Summary: The signs coverage form (CM 00 28 09 00) is one of the forms of the current inland marine program of Insurance Services Office. According to ISO's manual, it affords open perils coverage only for neon, fluorescent, automatic, or mechanical electric signs and lamps. Ineligible for coverage are billboards or ordinary fixed signs, whether or not they are directly illuminated by electric lights.
Under the inland marine program's modular format, a complete signs policy is formed by combining a signs coverage form with a declarations page—where all covered property is scheduled with limits of insurance—a common policy conditions form, and an inland marine general conditions form. Alternately, these forms may be added to forms and endorsements of the other commercial lines programs to form a commercial package policy.
Coverage
A. Coverage
We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.
1. Covered Property, as used in this Coverage Form, means:
a. Your signs; and
b. Similar property of others in your care, custody or control.
2. Property Not Covered
Covered Property does not include contraband, or property in the course of illegal transportation or trade.
Analysis
Under the signs coverage form, covered property includes the insured's signs and similar property belonging to others that is in the insured's care, custody, or control. It does not include contraband or property in the course of illegal transportation or trade.
Even though the coverage form makes no mention of it, the manual states that the form covers only neon, fluorescent, automatic, or mechanical electric signs and lamps. It does not cover ordinary wooden signs or billboards, even if they are illuminated by electric lights. The manual also stipulates that this form must be written on a non-reporting basis.
3. Covered Causes of Loss
Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE to Covered Property except those causes of loss listed in the Exclusions.
4. Additional Coverage—Collapse
We will pay for direct loss or damage caused by or resulting from risks of direct physical loss or damage involving collapse of all or part of a building or structure caused by one or more of the following:
a. Fire; lightning; windstorm; hail; explosion; smoke; aircraft; vehicles; riot; civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling objects; weight of snow, ice or sleet; water damage; earthquake; all only as insured against in this Coverage Form;
b. Hidden decay;
c. Hidden insect or vermin damage;
d. Weight of people or personal property;
e. Weight of rain that collects on a roof;
f. Use of defective materials or methods in construction, remodeling or renovating if the collapse occurs during the course of the construction, remodeling or renovating.
This Additional Coverage does not increase the Limits of Insurance provided in this Coverage Form.
Analysis
Property is insured against direct physical loss or damage subject to the exclusions as explained below. Note the emphasis on the loss being direct and physical. The major example of an indirect loss is loss of income. Thus, if the insured suffered lost income due to his big neon sign having been blown down, this form provides no coverage for the lost income. The loss also must be physical. If the big neon sign had been ordered to be installed by the date of the grand opening but was delayed in shipment, the loss of the sign is not covered.
Collapse is covered for named perils as an additional coverage, because collapse in general is one of the form's exclusions. The policy framers wanted to limit collapse coverage to just those perils listed as additional coverages. Note that the additional coverage refers to the collapse of a building or a structure, as opposed to the collapse of the sign. While some might argue that collapse of the sign itself is therefore not covered by the perils listed, a better interpretation is that the sign itself is a structure and therefore covered to the extent of the named perils if it collapses.
The 1995 form added additional perils to paragraph 4.a. that did not apply to collapse coverage in the 1990 and earlier forms. They are leakage from fire extinguishing equipment, sinkhole collapse, and volcanic action. The current form added earthquake to the list. On the other hand, the breakage of glass peril found in the older forms is now restricted to breakage of building glass.
Note that the additional coverage provided by the collapse perils do not serve to increase the limit of insurance.
Exclusions
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
a. Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
b. Nuclear Hazard
(1) Any weapon employing atomic fission or fusion; or
(2) Nuclear reaction or radiation, or radioactive contamination from any other cause. But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this Coverage Form.
c. War And Military Action
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
Exclusions B.1.a. through B.1.c. apply whether or not the loss event results in widespread damage or affects a substantial area.
2. We will not pay for loss or damage caused by or resulting from any of the following:
a. Delay, loss of use, loss of market or any other consequential loss.
b. Breakage during transportation, or breakage during installation, repairing or dismantling.
But we do insure against such loss or damage caused directly by fire, lightning, or by accident to the vehicle carrying the property if these causes of loss would be covered under this Coverage Form.
c. Dishonest or criminal act committed by:
(1) You, any of your partners, employees, directors, trustees, or authorized representatives;
(2) A manager or a member if you are a limited liability company;
(3) Anyone else with an interest in the property, or their employees or authorized representatives; or
(4) Anyone else to whom the property is entrusted for any purpose.
This exclusion applies whether or not such persons are acting alone or in collusion with other persons or such acts occur during the hours of employment.
d. Artificially generated current creating a short circuit or other electric disturbance within an article covered under this Coverage Form.
But we will pay for direct loss or damage caused by resulting fire if the fire would be covered under this Coverage Form.
This exclusion only applies to loss or damage to that article in which the disturbance occurs.
e. Voluntary parting with any property by you or anyone entrusted with the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
f. Unauthorized instructions to transfer property to any person or to any place.
g. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
3. We will not pay for loss or damage caused by or resulting from any of the following. But if loss or damage by a Covered Cause of Loss results, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss or damage.
b. Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.
c. Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or
(4) Maintenance;
of part or all of any property wherever located.
d. Collapse except as provided in the Additional Coverage-Collapse section of this Coverage Form.
e. Wear and tear, any quality in the property that causes it to damage or destroy itself, hidden or latent defect, gradual deterioration; mechanical breakdown; dampness, cold or heat.
Analysis
The exclusions, which define the coverage in an “open perils” coverage form, come in three sections. The first section excludes governmental action, nuclear hazard, and war and military action. These three exclusions are subject to the “concurrent causation” language found in property policies. It says that the exclusions apply regardless of any other cause or event that contributes concurrently or in any sequence to the loss. Thus if the building holding up the sign collapses because a mortar fired in military action hits it, the insured cannot claim coverage under the named collapse peril of falling objects.
However, the first two exclusions in the first group contain exceptions that allow coverage. The form does pay for loss caused by destruction ordered by a governmental authority to prevent the spread of a fire. Similarly, the nuclear hazard exclusion allows coverage for resulting fire.
The remaining two groups of exclusions are not subject to the concurrent causation language. The second group lists a number of non-physical type losses, such as delay, loss of use, dishonest or criminal acts, short circuits and other electrical disturbances within the sign, voluntary parting, and unauthorized instructions to transfer the sign. Some of these exclusions allow coverage if fire results, but in general they are non-physical types of losses.
Exclusion 2.b., breakage during transportation, installation, or repair or dismantling seems to expect that the contractor doing the work be responsible for the coverage. Exclusion 2.c. excluding dishonest or criminal acts, allows coverage for signs that are entrusted to carriers for hire or acts of destruction by the insured's employees. Yet, new in the 1995 form is the assertion that theft by an employee is not covered. The 1995 form also extends exclusion 2.c. to apply to partners, directors, and trustees, as well as employees.
The third group of exclusions except covered causes of loss from the effect of the exclusions. This general exception, found in the introductory paragraph, serves to narrow the effect of the exclusions. With the exception of weather conditions, these exclusions are often subject to concurrent causation wording in property forms. That they are not in this form, confirms that the exclusions are to be applied only when a covered cause of loss does not result. Thus wear and tear and mechanical breakdown, for example, are only excluded when no direct physical accidental damage occurs. This is quite a different exclusion from its counterpart found in property forms. Note that the collapse exclusion is in this group. The covered causes of loss applying to collapse are found in the additional coverages section of the form. It may seem strange to exclude weather conditions, such as wind and the weight of snow, but this exclusion applies only if the weather is a contributing factor in a governmental action, nuclear hazard, or a war loss.
Limits of Insurance
C. Limits Of Insurance
The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.
Analysis
This clause is straight forward and common. However, the manual states that standard rates may be applied to risks with total values of less than $100,000 and to individual signs valued at less than $25,000. Insureds with coverage needs outside these parameters should request special rates from the company. Further, there is a 50 percent reduction in rates for signs located inside buildings.
Deductible
D. Deductible
We will not pay for loss or damage in any one occurrence until the amount of the adjusted loss or damage before applying the applicable Limits of Insurance exceeds the Deductible shown in the Declarations. We will then pay the amount of the adjusted loss or damage in excess of the Deductible, up to the applicable Limit of Insurance.
Analysis
According to the manual, the deductible is optional on this form. When it is chosen, it usually an amount equal to five percent of the coverage limit. Thus, the insured will absorb the first part of the loss equaling five percent of the limit. Then the insurer will pay the balance of the loss up to the limit of liability.
Additional Conditions
E. Additional Conditions
The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
1. Coverage Territory
We cover property wherever located within:
a. The United States of America (including its territories and possessions);
b. Puerto Rico; and
c. Canada .
2. Coinsurance
If a Coinsurance percentage is shown in the Declarations, the following condition applies.
We will not pay the full amount of any loss if the value of Covered Property, except property in transit, at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property.
Instead, we will determine the most we will pay using the following steps:
a. Multiply the value of Covered Property, except property in transit, at the time of loss by the Coinsurance percentage;
b. Divide the Limit of Insurance of the property by the figure determined in Step a.;
c. Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step b.; and
d. Subtract the deductible from the figure determined in Step c.
We will pay the amount determined in Step d. or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.
Analysis
In addition to the conditions on the inland marine and the common policy conditions forms, these conditions also apply to covered property on the signs coverage form. The territory covered by the form is standard for most inland marine forms.
The signs coverage form has a coinsurance percentage listed in the declarations. The coinsurance clause details the amount that the insurer will pay for loss if the value of the covered property at the time of loss times the coinsurance percentage shown in the declarations is greater than the limit of insurance for the property—in other words, if the insured does not have insurance to value. Note that property in transit is excepted from this coinsurance discussion. The coinsurance clause applies before the deductible is applied to the loss.
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