AG 0140-Livestock Coverage

AG 0140–LIVESTOCK COVERAGE

(February 2019)

INTRODUCTION

The American Association of Insurance Services (AAIS) AG 0140–Livestock Coverage endorsement is used with the AAIS Agricultural Output Program to provide coverage for various types of livestock. It is attached to AG 0100–Agribusiness Property and Income Coverage Part.

This endorsement is not complete without the AG 0100. Instead, the AG 0140 amends the following parts of the AG 0100 to provide coverage and even then, the amendments apply only to the coverage being provided by the endorsement:

AGREEMENT

The insurance company provides the coverage described in this endorsement during the policy period in exchange for the named insured's premium payment. This endorsement is subject to CL 100–Common Policy Conditions and the following sections in AG 0100–Agribusiness Property and Income Coverage Part:

PROPERTY COVERED

Only the livestock listed and described on the declarations is covered.

PROPERTY NOT COVERED

Coverage does not apply to the following property. Exceptions, if any, will be listed on the declarations.

1. Contraband

These are goods that are illegal to possess or that are legal but in the course of illegal transportation.

 

Example: Marty hires Jerry to transport forty head of cattle to market. The cattle are usually covered. However, Marty’s farm is under government-ordered quarantine when the cattle are transported. Any loss to the cattle during transportation is excluded because the activity is illegal.

2. Waterborne Livestock

There is no coverage for livestock transported by water. There is an exception. Livestock being transported on ferries or other transfer boats are covered if the water transportation is part of a longer transport that includes rail or other land routes.

3. Carrier for Hire

When the named insured carries livestock for hire, there is no coverage for the livestock of others.

4. Livestock Not Described

Coverage is limited to only livestock specifically described on the declarations. All other livestock is not covered.

5. Other Property

This endorsement covers only livestock. All other property is not covered.

SUPPLEMENTAL COVERAGE

This Supplemental Coverage applies only when Off-Premises Power Interruption Coverage is selected on the declarations.

Off-Premises Power Interruption

Loss to livestock caused by electrical power to the building or structure that houses the livestock being interrupted because of an off-premises power failure is covered. The power failure must be due to direct physical damage to that off-premises power source that is caused by a peril this endorsement covers.

PERILS COVERED

The perils covered differences in the AG 0100 and the AG 0140 are significant. The AG 0100 covered perils are risks of direct physical loss or damage, subject to certain exclusions and limitations. AG 0140–Livestock Coverage applies to only losses caused by the perils listed below. This reduced coverage is an important difference that may be overlooked if not brought to the customer's attention when the policy is delivered.

The protection options are Basic Perils or Broad Perils. Broad Perils include six perils in addition to the 14 Basic Perils. Earthquake or Volcanic Eruption Coverage can be added to either selection.

1. Basic Perils

Only direct physical loss to covered property that one of the following perils causes is covered when the entry on the declarations is Basic Perils. This coverage is subject to Perils Excluded.

a. Fire

b. Lightning

c. Explosion

This coverage excludes loss or damage that sonic boom causes.

d. Windstorm or Hail

This coverage does not insure loss to livestock due to any of the following even if a result of windstorm or hail:

e. Aircraft or Vehicles

Direct physical contact between the livestock and aircraft, spacecraft, missiles or vehicles is covered. This also applies if the contact is with the building holding the livestock. The term vehicle includes the animals pulling the vehicle. If objects fall from an aircraft or are thrown up by an aircraft or vehicle and make direct physical contact with the livestock or the building holding the livestock, there is also coverage.

Note: Aircraft is not defined so could include direct contact with a drone or unmanned aerial vehicle (UAV).

 

Example: Gravity Plus Farms arranges to transport 30 sheep to market by air. While waiting to board the aircraft, another plane lands. It’s landing wheel sheers off, flies into the paddock holding the sheep, and kills two of the sheep. This loss is covered.

 

f. Smoke

When smoke occurs accidentally and suddenly, causing loss or damage, there is coverage but if the smoke is due to agricultural smudging or industrial operations, there is no coverage.

g. Riot or Civil Commotion

In addition to riot and civil commotion, the insurance company pays for loss or damage due to the following:

 

Example: Arnie hears that a riot is taking place in another part of town. He knows the sheriff and his deputies will be busy and decides to use the riot to cover his theft of some of Fred’s livestock. The coverage this peril provides does not apply to Fred’s livestock that was stolen.

 

h. Collision

Collision is expanded to include not only collision but also upset and overturn of any vehicle transporting the covered livestock.

i. Sinkhole Collapse

This is the same definition that is in AG 0100.

j. Collapse of a Bridge or Culvert

k. Stranding, Sinking, Burning, or Colliding of Ferries or Other Transfer Boats

In addition to damage caused by the stranding, sinking, burning or colliding of ferries or transfer boats, there is coverage for general average costs. Under Marine law, the sacrifice of one to save the rest must be shared by the rest. So, if the cargo of one shipper is thrown overboard, the loss of that cargo is shared by all shippers on the vessel proportionate to the value of their property on the vessel. Both the proportionate value of the cargo and the proportionate share of the cost to save property that is saved are covered under this peril.

l. Theft or Attempted Theft

This is theft as AG 0100 defines it. However, the following losses are not covered:

m. Flood

Flood is water that overflows or inundates areas that are usually dry. It can be caused naturally, artificially or accidentally by any of the following:

Flood may or may not be accompanied by wind.

n. Volcanic Action

This is the same definition that is in AG 0100.

2. Broad Perils

Direct physical loss to covered property caused by any of the Basic Perils outlined above or by any of the following perils is covered when Broad Perils is selected on the declarations.

This coverage is subject to Perils Excluded.

a. Vandalism

This peril is restricted to willful or malicious damage to covered property. It can include destruction but is not limited to destruction.

b. Accidental Shooting

c. Drowning From External Cause

d. Electrocution

e. Attack by a Dog or Wild Animal

f. Collapse of a Building or Other Structure

Note: Except for vandalism, none of these Broad Perils is further defined. This means that coverage is based on the peril’s name or title. It also means that the definition may be broadly defined and interpreted at the time of loss.

3. Optional Peril, Earthquake, or Volcanic Eruption

Coverage applies to direct physical loss to covered property that earthquake or volcanic eruption causes when this coverage is selected on the declarations. This coverage is subject to Perils Excluded.

Earthquake is not defined. However, volcanic eruption includes eruption, explosion, and effusion of a volcano. All earthquakes or volcanic eruptions that take place within 168 consecutive hours are considered a single loss. This period is not affected by the expiration date. This means that if the earthquake strikes the day before the policy expires, coverage continues for all aftershocks that may occur in the next 6 days even though the policy has expired.

PERILS EXCLUDED

1. Primary Exclusions

The first group of exclusions applies whether the loss event results in widespread damage or affects a significant geographical area or not and are essentially absolute. Subject to specific exceptions, 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

Loss or damage caused by order of any civil authority is excluded. Some examples of such loss or damage are seizure, confiscation, destruction, or quarantine of any property. This exclusion has an exception if a civil authority orders that property be destroyed to keep a fire from spreading. This exception applies only if a covered peril causes the fire.

 

Example: The local fire department burns down the Finnegans’ breeding barn so it can act as a firebreak against an advancing forest fire caused by a lightning strike. This loss of livestock in that barn is covered.

 

b. Nuclear Hazard

Coverage does not apply to any loss caused by or that results from a nuclear reaction, nuclear radiation, or radioactive contamination. Coverage does not apply if the event is controlled, uncontrolled, or if natural, accidental, or artificial means causes it. Loss caused by the nuclear hazard is not considered loss caused by fire, explosion, or smoke. There is an exception for direct loss by fire that results from the nuclear hazard.

Note: Coverage for nuclear risks is available through only nuclear coverage associations.

c. Earth Movement or Volcanic Eruption

Damage to covered property caused by earthquake, landslide, mudslide, mine subsidence, sinking-rising-shifting earth, and earth movement caused by volcanic eruption-explosion or effusion is excluded.

If property is damaged by fire, explosion or volcanic action resulting from earth movement, eruption, explosion, or the effusion of a volcano, there is coverage for the specific fire, explosion or volcanic action damage. Volcanic eruptions that occur within a 168-time period are considered a single occurrence. If a volcanic action begins at the end of the policy, the coverage continues into the next policy period since the 168-hour time period is not limited by the policy expiration.

If Optional Peril, Earthquake or Volcanic Eruption is selected on the declarations as covered, there is coverage as described in the optional peril, but the following is still not covered:

Note: If the earthquake or volcanic eruptions start within 72 hours of the inception date of the policy and the prior policy has no earthquake coverage, the Optional Peril, Earthquake or Volcanic Eruption still applies.

d. War

Note: The war exclusion in this form is deleted and replaced by a mandatory exclusion AG 0135–Exclusion – War and Military Action. Because the exclusion is mandatory, it is analyzed in place of the exclusion in the form.

Loss or damage that is caused either directly or indirectly by the following activities are not covered:

This exclusion takes precedence over any Nuclear Hazard exclusion if any of the above actions involve activities that would be otherwise excluded under the Nuclear Hazard exclusion.

Note: This last paragraph is very important because the Nuclear Hazard provides a limited amount of coverage for fire due to nuclear war, but this exclusion does not.

e. Utility Failure

A loss that is caused by the failure of a utility to supply its service to the insured is not covered if the failure occurs off the insured’s premises.

There are two exceptions.

2. Secondary Exclusion

If weather conditions cause any of the excluded perils described in paragraphs 1a-1e, there is still no coverage for loss or damage caused by those excluded perils. However, resulting losses caused by covered perils, are covered.

VALUATION

Livestock that is owned by the named insured is based on the actual cash value of the livestock as of the day of the loss. The same applies to the livestock that is owned by others but for which the named insured is legally liable, but there is one additional stipulation – the insurance will pay no more than the amount for which the named insured is legally liable.

HOW MUCH WE PAY

The following replaces AG 0100’s Loss Settlement Terms, Coinsurance, Property Covered Other than Builders' Risk and Value Reporting under How Much We Pay:

1. Loss Settlement Terms, Livestock

Subject to the other provisions in the How Much We Pay section, the most that is paid for the loss of any one animal is the Each Animal Limit entered on the declarations. The most that is paid in a single occurrence is the All Animals Limit on the declarations. The limits may be shown by type of animal by class or type.

2. Coinsurance, Livestock

This provision applies separately to each item or type of covered property that is subject to coinsurance.

The insurance company pays only part of a covered loss when the limit at the time of loss multiplied by the corresponding coinsurance percentage is less than the covered property’s value. There is no penalty if the value calculated is less than the limit of insurance.

However, if the value calculated is less than the limit, a penalty calculated as follows is applied:

Step 1. Multiply the livestock's value at the time of loss by the coinsurance percentage.

Step 2. Divide the limit for the covered property by Step 1.

Step 3. Multiply the total amount of loss by Step 2.

Step 4. Subtract the deductible from Step 3.

The most the insurance company pays is the lesser of the amount determined in Step 4. or the limit. The named insured must pay the difference between the loss amount and the payment amount.

3. Value Reporting, Livestock

Value reporting allows the named insured to receive the benefits of 100% coinsurance without a potential coinsurance penalty.

The named insured must file monthly written reports of full property values with the insurance company within 30 days after the month for which the values are reported. The values must be separated by kind, type, and location of the livestock.

a. Full Reporting

The insurance company adjusts the amount of loss, using the latest report of values, as follows:

Step 1: Divide the latest values reported prior to the loss by the actual values that existed on the date of the report.

Note: This should obviously be 100%. However, if the actual values are less than the values reported, they are under-reported, and a penalty applies.

Step 2. Multiply the total amount of loss by the amount determined in step 1.

Step 3. Subtract the deductible from the amount determined in step 2.

The most the insurance company pays is the lesser of the amount determined in step 3 or the limit. It does not pay any remaining part of the loss.

This calculation is made on the same basis as the report because it is based on locations and types or class of livestock.

 

Examples:

The livestock limit is $100,000 and the deductible is $1,000. The loss amount is $50,000.

Scenario 1: The last value reported is $90,000 and that amount is the actual value as of the reporting date.

Step 1: $90,000 value reported divided by $90,000 actual value equals 100%.

Step 2: $50,000 amount of loss multiplied by 100% equals $50,000.

Step 3: $50,000 minus the $1,000 deductible equals $49,000. This is the amount paid. The named insured pays the $1,000 deductible amount.

Scenario 2: The named insured reports $75,000 but the value was actually $90,000.

Step 1: $75,000 value reported divided by $90,000 actual value equals .833.

Step 2: $50,000 amount of loss multiplied by .833 equals $41,650.

Step 3: $41,650 minus the $1,000 deductible equals $40,650. This is the amount paid. The named insured pays $9,350.

 

b. Failure to Submit Reports

This provision applies to each covered location and for each class or type of livestock involved in a loss.

The first report may be due but has not yet been received when a loss occurs. In that case, the insurance company does not pay more than 90% of the loss it would have otherwise paid.

The first report may have been made but a subsequent report that is due is not yet received when a loss occurs. In that case, the insurance company does not pay more than the amount reported in the latest report it received.

c. Premium

This coverage’s premium at inception for all property subject to reporting is an advance premium. The insurance company determines a final premium at expiration or on the date that coverage is cancelled. It does so by using the average of all values reported. If the final premium exceeds the advance premium, the named insured pays the insurance company the difference. If the final premium is less than the advance premium, the insurance company refunds the difference to the named insured, subject to any minimum premium.

Premiums can be adjusted on other than an annual period as so stated on the declarations.

The reporting period and the dates reports and premiums are due may be amended by agreement. In that case, the changes are entered on the declarations.

OTHER CONDITIONS

Death of Livestock

Livestock loss means death due to a covered peril. This is not livestock health insurance coverage. If the animals die, there is a loss; if they live, there is not a loss.

In addition, loss means theft and attempted theft of the livestock. Death is not a requirement for loss due to theft because there is no way to know if a stolen animal is alive or dead.