Introduction

The American Association of Insurance Services (AAIS) has developed an inland marine form (IM 7304 12 04) that can be used to insure mobile medical equipment. A common need for this coverage could be for equipment used in a mobile mammography unit, or a mobile clinic of the type often used in rural areas. Mobile equipment, in this instance, means equipment such as ultrasound equipment, CAT (computerized axial tomography) scanners, or MRI (magnetic resonance imaging) scanners. This is not an inclusive list, by any means. The form is intended to be used in connection with other forms a hospital, say, would have in a complete package. The AAIS form covers property only, and, although coverage for loss of income may be purchased, the form does not provide any professional liability coverage for those staffing the unit, or liability coverage should a mobile unit's driver negligently cause bodily injury or property damage.

The insuring agreement states that, in return for the named insured's payment of premium, the insurer provides the coverages as described. The coverages are subject to the terms and conditions, the schedule of coverages, and additional policy conditions relating to cancellation, examination of books and records, assignment of rights and duties—in other words, the standard general property conditions governing most policies of insurance. Any requested endorsements are also to be indicated on the schedule of coverages.

Definitions

As in usually the case in policies of insurance, you and your mean the persons or organizations named as the insured on the declarations. We, us and our refer to the insurer.

The following words or terms are also defined:

Earth movement. This term includes, but is not limited to, earthquake, landslide, mudflow, mudslide, mine subsidence, or sinking, rising, or shifting of the earth. The term includes any movement or vibration of the earth, other than sinkhole collapse.

Flood. As is common in many property forms, flood means surface water, tidal water, waves, or the overflow of a body of water, all whether driven by wind or not. Spray from any of these, whether wind-driven or not, is also excluded. Although “water beneath the surface of the ground” is not included here, as it is in many forms, nonetheless it is not a covered cause of loss.

Limit. The applicable amount of coverage is the “limit.”

Pollutant. As defined in this and other AAIS forms, “pollutant” means “electrical or magnetic emissions, whether visible or invisible, and sound emissions.” The definition also includes any “solid, gaseous, thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste,” wording that is common in, for example, ISO forms. And, as is common in most definitions of pollutant, waste includes materials that are to be recycled, reclaimed, or reconditioned.

Schedule of coverages. This refers either to the pages labeled as a schedule of coverage, or schedules pertaining to the mobile medical equipment coverage form, and declarations or supplemental declarations that pertain to the coverage form.

Sinkhole collapse. Sinkhole collapse is the sudden settlement or collapse of earth underneath the covered property, that results in the property's being dropped into the void created under the surface by the action or water on limestone or similar rock formation. Not included within the definition is the value of the land, or any cost of filling the sinkhole.

Specified perils. These include aircraft, civil commotion, explosion, falling objects, fire, hail, leakage from fire extinguishing equipment, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action (as defined) water damage, weight of ice, snow, or sleet, and windstorm. The peril of “falling objects” does not apply to personal property in the open, or to damage to the interior of buildings and structures (including personal property inside these) unless the falling object first damages the exterior or the roofs or walls. Water damage means sudden or accidental discharge or leakage of water or steam as a direct result of breaking or cracking of a part of the system or appliance containing the water or steam.

Terms. Terms are all of the provisions, conditions, limitations, definitions, and exclusions applicable to the coverage.

Volcanic action. Airborne volcanic blast or shock waves, ash, dust, or particulate matter, or lava flow are encompassed by this term. Not included, however, is any cost to remove ash, dust, or particulate matter that does not cause direct physical loss to the insured property.

Covered Property; Property Not Covered

Mobile medical equipment, which means diagnostic medical equipment which is either designed or installed to be moved from location to location, and similar property of others in the named insured's care, custody, or control, is covered. As used in the coverage, diagnostic medical equipment includes, but is not limited to, ultrasound equipment, X-ray equipment, CAT scanners, and MRI scanners.

The equipment must be described on the equipment schedule. Because of the extremely great cost of this equipment, a description should include manufacturer, make, model, and serial number. Simply stating, for example, “One CAT scan unit” would be insufficient in the event a loss had to be proved.

As is common in inland marine coverage forms, coverage is for “direct physical loss”—that is, there is coverage unless it is otherwise excluded.

The mobile medical equipment form does not cover air- or watercraft, even that on which covered property is installed, nor does it cover autos, trailers, or any self-propelled vehicles designed for highway use on which covered property is installed.

Property not covered also includes contraband or property in the course of illegal transport or trade, or money, food stamps, lottery tickets, accounts, or securities.

Coverage Extensions

The coverage form contains only one coverage extension, and that is for debris removal. The limit of coverage is 25 percent of the amount the insurer pays for any direct physical loss to covered property. This amount, though, is within the limit of insurance applicable to the covered property. However, if the debris removal expense exceeds 25 percent of the amount paid, or if the loss to property and debris removal combined exceeds the limit for the damaged property, an additional $5,000 is available.

The debris removal limit may be increased. If there is a coinsurance provision, it does not apply to this coverage extension. Not included as “debris removal” is any cost to extract pollutants from land or water, or to remove, restore, or replace polluted land or water. Pollution clean up is one of the supplemental coverages. See description later in this article.

Supplemental Coverages

There are two supplemental coverages: expediting expenses; and pollutant clean-up and removal. Each of these may be increased with a new limit of coverage indicated on the schedule of coverages. If no increase is shown, then the limit as indicated in the coverage form applies. Unlike the limit for debris removal, which is included within the limit applicable to the covered property, these coverages are separate from, and not part of, that limit. These limits cannot be combined or added to each other or to a limit under a coverage extension, including any supplemental coverage or coverage extension added by endorsement. Coinsurance requirements, if any, do not apply to these coverages.

Expediting expenses are those necessary to accelerate the permanent repairs or replacement and make temporary repairs to damaged mobile medical equipment. The expenses also include additional labor or overtime and transportation charges. Coverage is limited to $5,000, which is payable only when a covered cause of loss damages covered property.

Pollutant clean-up and removal is limited to $10,000 for each location, in any twelve-month period, for all expenses arising out of a covered cause of loss. Expenses are paid only if reported to the insurer in writing within 180 days from the date the covered loss occurred. Coverage applies to the expense to extract pollutants from land or water. Given the nature of the covered equipment, it might be prudent to carry additional radioactive contamination coverage as part of a complete package. For more information, see Radioactive Contamination Coverage.

Exclusions

Like most inland marine coverage forms, the mobile medical equipment form states that direct physical loss is covered unless otherwise limited or excluded. The exclusions that are prefaced by anti-concurrent causation language include the following perils:

Civil authority. Loss caused by order of civil authority, such as seizure, confiscation, quarantine, or destruction of property is not covered; however, destruction of property to prevent the spread of fire is covered, so long as the fire would have been covered by the policy. For example, loss from a fire intentionally set by the named insured would be excluded; loss from a brushfire caused by lightning would be covered.

Earth movement or volcanic eruption. Volcanic eruption includes explosion and effusion (lava flow). See the definition of “earth movement,” earlier in this article under the Definitions subheading. Direct loss caused by fire, explosion, or “volcanic action” (as defined) resulting from either earth movement or volcanic eruption is covered. Notably, the exclusion does not apply to covered property while in transit.

Flood. There is no coverage for property caused by “flood,” as defined. However, direct loss by fire, explosion, or sprinkler leakage resulting from “flood” is covered. And, as was the case with the exclusion for earth movement, the exclusion for flood does not apply to covered property while in transit.

Nuclear hazard. Loss caused by nuclear reaction, radiation, or radioactive contamination, however caused, is not covered. But if direct loss by fire results from the nuclear hazard, that loss is covered. (But see the exclusion for war and military action, later in this article.)

Sewer backup and water below the surface. Loss caused by water backing up through a sewer or drain is not covered, nor is loss from water beneath the surface of the ground. “Water below the surface of the ground” includes, but is not limited to, water exerting pressure on or flowing, seeping, or leaking through or into a covered building or structure. Direct loss by fire, explosion, or theft that results from sewer backup or water below the surface is covered. Covered property while in transit is exempt from this exclusion.

War and military action. This excluded cause of loss includes undeclared or civil war, insurrection or revolution, unlawful seizure of power, rebellion, or warlike action taken by a military force. The latter includes action taken to prevent or defend against an actual or expected attack, by any government, sovereign, or other authority using military personnel or other agents. In the event that any action falling within the scope of this exclusion also involves nuclear reaction, radiation, or radioactive contamination, this exclusion applies rather than the nuclear hazard exclusion.

The following exclusions are not prefaced by anti-concurrent causation language; therefore, many of the exclusions will not serve to prevent coverage if an ensuing covered loss occurs:

Contamination or deterioration. Loss caused by contamination or deterioration, including hidden vice, corrosion, decay, fungus, mildew or mold, rot, or rust is not covered. But if one of these results in a “specified peril” (see Definitions) the loss or damage caused by the specified peril is covered.

Criminal, fraudulent, dishonest or illegal acts. Loss resulting from these types of acts is excluded, if committed by the named insured, partners, officers, directors, trustees, members or managers or the employees or agents of any of these. The exclusion does not apply to acts of destruction by the named insured's employees, or to covered property in the custody of a carrier for hire.

Electrical currents. Loss caused by arcing or electrical currents (other than lightning) is excluded, but if a “specified peril” (as defined) results, that loss or damage is covered.

Fault, defect, or error. Loss caused by faulty, defective, or negligent planning, specification, workmanship, remodeling, repair, renovation, or maintenance is not covered, whether or not the property is covered by this coverage form. However, if fault, defect or error results in a “specified peril,” loss or damage caused by that peril is covered.

Loss of use. Loss of use, delay, or loss of market is not covered. (However, business interruption coverage can be purchased. See Endorsements, later in this article.)

Mechanical breakdown. Loss caused by mechanical, structural or electrical breakdown is not covered, but if one of these results in a specified peril, which in turn results in a loss, that loss is covered.

Missing property. As is common with property coverage forms, if the only proof of loss is shortage discovered upon taking inventory, or mysterious or unexplained disappearance, there is no coverage. Exempt is property in the custody of a carrier for hire.

Pollutants. Loss caused by discharge, dispersal, or release or escape of pollutants is not covered, unless caused by a specified peril. Excepted as well is loss covered under the supplemental coverage for pollutant clean-up or removal.

 

Temperature/humidity. Loss caused by dryness, dampness, or changes in temperature is not covered; however, if one of these results in a specified peril, the loss resulting from the specified peril is covered.

Voluntary parting. A common exclusion is for loss caused by voluntary parting, in which the insured is induced by a fraudulent trick or device to part with possession of or title to the property.

Wear and tear. Loss caused by wear and tear, marring, or scratching is not covered, since these are the things that occur over time and are thus uninsurable.

Loss Settlement Provisions; Valuation

As is common in property coverage forms, the named insured is responsible for prompt notice to the insurer or the insurer's agent, protection of property, and completion of a proof of loss within 60 days after the insurer's request. If the loss involves a crime, a police report must be filed. The named insured must also submit to examination under oath as reasonably requested by the insurer, and, upon request, produce records of tax returns and bank microfilms of cancelled checks relating to the value of the property. The damaged property must be available for the insurer's inspection.

If the named insured volunteers any payments, he or she does so at his or her own expense. The property cannot be abandoned to the insurer without the insurer's written permission. The named insured must cooperate with the insurer in performing all duties required by the policy.

Unless the insured has selected replacement cost coverage, valuation of the lost or damaged property is based on actual cash value at the time of the loss, with a deduction for depreciation.

If the insured has replacement cost coverage, then coverage is limited to the cost or repair or replacement with similar materials and used for the same purpose, but not to exceed the amount actually spent to repair or replace the property. Replacement cost will not be reimbursed until the property is actually repaired or replaced. A claim for actual cash value may be made prior to repair or replacement, and a claim for replacement may be made within 180 days after the loss.

Loss to an article which is part of a pair or set is based upon a reasonable proportion of the value of the entire pair or set. Such a loss will not be considered a total loss of the pair or set. In the same vein, if a loss involves loss to parts of an article, valuation will be based on the value of only the lost or damaged part, or the cost to repair or replace the part.

Loss Payment Provisions

The insurer will not cover more than the named insured's insurable interest in any property. The deductible as shown on the “schedule of coverages” (as defined) applies to any covered loss; in event of a loss only that amount exceeding the deductible will be paid.

Subject to any coinsurance, in event of a covered loss the lesser of: actual cash value; the cost to repair or replace the damaged or lost property; or the applicable limit is the most that will be paid. If more than one coverage of the policy applies to the same loss, no more than the actual claim, loss or damage will be paid—in other words, coverages cannot be added onto each other. If more than one policy applies, loss is handled on a proportional basis (if the policies are subject to the same terms), or on an excess basis if the terms of the policies are not the same.

The coinsurance provision is extensive, and gives detailed procedures as to how a loss will be handled. The insurer will pay only a part of the loss if the limit of insurance is less than the percentage of the value of the covered property as indicated in the schedule of coverages. The insurer determines the amount it will pay by multiplying the coinsurance percentage the insured has selected by the value of the covered property at the time of the loss. The limit for the covered property is then divided by this result; in turn, this figure is multiplied by the total amount of the loss (following the application of the deductible). If there is more than one limit, the procedure applies separately to each limit. If there is only one limit indicated on the schedule of coverages, the procedure applies to the total of all covered property to which the limit applies.

In event of a covered loss, the insurer has the following options: pay the value of the lost or damaged property; pay the cost to repair or replace the property; repair, rebuild or replace with other property of like kind and quality, or take all or part of the property at an agreed or appraised value. The insurer must notify the insured of its intent to rebuild, repair, or replace within 30 days of receipt of the proof of loss.

Losses are adjusted with the named insured, unless a loss payee is designated. A loss is payable within 30 days of receipt of the proof of loss, and the amount has been established through agreement or filing of an appraisal award.

Losses to property of others may be paid either to the named insured on behalf of the owner, or to the owner. Of course, if the insurer pays the owner, payment will not be made to the named insured.

Other Conditions

The conditions include an appraisal provision, conformity to statute clause, no benefit to another having custody of insured property clause, subrogation clause, and a provision for coverage in event of the death of the named insured. Also contained in the conditions section is a provision that voids coverage as to the named insured and any other insured, if the named insured or any other insured has committed willful misrepresentation of a material fact or circumstance, or fraud.

Notably, a payment under the coverage does not reduce limits; they are restored following a loss. All terms must be complied with prior to a suit being brought against the insurer; the time for bringing suit is two years after the named insured first has knowledge of a loss. The territory limit is within the United States, its territories and possessions, Canada, and Puerto Rico.

Endorsements

There are two endorsements that may be attached to form IM 7304 to provide broad coverage. The first of these is the additional coverages endorsement IM 7311 12 04. This endorsement increases the supplemental coverages of the basic form (expediting expense and pollutant clean-up) by adding six supplemental coverages. These are:

Medical supplies. If a limit is indicated on the additional coverages schedule, the insurer covers direct physical loss caused by a covered peril to film, including X-ray film, syringes, contrast dyes, medical tubes and lubricants, bandages, and gauze. The supplies must be in a vehicle (self-propelled or hauled by a tractor) that is transporting mobile medical equipment.

Newly purchased or leased equipment. If indicated on the schedule, direct physical loss by a covered peril to equipment leased or purchased during the policy period is covered for up to 60 days.

On-board electronics. If a limit is indicated, there is coverage is for permanently installed electronic equipment used for communications, monitoring refrigeration or heating equipment and a vehicle's mileage and speed, tracking the vehicle, or for navigation. Equipment must be in a vehicle, either self-propelled or hauled by a tractor.

Recharge of fire extinguishing equipment. When a limit is indicated, the insurer will pay for recharging fire extinguishing equipment (or for replacing the equipment, if that is less expensive), if the equipment was discharged to fight a fire, as a result of a covered peril, or as the result of an accidental discharge. As in the previous coverages, the equipment must be in a vehicle.

Rental reimbursement. If a limit is indicated, in the event the insured equipment is rendered inoperable because of a covered loss, this coverage pays the cost to rent similar equipment. There is a 72 hour waiting period; coverage continues past the policy expiration date if the loss occurred before the expiration.

Rewards. If a limit is indicated, the insurer pays a reward for information leading to a conviction for arson, theft, or vandalism if one of these acts resulted in a loss.

Endorsement IM 7313 12 04 mobile medical equipment coverage – income coverage provides business interruption coverage. If a covered direct physical loss to covered mobile medical equipment occurs, the insurer pays the actual loss of net income (net profit or loss before income taxes) that would have been earned or incurred by the named insured's business. Net income includes payroll expense. As used in the endorsement, “covered mobile medical equipment” means equipment belonging to the named insured, as well as mobile medical equipment of others in the named insured's care, custody, or control. Coverage is provided during the restoration period—that is, the time it should reasonably take from the date of a covered loss to resume business on a pre-loss level. The period of restoration does not include increased time to comply with any ordinance or law regulating the use or repair of covered equipment, or requiring testing for or clean up of pollutants.

If an order of civil authority prohibits access to the covered equipment, the insurer pays loss of earnings for two consecutive weeks. However, the order must be the result of direct physical loss to property other than the insured property, and the prohibition must be the result of a peril that would be covered by the policy.

The following are excluded: the expense to put out a fire; increase in loss because of suspension, cancellation, or lapse of a lease or other contract; loss because of interference by strikers; unnecessary expenses; and utility failure. In the event of a loss because of suspension of a lease or contract, the insurer will cover the loss if the suspension results directly from the insured's business interruption.

Applicable loss conditions are found in the mobile medical equipment coverage form IM 7304 12 04, with one exception. If the insured intends to resume business, he or she must do so as soon as possible.

The form's valuation provisions state that the insurer, in determining the earnings loss, considers the business experience prior to the loss, the probable income had no loss occurred, continuing operating expenses including payroll expense necessary to resume pre-loss business, and other pertinent sources of information. If the business is not resumed, or resumed as soon as possible, the loss is valued on the basis of the time it would have taken to resume business.

If insured and insurer do not agree on the net income, payroll expense, and operating expense, the amounts may be determined by appraisal.