PM 00 01–COMMON POLICY PROVISIONS

(March 2018)

The ISO Personal Inland Marine Program offer coverage on a stand alone basis for a variety of personal property that, when owned in sufficient volume, is inadequately protected by basic residential policies. Specifically it provides policies that protect the following:

· Jewelry

· Furs (including fur-trimmed items)

· Fine arts

· Stamp collections

· Coin collections

· Silverware

· Bicycles

· Musical instruments

· Cameras

· Golfers equipment

While some aspects of the various policies differ according to the applicable property class, other coverage aspects are identical. Rather than replicate language in each coverage form, ISO’s program builds complete coverage by requiring that the attachment of PM 00 01–Common Policy Provisions Form.

ANALYSIS OF PROVISIONS

A. Agreement

Under this provision, the insurance carrier agrees to provide protection as described in the following policy pages. This is done in exchange for the named insured paying the policy premium AND complying with the required policy provisions.

Note: The named insured has to meet BOTH conditions in order to qualify for coverage.

B. Definitions

1. This portion of the form defines the terms that are critical to understanding how it responds to coverage situations. The following are the defined terms that, throughout the policy, appear in quotation marks:

a. "You" and "your"

These are used in the policy to refer to the "named insured" that appears on the policy’s declarations. “You” and “your” also extend to the named insured's spouse, but only if he or she lives in the same household.

b.”We", "us" and "our"

These three terms are used as references to the company providing the inland marine coverage.

2. The Common Provisions form also makes use of the following, defined term:

insured - The Common Provisions form considers all of the following to be insureds:

You and your spouse

(refer to separate definition)

The relatives of the named insured plus the relatives of the named insured’s spouse but only when those relatives are considered residents of the named insured’s household (meaning relatives who live at the insured location with the named insured)

Important – The form claries how to interpret the phrase “an insured.” When that phrase is used in the policy, it refers to either one or more insureds, as defined by the form.

C. Exclusions

There is no insurance protection for either direct or indirect loss that is due to any of the sources of loss that appear in this form section. The loss is excluded:

· regardless of any other cause or event contributing concurrently or in any sequence to the loss, and

· regardless of whether the damage is localized or widespread.

1. War

War is considered to include any of the following and any consequence of any of the following:

war	undeclared war	civil war	warlike act by military force or personnel
rebellion	revolution	insurrection	destruction, seizure or use for a military purpose

Even if a nuclear event is completely accidental, discharge of a nuclear weapon will be treated as a warlike act.

2. Nuclear Hazard

This refers to the following:

Nuclear reaction
Radiation
Radioactive contamination

This exclusion applies regardless of the incident being controlled and no matter how the event is caused. Any consequence of a nuclear hazard is also considered a nuclear hazard.

Losses created or involving a nuclear hazard are not considered to be a fire, explosion, or smoke loss, even when these three perils are included within those, otherwise, insured perils.

This policy does not respond to loss involving either direct or indirect nuclear hazard. However, an exception exists so that fire damage that directly arises from the nuclear hazard is covered.

3. Governmental Action

The policy does not allow coverage for property which is destroyed or seized under the orders of any government unit or public authority. There is a very important exception connected to this exclusion. If the government action or order is related to a fire or the prevention of the spread of fire, any loss caused by the fire IS eligible for coverage provided that fire would be otherwise covered by the policy except for this exclusion.

4. Intentional Loss

This exclusion refers to any loss that is due to any intentional act of any insured. An intentional act includes any act that is meant to create a loss. Any conspiracy to commit such an act also qualifies as an intentional act. The exclusion applies even to innocent insureds (insureds who do not participate in an intentional act, including its planning). Adding the reference to innocent insureds is a response to decisions in various jurisdictions that obligated insurers to settle certain intentional losses.

Example: Gerald and Gessie had their extensive stamp collection insured by a Personal Articles Form that was effective from 3/2/2018 to 3/1/2019. On 11/7/2018, most of the collection was destroyed in a fire. Their insurance company became suspicious when, during their investigation, they found evidence that part of the collection’s most valuable items were removed before the loss. However, those items were included as part of the insureds’ claim. They later discover that Gerald had set the fire. The entire claim is denied, even though it was also proved that Gessie had no knowledge of Gerald’s intentional act. Gessie sues her insurance company and wins. However, on appeal by the insurer, the higher court rules that, in accordance to the intentional loss provision, Gessie still is ineligible for coverage due to Gerald’s intentional act.

Related Court Cases:

“Intentional Act Exclusion Held Not Applicable When Severe Injury Was Not Intended”

5. Neglect

This exclusion bars coverage for any failure on the insured’s part to use all reasonable means to save and preserve property at and after the time of a loss. This exclusion fits perfectly with the intent of insurance to cover losses that are accidents or, in other words, which are beyond the control of the policyholder. It is logical to exclude payment for losses that could have been prevented by an insured taking care to protect his or her property. Remember, though, that the exclusion is for failure to take ordinary, rather than heroic, measures.

D. Loss Conditions

1. Loss Settlement

a. Standard Loss Settlement

(1) Scheduled Property

This condition applies to all specifically described items that are NOT subject to settlement at an agreed value.

Note: Agreed value applies to items appearing in the schedule with a double asterisk ** next to them.

Regardless of the value that appears in the schedule, any loss payment is actually determined according to the least expensive among the following options:

(a) Item’s actual cash value (market value less depreciation) that exists at the time of loss

(b) The cost of reasonable repairs it would take to restore the damaged property to its pre-loss condition

(c) The amount necessary to replace the a damaged or loss item with a substantially identical item

(d) The insurance limit that appears for the lost or damaged article

(2) Newly Acquired Property

Regardless of the value that appears in the schedule, any loss payment involving eligible, newly acquired property is actually determined according to the least expensive among the following options:

(a) Item’s actual cash value (market value less depreciation) that exists at the time of loss

(b) The cost of reasonable repairs it would take to restore the damaged property to its pre-loss condition

(c) The amount necessary to replace the a damaged or loss item with a substantially identical item

(d) The insurance limit that is applicable for the class of property

(3) Loss To a Pair, Set or Parts

When property that is part of a pair or set (or has multiple parts) suffers a covered loss, the insurer can choose to settle on one of the following basis:

(a) Repair or replace any component that results in returning the pair or set to its pre-loss value

(b) Pay the amount equal to the pair or set’s pre-loss and post-loss actual cash value

(c) Pay an amount that represents the value of the item that has been damaged or lost.

Example: Lamie Lenskuva’s Camera Schedule includes coverage for a Perspektuvs Company Custom Lens Package. The package contains a coated extension lens, wide-angle lens, close-up lens and telephoto lens; the package is valued at $1,000. While on a walk, some rotten kid on a bike snatches at the camera that’s hanging around Lamie’s neck. Lamie tugs at the lanyard and pulls the camera out of the kid’s hands. However, the kid has ripped off the extension lens from its mounting and, as he pedals away, smashes the lens on the street, destroying it.

Scenario 1: The extension lens is no different than the other lenses in the set. It attaches and detaches independently of the other members.

Scenario 2: The extension lens is the foundation of the lens package. While the extension may be used by itself, all of the other lenses may not be attached to Lamie’s camera without first attaching the extension lens.

Under Loss to Pairs and Sets, the insurer may consider the different circumstances. Under 1, the settlement may assume that the extension lens’ value is no greater than the other parts and settle the loss accordingly, say at $250 ($1,000 divided by the number of lenses - 4). Under 2, the loss to the lens is settled for $400 because the extension must be attached in order to use the other three lenses. The settlement takes this feature into account.

Example: Catelun loads up her car with her camera gear and starts to head home. She stops as she hears a “CRUNCH” under one of her rear tires. Catelun gets out of her car to investigate and finds that she has run over the camera mount. The mount allows her to attach cameras to her Stabilizer Model 450 Camera Tripod. When Catelun turns in a loss request for replacement of the $300 tripod, she is paid $45 to cover the loss of the mount which is a standard piece that can be purchased from any camera department.

Note: This condition DOES NOT say whether the insurer has the option of paying the least or most expensive of these options. However, it would be consistent with other settlement provisions of the policy that an insurer is likely to select the least expensive option.

When such a loss involves fine arts, the insurer will pay an amount equal to the property’s pre-loss value and will take possession of the existing, remaining parts.

(4) Recovered Property

The named insured and the insurer are obligated to tell each other when, after a loss has been paid, property involved in the claim has been recovered. What happens next is up to the named insured. The named insured may allow the company to have or keep the property or the property may be kept by (or returned to) the named insured. If the property is returned to the named insured, any payment has to be adjusted to reflect the condition or value of the property. In other words, the named insured may have to return part or all of any loss payment.

b. Agreed Value Loss Settlement – Scheduled Property Only

(1) This condition applies to all specifically described items that are subject to settlement at an agreed value.

Note: Agreed value applies to items appearing in the schedule with a double asterisk ** next to them.

The value that appears in the schedule, per agreement, is the established value that the insurer will pay for any lost or damaged item. If the insurer requests, the insured is obligated to surrender any existing property.

(2) When property that is part of a pair or set (or has multiple parts) suffers a covered loss, the insurer can choose to settle on the following basis:

(a) Pay the scheduled amount which, as agreed, represents the full value of the items (pair, set or multi-part property) that has been damaged or lost.

(b) After payment, the insurer at its option may take possession of any existing, remaining parts.

(3) If, after a loss has been paid, lost or stolen has been recovered, the named insured must surrender property to the insurance company.

(4) If the named insured wants the recovered property back, the item or items may be returned at a price negotiated between the named insured and the insurer.

c. Unscheduled Property – Blanket Insurance

(1) Postage Stamp or Rare and Current Coin Collections

The insurance company is obligated to pay for losses involving items under blanket coverage on a proportional basis. Payment for lost to unscheduled stamp or coin collection property will be based on the percentage of actual cash value of the lost or damage property compared to the total, listed blanket amount. However, the proportional payment is also subject to the following payment caps:

(a) A maximum of $1,000 for any unscheduled coin collection or

(b)A maximum of $250 for any individual item (stamp or coin) or for a single stamp pair, strip; block series sheet, cover, frame or card.

Related Article: Stamp Glossary

(2) Cameras, Fine Arts, Golfer’s Equipment, Musical Instruments and Silverware

The insurance company is obligated to pay for losses involving cameras, fine arts, golfer’s equipment, musical instruments and silverware under blanket coverage on a proportional basis. Payment for loss to such unscheduled property will be based on the percentage of actual cash value of the lost or damage property compared to the total, listed blanket amount. However, the proportional payment is also subject to maximum of $500 for any, individual item.

2. Loss Clause

Making an eligible payment under this form for a given loss (except for a total loss) will not reduce the amount of coverage available to pay for other eligible losses that involve scheduled property. When there is a total loss of an item the insurance company will return any applicable premium that has not been earned. If the property is replaced, any such return premium may be applied to the amount of premium due for the replacement property.

3. Loss Payment

a. The insurance company will adjust all losses with the named insured. The insurance company will pay the named insured unless another party has already paid such claim or some other person is named in the policy or has a legal right to receive payment.

b. All losses will be payable 60 days after the insurance company receives the named insured’s proof of loss and after one of the following occurs:

(1) The insurance company reaches an agreement with the named insured

(2) An entry of final judgment is entered

(3) The insurance company receives filing of an appraisal award.

This condition explains to the insured that the insurance company is only obligated to deal with persons who have a valid interest in the loss and not with disinterested third parties such as lawyers or independent brokers or specialists.

4. Duties after Loss

This provision reinforces an insured’s prime obligation to strictly comply with take action. It explains that if an insured fails to perform the specified duties and if that failure adversely affects (prejudices) the insurer, the insurer is no longer obligated to provide coverage. An insured's cooperation is critical to an insurance company's ability to perform under the insurance contract.

Related Court Case: Uncooperative Insured Can’t Seek Arbitration

In case of a loss to covered property, the named insured, the insured seeking coverage or a representative of either party is responsible for:

a. Giving prompt notice to the insurance company or the insurance company’s agent.

b. Notifying the proper authorities in case of loss by theft.

c. Protecting the property from further damage.

If repairs to the property are necessary, the insured is required to do both of the following:

· Make reasonable and necessary repairs to protect the property

· Keep an accurate record of repair expenses because most are covered under the policy.

d. Cooperate with the insurance company in the investigation of a claim.

This item acts as an important reminder that the insured must be an active and willing participant in the claims process.

Example: The Hardingtons submitted a claim for $8,000 of damaged musical instruments. The Stonewalls sent in a detailed list of the instruments, but they never allowed their insurance company to view the damaged property. Later they claimed that they saw no need to keep the property around as they expected to replace them from claim funds from the insurer. The Hardingtons filed suit after their insurer denied coverage, citing failure to cooperate.

Example: Primberly Bellwether notices that her emerald necklace she was wearing when she went on a dinner cruise on September 15^th is missing. She hunts around her home for it and then stops searching, thinking she will ask the cruise boat owner about it. Primberly is reminded about the missing necklace when her husband buys her a pair of matching earrings for Christmas. She asks the boat owner if he found it and then she files a claim for it. The insurer receives the claim report a couple of days after it is mailed, on January 29^th. The insurer springs into action, immediately notifying Primberly that, due to the delay in reporting the loss, her claim is denied.

e. Prepare an inventory of damaged personal property.

The inventory must show the quantity, description, actual cash value and amount of loss. The insured should also attach any bills, receipts and related documents that will justify the figures reported in the inventory.

Related Article: Actual Cash Value Guide

f. As often as is required by the insurance company, the insured must do all of the following:

(1) Show the damaged property

(2) Provide the insurance company with the records and documents that they request and allow them to make copies

(3) Submit to and sign an examination while under oath and without being in the presence of any other insured

(4) Assist in making any other relevant parties (household employees, household members or others) available to the insurer for questioning under oath. However, this requirement is only to help to a reasonable degree.

This condition may appear to be heavy-handed, but the insurer is in the vulnerable position of having to rely on the insured concerning the scope of the loss. The insurer is merely asserting its chances of getting accurate information for investigating a claim. Unfortunately, this condition often becomes a battleground between insurers and claimants. The interests of insureds may have been better served if this condition contained some wording that obligated an insurer to exercise courtesy and reasonableness when enforcing this provision.

(5) The named insured must send to the insurance company, within 90 days after its request, a signed, sworn proof of loss which to the best of the named insured’s knowledge describes the following:

(a) The time and cause of loss

(b) The interest of all "insureds" and all others in the applicable property, including all available information on any property liens

(c) Other insurance which may cover the loss

(d) The inventory of damaged personal property described in an earlier part of this section

5. Loss Payable Clause

The purpose of this provision is to change the way the policy operates when a loss payee appears on the policy declarations. When a loss payee appears, the loss payee is included in the definition of insured with regards to the covered property. Further, the loss payee is entitled to written notification if the policy is cancelled or not renewed. And the insurance company agrees to make such notification.

E. Other Conditions

1. Policy Period

This item merely states that the coverage supplied by this policy is only valid for loss that actually occurs during the applicable policy period.

2. Insurable Interest and Limit of Liability

Regardless of the number of people who have an insurable interest in the property covered, the insurance company providing coverage is limited in its response. It won’t pay an insured more than the amount of that insured's interest applying at the time of loss. It also will pay no more than the limit of liability for the covered property. Specifically, this form is only obligated to pay the policy limit that applies to a covered person who has suffered a loss to covered property.

3. Claim Against Others

This part of the policy allows the insurer to recover against any person who is legally responsible for a loss that is paid under this policy. When the insurance company believes such a party exists, any payment it makes to the named insured for a loss is deemed a loan.

Example: Yancy Trustem is happy to help her neighbor by lending her new camcorder. Unknown to Yancy, her neighbor gives the camcorder to her son, Firebran, who needs it for an extra credit project for school. Firebran is doing a homemade documentary on his skateboard gang. Firebran ends up destroying the camcorder after deciding to tape it to the top of his skateboard for “some really awesome action shots.” Yancy’s insurer, Point ‘n’ Pay Mutual, pays her nearly $1,900 to replace the camera. Point ‘n’ Pay’s adjuster then asks Yancy to sign over her rights to recovery. The adjuster then goes next to discuss arrangements for repayment with little Firebran’s parents.

The insurer may require the named insured to actively assist with all efforts to secure payment from other parties as well as permit the insurance company to assume the legal right to pursue applicable recovery payments. In other words, the rights assumed by the insurance company are only good for the maximum amount that the insurer paid to handle the loss.

Any amounts received by the named insured from other, responsible parties, must be repaid to the insurer up to the amount of the loan it previously paid.

4. Appraisal

If the named insured and the insurer disagree on the amount of loss, either party can demand that the loss be appraised. In this process:

· each party chooses a competent, impartial appraiser no later than 20 days after getting the other party’s request for an appraisal,

· the two appraisers will choose an umpire

· each party has to share the cost of the judge and pay the entire expense for their own appraiser.

If the appraisers cannot agree upon an umpire within 15 days, either the insurer or the named insured can ask that a judge be selected by a court of record in the state where the "residence premises" is located.

The appraisers have to submit separate opinions on the loss amount and an agreement (submitted to the insurer in writing) between any two persons (among the appraisers and the judge) becomes binding on both the insurer and the policyholder.

5. Other Insurance and Service Agreement

This represents a broader intent than the traditional other insurance provision since it addresses other sources of protection.

If a covered loss is also protected by other insurance, the insurer’s payment obligation is shared with the other coverage source. Specifically, the insurer becomes obligated to pay only its share of the loss. The share is determined by taking the total amount of available insurance and determining the insurer’s percentage of coverage.

If any valid service agreement applies to the covered property, this insurance is triggered once the amount available under the service agreement is paid. Service agreement refers to the following:

· Service plan

· Property restoration plan

· Warranties.

This condition applies even if, rather than being called a warranty or plan, the other source of coverage calls itself insurance.

Note: This condition only refers to other coverage, but does not specify whether the other source has to be valid and collectible. Therefore, a dispute could arise depending upon how this condition is exercised.

6. Suit Against Us

This condition states that no one can sue the insurer until all terms and conditions under this form have been complied with. Further, any suit has to be filed no later than two years after the loss date. The intent of this provision is to make certain that an insured follows the terms of the policy in order to avoid a lawsuit so that the lawsuit becomes a last resort. It should be to everyone’s advantage if conflicts can be resolved without having to go to court. However, suits happen and if this alternative is chosen, the insured must file the action within two years of the loss date.

Example: Primberly is furious about her insurer denying coverage for her missing emerald necklace, just because she reported the loss “fashionably late.” Primberly eventually files a lawsuit against her insurer over two years after the loss date. Her insurer notifies her that, since she filed the lawsuit after 24 months from the original loss date, she is barred from suing.

7. Insurance Not To Benefit Others

Through this policy provision, an insurer denies any policy benefit to entities (personal or commercial) that charge or receive a fee for providing a wide variety of services that involve having custody of the property:

8. Changes In Policy

An insurer has to give written permission or approval in order to make any valid waivers or changes in the policy.

9. Concealment or Fraud

This provision voids coverage to all persons otherwise eligible for protection if the insurer discovers any incidents of significant information being kept from it (either due to concealment or misrepresentation). Loss of coverage also results if any otherwise, covered persons are guilty of fraudulent behavior or lying (false statement) regarding any aspect of the applicable insurance coverage.

The provision attempts to be comprehensive, barring coverage to all parties, including innocent insureds. However, the provision wording may likely caused confusion over how it applies and appears to be vulnerable to court scrutiny in the event of claims.

10. Liberalization Clause

If the insurance company makes a change which broadens coverage under this edition of the policy and there is no additional premium charge for that change it automatically applies to this policy as of the date the change is implemented in the state in which the policy is issued. However, this applies only if the implementation date falls within 60 days prior to the policy inception date or during the policy period stated in the declarations.

It is very important to note that this clause does not apply to changes introduced in a general program revision which includes both broadening and restricting features. A general program revision can be implemented through either a subsequent policy edition OR though an amendatory endorsement.

11. Cancellations

a. The named insured has the right to cancel the policy at any time and for any reason. The only requirement is that the policy be returned or that a written notice be given to the insurance company. The named insured must specify that date upon which the cancellation is to be effective.

b. The insurance company is more restricted in how it may cancel the policy. A written notice must either be given to the named insured or mailed to the mailing address on the declarations.

Note: Proof of mailing (or delivery of notice) will be sufficient proof of notice.

The insurance company may cancel at any time by providing no less than 10 days notice before the date cancellation takes effect.

The premium for the unused days of insurance must be refunded when the policy is cancelled. The refund must be calculated on a pro rata basis when initiated by the insurance company but may be on a short rate basis when cancellation is initiated by the named insured.

12. Nonrenewal

The insurance company has the right to not renew this policy. If they do they must either deliver a non-renewal notice to the named insured or mail such a notice to the mailing address on the declarations. The notice must provide no less than 30 days before the expiration date of this policy. Only proof of mailing is required as a proof of notice.

13. Death

If an insured dies the insurance company will insure the legal representative of the deceased. This insurance is limited to only the property of the deceased covered under the policy at the time of death. Whoever was a member of the insured’s household at the time of the death is an insured but only while a resident of the residence premises. Also, whoever has temporary custody of the insured’s property is an insured but only until the appointment and qualification of a legal representative.