries are required for the Catastrophe Limit and the Earthquake Deductible. The earthquake deductible can be expressed as either a percentage or a flat dollar amount. CO 1062–Earthquake Schedule must be attached so that the scheduled locations and coverage limits can be entered. - Blanket Earthquake Coverage
If earthquake coverage is provided on a blanket basis, entries are required for the Occurrence, Aggregate, and Catastrophe Limits. The earthquake deductible, expressed as either a percentage or a flat dollar amount, must also be entered.
Equipment Breakdown Coverage
The checkbox beside Not Covered must be marked if coverage for equipment breakdown is not purchased.
If the checkbox for equipment breakdown coverage is selected, CO 1003–Equipment Breakdown Coverage Part must be attached. Limits must be entered for Property Damage. If Income Coverage is to be included, a limit must be entered for it. Coinsurance will apply to either or both of these coverages if a coinsurance percentage is entered next to the limit of insurance.
INCOME COVERAGES
There are four coverage options but only one can be selected. They are:
· Earnings, Rents and Extra Expense
· Earnings and Extra Expense
· Rents and Extra Expense
· Extra Expense Only
The period of loss is automatically extended to 30 days but an entry of 30 days or higher in this section will increase the days of coverage although it will not increase the limit of insurance.
COVERAGE EXTENSIONS
/SUPPLEMENTAL COVERAGES
Six Extension/Supplemental Coverages are listed. There are no defaults within the coverage form. If a limit is not entered, that particular extension/supplemental coverage does not apply. The limits are all sublimits of the equipment breakdown limits or the equipment breakdown income limits.
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Coverage |
Default in Coverage Form |
Entry |
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Expediting Expenses |
No coverage |
A limit must be entered in order to coverage to apply. |
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Pollutants |
No coverage |
A limit must be entered in order to coverage to apply. |
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Ordinance or Law (Undamaged) |
No coverage |
A limit must be entered in order to coverage to apply. |
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Ordinance or Law (Increased Cost of Construction plus Cost to Demolish) |
No coverage |
A limit must be entered in order to coverage to apply. |
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Off Premises Utility Service Interruption |
No coverage |
A limit must be entered in order to coverage to apply. |
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Defense Costs |
Covered without a limit and not part of the other limits. |
Covered |
Note: Entries must
be made in the Coverage Extensions/Supplemental Coverage section because there
are no default limits in the coverage form.
DEDUCTIBLES
Deductibles are required for the property coverage and the income coverage if selected. The property deductible must be expressed as a flat dollar amount. Income deductibles can be expressed in terms of a flat dollar amount, a waiting period or some other described method.
OPTIONS
Spaces are provided to describe Income Coverage Options and Other Conditions that apply.
Spoilage Coverage
CO 1004-Spoilage Coverage Part Schedule Coverage or CO 1005–Spoilage Coverage–Blanket Coverage must be attached if some level of spoilage coverage is selected. This section of the Schedule of Coverages has three coverage options:
- Not Covered
This box is checked if spoilage coverage is not provided. - Blanket Spoilage Coverage
If coverage is provided on a blanket basis, entries are required for the location and catastrophe limits. The spoilage deductible as a flat dollar amount must also be entered. - Scheduled Spoilage Coverage
If coverage is provided on a scheduled basis, the catastrophe limit and spoilage deductible must be entered. CO 1075–Spoilage Schedule must be attached so that the scheduled locations and coverage limits can be entered.
The options to select selling price valuation and/or refrigeration maintenance of service agreement are available on the basis of either blanket or scheduled coverage. When scheduled coverage is used, perils covered can also be selected. Instead of all five perils being automatically included, one of more of the perils can be selected. The perils are:
- Breakdown, Malfunction, or Failure (Equipment Breakdown)
- Refrigerant Contamination (Equipment Breakdown)
- Refrigerant Contamination (Other Causes of Loss)
- Power Disruption (Equipment Breakdown)
- Power Disruption (Other Causes of Loss)
Optional Coverages and Endorsements
Any other coverages or endorsements forming a part of, or attached to, the policy at inception must be listed in the spaces provided.
CO 1050–SCHEDULE OF COVERAGES
This schedule is identical to the CO 1051 except that there are no spaces to schedule Equipment Breakdown or Spoilage Coverage Parts information.