ISO Scientific And Medical Diagnostic Equipment Coverage Form

ISO SCIENTIFIC AND MEDICAL DIAGNOSTIC EQUIPMENT COVERAGE FORM ANALYSIS

(April 2018)

 

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INTRODUCTION

The Insurance Services Office (ISO) Scientific and Medical Diagnostic Equipment Coverage Form insures scheduled medical and scientific equipment. Magnetic resonance imaging (MRI) machines, computer-assisted tomography (CAT) scanners, x-ray machines, and research and weather information gathering equipment are examples of covered property. Similar property of others are covered while in the care, custody or control of the named insured is covered as are materials, supplies, and books that are part of the named insured's scientific or medical profession. Very importantly, mobile units are covered but only if scheduled.

 

POLICY CONSTRUCTION

Scientific and Medical Diagnostic Equipment Coverage requires at least the following six forms:

Related Article: IL 00 17–Common Policy Conditions Analysis

Related Article: CM 00 01–Commercial Inland Marine Conditions

IH DS 89–SCIENTIFIC AND MEDICAL DIAGNOSTIC EQUIPMENT DECLARATIONS

This analysis is of the 06 14 edition. Changes from the previous edition are in bold print.

The advisory Scientific and Medical Diagnostic Equipment Declarations does not have spaces for the named insured, its mailing address, other named insured information, the policy period, or the description of the insured business. That information is on the Common Policy Declarations. IH DS 89 contains the following information:

Insurance Company and Producer Name

The name of the insurance company that provides the coverage and the name of the agent or broker that produces the business are entered in the spaces provided.

Limits of Insurance

This section has spaces to enter limits of insurance for specific items listed with a limit under the following:

This section also provides a space to enter a limit for all supplies, books, and materials used in the named insured’s profession if coverage is to be provided.

The final limit that is to be entered is the All Covered Property in Any One Occurrence. This is the maximum that will be paid in a single occurrence and caps all of the limits listed earlier.

Artificially Generated Electrical, Magnetic, or Electromagnetic Energy Coverage

This section has a box to check to delete the Artificially Generated Electrical, Magnetic, or Electromagnetic Energy exclusion.

Equipment Breakdown Coverage

This section has a box to check to delete the Breakdown of Covered Property exclusion.

Coinsurance

This section has a space to indicate the coinsurance percentage that triggers the coinsurance additional condition if coinsurance applies.

Deductible

This section has spaces to enter three different deductible amounts for the following:

Optional Coverage

This section has spaces to enter limits of insurance for the following:

·         Virus, Harmful Code, or Similar Instruction

Note: There was a provision below this section to add Optional Coverage–Extra Expense in the previous edition of IH DS 89. This 06 14 edition does not because the 06 14 edition of IH 00 89 does not provide that optional coverage.

Rates and Premiums

This section has spaces to enter the rates per $100 and premiums for the coverage provided.

Special Provisions

Any special provisions are entered in the space provided.

IH 00 89–SCIENTIFIC AND MEDICAL DIAGNOSTIC EQUIPMENT COVERAGE FORM ANALYSIS

This analysis is of the 06 14 edition. Changes from the previous edition are in bold print.

Introduction

This section encourages the careful reading of the entire coverage form to determine what is covered, what is not covered, rights, and duties. It defines we, us, and our as the insurance company that provides this insurance coverage. It also defines you and your as the named insured on the declarations. The reader is also pointed to the Definitions section because certain words or terms used in the form have a more broadened or restricted meaning.

A. Coverage

The insurance company pays for direct physical loss or damage to covered property but only when that loss is from a covered cause of loss.

1. Covered Property

Covered property is only the property that is listed and described on the declarations. It must consist of one or more of the following:

a. The named insured’s scientific or medical diagnostic equipment along with materials, supplies, and books that are used in its scientific or medical profession.

b. Property of others that is similar to item a. and is in the named insured's care, custody, or control

c. The named insured’s owned mobile units

 

Example: Wonderful Weather Watchers is a local weather service that works to provide weather and other climatic information in remote areas to the National Weather Service. Wonderful has a variety of weather station equipment permanently installed at certain strategic geographical locations and mobile units for quick access to areas of developing weather phenomena. It also has a variety of other equipment and reference materials it uses in its everyday operations. Wonderful can insure all this equipment on this coverage form, as long as it is of a scientific nature and related to its weather and climate operations.

 

2. Property Not Covered

The following property is not covered:

a. Radioactive material

Note: This property is properly insured under radioactive contamination coverage forms. This coverage was previously referred to as radium floaters.

b. Data or media. The only exception is that data or media used to operate covered property is not covered.

Note: Electronic data or media that is built into and part of the scientific or medical diagnostic equipment is part of that equipment and is covered. Data or media that can be used in other applications and situations are not covered and should be insured under coverage forms and policies that insure electronic data processing equipment.

Related Articles:

AAIS Electronic Data Processing Equipment and Business Computer Coverage Forms

ISO Computer Systems Coverage Form

c. Stock in trade

Property that is merchandise and equipment that is kept on hand and used to conduct business operations is not covered. It should be covered under a standard commercial property coverage form instead.

Related Article: CP 00 10–Building And Personal Property Coverage Form Analysis

d. Contraband. Any property that is illegal for the named insured to own or that is in illegal trade or transportation is not covered.

3. Covered Causes of Loss

Covered causes of loss are direct physical loss or damage to covered property with the exception of causes of loss that are listed in the exclusions section.

4. Additional Coverages

Some of the following additional coverages are also additional amounts of insurance.

a. Additional Acquired Property

The named insured may acquire additional property similar to the kind this coverage form insures during the policy period. If it does, such property is covered for up to 60 days but not past the expiration date. The most the insurance company pays for loss or damage is 25% of the sum of the limit of insurance for all scheduled equipment on the declarations or $100,000, whichever is less. The named insured must report the value of the newly acquired property to the insurance company within 60 days after it takes possession of it and pays premium for it from the acquisition date. If this is not done, coverage ends after 60 days or at the expiration date, whichever occurs first.

Two important conditions apply:

 

Example: Wonderful Weather Watchers acquires two fully equipped mobile weather units just before the start of the long Labor Day weekend and cannot notify its insurance agent of the acquisition until the following Tuesday. Wonderful has a large schedule of covered equipment of all kinds and the limit of insurance on its covered property is $500,000. If a loss should occur before the units can be reported, $100,000 would be available to cover the loss because it is less than $500,000 X.25.

 

b. Debris Removal

A property damage loss usually creates debris that must be removed. The insurance company pays the cost of removing the debris of a covered loss. The expenses must be reported to the insurance company in writing within 180 days of the date of loss. The most paid is 25% of the sum of the following:

Payments under this Additional Coverage do not increase the limit of insurance that applies. However, the insurance company pays an additional $5,000 per occurrence when the direct physical loss or damage combined with the debris removal expense exceeds the limit of insurance or when the debris removal expense is more than the amount payable under the above described 25% limitation.

This coverage does not apply to costs to extract pollutants from land or water or to remove, restore, or replace polluted land or water.

c. Preservation of Property

Covered property may need to be moved in order to keep it from being damaged by a covered cause of loss. When the named insured takes such action, the insurance company pays for any direct loss or damage that such property sustains during the move. In addition, coverage applies at the location where the property is stored for up to 30 days after the date it was moved there.

The property removed must be moved back to the covered location or the temporary location must be added to the policy within 30 days from the date of the move. Otherwise, all coverage ends after 30 days.

This additional coverage does not increase the limit of insurance.

Notes: There are several important points to consider:

d. Pollutant Clean Up and Removal

The insurance company pays to clean up pollutants caused by or that result from a covered cause of loss that occurs during the policy period. The most paid is $10,000 as an aggregate amount during each separate 12-month policy period. The expenses are paid only if they are reported to the insurance company in writing within 180 days of the date of loss.

This coverage does not apply to costs to evaluate the presence or effects of pollutants. However, it does pay for testing that is part of the extracting of pollutants process from either land or water.

This limit is an additional amount of insurance.

 

Example: One of Wonderful Weather Watchers owned mobile units overturns during transport. The hydraulic fluid inside discharges down the slope to a small pond. While only a small amount actually reaches the pond, both it and the ground have to be cleaned up. The remediation efforts cost just over $12,500. This additional coverage pays its limit of $10,000 and Wonderful is relieved that its out-of-pocket expense is not higher.

 

e. Virus, Harmful Code, or Similar Instruction

This Additional Coverage first defines electronic data and computer programs with respect to this Additional Coverage as follows:

The following apply subject to this Additional Coverage’s provisions:

If electronic data is not replaced or restored, the loss is valued at the cost of replacement with similar blank media.

Once the period of restoration ends, business income coverage ends even if part of the limit of insurance has not been used. The most the insurance company pays is $5,000 for all loss or damage on an annual aggregate basis, regardless of the number of occurrences, premises, locations, or computer systems involved. This limit can be increased. It applies separately to direct physical loss or damage and to loss of business income.

Note: The limit for this additional coverage is in addition to the limit of insurance.

 

Example: The infamous Melissa virus had worldwide effects and Wonderful Weather Watchers did not escape its wrath. However, Wonderful realized that it was vulnerable if something along the lines of Melissa should strike. This is why it bought and paid for a substantially higher limit of insurance against computer viruses and extended the coverage to apply to its loss of business income as well. Wonderful was hit hard when Melissa struck but its recognition of its risk and the loss potential before the loss occurred (and its treatment of the effects of the risk) enabled it to escape all but a comparative few dollars of the damage the virus inflicted.

 

5. Optional Coverage–Equipment Breakdown

Note: The previous edition of IH 0089 included Optional Coverage–Extra Expense. This 06 14 edition does not. The revised 06 14 edition of IH 99 28–Business Income and Extra Expense now provides this option. It also adds definitions for Computer Equipment, Data, and Media that correspond with the coverage in
IH 00 89.

This Optional Coverage is really an optional cause of loss and it applies only if the box for it on the Declarations is checked. The limits available are the same as the limits available for the other causes of loss.

Coverage applies when direct physical loss or damage to covered property results from the breakdown of any of the following:

a. Covered scientific or medical diagnostic equipment

b. Property of others that is similar to item a. and is in the named insured's care, custody, or control

c. Equipment that makes up part of an owned mobile unit. There are exceptions. The driving engine or related equipment, transmission, or drivetrain are not part of this equipment

In order for coverage to apply, the equipment must either be in use or be connected and ready to be used. The breakdown must become evident at the time the loss occurs because physical damage to the equipment requires repair or replacement.

 

MountainPeak

Example: The information transmissions from a combination hydrometer and barometer at a remote mountain installation suddenly end. The technician dispatched to the site finds that the bearings on the fractional horsepower solar powered motor froze up and burned out the other components. The entire unit must be replaced. It takes a few days to locate a replacement unit.

The cost of the new unit is covered because Wonderful selected Optional Coverage–Equipment Breakdown.

B. Exclusions

1. Primary Exclusions

The first group of exclusions applies whether or not the loss event results in widespread damage or affects a significant geographical area and is 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. Governmental Action

This exclusion applies to the legal and authorized seizure or destruction of property by a government entity’s order. There is one exception. Loss or damage that is caused when the governmental entity orders property to be destroyed is covered if used as a method to prevent a fire from spreading is covered. However, this exception applies only if the fire being contained would have been a covered fire under this coverage form.

b. Nuclear Hazard

Nuclear reaction, radiation, or radioactive contamination is not covered. There is an exception. If a fire results from the nuclear reaction, radiation or radioactive contamination there is coverage for the direct loss or damage caused by that fire.

c. War and Military Action

This exclusion lists three specific warlike activities.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or that result 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. Marring, scratching, and breakage

Marring, scratching, exposure to light or breakage of tubes, bulbs, lamps, or glass articles that result in loss or damage is not covered. There are two exceptions:

b. Delay, loss of use, and loss of market

These are consequential or indirect losses that develop as a result of a direct loss or damage.

c. Dishonest or criminal acts

These are any dishonest or criminal acts that the named insured, its partners, employees, temporary employees, leased workers, officers, directors, trustees, authorized representatives, or members and managers of a limited liability company commit. This also includes theft.

Such acts committed by anyone with an interest in the property, their employees, temporary employees, leased workers, or authorized representatives who act alone or who act in collusion with other parties or with each other are also excluded. This exclusion also applies whether or not the acts take place during regular working hours.

This exclusion does not apply to acts of destruction by the named insured’s employees, temporary employees, leased workers, or authorized representatives. However, there is no coverage for theft by the named insured’s employees, temporary employees, leased workers, or authorized representatives.

d. Virus, harmful code or similar instruction

Any virus, harmful code, or similar instruction that is designed to damage equipment or disrupt operations. It could be added to or made part of a computer system, its data, or be added at the network connection. However it is added, the direct loss or damage to covered property it causes is excluded. There is an exception for coverage provided by A. Coverage 4. Additional Coverages e. Virus, Harmful Code, or Similar Instruction.

e. Processing or work upon the property

Loss or damage that is caused by or that results from the actual processing or work being done on the covered property. There is an exception. When the processing or work being done results in a fire or explosion, coverage applies to the loss or damage that fire or explosion causes but only if the fire or explosion are considered covered causes of loss under this coverage form.

Note: The excluded work is not specific to covered property but instead is on property. This means that work on property not covered could also invoke this exclusion.

f. Artificially generated electrical, magnetic, or electromagnetic energy

Loss or damage that is caused by or that results from artificially generated electrical, magnetic, or electromagnetic energy damaging, disturbing, disrupting, or interfering with any of the following:

Examples of this excluded energy are electrical current, charges a magnetic or electromagnetic field produces, and microwaves but are not limited to just these.

There are three exceptions:

g. Voluntary parting

The named insured or anyone else entrusted with the property being tricked or deceived into giving that property away.

h. Unauthorized instructions

When covered property is transferred to another person or place because unauthorized instructions were received to do so.

i. Neglect

Neglect on an insured’s part to do take reasonable measures to preserve and protect covered property from subsequent damage during and after the time of loss.

j. Theft (12 13 addition)

Theft by any person the named insured entrusts covered property to for any reason, whether they act alone or act in collusion with any other party. This exclusion applies 24 hours a day/7 days a week. There is one exception. Covered property that is in a carrier for hire’s care, custody, or control is not subject to this exclusion.

3. Other Exclusions

This group of exclusions applies to loss or damage caused by or that result from any of the following loss events. In every case, if loss or damage by a covered cause of loss occurs as a result of one of these excluded events, coverage applies to the loss or damage the resulting covered cause of loss causes. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Wear and tear, depreciation

This is loss or damage due to wear, tear, and depreciation.

Notes:

Wear and tear is damage that occurs naturally as a result of aging or normal wear.

Depreciation is a loss of value due to wear.

b. Any quality in the property

These are any qualities in the property that cause it to destroy or damage itself.

Note: An example is a loss or damage caused by hidden or latent defects in the property.

c. Breakdown of covered property

This is loss or damage caused by or that results from machines, tools, or mechanisms breaking down.

Note: This exclusion does not apply if the named insured purchases 5. Optional Coverages b. Equipment Breakdown.

d. Malfunction or failure of covered property to operate

When the loss or damage is due to scientific and medical diagnostic equipment not performing as intended. There are many reasons this could happen and none are covered unless they are a direct result of a covered cause of loss.

e. Insects, vermin, or rodents

This is loss or damage to covered property caused by or that results from insects, vermin, or rodents.

Note: Some examples are damage from mice, rats, cockroaches, squirrels, beavers, spiders, ants, centipedes, and ticks. Each is characterized by destructive habits that cause damage, such as gnawing and nibbling.

f. Corrosion, rust, dampness, or extremes of temperature

This is corrosion or rust, dampness, or extremes of temperature that cause loss or damage to covered property.

Notes:

Rust and corrosion are low-temperature oxidation processes that result in deterioration over time due to inactivity or neglect.

Dampness and temperature extremes can affect the oxidation process that affects different forms of property and can also have other effects on the same and other forms of property.

Note: The previous edition of IH 0089 had a specific exclusion for Optional Coverage–Extra Expense. This 06 14 edition does not because it does not provide that optional coverage.

C. Limits of Insurance

The most the insurance company pays for loss or damage in a single occurrence is the limit of insurance on the declarations for the applicable coverage.

D. Deductible

The insurance company does not pay for loss or damage until the amount of the adjusted loss or damage (before capping with the limit of insurance) exceeds the deductible on the declarations. It then pays the amount of the adjusted loss or damage that exceeds the deductible up to the applicable limit of insurance.

Note: Multiple deductibles are available on the declarations but there are no instructions on how those deductibles are to be applied if a single occurrence involves one or more of the covered causes of loss.

E. Additional Conditions

1. Valuation

This condition replaces the Valuation General Condition in the Commercial Inland Marine Conditions.

a. Property that is not data or media is valued as follows:

When total replacement is not required, payment will be for not more than what is reasonable to restore the damaged property to the condition it was in just before the loss occurred.

b. The value of data is the actual cost to reproduce it. If it is not reproduced or replaced, payment is for no more than the cost or the value of the media without having any stored data.

c. The value of media is the cost to repair or replace it with identical property, to the extent possible.

2. Other Conditions

These conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions.

a. Coverage Territory

The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. This includes property that is shipped by air within and between these points.

b. Coinsurance

This condition applies if there is a coinsurance percentage on the declarations.

The insurance company does not pay the full amount of any loss or damage if the value of covered property at the time of loss or damage multiplied by the coinsurance percentage is more than the limit of insurance for all covered property at that location. In such cases, the amount the company pays is determined as follows:

Step 1. Multiply the value of the covered property at the time and location of the loss or damage by the coinsurance percentage on the declarations.

Step 2. Divide the limit of insurance for covered property at the location where the loss or damage occurred by Step 1.

Step 3. Multiply the total amount of loss or damage at the loss location by Step 2. before applying the deductible (if any).

Step 4. Subtract the amount of deductible from Step 3.

The insurance company pays the lesser of Step 4. or the limit of insurance. Any amount that remains must be paid by other insurance or the named insured must pay it from its own funds.

c. Protective Safeguards

If the named insured states in the application that a protective safeguard is in place at a premises, that protective safeguard must be maintained and operational whenever the premises is not open for business.

If that safeguard is not operational when the premises is closed, all coverage at the premises is suspended until it becomes operational again.

Note: This is a very important warranty that removes all coverage, regardless of the cause of loss, when the protective safeguard goes down. There are no exceptions.

 

Example: Each of Wonderful Weather Watcher’s off-site locations is equipped with alarms that sound at the main location. A “wires-cut alarm notice” comes from a location and the crew immediately sets off. They investigate the site and do not find anything missing. They decide it was squirrel damage and return to the main location, planning to return in a few days to repair the alarm. After the Wonderful crew leaves, the burglars return to finish their job of taking all of the equipment. The Wonderful crew is dismayed to find all of their equipment taken when they return to the site. They are even more dismayed when the insurance company denies the claim because the alarm was not operational when the items were removed.

F. Definitions

There are five definitions.

1. Data

This is more than just data stored on media. It is also programming records used in equipment that is electronically controlled and those used to perform electronic data processing functions.

2. Media

This is software, films, tapes, discs, drums, and cells and other electronic data processing, recording, and/or storage media.

3. Mobile unit

The definition consists of two parts. The first is a transporting conveyance that is described on the declarations. The second is the scientific or medical diagnostic equipment that is installed in or on the conveyance.

The conveyance cannot be an aircraft or watercraft. It also cannot be a land motor vehicle used to pull the conveyance that holds the scientific or medical diagnostic equipment. There is an exception. The land motor vehicle can be covered if is not designed to travel on public roads.

4. Period of restoration

This is the period of time that starts at the time a covered loss occurs at a covered location. It ends when the damaged property should have been repaired, rebuilt, or replaced with the property of similar quality and done on a timely basis.

5. Pollutants

These are any solid, liquid, gaseous, or thermal irritant or contaminant. Pollutants also include smoke, vapor, soot, fumes, acids, alkalis, chemicals, or waste. Waste is any material intended for recycling, reconditioning, or reclamation.

ENDORSEMENTS

ISO has not developed any specific endorsements for exclusive use with the Scientific and Medical Diagnostic Equipment Coverage Form. ISO has developed three other endorsements that can be used to respond to specific situations.

IH 99 19–Additional Covered Property

This endorsement is used to include coverage for types of property ordinarily excluded.

IH 99 20–Additional Property Not Covered

This endorsement is used to exclude certain types of property the coverage form insures.

IH 99 28–Business Income and Extra Expense Coverage

This coverage form insures business income and extra expense and is used in conjunction with non-filed inland marine coverage forms.

 

UNDERWRITING CONSIDERATIONS

Underwriting scientific and medical diagnostic equipment involves analyzing a wide range of eligible property. This includes property at fixed locations, in transit, at other locations, and in or on mobile units. Eligible property can include complicated and widely varying combinations of size, value, mobility, and degree of damageability and susceptibility.

The building’s construction, the type of other occupants (and their operations), private and public fire protection, and exposures from adjacent or surrounding operations must be reviewed. Good quality construction and paid fire departments with adequate supplies of water to fight a fire are preferred. Some types of medical diagnostic equipment must be kept in separate rooms with temperature controls and dedicated fire extinguishing systems. The combustible load in these facilities should be kept as low as possible. Fixed locations must also be evaluated from the standpoint of earthquake, flood, wind, and other natural climatic conditions.

The equipment’s susceptibility to water damage must be determined and addressed. This may affect the use of traditional sprinkler systems and require using dry chemical and other less damaging fire extinguishing and suppression systems. Equipment that is sensitive or susceptible to water damage should not be placed under water lines and drains in the ceiling spaces or floors above. Operations should be conducted at or above grade level and excluding causes of loss by water should be considered if this is not possible.

Theft should be controlled by adequate external security, locks, combinations, and burglar and entry alarm systems if the equipment is extremely valuable or attractive and can be removed relatively easily.

Maintenance and equipment breakdown issues should be considered together. Maintenance keeps the equipment running properly in addition to complying with manufacturer warranties. The named insured or the manufacturer's representative may perform the maintenance. This applies to equipment at fixed locations as well as to mobile equipment. If equipment breakdown coverage is provided, deductibles should be high enough to eliminate routine or maintenance-type losses. The named insured should be familiar with the maintenance agreements and determine who is responsible for obtaining replacement parts or performing certain repairs.

Artificially generated electrical, magnetic, or electromagnetic energy is an important factor with many types of equipment that this coverage form insures, especially medical scanning devices. This equipment should be equipped with emergency power cut-offs and the switches located in a central control room or other easily accessible location. All electrical installation should be done according to the manufacturer's instructions, state and local codes, and National Fire Protection Association (NFPA) guidelines.

Transit and off premises exposures are also important and may be the most significant ones for certain types of operations. The manufacturer usually transports new medical diagnostic equipment to the site and supervises installing it. Professional businesses that specialize in moving such equipment should be used if the equipment must be moved after it is installed. Smaller units are more subject to theft regardless of how or why they are moved. Mobile equipment is usually in vans or vehicles custom designed and manufactured for the equipment and activity. The unit may be pulled by a tractor or be a self-contained power unit. Every movement should be preceded by following and complying with procedures in a detailed standard checklist. Mobile units should have periodic preventive maintenance performed on them. Exposures at temporary locations must also be evaluated.

If the named insured leases or rents property of others, the lease should be reviewed to determine each party’s rights and responsibilities as well as to verify the party that operates the equipment. Accurate records of the amount and type of leased equipment should be maintained and mobile equipment should be tracked based on the routes traveled.

Evaluating the named insured and related management issues is also important. This includes evaluating its financial condition, experience in the business, and overall loss experience. It must also address equipment maintenance procedures, keeping maintenance records, and the training and experience of the persons who do the maintenance.