FP 00 90–FARM PROPERTY–OTHER FARM PROVISIONS FORM–ADDITIONAL COVERAGE, CONDITIONS, DEFINITIONS ANALYSIS

(April 2020)

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INTRODUCTION

This form completes the coverage provided in:

· FP 00 12–Farm Property–Farm Dwelling, Appurtenant Structure and Household Personal Property Coverage Form

· FP 00 13–Farm Property–Farm Personal Property Coverage Form

· FP 00 14–Farm Property–Barns, Outbuildings and Other Farm Structures Coverage Form

FP 00 12–Farm Property–Farm Dwelling, Appurtenant Structure, and Household Personal Property Coverage Form Analysis

FP 00 13–Farm Property–Farm Personal Property Coverage Form Analysis

FP 00 14–Farm Property–Barns, Outbuildings and Other Farm Structures Coverage Form Analysis

It provides 11 loss conditions and five general conditions that apply in addition to the IL 00 17–Common Condition and any conditions that are part of the specific coverage forms. In addition, this form provides the definitions section for all of the coverage forms and seven additional coverages.

This analysis is based on the 04 16 edition of this form. Changes from the 09 03 edition are in bold print.

A. ADDITIONAL COVERAGES

1. Debris Removal

Coverage for the expense of removing debris that is the result of loss or damage to covered property is provided, but only if the loss or damage was due to a covered cause loss. This coverage is subject to the following limitations.

· The costs must be reported within 180 days after the loss.

· The most the insurance company pays is 25% of the sum of the amount it pays for the direct damage loss plus the deductible.

· Debris removal does not include any costs associated with the cleanup of pollutants.

· The debris removal cost is not in addition to the limit of insurance. It is part of the limit of insurance.

· If the debris removal cost exceeds the 25% limitation, or if the limit of insurance is depleted through payment of the direct loss, an additional 5% of the limit of insurance is available to pay for debris removal. This protection can be increased using endorsement FP 04 21– Debris Removal Increased Limit of Insurance.

Example: Fran’s barn was insured for $60,000 when it was destroyed by fire. The estimate to rebuild it was $75,000. Fran was upset because not only did she not have enough money to replace the barn, she also had nothing left to pay for debris removal. The adjuster calmed her by pointing out the additional debris removal coverage of $3,000 was available to pay for the debris removal expenses. ($60,000 X .05).

2. Reasonable Repairs

Under the Duties in the Event of Loss or Damage, the named insured is required to take reasonable care to protect covered property from further damage following a covered loss. This additional coverage pays for those activities. The costs must be reasonable and are only paid after a covered loss occurs. This cost is not an additional amount of insurance, so anything paid under this provision reduces the limits available to respond to any other loss or damage.

Note: This coverage does not pay for loss prevention methods taken before a loss occurs.

3. Damage to Property Removed for Safekeeping

If an insured suspects that a covered cause of loss is imminent and removes property to a safer location, coverage applies to that property for any cause of loss for up to 30 days after its removal. The coverage applies during transit to and from the initial location and any other places to which it may be moved. This is not an additional amount of insurance.

Example: Pearl sees wildfires heading in her property’s direction. She picks up everything she owns and heads to her sister’s place that is upwind of the fires. On the way, her vehicle overturns, and all her possessions are destroyed. All covered property is covered for this damage because the threatening cause of loss was fire.

4. Fire Department Service Charges

Some individuals and businesses enter into contracts for fire protection with local community fire departments when there is no publicly provided fire protection. The costs or fees for this protection are due only if the fire department responds to a call to protect the covered property from a covered cause of loss. Payments under this coverage are additional amounts of insurance, and no deductible applies.

5. Collapse

This coverage is available only for items covered by the Broad and Special Causes of Loss forms. This peril has become increasingly complicated in recent years. Building collapse is considered a falling down or caving-in of the building or any part of it. This action must be sudden or abrupt. If the building is in danger of collapsing but has not done so, it is not considered to be in a state of collapse. Any part of the building that has not collapsed is not considered collapsed, even though the collapse of the other part might have caused it to be separated. If there is cracking, bulging, leaning, settling, or any other signs of potential collapse, but the building or part of the building is still standing, it is not a collapsed building.

In order for coverage to apply, collapse of a building must be caused by one of the following:

· *A specified cause of loss or by glass breakage.

· Decay or damage by insects or vermin that is hidden from view. However, if the insured was aware of the damage before the loss occurred, there is no coverage.

· *Weight of rain on the roof or weight of people or personal property anywhere in or on the structure.

· Use of defective material during the course of construction but not after construction is complete unless caused by one of the other three situations described above.

* If loss or damage for these causes of loss would be covered under the Causes of Loss –Farm Property Coverage form except for the limitations in the first paragraph of this coverage, it continues to be covered.

Direct collapse coverage is not provided for foundations, retaining walls, underground pipes, flues, drains, cesspools, septic tanks, walks, roadways, patios, paved surfaces, awnings, fences, outdoor equipment, swimming pools, bulkheads, docks, piers and wharves unless the collapse is caused by a specified cause of loss or glass breakage. If a collapse is caused by any of the other above listed causes of collapse, these items are covered only if that cause of loss results in a covered building collapsing and the item is damaged because of that collapse.

Example: The roof on the covered barn collapses due to the weight of rain. The damage to the barn is covered as collapse. In addition, the fences, awnings, and outdoor equipment near the barn that are damaged when the barn collapsed are also covered as collapse. However, if the fence collapsed because of weight of rain or people sitting on it, there would be no collapse coverage for that fence.

6. Pollutant Cleanup and Removal

The policy pays up to $10,000 in the aggregate for expenses incurred to extract pollutants from land or water at the insured location, but only when the release of pollutants is caused by a covered cause of loss. There is no coverage for testing for pollutants except for testing that is done as a part of the extraction process. This limit is aggregated as it applies to all extractions at a location that occur during a 12-month policy period. The limit can be increased by using endorsement FP 04 22– Pollutant Clean Up and Removal Additional Aggregate Limit of Insurance.

Such expenses MUST be reported to the insurer no later than 180 days from the date of the covered loss that created the extraction expense.

7. Glass or Safety Glazing Material (04 16 addition)

This additional coverage is not as much new coverage as it is more a bringing together of different glass-related issues.

Coverage

(1) If glass or safety glazing material is broken, it is covered if it is part of any of the following covered:

· Building

· Structure

· Storm door

· Storm window

Note: The above coverage is not limited to only losses caused by a covered cause of loss.

(2) If glass or safety glazing material is broken due to earth movement, it is covered if it is part of any of the following covered:

· Building

· Structure

· Storm door

· Storm window

Note: Item (1) didn’t restrict coverage to cause of loss, so the addition of this seems odd but it does allow for an exception in the exclusion part of this additional coverage.

(3) If (1) or (2) occur and pieces of that glass or safety glazing material damage covered property, that damage is covered.

Exclusions

Damage to covered property as a result of the breaking of glass or safety glazing material is only covered as provided in item (3) above or as provided in the collapse additional coverage. Any other resulting loss to covered property is not covered.

Example: The windows in Millard’s barn are broken in an earthquake. Dust, rain and other elements enter into the building because of the broken windows. Coverage is provided for the cracked glass but not for any of the covered property damaged by the various elements that entered through the cracked glass.

This coverage does not apply if prior to the loss, the covered building or structure has been vacant for more than 60 days. There are two exceptions:

· When the covered building or structure is not on a covered location.

· When the breakage is due to earth movement as described in item (2) above.

B. FARM PROPERTY CONDITIONS

Loss Conditions

1. Abandonment

No one can abandon property to the insurance company. The company must agree in writing before it is responsible for any damaged covered property.

2. Appraisal

If the insurance company and the named insured disagree over the value of property, each side selects an appraiser. The two appraisers then choose an umpire. Both sides present their cases and the majority rules as far as establishing a final value. Each side pays its own appraisers and each shares the costs of the appraisal and the umpire. This appraisal condition establishes only the value of the loss. The insurance company continues to have the right to deny the entire claim.

3. Duties In The Event Of Loss or Damage

The named insured has a number of duties that must be performed when a loss occurs. These duties can be assigned to a representative or to the insured who wants coverage. If the duties are not performed as required, this can create problems for the insurance company such that they can be justified in denying the claim.

Related Court Case: Uncooperative Insured Can’t Seek Arbitration” - illustrates how an insured's attitude can affect coverage.

The police must be notified if a law is broken. This applies regardless of any inconvenience or preference to do otherwise. If a law has been broken and coverage is desired under this policy, the police must be notified.

Prompt notice of the loss must be given to the insurance company. Then, as soon as practicable, details must be provided. Reasonable steps must be taken to protect property, and the expenses to do so will be paid as part of the loss so it is important that records be maintained as to expenses incurred. The damaged property must be separated from undamaged property and set aside so that it can be examined. An inventory of both damaged and undamaged property must be provided that lists values, quantities, costs and the amount of loss. The insurance company will notify the named insured when the inventory is needed. The company must be allowed to inspect and test the property and also to inspect all records that validate the claim. As requested, copies of records must also be provided.

A signed and sworn proof of loss must be submitted to the company within 60 days of their request for it on the forms they provide.

A major duty is that of cooperation throughout the loss investigation and settlement.

The company has the right to question any insured under oath and to do so apart from other insureds. The questioning can occur as often as is reasonably required, as long as the questions relate to the loss.

4. Insurance under Two or More Coverages

If loss or damage occurs to an item insured under two or more coverage parts in the policy, the insurance company is only obligated to pay the actual amount of the loss.

5. Legal Action Against Us

Any legal action against the insurance company can only be made after full compliance with all conditions of the policy. If an action is brought, it must be brought within two years of the date of loss. Some state laws preempt and replace this condition with different time periods.

6. Loss Payment

The insurance company decides how to settle a covered loss. It can pay the value of the property, pay the cost of repairing or replacing the property, take all the property at its agreed or appraised cost, or repair or replace the property.

The value of the property is determined by the valuation clauses in the coverage forms.

Any cost to repair or replace does not include the increased costs necessary to satisfy government enforcement of laws or ordinances relating to the construction, use or repair of a property or the compliance of such laws or ordinances.

The company pays no more than the insured’s financial interest in the damaged property.

The insurance company informs the insured of the manner in which they will pay the loss within 30 days after receiving an acceptable proof of loss. Payment is also made within 30 days after receipt of the sworn proof of loss, provided all terms of the policy have been fulfilled, and an agreement as to the value of the property has been reached.

Payments to parties other than the named insured are handled separately and are solely for the interest of those parties.

The insurance company may defend the named insured for suits brought by owners of property and does so at its own expense.

7. Pairs, Sets, or Parts

If one part of a pair or set is damaged, the company either repairs or replaces the part or pays the difference between the value of the pair or set before the loss and the value of the remaining parts.

Example: The dining room set consisted of a table and six matching chairs. A fire damaged three of the chairs beyond repair. The remaining three chairs could be repaired, but the value of the full set was lost because the style was no longer made or available. The settlement was reached based on the full value of the set, minus the value of the three chairs as stand-alone pieces.

However, if Covered Property consists of many parts, and one of the parts is damaged, the company pays only to replace the particular part.

8. Other Insurance and Service Agreement

If other insurance subject to the same agreements, terms, and conditions exists, this policy pays only its portion of any loss. For all other insurance, this policy pays only on an excess basis. When a Coverage E loss involves other insurance on equipment borrowed or rented, this policy responds on a proportional basis.

This insurance pays in excess over any service or warranty agreement in place.

9. Recovered Property

If lost property is recovered after the loss has been paid, the named insured and the insurance company must inform one another of the recovery. The named insured has the option to take the property back but, in that case, must return the amount the insurance company paid for the loss settlement on it. Regardless of the decision, the insurance company pays the recovery expenses and the costs of repairing the property.

10. Transfer of Rights of Recovery Against Others To Us

When the insurance pays a claim, the organization or person to whom that settlement is made must transfer its rights of recovery for that particular loss to the insurance company. That entity must do everything possible to secure the rights for the company and do nothing to compromise those rights. The named insured has the right to waive any rights of recovery against third parties, but only if it does so prior to the loss and in writing. In addition, the named insured is permitted to waive its right after a loss if the party is another party insured on the policy, if it involves a business owned by the named insured or that owns it or if it involves a tenant. Such waivers must be in writing. Waiving rights as described above does not affect the insurance.

11. Unoccupancy and Vacancy (04 16 change)

If a building is vacant or unoccupied for over 120 consecutive days, the amount of any payment is automatically reduced by 15%, unless the period of vacancy or unoccupancy is extended by endorsement.

Note: The prior reduction was 50% of the applicable limit of insurance, while this is for 15% of the payment. The benefit to the named insured will vary based on the type of loss.

Example: Perry’s dwelling had been vacant for 180 days prior to its loss. The limit of insurance is $100,000.

Scenario 1: The amount of the loss is $15,000. Under the prior edition Perry would be paid for the entire loss because $100,000 X .5 = $50,000. Under the current edition Perry will be paid $15,000 X .85 = $12,750.

Scenario 2: The entire building is destroyed. Under the prior edition Perry would be paid $100,000 X .5 = $50,000. Under the current edition Perry would be paid $100,000 X .85 = $85,000.

This is not the only place where vacancy is discussed. Consult the Additional Coverage Glass or Safety Material in this form for its 60 day vacancy restriction and the FP 10 60–Causes of Loss Form–Farm Property for its 60 day vandalism vacancy restriction. In addition, refer to the Definitions Section in the form for the definition of unoccupancy and vacancy.

The restrictions in this condition and in the Cause of Loss form can be changed by using endorsement Form FP 04 75–Unoccupancy and Vacancy Permit and changing the number of days. However, any change made does not apply to the Additional Coverage Glass or Safety Material restriction.

GENERAL CONDITIONS

1. Concealment, Misrepresentation or Fraud

Any fraud on the part of the named insured voids the policy.

In addition, if the named insured or any other insured intentionally misrepresents or conceals a material fact relating to the policy, the covered property, the insured’s interest in the property or any claim voids the policy.

The two paragraphs above apply whenever the actions occur but are limited to only those that impact or relate to this insurance.

Example: Carmela owns Horizontal Farms and she and her family live in a dwelling on the property. This policy has two named insureds: Horizontal Farms, LLC, and Carmela.

Scenario 1: Carmela has been sued because of fraudulent statements she made relating to her cosmetics business. Because the statement is not related to Horizontal Farms, this policy is not void.

Scenario 2: Carmela’s 22-year-old son lies to the company adjuster regarding the property inside the barn at the time of a loss. Carmela’s son is an insured, so his lie voids the Horizontal Farms coverage.

2. Control of Property

Any act of neglect or other acts by a person over whom the named insured has no control, or who is beyond the direction of the named insured, does not affect this insurance. In addition, a breach of a condition at one location does not adversely affect insurance at another location, if that other location has not breached a condition.

Example: Fernando’s insured farming operations have three separate locations. Break-ins occurred at two of the locations on the same evening, but the property taken was substantially different in the two cases. Fernando reported the first location break-in to the police but decided to handle the second one alone. The decision to not report the second break-in is a breach and results in no loss payment by the insurance company. The insurance company will handle the first claim as long as Fernando continues to cooperate with them in the investigation and adjustment.

3. Liberalization

Any broadening feature introduced by the insurance company automatically applies to this policy if introduced during its policy term or if introduced up to 45 days before the start of the policy term. This applies only if there was no premium charge made for the new or broadened feature.

4. Mortgageholders

Mortgageholders have special privileges because of their financial interest in the policy. Any loss is paid to them as their interest may appear. They receive payment even if foreclosure on the property has begun. Denial of claim to the named insured does not necessarily mean a denial to the mortgageholder, if they take appropriate actions directed by the insurance company that the insured refused to take. Under such circumstances, the mortgageholder assumes responsibility for following policy provisions such as cooperating with the insurer, submitting proof of loss and notification of change in exposures. If the insurance company pays the mortageholder, it becomes the mortgageholder with respect to the Covered Property.

Because of this unique relationship, the mortgageholder must receive a written notice of cancellation. It receives ten days’ notice for nonpayment of premium and 30 days for any other cancellation reason. Non-renewal notice must be sent ten days prior to policy expiration.

Important: Various state laws and statutes have different requirements concerning policy termination. In those instances, state law prevails and the notice periods indicated above may be changed.

5. No Benefit to Bailee

This insurance is only for the benefit of the named insured. As a result, this insurance does not relieve a bailee of their obligations relating to the handling and holding of property that belongs to their customers.

6. Policy Period

Only covered losses or damages that begin during the policy period shown on the declarations are covered.

Example: A windstorm begins at 11:00 PM on 12/31/19 and doesn’t end until 8:00 AM on 1/1/20. Tony’s policy with Educated Firm ended at 12:01 AM on 1/1/20, at which time coverage moved to New Firm.

Scenario 1: The windstorm started slow, and Tony’s property did not sustain any damage until 3:00 AM. All damage from the windstorm will be paid under the New Firm policy.

Scenario 2: The windstorm started with a mighty gust that ripped off a barn door. Damage accumulated throughout the entire storm. All damage from the windstorm is covered under Educated Firm’s policy because the damage began at 11:00 PM. Even though further damage occurred after midnight, it began in the prior policy term.

Note: The question of which loss or damage began when may be considered ambiguous, and that may be to the client’s advantage, especially if the property is underinsured. If part of the loss can be proven to have started during one policy period and another part of the loss started in the next policy period, additional limits may be available to compensate the named insured.

C. DEFINITIONS

1. Agritainment (04 16 addition)

Any activity that meets all of the following criteria:

· Agricultural or aquacultural related

· Operated primarily on the insured location

Note: The term “primarily” is used so the activity may also take place off the insured location as long as it is “primarily” taking place on the insured location. As an example, a hayride may be primarily on the insured location but may leave the insured location by crossing a road and then continue on the insured location on the other side of the road. This could be still considered on the insured location.

· Tourism or entertainment purpose

· Monetary or other compensation is the reason the activity is taking place

Note: This is a new term and will require court interpretations before it is fully refined. Many terms are open ended. The last item states that monetary or other compensation is required but doesn’t state who is required to receive such compensation. This would mean that if the named insured is permitting the activity to take place so that a charitable organization can conduct a fundraiser but receives no compensation, it is still considered agritainment because the charitable organization is receiving compensation.

2. Agritainment property

The insured-owned property used in agritainment. The term “primarily” modifies how much time the property must be used in agritainment. This means that the property may occasionally be used for other purposes, but doesn’t define exactly how much.

A modification to this definition explains that buildings, structures, land, water, and growing crops are never considered agritainment property. The growing crop exception does not apply to nursery stock that is available for purchase though.

3. Business Property

Any property that is used in a trade, profession, or occupation other than farming operations. Property used in agritainment is not considered business property.

Note: This definition uses the term “agritainment” property and not the term defined above as “agritainment property.” This may be a typo or may be intentional. If intentional, then property that is used in any way with agritainment would not be considered business property and that is an advantage to the insured.

4. Dwelling

Any building used for family residential purposes. This includes trailers, modular living units, and prefabricated buildings. It does not include buildings used to store agricultural products, livestock, or poultry.

5. Farm Personal Property

This is any equipment, supplies and products that are used in or produced by farming or ranching operations. Examples are feed, seed, fertilizer, livestock, other animals, poultry, grain, bees, fish, worms, produce and agricultural machinery, vehicles and equipment but the definition is not limited to only these.

6. Insured (04 16 change)

When the named insured is an individual, other persons are also insureds.

In the coverage forms, the beginning statement declares that the named insured is both the individual listed and his or her cohabitating spouse.

A number of other individuals are considered insureds based on their relationship with the named insured. When considering who is an insured, it is important to apply the following criteria to both the named insured and the spouse:

· A relative who is living in the household

· Any non-relative living in the household who is under 21 years old and is in the care of the named insured, spouse or a relative living in the household

Note: The wording changed slightly, but the intent is the same.

· Any person who meets the two above criteria except he or she is under 24 and has moved out in order to attend school full time.

Note: The prior edition provided coverage for those non-relative students only until 21 years of age. This edition changed the age to 24 for both relative and non-relative students.

7. Insured Location

This is any location listed on the declarations as an insured location, including any private approaches to the property.

8. Livestock

The animals considered as livestock are cattle, sheep, swine, goats, horses, mules, and donkeys. If other livestock is kept, such as llamas, bison, water buffalo and other exotic or unusual animals, a special endorsement is necessary to extend coverage by extending the definition of livestock.

9. Money

Money is currency and coins. The term is also bank notes, scrip, debit or smart cards, money orders, register checks and travelers checks. All these items are easily used as substitutes for cash. The currency, coins, and bank notes must be in use and have a face value.

10. Pollutants

This term is referring to irritants and contaminants in any state. Waste and materials to be recycled, reclaimed, or reconditioned are also pollutants if they are irritants and contaminants.

11. Poultry

A fowl that is kept by the named insured. The reason the fowl is kept must be for sale or for use.

Note: A pet fowl would not be considered poultry.

Example: Priscila loves her hens. She has 10 that regularly produce eggs. These are considered poultry. Priscilla also has three hens that are no longer producing but have become pets to her. They will not be sold. These are not poultry.

12. Securities

Securities are instruments or contracts that represent money or other assets. These can be negotiable or non-negotiable items. The items defined within the money definition in this section are not securities.

13. Specified Causes of Loss (04 16 change)

Note: This term is used in the Collapse Additional Coverage.

The definition varies based on the covered causes of loss.

a. When the causes of loss are either Basic or Broad the term means fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing equipment, sinkhole collapse, volcanic action, falling objects, weight of snow, ice or sleet and water damage. Some of these terms need additional explanation:

· Smoke includes puffback, soot, fumes, or vapors from furnaces.

· Sinkhole collapse is covered only when land suddenly sinks into an empty space created underground by water acting on limestone. It does not include the cost of filling the hole or any sinking into man-made spaces.

· Falling objects do not include coverage for property in the open or for the falling object itself. There is no coverage for damage to the interior of a building or personal property in that building unless the falling object first breaches and creates an opening in the building.

· Water damage is the accidental discharge or leaking due to breaking apart or cracking of different systems that contain water or steam. Damage related to sump systems is not considered water damage.

b. When the causes of loss are Special, one paragraph is added to the above. The paragraph expands the definition of water damage. Water damage that starts with the breaking of an off location municipal water supply system water or sewer pipe is covered. The cause of the break must be wear and tear and result in discharge or leaking of water or waterborne material.

Note: The changes to this item are the splitting of the definition between basic/broad and special. There is no change to the basic/broad definition, but the special adds the off location pipe breakage water damage.

14. Unoccupancy and Unoccupied

These terms refer to a dwelling not being lived in or to a building or structure not being used. A structure is considered unoccupied even if it contains furnishings and other property related to the normal occupancy. The term is related to the actual, not the potential, use of a covered building. A building or dwelling under construction is not considered unoccupied.

15. Vacancy and Vacant

A dwelling or building is vacant when it no longer contains furnishings or property necessary for it to be used in the intended manner. A building or dwelling under construction is not treated as vacant.

D. LIMITS OF INSURANCE

The policy pays the less of either the limit shown in the Declarations or the special limit that applies to certain categories of covered property. Whatever limit is used applies per occurrence.

E. DEDUCTIBLE

The insurance company does not pay a loss until the amount of loss exceeds the deductible stated in the declarations. The company then pays until it pays the amount of the loss, reaches the limit of insurance or the special limit of insurance. If more than one deducible applies to one occurrence, only the highest deductible is used.

Example: A brushfire swept through the Bar Z ranch. Three barns, a donkey, ten horses, two tractors, the house, and all of its contents were destroyed. All the property was insured under the same policy. When the loss was adjusted, only the $1,000 deductible for the dwelling was applied, instead of having to satisfy a separate deductible for each type of property.