Summary: The contractors equipment form provides open perils coverage for mobile machinery, equipment, and tools that contractors use in their trade. Because the form does not restrict coverage to a particular location, it can cover contractors equipment at job sites, owned locations, or in transit.
Two different forms are available from AAIS for contractors equipment, IM-7000 and IM-7001. The differences lie in the property covered, perils excluded, and additional coverage sections. This treatment examines in detail form IM-7000, with notes as to the differences in form IM-7001. Both forms were updated in 2004, and those changes will be highlighted.
Topics Covered: Underwriting and rating Insuring agreement and definitions Property covered Property not covered Coverage extensions Supplemental coverages Perils and exclusions Insured's duties in case of loss Valuation How much we pay Loss payment Reporting conditions Other conditions Endorsements
A contractors equipment floater covers the machinery, equipment, and tools that contractors use in the performance of their trade. According to the 1976 Nationwide Marine Definition such equipment must be of a “mobile or floating nature” and cannot be: 1. on sale or consignment; 2. in the course of manufacture; or 3. designed for highway use.
The following information about the contractor is necessary in order to properly underwrite the risk:
1. type of contractor and work performed;
2. a schedule of equipment that includes the following information:
a. the value of each item
b. name of manufacturer
c. year of manufacture
d. model and identification numbers
e. serial number
f. full descriptive data
3. number of years the applicant has been in business
4. financial condition of the risk
5. loss prevention measures employed
6. loss experience of the risk
A contractors equipment floater is rated based on the total value of the equipment being insured. The base rate may then be modified with credits or debits for the following: deductible, loss experience, management, security, and fire protection.
Insuring Agreement and Definitions
In return for “your” payment of the required premium, “we” provide the coverage described herein subject to all the “terms” of the contractors Equipment Coverage. This coverage is also subject to the “schedule of coverages” and additional policy conditions relating to assignment or transfer of rights or duties, cancellation, changes or modifications, inspections, and examination of books and records.
Endorsements and schedules may also apply. They are identified on the “schedule of coverages.”
Refer to Definitions for words and phrases that have special meaning. These words and phrases are shown in quotation marks or bold type.
1.The words “you” and “your” mean the persons or organizations named as the insured on the “declarations”.
2.The words “we”, “us”, and “our” mean the company providing this coverage.
3.”Contractors' equipment” means machinery, equipment, and tools of a mobile nature that “you” use in “your” contracting, installation, erection, repair, or moving operations or projects.
“Contractors Equipment” also means:
self-propelled vehicles designed and used primarily to carry mounted equipment; or
vehicles designed for highway use that are unlicensed and not operated on public roads.
4.”Equipment schedule” means a schedule of “contractors' equipment” that is attached to this policy and that describes each piece of covered equipment.
5.”Jobsite” means any location, project, or work site where “you” are in the process of construction, installation, erection, repair, or moving.
6.”Limit” means the amount of coverage that applies.
7.Pollutant” means:
a.any solid, liquid, gaseous, or thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials to be recycled, reclaimed, or reconditioned, as well as disposed of; and
b.electrical or magnetic emissions, whether visible or invisible, and sound emission.
8.”Schedule of coverages” means:
a.all pages labeled schedule of coverages or schedules which pertain to this coverage; and
b.declarations or supplemental declarations which pertain to this coverage.
9.”Sinkhole collapse” means the sudden settlement or collapse of earth supporting the covered property into subterranean voids created by the action of water on a limestone or similar rock formation. It does not include the value of the land or the cost of filling sinkholes.
10.”Specified perils” means aircraft; civil commotion; explosion; falling objects; fire; hail; leakage from fire extinguishing equipment; lightning; riot; “sinkhole collapse”; smoke; sonic boom; vandalism; vehicles; “volcanic action”; water damage; weight of ice, snow, or sleet; and windstorm.
Falling objects does not include loss to:
a.personal property in the open; or
b.the interior of buildings or structures or to personal property inside buildings or structures unless the exterior of the roofs or walls are first damaged by a falling object.
Water damage means the 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.
11.”Terms” means all provisions, limitations, exclusions, conditions, and definitions that apply.
12.”Volcanic action” means airborne volcanic blast or airborne shock waves; ash, dust, or particulate matter; or lava flow.
Volcanic action does not include the cost to remove ash, dust, or particulate matter that does not cause direct physical loss to the covered property.
Analysis
The AAIS contractors equipment promises to provide the coverage described in exchange for payment of the premium. The agreement goes on to make the coverage subject to the declarations, policy conditions, and any attached endorsements and schedules. In the 2004 form, the term declarations is removed and is replaced with “schedule of coverages.”
The terms defined are defined as in most other property policies: you and your; we, us, and our; limit; pollutant; sinkhole collapse; specified perils; terms; and volcanic action.
There are new terms defined in the 2004 policies. “Contractors' equipment” is defined and
indicates that mobile equipment that the insured uses in contracting, installation, erection, repair, or moving projects is considered contractors' equipment. Also included in the definition is self-propelled equipment that is used to carry other mounted equipment, or vehicles designed for highway use that are unlicensed and not used on public roads. Equipment was not defined before, so virtually anything could be construed as contractors' equipment previously; now it has been defined and limited.
“Equipment schedule” is another new term, and simply identifies that a schedule attached to the policy that describes each piece of covered equipment is considered to be the equipment schedule.
“Jobsite” has been defined to identify exactly what is a jobsite; it's defined as any location, project or worksite where the insured is in the process of construction, erection, repair, or moving. While this appears to be a broad definition, remember that it was not identified before, so this really restricts what can be considered a jobsite even though it is quite broad.
“Schedule of coverages” is a new term that replaces declarations. The schedule includes the declarations pages, and also includes all pages labeled schedule of coverages or schedules which pertain to this coverage. Therefore this is broader than the normally used declarations; now any schedules are included in the term.
Note that the terms earth movement and flood are not defined, as in other policies. The AAIS contractors equipment floater does not exclude these perils, thus they are not defined.
Like the AAIS EDP floater see Electronic Data Processing (EDP) Coverage, the contractors equipment floater employs a broader definition of “pollutant.” This has been broadened even further in the 2004 forms. Now radioactive irritants are included, as well as acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Also included are visible or invisible electrical or magnetic emissions, and sound emissions.
The contractors equipment floater defines sinkhole collapse as the sudden settling or collapsing of earth supporting covered property into voids in the earth. By virtue of this definition, sinkhole collapse does not include the value of the ground, itself, nor the cost of filling sinkholes.
The definition of “specified perils” is similar to the broad form causes of loss supported by ISO and includes aircraft; civil commotion; explosion; falling objects; fire; hail; leakage from fire extinguishing equipment; lightning; riot; sinkhole collapse as defined in the policy; smoke; sonic boom; vandalism; vehicles; volcanic action as defined in the policy; water damage; weight of ice, snow, or sleet; and windstorm.
The definition of volcanic action is comparable to the term as used in standard ISO property policies. It includes airborne shock waves, ash, dust, and lava flow. However, it does not include clean-up costs of ash or dust if there hasn't been any direct physical loss to covered property. Dirt from a volcanic eruption is not included in this peril unless the dirt causes direct physical loss to covered property. Specified perils and volcanic action have been revised in the 2004 forms for clarity purposes.
“We” cover the following property unless the property is excluded or subject to limitations.
1.Scheduled Equipment
a.Coverage—”We” cover direct physical loss caused by a covered peril to:
1)”your” “contractors' equipment”; and
a.”your” contractors equipment and
b.equipment of others in “your” care, custody, or control described on the “declarations”.
2)”contractors' equipment” of others in “your” care, custody, or control.
b.Coverage Limitation—”We” only cover “your” “contractors' equipment” and “contractors' equipment” of others:
1)that are described on the “equipment schedule”; and
2)when Scheduled Equipment is indicated on the “schedule of coverages”.
2.Schedule On File –
a.Coverage – “We” cover direct physical loss caused by a covered peril to:
1)”your” “contractors' equipment”; and
2)”contractors' equipment” of others in “your” care, custody, or control.
b.Coverage Limitation – “We” only cover “your” “contractors' equipment” and “contractors' equipment” of others:
1)that are listed in a schedule which “you” must submit to “us” and “we” keep on file, the schedule must contain a description of each item to be covered and a “limit” for each item; and
2)when Schedule on File is indicated on the “schedule of coverages”.
Analysis
The AAIS form covers equipment belonging to the insured. It also covers the equipment of others in the insured's care. Such equipment may either be scheduled on the policy or be listed on a schedule kept on file by the insurer. The 2004 forms have included a coverage limitation which states that the insured's equipment and equipment of others is only covered when it is described on the equipment schedule and when scheduled equipment is included on the schedule of coverages. The IM 7001 does not have the provision that the scheduled equipment must be listed on the schedule of coverages. Form IM 7001 does not provide the option of a schedule to be filed with the insurer.
1.Aircraft or Watercraft – “We” do not cover aircraft or watercraft.
2.Contraband – “We” do not cover contraband or property in the course of illegal transportation or trade.
3.Leased or Rented Property – “We” do not cover property that “you” lease, or rent to others.
4.Loaned Property – “We” do not cover property that “you” loan to others.
5.Underground Mining Operations – “We” do not cover property while stored or operated underground in connection with any mining operations.
6.Vehicles — “We” do not cover automobiles, motor trucks, tractors, trailers, and similar conveyances designed for highway use and used for over the road transportation of people or cargo. However, this does not include:
a.self-propelled vehicles designed and used primarily to carry mounted equipment; or
b.vehicles designed for highway use that are unlicensed and not operated on public roads.
7.Waterborne Property – “We” do not cover property while waterborne except while in transit in the custody of a carrier for hire.
Analysis
Minor changes have been made to the seven types of property not covered. Loaned property is now listed as a separately not covered item, and is no longer included with leased or rented property. The exclusion however is the same. The automobiles and trucks exclusion has been renamed vehicles, and the exclusion is the same as it was. Form IM 7001 does not include the transportation of people or cargo in the exclusion, and does not make an exception for vehicles designed and used to carry mounted equipment or vehicles designed for highway use but are unlicensed and not operated on public roads. So IM 7001 is more restrictive as there are no exceptions to the exclusion – autos, trucks, trailers, tractors and similar vehicles are excluded. The remaining exclusions are the same.
Provisions That Apply To Coverage Extensions – The following Coverage Extensions indicate an applicable “limit”. This “limit” may also be shown on the “schedule of coverages”.
If a different “limit” is indicated on the “schedule of coverages”, that “limit” will apply instead of the “limit” shown below.
However, if no “limit” is indicated for a Coverage Extension, coverage is provided up to the full “limit” for the applicable covered property unless a different “limit” is indicated on the “schedule of coverages”.
Unless otherwise indicated, the coverages provided below are part of and not in addition to the applicable “limit” for coverage described under Property Covered.
The “limit” provided under a Coverage Extension cannot be combined or added to the “limit” for any other Coverage Extension or Supplemental Coverage including a Coverage Extension or Supplemental Coverage that is added to this policy by endorsement.
If coinsurance provisions are part of this policy, the following coverage extensions are not subject to and not considered in applying coinsurance conditions.
Debris Removal –
1.Coverage – “We” pay the cost to remove the debris of covered property that is caused by a covered peril.
2.We Do Not Cover — This coverage does not include costs to:
a. extract “pollutants” from land or water; or
b. remove, restore, or replace polluted land or water.
3. Limit – “We” do not pay any more under this coverage than 25% of the amount “we” pay for the direct physical loss. “We” will not pay more for loss to property and debris removal combined than the “limit” for the damaged property.
4. Additional Limit –”We” pay up to an additional $5,000 for debris removal expense when the debris removal expense exceeds 25% of the amount “we” pay for direct physical loss or when the loss to property and debris removal combined exceeds the “limit” for the damaged property.
5. You Must Report Your Expenses – “We” do not pay any expenses unless they are reported to “us” in writing within 180 days from the date of direct physical loss to covered property.
Analysis
There are now additional coverages and supplemental coverages where there were only additional coverages before. Provisions now define how the additional coverage limits will interact with the policy limits themselves. The limits for the coverage extensions are not in addition to the policy limits, they are part of the limits. If coinsurance provisions are part of the policy they do not apply to the coverage extensions.
Debris removal is the only defined coverage extension. The remaining coverages that had been additional coverages are now supplemental coverages. The supplemental coverage limits are separate from the policy limits.
Provisions That Apply To Supplemental Coverages — The following Supplemental Coverages indicate an applicable “limit”. This “limit” may also be shown on the “schedule of coverages”.
If a different “limit” is indicated on the “schedule of coverages”, that “limit” will apply instead of the “limit” shown below.
However, if no “limit” is indicated for a Supplemental Coverage, coverage is provided up to the full “limit” for the applicable covered property unless a different “limit” is indicated on the “schedule of coverages”.
Unless otherwise indicated, a “limit” for a Supplemental Coverage provided below is separate from, and not part of, the applicable “limit” for coverage described under Property Covered.
The “limit” available for coverage described under a Supplemental Coverage:
a. is the only “limit” available for the described coverage; and
b. is not the sum of the “limit” indicated for a Supplemental Coverage and the “limit” for coverage described under Property Covered.
The “limit” provided under a Supplemental Coverage cannot be combined or added to the “limit” for any other Supplemental Coverage or Coverage Extension including a Supplemental Coverage or Coverage Extension that is added to this policy by endorsement.
If coinsurance provisions are part of this policy, the following supplemental coverages are not subject to and not considered in applying coinsurance conditions.
1. Employee Tools –
a. Coverage — “We” cover direct physical loss caused by a covered peril to tools owned by “your” employees.
b. Coverage Limitation — “We” only cover tools owned by “your” employees while at a:
1) premises that “you” own or operate;
or
2) “jobsite”.
c. Limit — The most “we” pay in any one occurrence for loss to employee tools is $5,000.
2.Equipment Leased Or Rented From Others –
a. Coverage – “We” cover direct physical loss caused by a covered peril to “contractors' equipment” that “you” have leased or rented from others.
b. Limit – The most “we” pay in any one occurrence for equipment leased or rented from others is $25,000.
3.Newly Purchased Property –
a. Coverage – “We” cover direct physical loss caused by a covered peril to additional “contractors' equipment” that “you” purchase during the policy period.
b. Limit – The most that “we” pay for any loss under this supplemental coverage is the least of the:
1) actual cash value of the covered property; or
2) “limit” for newly purchased property indicated on the “schedule of coverages”. If no “limit” is indicated, then 30% of the Catastrophe Limit indicated on the “schedule of coverages” applies to this coverage.
c. Time Limitation – “We” extend coverage to the additional “contractors' equipment” that “you” purchase for up to 60 days.
This supplemental coverage will end when any of the following first occur:
1) this policy expires;
2) 60 days after “you” obtain the additional “contractors' equipment”;
or
3) “you” report the additional “contractors' equipment” to “us”.
d. Additional Premium — “You” must pay any additional premium due from the date “you” purchase the additional “contractors' equipment”.
Analysis
Provisions identified in the supplemental coverages are very similar to the ones found in the coverage extensions; the difference is that the limits for supplemental coverages are in addition to the policy limits, and are not included in the policy limits. Employee tools and equipment leased or rented from others are new coverages in the IM 7000; these coverages do not appear in the IM 7001. Direct physical loss to tools owned by employees are covered as long as the tools are on a jobsite or a premises that the insured owns or operates. Coverage is limited to $5000 for any one occurrence. If the insured has leased or rented equipment, direct physical loss is covered up to $25,000 per occurrence.
The newly purchased property coverage has been reworded with no change in coverage. The time limitation is sixty days in the IM 7000, and is thirty days in the IM 7001.
4. Pollutant Cleanup And Removal –
a. Coverage – “We” pay “your” expense to extract “pollutants” from land or water if the discharge, dispersal, seepage, migration, release, or escape of the “pollutants” is caused by a covered peril that occurs during the policy period.
b. Time Limitation – The expenses to extract “pollutants” are paid only if they are reported to “us” in writing within 180 days from the date the covered peril occurs.
c. We Do Not Cover – “We” do not pay the cost of testing, evaluating, observing, or recording the existence, level, or effects of “pollutants”.
However, “we” pay the cost of testing which is necessary for the extraction of “pollutants” from land or water.
d. Limit — The most “we” pay for each location is $25,000 for the sum of all such expenses arising out of a covered peril occurring during each separate 12- month period of this policy.
5.Rental Reimbursement –
a. Coverage – In the event of a direct physical loss by a covered peril to “your” “contractors' equipment”, “we” reimburse “you” for “your” expense to rent similar equipment while “your” equipment is inoperable.
The deductible amount indicated on the “schedule of coverages” does not apply to a loss covered under this supplemental coverage.
b.Waiting Period – “We” will not reimburse “you” for the rental of equipment until after the first 72-hours (unless otherwise indicated on the “schedule of coverages”) following the direct physical loss to “your” “contractors' equipment” caused by a covered peril.
c.Incurred Rental Expenses – After the waiting period has passed, “we” will only reimburse “you” for the rental expenses that “you” actually incur.
d.Coverage After Expiration Date – “We” will continue to reimburse “you” for the rental of equipment after the expiration date of this coverage, provided the loss occurred before the expiration date.
e.Coverage Limitations – “We” will not reimburse “you”:
1)if “you” can continue or resume “your” operations with similar equipment that is available to “you” at no additional expense to “you”; or
2)for the rental expense of any equipment unless “you” make every reasonable effort to repair, replace, or rebuild the inoperable equipment after the loss by a covered peril occurs.
f.Limit – The most “we” reimburse “you” in any one occurrence for rental expenses is $5,000.
6. Spare Parts And Fuel –
a.Coverage – “We” cover direct physical loss caused by a covered peril to:
1)spare parts and accessories for “contractors' equipment”; and
2)fluids for vehicles and “contractors' equipment”; fluids include gasoline, oil, and hydraulic fluid.
b.Limit – The most “we” pay in any one occurrence for loss to spare parts and accessories is $5,000.
Analysis
The pollution cleanup and removal coverage remains the same except that the limit has been increased to $25,000. The IM 7001 retains the $10,000 limit.
Rental reimbursement now specifies that damage must be caused by a direct physical loss from a covered peril, and not just a loss from a covered peril. IM 7001 does not include rental reimbursement.
Spare parts and fuel are another new coverage. Direct physical loss caused by a covered peril is covered up to $5,000 per occurrence for loss to spare parts and accessories for contractors' equipment, as well as fluids including gasoline, oil, and hydraulic fluid. This coverage is not available in the IM 7001.
“We” cover risks of direct physical loss unless the loss is limited or caused by a peril that is excluded.
PERILS EXCLUDED
1.”We” do not pay for loss or damage caused directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.
a.Civil Authority – “We” do not pay for loss caused by order of any civil authority, including seizure, confiscation, destruction, or quarantine of property.
”We” do cover loss resulting from acts of destruction by the civil authority to prevent the spread of fire, unless the fire is caused by a peril excluded under this coverage.
b.Nuclear Hazard – “We” do not pay for loss caused by or resulting from a nuclear reaction, nuclear radiation, or radioactive contamination (whether controlled or uncontrolled; whether caused by natural, accidental, or artificial means). Loss caused by nuclear hazard is not considered loss caused by fire, explosion, or smoke. Direct loss by fire resulting from the nuclear hazard is covered.
c.War And Military Action – “We” do not pay for loss caused by:
1)war, including undeclared war or civil war; or
2)a warlike action by a military force, including 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; or
3)insurrection, rebellion, revolution, or unlawful seizure of power including action taken by governmental authority to prevent or defend against any of these.
With regard to any action that comes within the “terms” of this exclusion and involves nuclear reaction, nuclear radiation, or radioactive contamination, this War and Military Action Exclusion will apply in place of the Nuclear Hazard Exclusion.
Analysis
The AAIS contractors equipment form is written on an open perils basis, subject to certain exclusions. The form has removed the term “external” in its description of risks of direct physical loss; this broadens coverage. Under this form, coverage is inferred if covered property at a scheduled location is damaged by a covered peril. A peril is “covered” unless it is limited or excluded elsewhere on the form. Therefore, an insurer must identify an exclusion or limitation in order to deny coverage based on the cause of loss.
Section 1 of the perils excluded section states that there are three exclusions that eliminate coverage, regardless of whether other causes or events contribute to or aggravate the loss. This type of wording is known as the concurrent causation doctrine, which is discussed extensively elsewhere in this volume. See Concurrent Causation. Print users will find this analysis beginning on page M.20-1 in the Miscellaneous Property section of the Fire & Marine volume. These three exclusions are for actions of civil authority, nuclear hazards, and war. There is an exception to the civil authority exclusion, which permits coverage for loss caused by civil authority in trying to prevent the spread of fire, unless the peril that causes the loss is excluded elsewhere. There have been some revisions in the new form. Under civil authority, it states that “”We” do cover loss” where it used to say “”we” do pay for loss” in the exception to the exclusion.
The war and military action exclusion has been expanded and now excludes warlike actions taken to prevent or defend against an actual or expected attack by a government or authority using military force. Also excluded is insurrection, rebellion, revolution, and unlawful seizure of power or action taken to prevent or defend against any of these. This is to exclude terrorist and similar attacks.
2.”We” do not pay for loss or damage that is caused by or results from one or more of the following:
a.Contamination or Deterioration – “We” do not pay for loss caused by contamination or deterioration including corrosion, decay, fungus, mildew, mold, rot, rust, or any quality, fault, or weakness in the covered property that causes it to damage or destroy itself.
But if contamination or deterioration results in a covered peril, “we” do cover the loss or damage caused by that covered peril. This exclusion does not apply to acts of destruction by “your” employees, but “we” do not pay for theft by employees.
b.Criminal, Fraudulent, Dishonest Or Illegal Acts – “We” do not pay for loss caused by or resulting from criminal, fraudulent, dishonest, or illegal acts committed alone or in collusion with another by:
1) “you”;
2) others who have an interest in the property;
3) others to whom “you” entrust the property;
4) “your” partners, officers, directors, trustees, joint venturers, or “your” members or managers if “you” are a limited liability company; or
5) the employees or agents of 1), 2), 3), or 4) above, whether or not they are at work.
This exclusion does not apply to acts of destruction by “your” employees, but “we” do not pay for theft by employees.
This exclusion does not apply to covered property in the custody of a carrier for hire.
c.Loss of Use – “We” do not pay for loss caused by or resulting from loss of use, delay, or loss of market.
d. Mechanical Breakdown – “We” do not pay for loss caused by any mechanical, structural, or electrical breakdown or malfunction including a breakdown or malfunction resulting from a structural, mechanical, or reconditioning process.
But if a mechanical, structural, or electrical breakdown or malfunction results in a covered peril, “we” do cover the loss or damage caused by that covered peril.
e.Missing Property – “We” do not pay for missing property where the only proof of loss is unexplained or mysterious disappearance of covered property, or shortage of property discovered on taking inventory, or any other instance where there is no physical evidence to show what happened to the covered property.
This exclusion does not apply to covered property in the custody of a carrier for hire.
f.Pollutants – “We” do not pay for loss caused by or resulting from release, discharge, seepage, migration, dispersal, or escape of “pollutants”:
1)unless the release, discharge, seepage, migration, dispersal, or escape is caused by a “specified peril”; or
2)except as specifically provided under the Supplemental Coverages – Pollutant Cleanup and Removal.
“We” do cover any resulting loss caused by a “specified peril”.
g.Temperature/Humidity – “We” do not pay for loss caused by dryness, dampness, humidity, or changes in or extremes of temperature.
But if dryness, dampness, humidity, or changes in or extremes of temperature results in a covered peril, “we” do cover the loss or damage caused by that covered peril.
h.Voluntary Parting – “We” do not pay for loss caused by or resulting from voluntary parting with title to or possession of any property because of any fraudulent scheme, trick, or false pretense.
i.Wear And Tear – “We” do not pay for loss caused by wear and tear, marring, or scratching.
But if wear and tear, marring, or scratching results in a covered peril, “we” do cover the loss or damage caused by that covered peril.
Analysis
Section 2 incorporates nine excluded perils that have been reordered from the prior form. Contamination and deterioration are now listed first, and form IM 7000 includes a clause that covers ensuing damage if the covered peril results from the contamination or deterioration.
The criminal, fraudulent, or dishonest acts exclusion has been modified slightly and now excludes members or managers if the insured is a limited liability company.
This exclusion specifically deletes coverage for theft by employees, although destruction of covered property by employees is covered. There also is an exception that permits coverage for covered property that is in the custody of a carrier the insured has hired.
The exclusion for temperature/humidity has been changed and now covers ensuing losses if the temperature/humidity result in a covered peril, damage from that peril is covered. This is not included in form IM 7001. For example, the insured's dozer is exposed to extremely high heat, which melts belts within the engine and then starts a fire. The exposure to high heat is not covered, but the damage from the fire is covered. The mechanical breakdown exclusion has been broadened and excludes malfunction and not just breakdown; an ensuing peril coverage clause has also been added. Form IM 7001 lists specified peril in the ensuing coverage peril instead of covered loss. The same language difference appears in the wear and tear exclusion.
An exception is now present in the pollution exclusion so that the cleanup and removal provided in the supplemental coverage is not overridden.
Form IM 7001 retains the two exclusions not included in IM 7000:
1.Puncture, Blowout, and Road Damage of tires—such damage is covered if caused by one of the “specified perils.”
2. Weight of Load—there is no coverage if a piece of machinery is damaged while the insured is operating it under conditions that exceed its “registered lifting capacity.”
Insured's Duties in Case of Loss
1. Notice – In case of a loss, “you” must:
a. give “us” or “our” agent prompt notice including a description of the property involved (“we” may request written notice); and
b.give notice to the police when the act that causes the loss is a crime.
2. You Must Protect Property – “You” must take all reasonable steps to protect covered property at and after an insured loss to avoid further loss.
a.Payment of Reasonable Costs – “We” do pay the reasonable costs incurred by “you” for necessary repairs or emergency measures performed solely to protect covered property from further damage by a peril insured against if a peril insured against has already caused a loss to covered property. “You” must keep an accurate record of such costs. “Our” payment of reasonable costs does not increase the “limit”.
b.We Do Not Pay – “We” do not pay for such repairs or emergency measures performed on property which has not been damaged by a peril insured against.
3.Proof of Loss – “You” must send “us”, within 60 days after “our” request, a signed, sworn proof of loss. This must include the following information:
a.the time, place, and circumstances of the loss;
b.other policies of insurance that may cover the loss;
c.”your” interest and the interests of all others in the property involved, including all mortgages and liens;
d.changes in title of the covered property during the policy period; and
e.estimates, specifications, inventories, and other reasonable information that “we” may require to settle the loss.
4.Examination – “You” must submit to examination under oath in matters connected with the loss as often as “we” reasonably request and give “us” sworn statements of the answers. If more than one person is examined, “we” have the right to examine and receive statements separately and not in the presence of others.
5. Records – “You” must produce records, including tax returns and bank microfilms of all cancelled checks relating to value, loss, and expense and permit copies and extracts to be made of them as often as “we” reasonably request.
6.Damaged Property – “You” must exhibit the damaged and undamaged property as often as “we” reasonably request and allow “us” to inspect or take samples of the property.
7.Volunteer Payments – “You” must not, except at “your” own expense, voluntarily make any payments, assume any obligations, pay or offer any rewards, or incur any other expenses except as respects protecting property from further damage.
8. Abandonment – “You” may not abandon the property to “us” without “our” written consent.
9. Cooperation – “You” must cooperate with “us” in performing all acts required by this policy.
Analysis
In the event of a loss, the policy requires the following:
1. Notice. The insured must give prompt, written notice of the loss to the insurer. However, “prompt” is not defined, which leaves it open for interpretation. Generally when a term is not defined the dictionary is used. Merriam Webster Online defines prompt as: performed readily or immediately; but immediately when? Some views hold that as soon as the insured discovers the loss it should be reported. Other views are a little more lenient. Couch on insurance provides an in-depth discussion in chapter 191.
2. Protect property. After a loss, the insured must use “reasonable” means to protect covered property from further loss. The insurer pays for these “reasonable” measures. This does not include property that has not been damaged.
3. Proof of loss. The insured must provide the insurer with a signed, sworn proof of loss within sixty days after the insurance company requests it. The policy outlines what must be included in the proof of loss.
4. Submit to an examination. The insurer retains the right to examine the insured under oath about the loss. If more than one individual is involved or affected by the loss, the insurer may interview the individuals separately from one another. (In order to avoid possible collusion in a fraudulent claim.)
5. Produce all records that pertain to the value of the lost or damaged property. Such records might include canceled checks and tax returns.
6. Exhibit the damaged property to the insurer, as often as the insurer requests. The insurer may inspect both damaged and undamaged property.
7. The insured may not volunteer payments, except at his or her own expense, other than to protect the property from further damage.
8. Abandonment. The insured may not abandon property to the insurance company unless prior permission, in writing, is obtained.
9. Cooperation. The last condition requires the insured to cooperate with the insurer in carrying out the requirements of the policy.
There have been no changes in this section of the policy.
1.Actual Cash Value – The value of covered property will be based on the actual cash value at the time of the loss (with a deduction for depreciation) unless replacement cost is indicated on the “schedule of coverages”.
2.Replacement Cost – The value of covered property will be based on the replacement cost without any deduction for depreciation unless Actual Cash Value is indicated on the “schedule of coverages”.
a.Replacement Cost Limitation – The replacement cost is limited to the cost of repair or replacement with similar materials and used for the same purpose. The payment will not exceed the amount “you” spend to repair or replace the damaged or destroyed property.
b.Replacement Cost Does Not Apply Until Repair Or Replacement – Replacement cost valuation does not apply until the damaged or destroyed property is repaired or replaced.
c.Time Limitation –”You” may make a claim for actual cash value before repair or replacement takes place, and later for the replacement cost if “you” notify “us” of “your” intent within 180 days after the loss.
3.Pair or Set – The value of a lost or damaged article which is part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. The loss is not considered a total loss of the pair or set.
4. Loss to Parts – The value of a lost or damaged part of an item that consists of several parts when it is complete is based on the value of only the lost or damaged part or the cost to repair or replace it.
Analysis
Form IM 7000 can now value the lost or damaged property at replacement cost if replacement cost is indicated on the schedule of coverages. Form IM 7001 still only provides actual cash value coverage. Therefore, a new section has been added to form IM 7000 detailing the parameters for replacement cost coverage. The coverage is limited to the cost to repair or replace with similar materials used for the same purpose, and the coverage does not apply until the property is repaired or replaced. A time limit is also imposed; the insured can make a claim for actual cash value first but can then claim replacement cost as long as the claim is submitted within 180 days from the date of loss. The “pairs and sets” and “parts” clauses have not been changed. Loss of one part of a set is not considered a total loss of the set; the value is determined at a reasonable proportion of the total value of the set. In like fashion, the value of a lost or damaged part of an item that has several parts is based on only the value of the damaged part; it is not considered a total loss.
1.Insurable Interest – “We” do not cover more than “your” insurable interest in any property.
2.Flat Deductible – “We” pay only that part of “your” loss over the deductible amount indicated on the “schedule of coverages” in any one occurrence unless Percentage Deductible is indicated on the “schedule of coverages”.
3.Percentage Deductible – When a percentage deductible is indicated on the “schedule of coverages”, “we” pay only that part of “your” loss over the deductible amount as determined below.
a.Determining The Deductible Amount – The deductible amount is determined by applying the percentage indicated on the “schedule of coverages” to the value of the covered property that is involved in the loss. The value is determined by the provisions described under the Valuation section of this policy.
b.Two Or More Items – If a loss involves two or more pieces of equipment, the percentage indicated on the “schedule of coverages” will apply only to the covered property with the highest value.
c.Minimum and Maximum Deductible – The percentage deductible will not exceed the Maximum Deductible amount and will not be less than the Minimum Deductible amount indicated on the “schedule of coverages”.
4.Loss Settlement Terms – Subject to paragraphs 1., 2., 3., 5., 6., and 7. under How Much We Pay, “we” pay the lesser of:
a.the amount determined under Valuation;
b.the cost to repair, replace, or rebuild the property with material of like kind and quality to the extent practicable; or
c.the “limit” that applies to the covered property. However, the most “we” pay for loss in any one occurrence is the Catastrophe Limit indicated on the “schedule of coverages”.
5.Coinsurance –
a.When Coinsurance Applies – “We” only pay a part of the loss if the “limit” is less than the percentage of the value of covered property that is indicated on the “schedule of coverages”.
b.How We Determine Our Part Of The Loss – “Our” part of the loss is determined using the following steps:
1)multiply the percent indicated on the “schedule of coverages” by the value of the covered property at the time of loss;
2)divide the “limit” for covered property by the result determined in b.1) above;
3)multiply the total amount of loss, after the application of any deductible, by the result determined in b.2) above.
The most “we” pay is the amount determined in b.3) above or the “limit”, whichever is less. “We” do not pay any remaining part of the loss.
c.If There Is More Than One Limit – If there is more than one “limit” indicated on the “schedule of coverages” for this coverage part, this procedure applies separately to each “limit”.
d.If There Is Only One Limit – If there is only one “limit” indicated on the “schedule of coverages” for this coverage, this procedure applies to the total of all covered property to which the “limit” applies.
e.When Coinsurance Does Not Apply – Conditions for coinsurance do not apply unless a coinsurance percentage is indicated on the “schedule of coverages”.
6.Insurance Under More Than One Coverage – If more than one coverage of this policy insures the same loss, “we” pay no more than the actual claim, loss, or damage sustained.
7.Insurance Under More Than One Policy –
a. Proportional Share – “You” may have another policy subject to the same “terms” as this policy. If “you” do, “we” will pay “our” share of the covered loss. “Our” share is the proportion that the applicable “limit” under this policy bears to the “limit” of all policies covering on the same basis.
b. Excess Amount – If there is another policy covering the same loss, other than that described above, “we” pay only for the amount of covered loss in excess of the amount due from that other policy, whether “you” can collect on it or not. But “we” do not pay more than the applicable “limit”.
Analysis
This section explains how much the insurer will pay in the event of a covered loss. The first requirement limits the insurer's responsibility to only the insured's insurable interest in the property. Therefore, the insured will only be reimbursed for the portion of loss in which he holds an insurable interest, regardless of the limits of insurance purchased. This type of provision is common in first party insurance contracts.
Losses are reduced by the amount of deductible shown on the declarations. The deductible applies per occurrence. Form IM 7000 significantly changes the deductible provisions, and now has a flat deductible and a percentage deductible. The flat deductible is the same as the deductible provisions in the prior policy; losses are reduced by the amount of deductible and the deductible applies per occurrence.
With the percentage deductible, only that part of the loss that is over the deductible amount is paid. In event of loss, the percentage is applied to the value of the covered property involved in a loss. The value of the item is determined by following the valuation provisions described earlier. For example, the insured has a dozer valued at $30,000 with a five percent deductible. The five percent would be applied to the $30,000 so the insured's deductible for this dozer would be $1500.
When two or more pieces of equipment are damaged, the percentage deductible applies only to the highest valued piece of equipment. So if two dozers were involved in a loss, one valued at $30,000 and the other valued at $45,000 with the same five percent deductible, the deductible for the entire loss would be $2250.00 which is five percent of the $45,000.
The percentage deductible is restricted however and will not be more or less than the maximum or minimum deductibles listed in the “schedule of coverages”.
Losses are settled at ACV, as determined under the valuation section, discussed previously in this article. Under both forms (IM 7000 and IM 7001), the insurer must notify the insured which one of the following three options it will choose to pay the claim:
1. Pay the value of the loss.
2. Rebuild, repair, or replace with property of like kind and quality, to the extent practicable, within a reasonable time.
3. Pay the limit that applies to the covered property. There is no longer the statement regarding whether the loss is total or partial; the loss is settled for the limit.
Both forms agree to adjust claims with the insured.
If the covered property belongs to someone other than the insured, the insurer may settle directly with that other party.
There is a coinsurance penalty if the limit of insurance purchased is less than that required by the coinsurance percentage chosen and indicated on the declarations. The policy now states that coinsurance does not apply unless listed in the “schedule of coverages”.
The coinsurance percentages that are available are 80, 90, or 100 percent. The insurer will pay the lesser of the amount determined by the coinsurance formula included in this clause or the limit of insurance. The coinsurance formula requires that the value of the covered property—at the time of loss—be multiplied by the coinsurance percentage shown on the declarations to determine the limit of insurance that should have been purchased. The limit actually purchased is then divided by the amount that should have been carried. The resulting percentage is multiplied by the amount of loss minus the deductible to determine the recovery. This is often referred to as had/should x (loss-deductible).
As an example, a coinsurance percentage of 90 percent is shown on the declarations, the limit of insurance for the contractor's equipment is $150,000 and the policy carries a $1,000 deductible. At the time of a total loss, the equipment is worth $250,000. The insured should have had 90 percent of the actual value of $250,000 which is $225,000. (.90 x $250,000=$225,000). The insured does not have the proper amount of coverage, so is penalized due to the coinsurance clause.
The limit that exists ($150,000) is divided by the amount of coverage the insured should have had ($225,000). This results in .67 percent ($150,000/$225,000=.67). This amount is multiplied by the total amount of the loss after the application of the deductible – $250,000 – $1,000 = $249,000. This results in a settlement of $167,000 (.67 x $249,000 = $167,000).
In formula form, you have:
Had/Should x (Loss –Deductible) = Settlement.
$150,000/$225,000 x ($250,000 – $1,000)= Settlement
.67 x $249,000 = $167,000.
In the event that more than one policy coverage applies to the same loss, the insurer will pay no more than the actual claim, loss, or damage sustained. This again restricts payment to only what actually is lost by the insured.
The last provision deals with situations in which coverage is available under more than one policy. If the terms of coverage on the other policy are the same as those contained in the AAIS form, the AAIS insurer will pay the portion of the loss that the applicable limit under this policy bears to the limits of all policies covering on the same basis. This is called pro-rata sharing by limits. If the other policy does not have the same terms as the AAIS form, then the AAIS policy will be excess of the amount due from the other policy whether the coverage is collectible or not. In any event, the policy will not pay more than the applicable limit on the covered property.
1.Loss Payment Options –
a.Our Options – In the event of loss covered by this coverage form, “we” have the following options:
1)pay the value of the lost or damaged property;
2)pay the cost of repairing or replacing the lost or damaged property;
3)rebuild, repair, or replace the property with other property of equivalent kind and quality, to the extent practicable, within a reasonable time; or
4)take all or any part of the property at the agreed or appraised value.
b.Notice Of Our Intent To Rebuild, Repair, Or Replace – “We” must give “you” notice of “our” intent to rebuild, repair, or replace within 30 days after receipt of a duly executed proof of loss.
2.Your Losses –
a.Adjustment And Payment Of Loss–”We” adjust all losses with “you”. Payment will be made to “you” unless another loss payee is named in the policy.
b.Conditions For Payment Of Loss–An insured loss will be payable 30 days after:
1)a satisfactory proof of loss is received, and
2)the amount of the loss has been established either by written agreement with “you” or the filing of an appraisal award with “us”.
3.Property of Others –
a.Adjustment And Payment of Loss To Property of Others – Losses to property of others may be adjusted with and paid to:
1)”you” on behalf of the owner; or
2)the owner.
b.We Do Not Have To Pay You If We Pay The Owner – If “we” pay the owner, “we” do not have to pay “you”. “We” may also choose to defend any suits brought by the owners at “our” expense.
Analysis
At the time of a loss, the insurer has four settlement options: pay the value of the loss; pay the cost to repair or replace the damaged property; rebuild, repair, or replace the damaged property with material of like kind and quality to the degree that is practical within a reasonable time; or take all or any of the damaged property at the agreed or appraised value. The insurer must notify the insured of its decision to rebuild, repair, or replace the property within 30 days after receiving a duly executed proof of loss.
Regardless of which option is chosen, the insurer does not owe more than the insured's insurable interest in the property. Once again, the insurer retains the sole right to choose the option; the insured has no contractual right to negotiate the option chosen.
The insurer adjusts all losses with the insured. Payment must be made to the insured with 30 days after receiving an acceptable proof of loss and establishing the amount of settlement. That amount may be decided through either a written agreement between the insured and insurer or the filing of an appraisal award with the insurer.
The insurer retains the right to adjust losses to property of others with either the insured or the owner of the property. If the insurer elects to deal with the owner, there is no obligation to pay the insured. If the owners of property sue the insured, the insurance company may choose to defend the suit at its expense. The policy is silent on who bears the cost of defense if the insurer elects not to defend the insured in such a situation.
Equipment Leased Or Rented From Others – If indicated on the “schedule of coverages”, the following reporting conditions apply.
1.Reports –
a.You Will Report To Us – Within 30 days after the end of the policy period, “you” will report to “us” the total amount of “your” expenditures for “contractors' equipment” that “you” lease or rent from others.
b.Cancellation – If this policy is canceled, “you” will report the total amount of expenditures up to and including the date of cancellation.
2.Premium Computation And Adjustment –
a.The premium will be adjusted at the end of the policy period. The total computed premium will be determined by multiplying “your” total equipment expenditures by the reporting rate indicated on the “schedule of coverages” for Equipment Leased or Rented From Others.
b.”We” will compare the total computed premium to the deposit premium. If it is more than the deposited premium, “you” will pay “us” the difference. If it is less than the deposit premium, “we” will pay “you” the difference subject to the minimum premium indicated on the “schedule of coverages”.
3.Provisions That Affect How Much We Pay – The following provisions apply to reports that are submitted and may affect How Much We Pay:
a.Failure To Submit Reports — If “you” have failed to submit the required reports or no report has been submitted, the most “we” will pay is 90% of the “limit”.
b.Reported Values Are Less Than The Full Value – If “your” last report before a loss shows less than the actual value of “your” expenditures for “contractors' equipment” that “you” lease or rent from others, “we” will only pay a part of the loss. “We” will not pay a greater portion of the loss, prior to the application of the deductible, than the total expenditures “you” reported divided by “your” actual expenditures for “contractors' equipment” that “you” lease or rent from others during the reporting period.
c.We Will Not Pay More Than The Limit – “We” will not pay more than the applicable “limit” regardless of any reported value used in computing the premium.
Analysis
This is an entirely new set of conditions that pertains solely to equipment leased or rented from others, and only appears in form IM 7000. The reporting of rented/leased equipment is required at the end of the policy period so that the correct premium for the term can be calculated. If reports are not filed, then payment of claims is reduced by 10 percent. Also, if the value of leased or rented equipment is understated, only a portion of the loss is paid. The reported value of equipment is divided by the actual value of equipment; the policy will not pay more than this amount. For example, the insured reports leased equipment of $65,000 when he actually leased $95,000 of equipment. The loss amount is $30,000. When $65,000 is divided by $95,000 the result is .68. Sixty-eight percent of $30,000 is $20,400; this becomes the amount available to pay the loss before the deductible is subtracted. The amount of the limit is the maximum amount that the policy will pay, regardless of the amount reported.
1.Appraisal – If “you” and “we” do not agree on the amount of the loss or the value of covered property, either party may demand that these amounts be determined by appraisal.
If either makes a written demand for appraisal, each will select a competent, independent appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers will then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, “you” or “we” can ask a judge of a court of record in the state where the property is located to select an umpire.
The appraisers will then determine and state separately the amount of each loss.
The appraisers will also determine the value of covered property items at the time of the loss, if requested.
If the appraisers submit a written report of any agreement to “us”, the amount agreed upon will be the amount of the loss. If the appraisers fail to agree within a reasonable time, they will submit only their differences to the umpire. Written agreement so itemized and signed by any two of these three sets the amount of the loss.
Each appraiser will be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire will be paid equally by “you” and “us”.
2.Benefit to Others – Insurance under this coverage shall not directly or indirectly benefit anyone having custody of “your” property.
3.Conformity With Statute – When a condition of this coverage is in conflict with an applicable law, that condition is amended to conform to that law.
4.Estates – This provision applies only if the insured is an individual.
a. Your Death – On “your” death, “we” cover the following as an insured:
1)the person who has custody of “your” property until a legal representative is qualified and appointed; or
2)”your” legal representative.
This person or organization is an insured only with respect to property covered by this coverage.
b.Policy Period Is Not Extended – This coverage does not extend past the policy period indicated on the declarations.
5.Misrepresentation, Concealment, Or Fraud – This coverage is void as to “you” and any other insured if, before or after a loss:
a.”you” or any other insured have willfully concealed or misrepresented:
1)a material fact or circumstance that relates to this insurance or the subject thereof; or
2)”your” interest herein.
b.there has been fraud or false swearing by “you” or any other insured with regard to a matter that relates to this insurance or the subject thereof.
6.Policy Period – “We” pay for a covered loss that occurs during the policy period.
7.Recoveries – If “we” pay “you” for the loss and lost or damaged property is recovered, or payment is made by those responsible for the loss, the following provisions apply:
a.”you” must notify “us” promptly if “you” recover property or receive payment;
b.”we” must notify “you” promptly if “we” recover property or receive payment;
c.any recovery expenses incurred by either are reimbursed first;
d.”you” may keep the recovered property but “you” must refund to “us” the amount of the claim paid, or any lesser amount to which “we” agree; and
e.if the claim paid is less than the agreed loss due to a deductible or other limiting “terms” of this policy, any recovery will be pro rated between “you” and “us” based on “our” respective interest in the loss.
8.Restoration of Limits – A loss “we” pay under this coverage does not reduce the applicable “limit” unless it is a total loss to a scheduled item. In the event of a total loss to a scheduled item “we” refund the unearned premium on that item.
9.Subrogation – If “we” pay for a loss, “we” may require “you” to assign to “us” “your” right of recovery against others. “You” must do all that is necessary to secure “our” rights. “We” do not pay for a loss if “you” impair this right to recover.
“You” may waive “your” right to recover from others in writing before a loss occurs.
10.Suit Against Us – No one may bring a legal action against “us” under this coverage unless:
a.all of the “terms” of this coverage have been complied with; and
b.the suit has been brought within two years after “you” first have knowledge of the loss.
If any applicable law makes this limitation invalid, then suit must begin within the shortest period permitted by law.
11.Territorial Limits – “We” cover property while it is in the United States of America, its territories and possessions, Canada, and Puerto Rico.
Analysis
Both AAIS contractors equipment forms contain the following 11 conditions:
1. Appraisal. This condition provides for an appraisal in the event that the insured and insurer disagree on the amount of the loss or the value of the property. The prior policy stated “actual cash value”; now the policies simply state “value”. Either party may demand the appraisal, in writing. After that written demand, each party chooses an independent appraiser and notifies the other party of its choice. This must be done within 20 days of the receipt of the written demand. The two appraisers then select an umpire. If the two appraisers cannot agree on the umpire within 15 days, either the insured or the insurer may ask a judge to intervene and select an umpire. The appraisers separately determine the amount of loss. If the appraisers agree, the amount agreed upon is the amount of the loss. However, if they cannot agree, the amount of the difference must be submitted to the umpire. Written agreement of two of the three sets the amount of loss. Each party pays its own appraiser, with the expenses of the umpire, as well as other expenses of the appraisal, shared between the parties.
2. Benefit to Other. There is to be none.
3. Conformity with Statute. Any condition that is contrary to law is amended to reflect the law.
4. Estates. Applies only if the insured is an individual. Upon the insured's death, one of the following becomes an insured under the policy: either the person who has custody of the insured's property until a legal representative is appointed; or the insured's legal representative. The coverage applicable to the estate does not extend past normal policy expiration.
5. Misrepresentation, Concealment or Fraud. Voids the coverage. Condition 5 specifically outlines what is considered a misrepresentation, concealment, or fraud. This includes the insured willfully concealing a material fact or the insured's interest in the coverage. It also includes “false swearing” by any insured relating to the insurance.
6. Policy Period. Stated on the policy declarations.
7. Recoveries. The insured and the insurer are obligated to inform the other party if lost or damaged property is recovered after the insurer has paid for it. In this event, recovery expenses incurred by either party are reimbursed first. The insured may keep the recovered property. If the insured chooses to keep the recovered property, he must reimburse the insurer for the amount of the claim paid or any lesser amount the insurer agrees to. If a deductible or other policy limitation decreases the claim paid to less than the agreed loss, any recovery is pro-rated between the insured and insurer based on their respective interest in the loss.
8. Restoration of Limits. A loss that is paid under the policy does not decrease the applicable limits of insurance, unless it is a total loss. In that case, the item is deleted from the schedule and the remaining premium is refunded.
9. Subrogation. The ninth condition permits the insurer to require that any subrogation rights of the insured be assigned to it. The insured must do all he or she can to secure the insurer's subrogation rights. The insurer may refuse to pay a loss if the insured impairs its subrogation rights. However, the insured may waive recovery rights from others in writing prior to a loss.
10. Suit Against the Insurer. The insured may not sue the insurer, unless he or she complies with all coverage terms. Such a suit must be brought within two years after the insured first knows about the loss. If a law invalidates this limitation, then suit must be brought within the shortest period permitted by law.
11. Territorial Limits. United States, its territories and possessions, Canada, and Puerto Rico.
The AAIS contractor's equipment program has several endorsements available to modify the basic policy:
1. Rental Reimbursement IM 7014—since this coverage is automatically included in form IM-7000, it must be added via endorsement IM-7014 to form IM-7001. The insured may purchase up to $15,000 of rental reimbursement coverage.
2. Boom Restriction IM 7016—endorsement IM 7016 removes coverage for booms that exceed twenty-five feet in length. It does, however, still cover such booms in transit when damaged by a specified peril.
3. Percentage Deductible IM 7018—instead of a flat dollar deductible, this option allows the insured to choose a selected percentage of the value of an insured item as the applicable deductible. This amount is then subject to a minimum and a maximum dollar amount. Since form IM 7000 now has the percentage deductible option, this endorsement is used only with form IM 7001.
4. Split Deductible IM 7021—form IM 7021 allows the insured to select two different deductible amounts for different covered perils (e.g. $2,500 deductible for vandalism losses and $1,000 for all other covered perils).
5. Equipment Leased or Rented From Others IM 7012—extends coverage for equipment that has been leased or rented from others, but is not on the schedule. Since form IM 7000 now includes this option, this endorsement is used only with form IM 7001.
6. Replacement Cost IM 7020—amends the adjustment of losses from ACV to replacement cost. This option also has been added to form IM 7000; therefore this endorsement applies only to form IM 7001.
7. Small Tools IM 7015 —extends coverage to the “small tools” of the insured and his or her employees. A separate deductible applies to this endorsement. The employee tools provision of this endorsement applies only to IM 7001 as employee tools are now afforded coverage under IM 7000.
8. Waterborne Coverage IM 7019—removes the exclusion of waterborne property.
9. Weight of Load Exclusion IM 7017—amends form IM 7000 to include the wording from IM 7001 that there is no coverage when a piece of machinery is being used beyond its registered lifting capacity.