AG 0152-Poultry Coverage

AG 0152–POULTRY COVERAGE

(February 2019)

INTRODUCTION

The American Association of Insurance Services (AAIS) AG 0152–Poultry Coverage endorsement is used with the AAIS Agricultural Output Program to provide coverage for poultry. It is attached to AG 0100–Agribusiness Property and Income Coverage Part.
This endorsement is not complete without the AG 0100. Instead the AG 0152 amends the following parts of the AG 0100 in order 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:

DEFINITIONS

The following definitions apply in addition to the definitions in the AG 0100. These new definitions apply only to the coverages this endorsement provides:

1. Bird

A single fowl that is of the type and kind that is listed and described on the declarations. When reference is to more than one bird, the term ‘birds’ is used.

2. Flock

All the birds that are in common housing and were born on the same hatch date.

3. Hatch

Any group of birds with a common hatch date.

4. Hatch date

A specific 24 consecutive hour period during which birds are hatched.

5. Purchase date

The date on which the named insured became the birds’ owner.

6. Supplies

These are feed, grain, grit, medicine, vaccines, sanitation products, litter, and fuel.

Note: Grit is a minute, rough granule of stone. Litter is any material used as bedding for animals. Straw is an example of such bedding.

PROPERTY COVERED

Only the poultry listed and described on the declarations at a covered location are covered. Supplies that are incidental to and used directly to raise or service covered poultry is also covered but only when there is a limit for supplies on the declarations.

PROPERTY NOT COVERED

Coverage does not apply to the following property:

1. Contraband

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

 

bird

Example: Oscar was fascinated with a bird he encountered in Uruguay. He wanted to attempt cross breeding to increase the size of his other birds. Due to various laws and import restrictions, Oscar was not permitted to bring the bird into the country. However, Oscar found a black-market supplier. This bird is not covered because it is contraband.

2. Diseased Poultry

Sick or diseased poultry are not covered. The only exception is when a covered peril causes the poultry to become sick or diseased and the poultry subsequently dies. This exception is described in greater detail under the Other Condition later in this analysis.

 

Example: Jennifer’s poultry are tested and found positive for bird flu. She is ordered to immediately destroy her entire flock and decontaminate the property. When she contacts her insurance company, she is saddened to learn she has no coverage because bird flu is not a covered peril.

3. Property Not Described

Coverage only applies to property that is described on the declarations. Therefore, if it is not described, it is not covered.

SUPPLEMENTAL COVERAGES

Coverage applies to each of the following when there is a limit for it on the declarations.

1. Eggs

When a limit is entered on the declarations for eggs, the coverage provided is for eggs that have been packed, crated, and are pending shipment to market.

Instead of only covering the eggs, a limit can be entered for eggs and egg packing material. The coverage provided is then expanded to cover the packing material in addition to the eggs that been packed, crated, and are pending shipment.

Note: A limit should be entered for Eggs or Eggs and Packing Material but not for both.

2. Transit-to-Market Damage

If there is a limit on the declarations for this Supplemental Coverage, covered poultry in transit to market that is damaged when the transporting vehicle has a collision, upset or overturn is covered. The coverage is for the reduction in value between the actual cash value of the poultry before and after the loss.

 

Example: Mike makes too wide a turn and the semi flips. Most of the birds that were being taken to slaughter are killed immediately but even the survivors are required to be destroyed immediately. Mike would have collected .50 per pound for the birds but because of the accident the birds can be sold only for animal feed, so that value is .05 per pound. Mike is therefore paid .45 per pound subject to the limit of insurance.

fliptruck

3. Housing Damage–Consequential Loss

If there is a limit on the declarations for this Supplemental Coverage, covered poultry is covered if the building or structure where they are housed is damaged by a covered peril. The coverage is for the reduction in value between the actual cash value of the poultry before and after the loss.

The insured cannot collect the money and do nothing. He or she must make reasonable efforts to provide adequate housing for the poultry and, if necessary, minimize the loss by selling the poultry at the highest possible price.

There is no coverage for the damage to the building or structure.

Note: A statement in this coverage refers to a percentage entered on the declarations for this coverage but the declarations does not have a space for a percentage to be entered.

 

Example: A fifty-pound drone falls through Patricia’s poultry barn roof. The temperatures plummet and she must move the poultry or sell them at a loss. A neighbor had recently sold a hatch and was preparing for a new one and was willing to accept 1/3 of her flock. The barn cannot be repaired as quickly as needed to save the birds, so the remaining birds must be sold. Patricia can sell the birds for .35 a pound but the actual cash value is .50. The loss is therefore settled at .15 per pound.

 

4. Off-Premises Power Interruption

If there is a limit on the declarations for this Supplemental Coverage and if a loss occurs because electrical power supplied from an off premises power source to the poultry housing building(s) is interrupted, there is coverage. Direct physical damage to the off-premises power source caused by a peril covered by this endorsement must be the reason for the interruption.

If a deductible is indicated for this specific coverage, then it will apply.

A deductible specific to this coverage may be entered on the declarations.

PERILS COVERED

The perils covered differences in the AG 0100 and the AG 0152 are significant. The AG 0100 covered perils are risks of direct physical loss or damage, subject to certain exclusions and limitations. AG 0152–Poultry 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 insured can choose basic perils, broad perils or can select basic plus only certain of the broad perils. Whatever is selected must be shown on the declarations.

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 poultry due to any of the following even if a result of windstorm or hail:

e. Aircraft or Vehicles

Direct physical contact between the poultry and aircraft, spacecraft, missiles or vehicles is covered. This also applies if the contact is with the building holding the covered property. 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 covered property or the building holding the covered property, there is also coverage.

f. Smoke

Coverage applies to only sudden and accidental loss or damage by smoke. There is no coverage for loss or damage that agricultural smudging or industrial operations causes.

g. Riot or Civil Commotion

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

h. Collision

Collision is expanded to include not only collision but also upset and overturn of any vehicle transporting the covered property. There is an exception. This peril does not apply to coverage for Supplemental coverage for eggs or for eggs and packing material.

i. Sinkhole Collapse

This is the same as the definition in AG 0100.

j. Volcanic Action

This is the same as the definition in AG 0100.

2. Optional Perils

The insured can select basic perils plus one or more of the following optional perils. The perils selected must be shown on the declarations. If all the optional perils are desired, the declarations should just state broad perils.

a. Vandalism

This peril is restricted to willful or malicious damage to covered property. It can include destruction but is not limited to destruction. There are two exceptions. Theft of property is not covered and loss or damage due to a change in temperature or humidity is also not covered.

 

Example: Omar is being honored at the statewide egg producers’ convention so the entire Messick family travel to the presentation and stay overnight. When they return home, they discover that vandals used their ATV’s to tear through the family’s poultry operation. They even damaged power lines causing all property in the freezer units to thaw. All damage to the poultry is covered but the spoilage of flash frozen property kept in the freezer units is not.

 

b. Earthquake or Volcanic Eruption

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.

c. 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:

o    Spray from any of the above

o    Wind driven conditions that impact any of the above

o    Surges and storm tides

Certain paragraphs within the Item g. Water in the Perils Not Covered Section in the AG 0100 do not apply when this coverage is selected.

d. Limited Collapse

If weight of ice, sleet or snow causes a collapse, there is coverage.

3. Broad Perils

When Broad Perils is selected on the declarations, direct physical loss to covered property caused by any of the Basic Perils or by any of the Optional Perils above is covered unless excluded in 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. Ordinance or Law

Coverage does not apply to any increased cost due to enforcing any building code, ordinance, or law. The building code, ordinance, or law must regulate construction, use, or repair of any building or structure, demolishing it, or removing its debris.

b. 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.

c. Nuclear Hazard

Coverage does not apply to any loss caused by or that results from 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 umbrella coverage associations.

d. 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 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

e. 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 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 activity, but this exclusion does not.

f. 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.

g. Water

Loss that is caused by any of the following is not covered:

o    Spray from any of the above

o    Wind driven conditions that impact any of the above

o    Surges and storm tides

o    Drains

o    Sewer

o    Sump and all related equipment include the pump

o    Any system designed to drain off foundation water

o    Basements

o    Openings such as windows or doors

o    Foundations

o    Floors or walls

o    Paved surfaces

o    Structures such as septic tanks or swimming pools.

When any of the above results in a fire, explosion or sprinkler leakage loss, coverage is provided for that resulting loss.

This exclusion is absolute and applies regardless of the reason for the water or the material in the water is manmade or an act of nature. It applies even if the water or material travel over, through or are released from or escape from a water containment system such as a dam or levee.

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 result from any of these events.

a. Electrical Currents

Loss that electrical arcing or electrical currents causes is excluded. Such arcing or currents may cause a fire. In that case, coverage applies to the damage the fire causes. Coverage also applies to loss that lightning causes.

Coverage also applies to direct loss a covered peril causes at a covered location as a result of power or any other utility service being interrupted.

b. Mechanical Breakdown

Loss or damage caused by or that results from mechanical breakdown is excluded. Loss or damage that occurs when centrifugal force causes moving parts of machinery to burst or rupture is also excluded. If any of these events causes a covered peril, the ensuing loss or damage that peril causes is covered.

c. Consequential Loss

There is no coverage for loss that loss of use, delay, business interruption, or loss of market causes. The only exception is Supplemental Poultry Coverages 3. Housing Damage–Consequential Loss if selected.

d. Defects, Errors and Omissions

There is no coverage for loss or damage resulting from one or more of the following:

If any of the items listed above causes a covered peril to occur, coverage applies to the loss or damage the covered peril causes.

e. Weather

There is no coverage if weather conditions contribute in any way to cause loss or damage due to a peril excluded under 1. Primary Exclusions. However, coverage applies for loss that a covered peril causes unless the ensuing loss itself is excluded.

WHAT MUST BE DONE IN CASE OF LOSS

This provision applies in addition to the provisions in What Must Be Done In Case Of Loss in AG 0100. It applies only to the coverage this endorsement provides.

Duties in the Event of Loss

The named insured must notify the insurance company within 24 hours of the occurrence of the covered peril that causes the loss. Please note that it is not within 24 hours of the loss – it is within 24 hours of the occurrence of the covered peril. The loss may take many days to totally manifest, so the time starts with the peril.

If more than 100 birds die, all must be held for at least 72 hours so that the insurance company can inspect. This requirement does not apply if so doing would violate laws, ordinances or governmental health regulation.

If the insurance company is not able to do the inspection within the 72-hour time period, the named insured is required to have the birds counted in front of two impartial parties. Those witnesses must sign the named insured’s statement of the count. The count must be sent to the insurance company promptly.

VALUATION

Property that this endorsement covers is valued as follows:

1. Poultry

Poultry valuation is based on the least of:

·         The actual cash value of the poultry at time of the loss

·         Maximum value shown in the declarations

·         The current market value

If reporting conditions apply, the formula for establishing the actual cash value may be stated in the declarations.

2. Supplies

Supplies that are covered by this endorsement are valued at actual cash value as of the time of loss.3. Property of Others.

The valuations in 1. and 2. above apply to property that is owned by others but for which the named insured is legally liable subject to one additional stipulation. The insurance will pay no more than the amount for which the named insured is legally liable.

HOW MUCH WE PAY

These provisions replace AG 0100 Loss Settlement Terms, Coinsurance, Property Covered Other than Builders' Risk and Value Reporting:

1. Loss Settlement Terms, Poultry

a. Subject to all terms in AG 0100 How Much We Pay, the insurance company pays the least of the following:

·         The amount determined under Valuation

·         The cost to repair, replace, or rebuild covered property with property of similar kind and quality

·         The limit that applies

b. The limit of poultry is the actual cash of the birds based on the valuation sections. However, there may be limits on the declarations based on buildings, structures and covered location. If so, the payment will not exceed any such established limits.

2. Coinsurance, Poultry

Poultry coinsurance is based on number of birds not amount of insurance. Therefore, the coinsurance is based on birds, not values. If the insured owns more birds per hatch than reported, any loss payment will be reduced. It is computed per hatch.

The penalty is computed as follows:

Step 1. Determine the number of birds reported in the hatch at inception.

Step 2. Determine the number of birds actually in the hatch at inception.

Step 3. Divide Step 1 by Step 2.

Step 4. Multiply the total amount of loss by Step 3.

Step 5. Subtract the deductible from Step 4.

If step 5. is more than the limit of insurance, the limit of insurance is paid.

If step 5. is less than the limit of insurance, it is paid, and the insured must pay the difference between the loss amount and the payment amount.

3. Value Reporting, Poultry

This condition applies to any item that has value reporting beside it in the declarations. There are three methods of reporting – Monthly Hatch, Monthly Report of Birds and Monthly Report of Poultry Values. These options allow flexibility with the particular agribusiness operations method of keeping track of inventory.

This policy requires monthly reporting and the report is due within 15 days of the last day of each business month. This means that if a policy is effective 3/1-3/1, the first report is due on 4/15 for the values reported on 3/31. The policy can be amended only if there is a written agreement between both parties and shown on the declarations.

The reports must describe all poultry subject to the report. The description should include kind, type and location of the poultry. The method of reporting varies based on what is indicated on the declarations.

a. Monthly Hatch Reporting

The insured must report all the birds that are acquired during the month. The birds are covered as of the date of possession. Coverage ends on the date the report is due. As of that date, the new birds are specifically insured based on the terms of the endorsement. If a bird is not reported, it is not covered.

Premium is due within 40 days of the report.

Note: This appears to be more of an automatic coverage for newly acquired items than a reporting form. Following that logic, premium should be charged back to the date of acquisition. However, while the paragraph is clear that premium is due, it is not clear as to what premium is due.

b. Monthly Report of Birds

The insured must report all the birds on hand as of the last business day of the month. They must be reported based on age, kind and type for each location. The valuation table on the declarations is used to develop the actual cash value for the birds that is used for loss adjustment and premium development.

If the report is late when a loss occurs, the loss is adjusted based on the last filed report.

Premium is due within 40 days of the report.

Note: This is the standard monthly reporting and adjustment method where the insured computes and pays the premium for the prior month of coverage. There is no deposit to be worked off and no annual adjustment.

c. Monthly Report of Poultry Values

The insured must report the full value of the poultry on hand as of the last business day of the month. Each report must include the number of birds in each hatch and the value of each hatch. If a report is late when a loss occurs, the loss paid cannot exceed the values on the last filed report.

Premium is adjusted at the anniversary date or termination and is based on the averages values reported. The insured can choose a monthly adjustment by so stating in the declarations. If so, the earned premium is computed each month.

Note: This is very similar to a standard property reporting method.

OTHER CONDITIONS

This additional condition applies to the coverage this endorsement provides. It does not replace any other conditions in AG 0100.

Poultry, Death, or Necessary Destruction

Poultry loss means death. The death must result from a covered peril and happen within 48 hours of the occurrence.

Death includes any destruction required because of damage or injury that a covered peril causes and that an official health officer, attending veterinarian, or the insurance company's authorized representative recommends or directs. The destruction must take place within 48 hours after the occurrence unless the insurance company's representative authorizes a longer time period.