CG 00 35–RAILROAD PROTECTIVE LIABILITY COVERAGE FORM ANALYSIS

(November 2019)

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INTRODUCTION

Insurance Services Office (ISO) CG 00 35–Railroad Protective Liability Coverage Form has two distinct coverages. The first protects the railroad from certain liability claims for bodily injury and property damage. The second protects the railroad from tangible losses to its property. The coverage provided islimited to specific circumstances. It is written as a stand-alone, monoline coverage form and contains its own conditions. It is not written or combined with any other coverage form or policy. Coverage is written on an occurrence basis. A claims-made version is not available.

While this is an analysis of the 04 13 edition, the only changes from the 12 07 edition are in format.

CG 00 35–RAILROAD PROTECTIVE LIABILITY COVERAGE FORM ANALYSIS

Form CG 00 35 opens by stating that it has certain provisions which restrict coverage. It encourages the insured to carefully read the coverage form in order to understand its rights and duties and to determine what is covered and not covered. It also points out that the terms you and your to refer to the named insured and that an insured is any person or entity that qualifies as such under Section II–Who Is an Insured. The terms we, us, and our refer to the insurance company that provides the coverage. It refers to Section V–Definitions because understanding the definitions is critical to understanding this form.

SECTION I–COVERAGES

COVERAGE A–BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

The insurance company agrees to pay for damages the insured becomes legally obligated to pay due to the occurrence of covered bodily injury and property damage up to the limits stated in Section III–Limits of Insurance. The injury or damage must arise out of acts or omissions at the job location related to or in conjunction with the work done or operations performed, which is described on the declarations. Damages for bodily injury also includes claims for care, loss of services, or death that results from the bodily injury. The loss must occur during the policy period.

The insurance company has the right and the duty to defend any suit for covered damages and may investigate or settle any claim or suit at any time and at its sole discretion. Its duty to pay ends when the limits of insurance are used up paying judgments and settlements.

The insurance company is not required to defend the insured against any suit for bodily injury or property damage that does not qualify for protection under form CG 00 35.

Example: Purposeful Builders is a contractor. CG DS 04 lists the following information:

Job Location - Intersection of Highway 31 and State Road 12
Operation - Repair of a safety crossing gate.

The engineers at the jobsite notice that a railroad trestle at the same location is in dangerously poor condition. The railroad company agrees with the assessment and contracts with Purposeful to demolish the trestle and build a new one in its place. CG 00 35 would not cover any loss related to the demolitions and rebuild because it is not the work described on CG DS 04.

Note: In the above situation, coverage could be secured if the description of operations on the declarations is amended via an insurer-issued endorsement.

2. Exclusions

a. Expected or Intended Injury

Coverage does not apply to bodily injury or property damage expected or intended by the insured. This exclusion has an exception that covers bodily injury that results from the insured using reasonable force to protect persons or property.

Note: The primary reason for this exclusion is to keep the insurance company from becoming involved with non-accidental losses, which is in the public interest. It prevents an insured from using the insurance coverage for gain, such as theft, to inflict injury on a competitor, as an instrument of revenge, or to cause any other intentional harm. This exclusion's wording continues to be challenged and interpreted by the courts. ISO does not currently have an endorsement available to buy back this coverage or to delete this exclusion.

Example: Aggressive Constructors is repairing a section of highway that crosses Southeast Railways' track and roadbed. Aggressive purchases CG 00 35 for this job with respect to the railroad track crossing in the name of Southeast Railways and accurately describes the job location and the nature of the work being performed. The owner of a large sports utility vehicle sues Southeast for damage her vehicle sustained when she tried to drive around the jobsite instead of using a posted detour.

When she decided to go around the obstruction, an employee operating a backhoe started shoving her vehicle, badly damaging the passenger side. This intentional property damage loss is excluded.

b. Contractual Liability

There is no coverage for bodily injury or property damage in cases where the insured must pay damages based on having assumed liability in a written contract or agreement. However, coverage does apply to liability for damages assumed in a covered contract or agreement as defined by form CG 00 35.

Related Court Case: Assumption Of Liability Via Contract

c. Completed Work

Bodily injury or property damage losses that occur after the work is complete are excluded. Work is considered complete on the date that the first of the following events occurs:

The contractor's work as detailed in the contract or agreement is complete
All work required to be done at the job location is complete
The insured, a governmental authority, or another contracting party puts that part of the work at the job location to its intended use

Note: This exclusion has an exception. It states that it does not apply to bodily injury or property damage as a result of the presence or removal of tools, uninstalled equipment, or abandoned or unused materials.

Example: Pell Contracting finishes its work on a railroad crossing for Incoming Railroad. A car is damaged the next day when it runs over a hammer one of Pell’s workers mistakenly left behind. CG 00 35 covers the claim the car's owner files against Incoming because the tool left at the jobsite caused the damage to the vehicle, even though the job itself was finished.

d. Acts or Omissions of Insured

Coverage does not apply to bodily injury or property damage caused solely by an act or omission of any insured, other than those of the named insured's designated employees.

Example: Foster Landscaping is grading land adjacent to O & B Railroad's track bed. A track repairman on an O & B work train assigned to work with Foster at the jobsite carelessly unloads a section of track rail partially on the path of oncoming traffic. Form CG 00 35 that Foster purchased for O&B Railroad covers the various losses the drivers of the vehicles sustain when they strike the section of rail because the O & B employee is a designated employee.

This exclusion has an exception. It permits coverage for injuries and damages to certain employees provided they are sustained on the jobsite. Those qualifying for the exception are the named insured’s designated employees, employees of the governmental authority, and employees of the contracting party(s). The named insured’s employees are not included as contracting party employees.

CG 00 35 protects the named insured against liability for loss or damage that occurs that it does not control because they result from the actions of another party–the contractor. It is not intended to cover operations the named insured directly controls, such as its own acts and acts of its employees.

e. Workers Compensation and Similar Laws

There is no coverage for any requirement or obligation of the insured imposed by any workers compensation, disability benefits, unemployment compensation or similar law. This exclusion has an exception. It states that it does not apply to any obligation the insured has under the Federal Employers Liability Act.

Note: The intent of this exclusion is to eliminate CG 00 35 indemnifying the insured for an injury that workers compensation insurance covers.

f. Pollution

Coverage does not apply to bodily injury or property damage that arises out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at or from the job location:

Due to past or present use of the job location by the named insured or others to handle, store, dispose of, process, or treat waste
Due to the contractor dumping or disposing of waste at the job location without the named insured or any of its designated employees knowing about it
Where the named insured or any contractor that works on its behalf performs operations if the named insured, its designated employees, or the contractor brought the pollutants to the job site in conjunction with those operations. This section of the exclusion has an exception. It states that it does not apply if the bodily injury or property damage arises out of fuels or lubricants that escape from equipment used at the job location or that arises out of heat, smoke, or fumes from a hostile fire.
Where the named insured or contractors that work in any capacity for it or on its behalf perform operations where they test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of pollutants

Pollutants are defined as any solid, liquid, gaseous, or thermal irritant or contaminant. They include smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste also includes materials to be recycled, reconditioned, or reclaimed.

Note: CG 28 31–Pollution Exclusion Amendment can be used to provide a modest amount of pollution coverage. It amends the subparagraph that applies to pollutants that any insured, contractor, or sub- contractor bring on the job site. The change results in providing pollution coverage for fuels or lubricants used in equipment that the named insured or the designated contractor bring to the job site.

Example: Jason’s Builders Ltd. Is covered by a CG 00 35 written on behalf of Valley Railways. While at the described jobsite and operation (building a large storage barn with a foundation, next to a sidetrack) a Jason’s employee’s backhoe accidentally runs over a row of 10-gallon gas cans used for onsite re-fueling. Work is interrupted as specialists are called in to clean-up the contamination and run soil tests. The expenses for this work are covered.

Related Court Cases:

Pollution Claim by Insured for Damage to His Property by Former Tenant Held Not Covered

Pollution Cleanup Costs Incurred During Policy Period by Subsidiary Acquired Thereafter Held Not Covered

Pollution Exclusion Held Applicable to Cigarette Smoke

g. Damage to Owned, Leased, or Entrusted Property

There is no coverage for damage to property owned by or leased or entrusted to the named insured under a lease or trust agreement.

Note: Coverage B–Physical Damage to Property covers this property.

h. War

There is no coverage for bodily injury or property damage caused directly or indirectly in any way by war, undeclared war, and civil war. This includes warlike action by a military force. This exclusion also applies to actions a government takes to prevent or defend against an expected or actual attack by any government or other authority that uses military personnel or agents. It also applies to rebellion, revolution, insurrection, or unlawful seizure of power and the action the government takes to prevent or defend against any of these.

COVERAGE B–PHYSICAL DAMAGE TO PROPERTY

1. Insuring Agreement

The insurance company pays for physical damage to covered property. The damage must occur during the policy period and result from acts or omissions at the job location related to or in conjunction with the operations described on the declarations. The named insured must own the property, lease it, or have the property entrusted to it under the terms of a lease or trust agreement. The physical damage must be direct and accidental. The property can be railroad rolling stock and its contents, mechanical construction equipment, or moving power equipment. It can also include railroad tracks, rail beds, cables, signals, bridges, and even buildings.

Note: This may appear to be first party coverage. However, it is actually third-party coverage because the contractor purchases this coverage for the named insured's benefit.

Example: Conyers Contracting is installing a traffic signal in front of the railroad crossing that Ready Or Not Railroad owns. Conyers must purchase CG 00 35 in favor of Ready because the work it will do is within 50 feet of the railroad crossing and track. CG 00 35 lists the location of the work and describes the nature of the operations. While installing the electrical wiring for the traffic signal, Conyers damages the crossing signal's electrical warning system. The damage to the crossing signal's electrical system is covered because it occurred at the work location and is related to the operations performed.

2. Exclusions

The insurance coverage provided does not apply to physical damage to property from the following, except as noted.

a. Completed Work

Bodily injury or property damage losses that occur after the work is complete are excluded. Work is considered complete on the date that the first of the following events occurs:

The contractor's work as detailed in the contract or agreement is complete
All work required to be done at the job location is complete
The insured, a governmental authority, or another contracting party puts that part of the work at the job location to its intended use

This exclusion has an exception. It states that it does not apply to physical damage to property as a result of the presence or removal of tools, uninstalled equipment, or abandoned or unused materials.

b. Acts or Omissions of Insured

Coverage does not apply to physical damage to property caused solely by an act or omission of any insured. The exception to this exclusion is those acts and omissions by the named insured's designated employees as CG 00 35 defines them.

c. Nuclear Incidents or Conditions

There is no coverage for loss or physical damage to property due to any act or condition that relates to nuclear reaction, radiation, or contamination.

d. Pollution

Coverage does not apply to physical damage to property due to discharge, dispersal, seepage, migration, release, or escape of pollutants that Coverage A Exclusions. f. Pollution excludes.

SUPPLEMENTARY PAYMENTS–COVERAGE A

CG 00 35 includes a number of supplementary payments the insurance company makes in addition to the amounts in Section III–Limits of Insurance. These payments apply to claims being investigated and/or settled and to any suit the insurance company defends. These payments do not reduce the limits of insurance.

All expenses the insurance company incurs
Suit-related court costs that are the insured’s responsibility. However, the supplemental coverage is not extended to an insured’s own -attorney fees or expenses.
Interest that accrues on the full amount of any judgment after it is entered but before the insurance company pays, offers to pay, or deposits with the court the part of the judgment that is its responsibility and that is within the limits of insurance
Cost of bonds to release attachments. It pays only the cost of bond amounts within the appropriate limit of insurance. The insurance company is not required to furnish these bonds.
Expenses the insured incurs for first aid administered to others at the time of an accident for bodily injury this insurance covers
Reasonable expenses the insured incurs at the insurance company's request to help it investigate or defend a claim or suit. This includes up to $250 per day in lost earnings if the insured must be away from work.
Prejudgment interest that is the insured’s responsibility on the part of any judgment the insurance company pays. However, there is no payment for any prejudgment interest that accrues during the period of time after the insurance company offers the limit of insurance as settlement.

Note: These supplementary payments are somewhat different than those in ISO CG 00 01–Commercial General Liability Coverage Form. For instance, the supplementary payment for medical expenses in CG 00 35 is not the same as the medical expenses coverage in CG 00 01. This is because CG 00 35 must provide the coverage that causes the loss in order for the expense to be paid.

Example: While walking through a construction site, Mary trips over her bootlace and slams onto the ground. The construction supervisor calls 911, and an ambulance takes Mary to the emergency room for treatment. Under CG 00 01, Coverage C–Medical Payments handles the cost of the ambulance and the emergency room. CG 00 35 does not have similar coverage because the accident was not the contractor's fault. The medical expenses are either Mary's or the construction supervisor's responsibility.

SECTION II–WHO IS AN INSURED

The following railroad company parties that CG 00 35 includes as insureds:

The named insured
The named insured's executive officers and directors, limited to their duties as officers and directors
The named insured's stockholders, limited to their liability as stockholders
Any railroad that operates over the named insured's tracks

Note: The number of interests that qualify as insureds is very limited. There is no coverage for outside interests, operations, and exposures of executive officers, directors, and stockholders. They must arrange separate coverage for the outside activities. Unlike CG 00 01 or CG 00 09–Owners and Contractors Protective Liability Coverage Form, insured status does not extend to spouses, partners, or joint ventures or to newly acquired or formed entities. In addition, CG 00 35 does not have provisions to include any additional insureds at all as CG 00 01 and CG 00 09 have.

SECTION III–LIMITS OF INSURANCE

1. The most the insurance company pays are the limits of insurance on the declarations. This is subject to the rules outlined below. This is regardless of the number of insureds, claims made, suits brought, or number of parties that make claims or bring suits.

Example: CG 00 35 has two named insureds, and a loss occurs. The injured person sues each named insured separately. CG 00 35 responds on behalf of each named insured and treats each one separately. However, the form’s stated limits apply singly to the loss.

2. The most the insurance company may pay for the total of damages for all bodily injury, property damage, and all physical damage to property is the Aggregate Limit on the declarations.

Note: Coverage ends when claim payments made during the policy period use up this limit.

Example: CG 00 35 has a $6,000,000 Aggregate Limit. The insured sustains four covered losses of $2,000,000 each during the policy period, for a total of $8,000,000 in damages. The most that may be paid is the $6,000,000 Aggregate Limit.

3. The most the insurance company pays for all bodily injury, property damage, and physical damage to property from any one covered occurrence is the Each Occurrence Limit on the declarations. This is subject to the Aggregate Limit.

Example: CG 00 35 for Confused Railway has a $2,000,000 Each Occurrence Limit. It hires Acme Construction to repave a road on its premises adjacent to its tracks. Acme's negligent act during construction results in three elementary school-aged children being injured when they ride their bikes on the road being repaired. Their parents submit claims that total $3,000,000 in damages. However, the maximum amount of coverage available to respond to the loss is the $2,000,000 Each Occurrence Limit.

4. Payment for physical damage to property is not for more than the smaller of the property’s actual cash value at the time of loss or the cost to repair or replace the property with similar property. This is subject to the Each Occurrence Limit.

This section also clarifies how the limits of insurance apply. They apply separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

Example: The original 12-month policy period ran from January 1 to January 1. During the second policy period, the insured requested an extension of the policy period to July 1 to match its accounting year. The limits apply separately to the first annual 12-month policy period of January 1 to January 1. They also apply separately to the second policy period extended an additional six months, from the original January I expiration date to the new July 1 date. From that point forward, the annual 12-month period of July 1 to July 1 has a separate set of limits. If a short-term policy had been issued instead of the six-month extension, it would have had its own set of limits. Because the original policy period was extended, the original limits applied to both the original period and the extension period.

SECTION IV–CONDITIONS

A. CONDITIONS THAT APPLY TO COVERAGE A AND COVERAGE B

1. Assignment

Any assignment of interest is not binding on the insurance company unless it issues an endorsement that acknowledges and agrees to the assignment.

2. Bankruptcy

The insurance company’s obligations are totally unaffected if the insured or an insured’s estate falls into bankruptcy or insolvency.

3. Cancellation

a. The named insured on the declarations can cancel at any time by giving the insurance company advance notice of its intent to do so.

b. The insurance company can cancel at any time by giving written notice of cancellation to the named insured, the contractor, and any governmental authority or contracting party on the declarations at their last known mailing address. It must be mailed or delivered at least 60 days before cancellation takes effect.

Note: There is no provision for the shorter notice period for non-payment of premium found in nearly every other coverage form or policy.

c. The notice must state the cancellation date. This is the date that the policy period and coverage ends.

d. In case of cancellation, the insurance company refunds any unearned premium. Refunds on cancellations it initiates are pro rata. Refunds on cancellations the named insured initiates may be less than pro rata. In any case, cancellation is effective even if a refund has not been offered or made.

e. If the notice of cancellation is mailed and not delivered, proof of mailing is sufficient proof of notice.

4. Changes

The policy issued is the agreement between the named insured, the contractor, and the insurance company with respect to the insurance coverages provided. Only the named insured has the right to request changes to the policy. However, the insurance company must agree to the changes and endorse the policy accordingly. Policy terms are changed or waived only when the insurance company issues the appropriate endorsement.

Note: The contractor pays for the policy but it does not have any right to request changes to it.

5. Inspections and Surveys

a. The insurance company has the right to make inspections and surveys at any time, report its findings to the named insured, and recommend changes it feels should be made.

b. The insurance company is not obligated to make inspections and surveys. Anything it does in this regard relates only to its findings of the risk's insurability and the premiums to charge. It does not make safety inspections or attempt to perform duties of parties that provide for the health or safety of workers or the public. It does not warrant that conditions are safe or healthful or comply with any law, regulation, code, or standard.

c. This condition applies to the insurance company as well as to any rating, advisory, rate service, or other organization that also makes inspections, surveys, reports, or recommendations for insurance purposes.

d. Paragraph b. above does not apply to inspections or recommendations with respect to certification of boilers, pressure vessels, or elevators under any state or municipal statute, ordinance, or regulation.

6. Other Insurance

a. CG 00 35 provides primary coverage. The insurance company does not look for contribution from any other insurance available to the named insured unless a different contractor, not insured under this policy, is protected by insurance for the same operation and job location.

b. CG 00 35 then shares with the other insurance on the basis of one of two options.

If the other insurance permits contribution by equal shares, this insurance also does. Each insurance company contributes equal amounts until it uses up its limit of insurance or the loss is paid, whichever occurs first.

Example: North To South Railroad has coverage under three separate CG 00 35 policies. Each applies to the same trestle construction project and has the same named insured but a different contractor. Each policy responds when a loss occurs for which North To South is liable for damages. The Each Occurrence Limit for Policy A is $500,000, $1,000,000 for Policy B, and $2,000,000 for Policy C. The damages assessed against North to South amount to $3,000,000.

Under Contribution by Equal Shares, each policy contributes $500,000. This amounts to $1,500,000 of the $3,000,000 in damages. Policy A's limits are now used up. Policy B and Policy C then contribute an additional $500,000 each, for a total contribution of $2,500,000. This uses up Policy B's limits. Policy C then contributes the remaining $500,000 to reach the total damages amount of $3,000,000. Under this approach, no policy pays more than its Each Occurrence Limit.

If the other insurance does not include contribution by equal shares, contribution is by limits. With this approach, each company's share is the ratio of its limit of insurance that applies to the total limits of insurance that apply by all companies. Under contribution by limits, contribution is proportionally by limits. Ratios are determined based on each insurance company's limit as a percentage of the total limits that apply. The loss is then apportioned between the various policies.

Example: Continuing the example above, Policy A's Each Occurrence Limit is $500,000, Policy B's is $1,000,000, and Policy C's is $2,000,000, for a total limit of $3.500,000 available to pay claims. Policy A's limit is approximately 14% of the total, Policy B's is about 29%, and Policy C has the remaining 57%. The total amount of North To South’s liability is $3,000,000, Policy A pays approximately $420,000, Policy B pays about $870,000, and Policy C pays the remaining $1,710,000.

Note: This approach is similar to that of CG 00 01 but CG 00 35 does not refer to excess insurance.

7. Premium and Premium Audit:

a. The insurance company calculates all premiums according to its rules and rates.

b. The premium base is contract cost. This is the total cost of operations described on the declarations.

c. The advance premium on the declarations is only a deposit premium. At the end of each audit period, the insurance company determines the actual earned premium for the period and notifies the contractor. The date on the billing notice is the date the company expects to receive the premium billed. However, if the advance and audit premiums are more than the earned premium, the insurance company refunds the excess to the contractor. Premium payment is never the railroad's obligation.

Note: Audit period is not clearly defined or explained. It can be monthly, quarterly, annually, or any reasonable period the contractor and the insurance company agree to.

Example: The policy is subject to monthly audit, and the deposit premium charged at inception is estimated to approximate the final annual earned premium. An audit is performed at the end of each month to determine that month’s exposure. The actual earned premium for that month is deducted from the deposit premium, and the insurance company sends the contractor a statement that shows that month’s figures and calculations. When the actual earned premium exceeds the deposit, the statement also includes a bill for the amount due that exceeds the deposit. At that point, the contractor must pay any additional amounts.

8. Transfer of Rights of Recovery Against Others to Us

Any rights the insured has against others to recover all or part of any payment the insurance company made transfer to the company. The insured must preserve those rights and not do anything after the loss occurs to impair them. The company can request that the insured bring suit or transfer those rights to it and help it enforce them.

9. When We Do Not Renew

If the insurance company decides to not renew, it mails or delivers written notice stating so to the first named insured on the declarations at least 30 days before the expiration date. If the notice is mailed, proof of mailing is sufficient proof of notice.

Notes:

There is no requirement to notify the contractor of the non-renewal, even though it pays for the coverage.

This paragraph is modified by specific endorsements in many states as to the number of days of advance notice of non-renewal required, what is considered acceptable as proof of mailing, and valid reasons to terminate or not renew coverage. Each state’s requirements must be evaluated carefully when considering any changes or modifications of this condition.

B. CONDITIONS THAT APPLY TO ONLY COVERAGE A

1. Legal Action Against Us

No party has the right to join the insurance company in any way, bring it into a suit that claims damages from an insured, or sue it unless all its terms and conditions have been complied with.

The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, it is not liable for damages not subject to payment under CG 00 35’s terms. It is also not liable for damages that exceed the limit of insurance.

An agreed settlement is a settlement and release of liability that the insured, the insurance company, and the claimant or the claimant's legal representative sign.

2. Duties in the Event of Occurrence, Claim, or Suit

The named insured has a number of duties to perform if there is a claim or demand for coverage:

a. The named insured must inform the insurance company of any occurrence that may result in a claim as soon as possible. At a minimum, the notice should include information with respect to how, when, and where the event took place and the names and addresses of all injured parties and any witnesses. It should also indicate the nature and location of any injury or damage as a result of the occurrence.

b. With respect to claims made or suits brought, the named insured or any insured must immediately record its details, the date it was received, and notify the insurance company as soon as possible. This is in addition to providing the company with timely written notice of the claim or suit.

c. Every insured involved in or with a given claim must:

Immediately send the insurance company copies of demands, notices, summonses, and legal documents it receives in conjunction with the claim or suit.
Authorize and give the insurance company permission to obtain records and other information it needs.
Cooperate with the insurance company as it investigates or settles the claim or defends against the suit.
When the insurance company requests, help it enforce any right against any person or organization that may be liable to the insured for injury or damage that this insurance covers.

d. No insured may voluntarily make any payments, assume any obligations, or incur any expenses without the insurance company's consent. If it does, it does so at its own cost or expense. Important, this part does not apply to the cost of providing first aid.

3. Separation of Insureds

Other than the limits of insurance and any rights and duties that apply specifically to the first named insured, the insurance provided applies to each named insured as if it was the only named insured. It also applies separately to each insured against whom a claim is made or a suit is brought.

C. CONDITIONS THAT APPLY TO ONLY COVERAGE B

1. Appraisal

If the named insured and the insurance company cannot agree on the value of property damaged or the amount of loss, either may demand a written appraisal within sixty days after filing the proof of loss. At that point, each party selects a competent appraiser. The two appraisers then select a competent and impartial umpire. Each appraiser then separately states the value of the property and amount of loss. Any differences are submitted to the umpire. Any decision that any two parties agree to is binding on all parties. The named insured and the insurance company each pay the cost of their appraisers and share the expenses of the appraisal and the umpire equally.

The insurance company still retains its right to deny the claim even when it agrees to an appraisal.

2. No Benefit to Bailee

No party other than the named insured that has custody of the property may benefit from the protection of this insurance.

3. Insured's Duties in the Event of a Loss

The named insured must:

a. Protect the property, regardless of whether the loss is covered or not. If it does not, any further loss to the property is excluded. The insurance company treats reasonable costs the named insured incurs to protect property as expenses incurred at its request.

b. Submit a sworn proof of loss to the insurance company as soon as possible after the loss. It must include the information the company needs to settle the loss. In addition, it must make the damaged property available for examination if the company requests.

4. Legal Action Against Us

No party has the right to sue the insurance company unless all terms of the coverage form have been fully met and until 30 days after the proof of loss is filed and the amount of loss determined.

5. Payment of Loss

The insurance company has the option to pay the loss in money. If it exercises that option, the named insured cannot abandon damaged property to it.

Note: This means that the insurance company has the option to pay money or to repair or replace. The company cannot be forced to take property it does not want.

SECTION V–DEFINITIONS

Defined words are used throughout the coverage form. Restricting the meanings of select terms facilitates everyone having a clearer understanding of the coverage intended. There are 12 defined terms.

1. Bodily injury

This refers to physical injury to a body, sickness, or disease a person sustains. It includes death when it occurs as a result of covered, bodily harm.

2. Contractor

This is the contractor that is documented on the policy declarations. It includes subcontractors that work for that contractor in any capacity. It does not include the named insured.

3. Covered contract

This is any contract or agreement to carry a person or property for a charge. It also includes any interchange contract or agreement with respect to motive power or rolling stock equipment.

Note: Motive power refers to various, powered property that moves along railways (such as locomotives, railcars, railbus, rapid transit, or railroad maintenance equipment).

4. Executive officer

This is a person who occupies any officer position that the named insured's charter, constitution, by-laws, or similar governing documents created.

5. Hostile fire

This is a fire that becomes uncontrollable or burns outside of its intended place.