Changes to the Commercial Property Form

MS DC 01 increases the fire department service charge from $1,000 to $5,000. The service charge is for the insured's liability for fire department service charges when the fire department is called to save or protect covered property from a covered cause of loss.

Additional Coverages

The commercial property form offers several additional coverages. The MS DC 01 adds ten more coverages to this category.

Customers' Goods. The MS DC 01 will pay for loss or damage to customers' goods resulting from a covered cause of loss. “Customers' goods” is a defined term.

A limit of insurance for customers' goods must be indicated in the declarations in order for the coverage to be provided. The only types of goods for which this additional coverage is available are as follows: (1) other than furs, fur garments, or garments trimmed with fur at a premises described in the declarations and not in storage; (2) comprised of furs, fur garments, or garments trimmed with fur at the premises described in the declarations and not in storage; (3) in transit; and (4) in storage and at a premises described in the declarations, for which a storage receipt has been issued.

The coverage also pays for earned charges that become uncollectible due to loss or damage to customers' goods, loss or damage due to misidentification of customers' goods, and loss or damage to customers' goods temporarily at a premises not described in the declarations. The most that will be paid for goods temporarily at a premises not described in the declarations is $10,000.

The form will not pay for loss or damage in the following circumstances: (1) when the insured accepts customers' goods without charging a fee; (2) while customers' goods are in the custody of other bailees, unless the property is at a premises described in the declarations or is in the care, custody, or control of a carrier for hire; (3) caused or resulting from theft from an unattended vehicle unless the vehicle's windows, doors, and compartments were closed and locked at the time of the theft and there are visible signs of forced entry; (4) caused or resulting from processing or work upon the property. If fire or explosion result from any of these circumstances, direct loss or damage caused is covered.

Because of the additional coverage for customers' goods, a description of how customers' goods are valued is added to the valuation loss condition of the commercial property form. The least of the following amounts is the value of customers' goods: (1) amount at which the insured's liability is limited under contract; (2) actual cash value; (3) cost of restoring the property to its preloss condition; or (4) cost of replacing the property with substantially identical property. The value includes labor, materials, and services provided or arranged by the insured.

The additional coverage for customers' goods also warrants a supplement to the Additional Conditions section of the commercial property form. The form states that the insurer may repair or replace any part of a pair or set to set its value before the loss or may pay the difference between the value of the pair or set before and after the loss. The form further allows the insured to settle losses that are less than $500 with the owners of the property, and the insurer will provide reimbursement within thirty days of receiving the required statements of loss.

The following commercial property provisions do not apply to the customers' goods additional coverage:

1. personal property of others under covered property in the coverage section;

2. personal effects and property of others and property off-premises coverage extensions;

3. the deductible section as it applies to customers' goods in the care, custody, or control of a carrier for hire;

4. the coinsurance additional condition; and

5. property in transit under additional coverage extensions in the special causes of loss form.

The following exclusions apply to the additional coverage for customers' goods:

1. ordinance or law;

2. governmental action;

3. nuclear hazard;

4. war and military action;

5. artificially generated electrical current;

6. delay, loss of use, or loss of market;

7. smoke, vapor, or gas from agricultural smudging or industrial operations;

8. wear and tear; rust or other corrosion, decay, deterioration, hidden or latent defect, or any quality in property that causes it to damage or destroy itself;

9. smog;

10. nesting or infestation, or discharge or release of waste products or secretions by insects, birds, rodents, other animals;

11. mechanical breakdown;

12. dishonest or criminal acts;

13. voluntary parting;

14. discharge, dispersal, seepage, migration, release, or escape of pollutants;

15. neglect of insured to save and preserve property;

16. weather conditions; and

17. acts or decisions.

The following limitations from the commercial property special causes of loss form do not apply to the customers' goods additional coverage:

1. steam boilers, steam pipes, steam engines, or steam turbines caused by or relating to a any condition or event inside such equipment;

2. hot water boilers or other water heating equipment caused by or resulting from any condition or event inside such equipment;

3. interior of any building or structure or personal property in the building or structure caused by rain, snow, sleet, ice, sand, dust, whether driven by wind or not;

4. building materials and supplies not attached as part of the building or structure, caused by or resulting from theft; and

5. the $2,500 special limit for furs, fur garments, and garments trimmed with fur.

Money and Securities. MS DC 01 will pay for loss of money and securities (both defined terms) used in the named insured's business. The coverage is there while the money and securities are at a bank or savings institution, within the living quarters of the named insured or any employee having use and custody of the property, at the described premises, or in transit between any of these places; the insured has, in effect, crime coverage both inside and outside the premises described in the declarations page. The covered causes of loss are theft, disappearance, or destruction; excluded cause of loss are accounting or arithmetical errors, loss due to giving property in any exchange or purchase, and loss of property contained in any money-operated device.

Unless different limits are shown in the declarations, the most paid under this additional coverage is $5,000 while the money and securities are in a bank or in the described premises, and for loss while the money and securities are anywhere else. All loss cause by one or more persons and involving a single act or series of related acts is considered one occurrence; this is important since the loss is covered on a per occurrence basis.

Finally, the insured must keep records of all money and securities so the insurer can verify the amount of any loss or damage.

Fire Extinguisher Systems Expense. This endorsement will pay for the cost of recharging or replacing—whichever is less—the fire extinguishers and extinguishing systems if they are discharged on or within 100 feet of the described premises. Also covered is loss or damage to covered property as a result of an accidental discharge, but not if the system is discharged during installation or testing. The most that will be paid under this coverage is $5,000 in any one occurrence, with no deductible applying.

Reward Payment. The named insured will be reimbursed up to $5,000 for rewards paid to an eligible person for information leading to the arrest and conviction of any person committing a crime resulting in loss to covered property from a covered cause of loss. Up to $5,000 is also paid for a reward paid to an eligible person for the return of stolen property when the loss is caused by theft.

An “eligible person” is defined as “that person designated by a law enforcement agency as being the first to voluntarily provide the information leading to the arrest and conviction or return of the stolen covered property.” The following persons cannot be eligible persons: the named insured and family members; the named insured's employees and family members; an employee of a law enforcement agency; an employee of a business engaged in property protection; any person who had custody of the covered property at the time the theft was committed; or any person involved in the crime. And, no reward will be reimbursed unless and until the person committing the crime is convicted (no word on how appeals affect this requirement), or the covered property is returned.

Money Orders and Counterfeit Money. The insurer will pay for loss resulting directly from the named insured's having accepted in good faith money orders not paid upon presentation, or counterfeit money that is acquired during the regular course of business. The most that will be paid for any loss under this additional coverage is $1,500 unless a different limit is shown in the declarations.

Forgery or Alteration. The insurer promises to pay for loss resulting from forgery (a defined term) or alteration of checks, drafts, promissory notes, or similar written promises to pay a sum certain in money. The most to be paid is $2,500 in any one occurrence, unless a different limit is shown in the declarations. This amount includes legal expenses for defense of the insured in case the insured is sued for refusing to pay the forged or altered instrument on the basis that it has been forged or altered.

Outdoor Signs. The insurer promises to pay for direct physical loss of or damage to all outdoor signs at the described premises owned by the named insured, or owned by others but in the care, custody, or control of the named insured. The most to be paid in any one occurrence is $5,000, unless a different limit for outdoor signs is shown in the declarations. The provision supersedes all other outdoor sign coverage references on the commercial property form.

Employee Dishonesty. MS DC 01 will pay for direct loss of or damage to the named insured's business personal property, money, and securities resulting from dishonest acts committed by any of the named insured's employees. The employees have to have the manifest intent to cause the named insured to sustain loss and to obtain financial benefit. The loss suffered by the insured will be paid up to $5,000 in any one occurrence. All loss or damage caused by one or more employees and involving a single act or series of related acts is considered one occurrence.

There are several limitations to this coverage. The form will not pay for loss or damage resulting from any dishonest or criminal act committed by the named insured, partners, members, officers, managers, directors, trustees, authorized representatives, or by anyone to whom the named insured entrusts the property that is taken or damaged. The endorsement will not pay for loss or damage the proof of which as to its existence or amount is based on an inventory computation or a profit or loss computation. The endorsement will not apply to loss or damage that the named insured sustains through acts not committed during the policy period, and the coverage will apply only for loss or damage discovered no later than one year from the end of the policy period. The limits of insurance for this type of coverage do not accumulate from policy period to policy period. And, this endorsement does not apply to loss caused by any employee after discovery by the named insured of any dishonest act committed by that employee before or after being hired by the named insured.

Ordinance Or Law—Equipment Coverage. MS DC 01 promises to pay to repair or replace covered property as required by law when the loss is caused by a covered cause of loss. If a covered cause of loss occurs to covered refrigeration equipment, the cost to reclaim the refrigerant as required by law, the cost to retrofit the equipment to use non-CFC refrigerant as required by federal law, and the increased cost to recharge the system with non-CFC refrigerant are all covered. The terms of coverage apply separately to each piece of covered equipment.

If replacement cost coverage applies and the insured repairs or replaces the equipment, the insured will pay the lesser of the amount actually spent to repair the equipment, but not more than it would cost to replace the equipment with that of the same kind and quality or the limit of insurance. If the equipment is not repaired or replaced when the replacement cost coverage option applies, the insurer will pay the lesser of the actual cash value of the equipment at the time of loss or the limit of insurance.

The insurer will not pay for loss due to any ordinance or law that the insured was required to comply with before the loss even if the equipment was undamaged and that the insured failed to comply with. The coinsurance additional condition does not apply to the coverage.

Artificially Generated Electrical Current. The endorsement will pay for loss or damage to computers due to artificially generated electrical current if such loss or damage is caused by or results from an occurrence that took place within 1,000 feet of the described premises or interruption of electric power supply, power surge, blackout, or brownout if the cause of the occurrence took place within 1,000 feet of the described premises.

Coverage Extensions

MS DC 01 makes several changes to the coverage extensions section of the building and personal property coverage form, CP 00 10.

Newly Acquired or Constructed Property. The form replaces the commercial property policy's period of coverage provision of newly acquired or constructed property with a provision stating that coverage will end when the policy expires, thirty days after the named insured acquires the property or begins construction, the named insured reports values, and, with respect to computers, when specific insurance at the newly acquired premises is obtained—whichever comes first. Additional premium will be charged for values reported from the date the named insured acquires the property or begins construction.

Personal Effects and Property of Others. The business personal property insurance is extended to personal effects owned by the named insured, officers, partners, members, managers, and employees; it is also extended to personal property of others in the care, custody, or control of the named insured. The most that the insurer will pay is $5,000 in any one occurrence while the property is at each described premises.

Valuable Papers and Records (Other Than Electronic Data). The business personal property insurance is extended to apply to direct physical loss or damage to valuable papers and records that the named insured owns, or that are in the care, custody, or control of the named insured. Coverage includes the cost to research lost information on valuable papers and records for which duplicates do not exist, but not valuable papers and records that exist as electronic data. The loss or damage must be caused by the specified causes of loss as defined in the causes of loss—special form, or by collapse. The most that the insurer will pay under this extension is $10,000 in any one occurrence at each described premises; for valuable papers and records not at a described premises, the most that will be paid is $5,000. These amounts are additional insurance. The cost of blank material for reproducing the records, whether or not duplicates exist, and in the case where duplicates do exist, for the cost of labor to transcribe or copy the records, is covered as well, subject to the applicable limit of insurance. This is not additional insurance.

Property Off-Premises. The named insured may extend coverage to property while it is away from the described premises, under certain conditions. The property must be temporarily at a location that the named insured does not own, lease, or operate; or the property must be in storage at a location leased by the named insured; or the property must be at a fair, trade show, or exhibition. The extension does not apply to property in or on a vehicle (except for computers), or to property in the care, custody, or control of the named insured's salespersons (unless the property is in such care at a fair, trade show, or exhibition). The most the insurer will pay for loss or damage is $10,000 in any one occurrence unless a different amount is shown in the declarations.

Outdoor Property. MS DC 01 will pay for loss or damage to fences and retaining walls that are not part of a building; the most that will be paid in any one occurrence is $2,500. The endorsement will pay for loss or damage to outdoor radio, television, satellite, or other antennas; the most to be paid for this coverage extension is $3,000 in any one occurrence. Covered also are trees, shrubs, and plants other than stock (a defined term); the most paid here is $2,500 in any one occurrence, but not more than $500 for any one tree, shrub, or plant. This coverage for outdoor property is only for the following covered causes of loss: fire, lightning, explosion, riot or civil commotion, or aircraft.

Accounts Receivable. Coverage may be extended to accounts receivable. The endorsement will pay all amounts due from the named insured's customers that cannot be collected, interest charges on any loan required to offset amounts that cannot be collected, necessary excess collection expenses, and other reasonable expenses incurred by the named insured to reestablish accounts receivable records. The payment is made due to direct physical loss or damage by any covered cause of loss to the accounts receivable records. The most that will be paid under this extension in any one occurrence is $5,000 unless a different limit is shown in the declarations. For accounts receivable not at a described premises, the most the insurer will pay is $2,500 in any one occurrence.

Changes to the Causes of Loss Form

MS DC 01 modifies the causes of loss—special form, CP 10 30. Certain changes are made to particular parts of form CP 10 30.

The mechanical breakdown exclusion in the exclusions section of CP 10 30 does not apply to loss or damage to computers.

The paragraphs referencing the excluded causes of loss to personal property in the exclusions section are replaced by the following: We will not pay for loss or damage caused by or resulting from the following causes of loss: dampness or dryness of atmosphere or changes or extremes of temperature (unless such conditions result from physical damage caused by a covered cause of loss to an air conditioning unit or system); or marring or scratching. However, if one of these excluded causes of loss results in a specified cause of loss (a defined term) or building glass breakage, the insurer will pay for the loss or damage caused by that specified cause of loss or glass breakage.

The following four exclusions are added to the exclusions section, but apply only to coverage for computers. These exclusions apply regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

Errors or Omissions. The endorsement does not apply to loss or damage caused by errors or omissions in processing, recording, or storing electronic data on computers. However, the insurer will pay for direct loss or damage caused by resulting fire or explosion if these causes of loss would be covered by the endorsement.

Electrical Disturbance. Loss due to electrical or magnetic injury, disturbance, or erasure of electronic recordings is not covered. Direct loss or damage caused by lightning is covered.

Computer-Related Losses. The inability to correctly recognize, process, distinguish, interpret, or accept one or more dates or times is another cause of loss that MS DC 01 does not cover. This relates to failure, malfunction, or inadequacy of the following: computer hardware, application software, operating systems and related software, networks, microprocessors (computer chips) that are not part of any computer system, and any other computerized or electronic equipment or components. The failure, malfunction, or inadequacy of any other products, any services, data, or functions that directly or indirectly use or rely upon the items listed are also excluded.

Computer Advice or Consultation. The form will not respond to a loss or damage caused by any advice, consultation, design, evaluation, inspection, maintenance, repair, replacement, or supervision provided or done by or for the named insured in order to rectify or test for any potential or actual problems described in the previously mentioned computer-related loss clause.

If an excluded cause of loss as described in these four clauses results in a specified cause of loss (a defined term on CP 10 30), or in elevator collision resulting from mechanical breakdown, the insurer will pay for the loss or damage caused by these things.

The exclusions section of CP 10 does not apply to the coverage for employee dishonesty that this endorsement provides, except for the governmental action, nuclear hazard, and war and military action exclusions.

The exclusions section and the limitations section do not apply to the coverage for outdoor signs that MS DC 01 provides. There are exceptions. The following exclusions do apply: governmental action, nuclear hazard; war and military action; wear and tear; rust or other corrosion, decay, deterioration, hidden or latent defect in the property that causes it to destroy itself; and mechanical breakdown, including rupture or bursting caused by centrifugal force.

As for the coverage for valuable papers and accounts receivable that MS DC 01 offers, the endorsement notes that the exclusions section of CP 10 30 does not apply except for certain exclusions. The exclusions that apply to valuable papers and accounts receivable coverage are as follows: governmental action; nuclear hazard; war and military action; computer-related losses; computer advice or consultation; continuous or repeated seepage or leakage of water; water and other liquids that flow from plumbing or air conditioning equipment; weather conditions; acts or decisions of any group, person, organization, or governmental body; and faulty, inadequate, or defective design, workmanship, maintenance, or materials used in repair or construction of part or all of any property on or off the described premises.

The exclusions that apply just to accounts receivable coverage are as follows: loss or damage caused by or resulting from alteration, falsification or destruction of records of accounts receivable done to conceal the wrongful giving or taking of money, securities, or other property; loss or damage caused by or resulting from bookkeeping, accounting or billing errors; any loss or damage that requires any audit of records or any inventory computation to prove its factual existence.

MS DC 01 also offers an additional coverage extension for property in transit. The coverage for loss or damage is increased to $10,000 from the $5,000 offered under CP 10 30.

Changes to the CGL Form

The MS DC 01 changes several sections of the CGL form.

An insuring agreement applying to delivery errors and omissions is added to the coverages section of the CGL form. The insuring agreement promises to pay for sums the insured becomes legally obligated to pay as damages because of a failure to deliver or a misdelivery of items the insured holds for sale by any of the insured's employees or by a concessionaire trading under the insured's name. The insurer has the right and duty to defend the insured against any suit (a defined term), but not against a suit seeking damages for delivery errors and omissions to which the insurance does not apply. The most that will be paid under this insuring agreement is the limit of insurance when the loss or damage in any one occurrence exceeds $250. The right and duty to defend end when the limit of insurance has been reached. The errors in delivery must take place within the coverage territory and during the policy period.

The insurance does not apply to intentional errors, misdeliveries, or failures to deliver; bodily injury, property damage, or personal advertising injury; or discrimination based on a customer's race, color, national origin, religion, gender, marital status, age, sexual orientation or preference, physical or mental condition, or residence location.

The supplementary payments provisions applicable to bodily injury and property damage liability and personal and advertising injury liability coverages also apply to delivery errors and omissions coverage.

Another insuring agreement added under MS DC 01 is sales and disposal liability coverage. The insuring agreement promises to pay for the sums that the insured becomes legally obligated to pay as damages due to acts or omissions arising out of the sale or disposal of customers' goods in the course of sale and disposal operations.

The insurance does not apply to liability or damages that the insured is obligated to pay by the assumption of liability in a contract or agreement—the exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement. Liability arising out of dishonest or criminal acts by the named insured, the named insured's employees, or any other person the named insured entrusts with such property is excluded.

The following is added to the limits of insurance section of the CGL form. The most that the insurer will reimburse the named insured for the sum of all damages covered under the delivery errors and omissions or the sale and disposal liability coverage insuring agreements is $5,000 in any annual period.

Finally, the duties in the event of a claim clause of the CGL form is changed for the delivery errors and omissions and sale and disposal liability coverages. The named insured must notify the insurer as soon as possible of any error or omission that may result in a claim, including information about how, when, and where the error or omission took place and the names and addresses of those making a claim. Notice of a claim or suit brought against the insured must be given as soon as practicable, and the specifics of the suit and the date it was received must be immediately recorded. Copies of all demands, notices, summonses, or legal papers received in connection with the suit must immediately be sent to the insurer. The insurer should be authorized to obtain records and other information, as well. And, of course, the named insured has to cooperate with the insurer in the investigation or settlement of the claim or defense against the suit.

Definitions

There are nine definitions on the MS DC 01.

Computer. Computer means the named insured's programmable electronic equipment that is used to store, retrieve, and process electronic data. It includes their component parts and dedicated air conditioning, fire suppression equipment, and electrical equipment used exclusively in the named insured's computer operations; and associated peripheral equipment that provides communication, including input and output functions such as printing or auxiliary functions such as electronic data transmission. It does not include electronic data and media.

Counterfeit money. Counterfeit money is an imitation of money that is intended to deceive and to be taken as genuine.

Customers' goods. Customers' goods are goods and articles that are the property of the named insured's customers that are accepted by the named insured for laundering and dry cleaning or other similar work.

Employee. Employee means any natural person while in the named insured's service or for thirty days after termination of service who the named insured compensates directly by salary, wages, or commissions; and who the named insured has the right to direct and control while performing services for the named insured; or any natural person who is furnished temporarily to the named insured to substitute for a permanent employee, as defined, who is on leave—or to meet seasonal or short term work load conditions—while that person is subject to your direction and control and performing services for you.

Forgery. Forgery is the signing of the name of another person or organization with intent to deceive.

Manager. Manager means a person serving in a directorial capacity for a limited liability company.

Money. Money is currency, coins, and bank notes in current use and having a face value; and travelers checks, register checks, and money orders held for sale to the public.

Sale And Disposal Operations. Sale and disposal operations are all activities the named insured conducts to sell or dispose of customers' goods that are unclaimed by the owner of the property.

Securities. Securities means negotiable and nonnegotiable instruments or contracts representing either money or other property and includes redeemed coupons, tokens, tickets, revenue, and other stamps (whether represented by actual stamps or unused value in a meter) in current use; and evidences of debt issued in connection with credit or charge cards, which cards are not issued by the named insured.

Endorsements

Endorsement MS DC 02 offers equipment breakdown protection coverage. This endorsement is subject to all the provisions of the building and personal property coverage form, causes of loss—special form, and, if attached to and made part of the policy, the business income (and extra expense) coverage form.

This endorsement declares that the insurer will pay for direct loss of or damage to covered property at the premises described in the declarations caused by or resulting from a mechanical breakdown or electrical failure to pressure, mechanical, or electrical machinery and equipment. The following exclusions found on the causes of loss—special form do not apply to this coverage: the artificially generated electrical current exclusion; the mechanical breakdown exclusion; and the exclusion relating to explosion of steam boilers, steam pipes, steam engines, or steam turbines owned or leased by the named insured, or operated under the control of the named insured. The following limitations found in the causes of loss—special form also do not apply: the limitation relating to steam boilers, steam pipes, steam engines, or steam turbines; and the limitation relating to hot water boilers or other water heating equipment.

MS DC 02 also states that the insurer will not pay for loss or damage in any one occurrence until the amount of loss exceeds the deductible shown in the declarations for equipment breakdown protection coverage for any loss to covered property caused by mechanical breakdown or electrical failure.

Mechanical breakdown or electrical failure to pressure, mechanical or electrical machinery and equipment does not mean any malfunction, leakage at any valve, fitting, or connection, damage to any vacuum tube, or the functioning of any safety or protective device.

The provisions of this coverage do not increase any amount of insurance that is otherwise provided in this policy.

Whenever any covered pressure, mechanical, or electrical machinery and equipment is found to be in, or exposed to, a dangerous condition, any representative of the insurer may immediately suspend the insurance against loss offered by this endorsement. This can be done by delivering or mailing a written notice of suspension to the last known address of the named insured, or the address where the pressure, mechanical or electrical machinery and equipment is located. If the insurer does suspend the insurance, the named insured gets a pro rata refund of premium.

Endorsement MS DC DS is a supplemental schedule for the dry cleaning and laundry facilities. Using this schedule, the insured can do a number of things. One section allows the insured to specifically list the desired limits of insurance per occurrence for certain coverages. These coverages include money and securities, forgery or alteration, outdoor signs, employee dishonesty, accounts receivable, and property in transit. Another section of the endorsement has a schedule wherein the insured can set limits of insurance for coverage of customers' goods, such as furs, fur garments, garments trimmed with fur, and other non-fur garments. A third section of MS DC DS has a schedule for equipment breakdown protection coverage that lists the deductible and the waiting period. Finally, the endorsement has a section in which the insurer can list the forms applicable to specific premises or coverages.