Summary: Form CM 00 22 03 10 provides equipment dealers coverage under the Insurance Services Office commercial insurance program. The form's purpose is to provide coverage for dealers in agricultural implements and contractors' equipment, insuring the dealer's stock in trade and similar property of others in the dealer's custody or control. The form was updated in March 2010. Following is a discussion of the form, including changes in the updated form.
Topics covered:
Introduction Insuring agreement Property not covered Causes of loss Collapse Coverage extensions Exclusions Limits of insurance and deductible Additional conditions Definitions Declarations page
Introduction
Equipment dealers form CM 00 22 provides open perils coverage for dealers in mobile agricultural and construction equipment. Coverage may be written on a reporting or nonreporting basis. When written on a reporting basis, form CM 99 02 09 04 is attached. To create a monoline equipment dealers coverage policy, form CM 00 22 is used together with policy declarations and equipment dealers declarations pages, common policy conditions form IL 00 17 11 98; (see Common Policy Conditions), Commercial Inland Marine Conditions form CM 00 01 09 04 (see Introduction, General Rules and Conditions), and any appropriate endorsements. Declarations pages and forms for any other desired or necessary coverages may be added to complete a package policy for the insured.
A. Coverage
We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.
1. Covered Property, as used in this coverage form, means:
a. Your stock in trade consisting principally of mobile agricultural and construction equipment; and
b. Similar property of others in your care, custody or control.
Analysis
The equipment dealers coverage form provides open perils coverage, promising to pay for direct physical loss of or damage to covered property from any covered cause of loss. The “covered causes of loss” applicable to this form are “direct physical loss or damage to covered property except those causes of loss listed in the exclusions.”
The form defines covered property as the named insured's stock in trade. The stock in trade consists principally of mobile agricultural and construction equipment such as tractors, combines, dozers, forklifts, etc. Note that while the form states that stock in trade consists principally of mobile agriculture and construction equipment, the stock in trade is not limited to such equipment. If a dealer carries other items for the accommodation of customers, there would be coverage; for example, an inventory of hats or jackets carried by a farm equipment or contractor's equipment dealer. The form also covers similar property of others in the care, custody, or control of the insured. So if an equipment dealer has a customer's tractor on premises for repair or storage in the off-season, coverage is provided.
2. Property Not Covered
Covered Property does not include:
a. Automobiles, motor trucks, motorcycles, aircraft or watercraft;
b. Accounts, bills, currency, deeds, money, notes, securities and evidences of debt;
c. Property while in the course of manufacture;
d. Property leased, rented or sold, including property sold under a deferred payment sales agreement, after it has left your custody or the custody of carriers for hire when you are responsible for delivery;
e. Furniture, fixtures, office supplies, improvements and betterments, machinery, tools, fittings, patterns, dies, molds and models;
f. Property of others described in the Declarations; or
g. Contraband, or property in the course of illegal transportation or trade.
Analysis
Though the scope of covered property is broad where the insured's inventory consists primarily of mobile agricultural and contractor's equipment, the form does list certain types of property as “property not covered.”
The insured may choose to cover any or all of the property in item “e” by entering amounts of insurance in the spaces provided in the declarations for additionally covered property and attaching additionally covered property endorsement CM 99 01 09 00. That endorsement includes a separate 80 percent coinsurance clause identical to the clause in form CM 00 22. That clause applies to each of the items listed as “additionally covered property.”
Item “f,” property of others described in the declarations, applies only to property of others that the insured does not wish to cover under the equipment dealers form for whatever reason. The most usual reason for not wanting to cover the property of others is that dealers coverage on property of others is limited in amount to the smaller of the actual cash value of the property including labor and materials added by the insured; or the amount for which the insured is liable plus value of labor and materials added, with no coverage for the insured's possible additional liability for loss of use of the equipment.
Loss of use could be a sizable item with the kinds of equipment held by equipment dealers, in some cases perhaps involving substantially more than the actual cash value of the equipment itself. The 80 percent coinsurance clause (or the value reporting provision unless reports are of gross sales) applies to the value of insured property of others as well as the insured's own property, creating additional valuation problems that may be avoided by insuring the property of others separately.
3. Covered Causes Of Loss
Covered Causes of Loss means Direct Physical Loss Or Damage to Covered Property except those causes of loss listed in the Exclusions.
Analysis
As noted previously, the equipment dealers form is open perils—unless excluded, a loss is covered. This is relatively standard open perils wording. The property must sustain a direct physical loss or direct damage, and both partial and total losses are covered. The prior form stated that a covered cause of loss was risk of direct physical loss or damage; the policy now states that direct physical loss or damage is covered, not just the risk of such damage.
4.Additional Coverage – Collapse
The coverage provided under this Additional Coverage – Collapse applies only to an abrupt collapse as described and limited in Paragraphs a. through c.
a. For the purpose of this Additional Coverage – Collapse, abrupt collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.
b. We will pay for direct physical loss or damage to Covered Property, caused by abrupt collapse of a building or any part of a building that contains Covered Property insured under this coverage form, if such collapse is caused by one or more of the following:
(1) Building decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;
(2) Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to collapse;
(3) Use of defective material or methods in construction, remodeling or renovation if the abrupt collapse occurs during the course of the construction, remodeling or renovation.
(4) Use of defective material or methods in construction, remodeling or renovation if the abrupt collapse occurs after the construction, remodeling or renovation is complete, but only if the collapse is caused in part by:
(a) A cause of loss listed in Paragraph (1) or (2);
(b) One or more of the following causes of loss: Fire; lightning; windstorm; hail; explosion; smoke; aircraft; vehicles; riot; civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling objects; weight of snow, ice or sleet; water damage; earthquake; all only as insured against in this coverage form;
(c) Weight of people or personal property;
Or
(d) Weight of rain that collects on a roof.
c. This Additional Coverage – Collapse will not increase the Limits of Insurance provided in this coverage form.
Analysis
The additional coverage clause for collapse was substantially revised in 2010. The form provides coverage for direct physical loss or damage to covered buildings or any part of a building that contains covered property caused by an abrupt collapse as described. The prior policy did not specify that the collapse must be abrupt. Abrupt collapse is then defined as an abrupt falling down or caving in of a building or any part of a building with the result that the building cannot be used for its intended purpose.
The perils of decay or insect or vermin damage hidden from view and unknown by the insured, and use of defective materials or methods in construction or remodeling as long as the collapse occurs during the course of the construction or remodeling remain the same.
The perils of fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing equipment, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of snow, ice or sleet, water damage, earthquake, weight of people or personal property or weight of rain collecting on a roof now apply only if defective materials were used in construction and the building collapsed after construction was finished and if the collapse was in part caused by one of the listed perils. This significantly narrows the covered perils for collapse if the collapse does not occur after the course of construction with defective materials.
Coverage Extensions
5. Coverage Extensions
a. Debris Removal
(1)Subject to Paragraphs (3) and (4), we will pay your expenses to remove debris of Covered Property caused by or resulting from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date of direct physical loss or damage.
(2)Debris Removal does not apply to costs to:
(a)Extract “pollutants” from land or water; or
(b)Remove, restore or replace polluted land or water.
(3)Subject to the exceptions in Paragraph (4), the following provisions apply:
(a)The most we will pay for the total of direct physical loss or damage plus debris removal expense is the Limit of Insurance applicable to the Covered Property that has sustained loss or damage.
(b)Subject to (a) above, the amount we will pay for debris removal expense is limited to 25% of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage.
(4)We will pay up to an additional $10,000 for debris removal expense, for each location, in any one occurrence of physical loss or damage to Covered Property, if one or both of the following circumstances apply:
(a)The total of the actual debris removal expense plus the amount we pay for direct physical loss or damage exceeds the Limit of Insurance on the Covered Property that has sustained loss or damage.
(b)The actual debris removal expense exceeds 25% of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage.
Therefore, if (4)(a) and/or (4)(b) apply, our total payment for direct physical loss or damage and debris removal expense may reach but will never exceed the Limit of Insurance on the Covered Property that has sustained loss or damage, plus $10,000.
(5)Examples
The following examples assume that there is no coinsurance penalty.
Example #1
| Limit of Insurance | $ | 90,000 |
| Amount of Deductible | $ | 500 |
| Amount of Loss | $ | 50,000 |
| Amount of Loss Payable | $ | 49,500 |
| ($50,000 – $500) | ||
| Debris Removal Expense | $ | 10,000 |
| Debris Removal Expense | ||
| Payable | $ | 10,000 |
| ($10,000 is 20% of $50,000) | ||
The debris removal expense is less than 25% of the sum of the loss payable plus the deductible. The sum of the loss payable and the debris removal expense ($49,500 + $10,000 = $59,500) is less than the Limit of Insurance. Therefore the full amount of debris removal expense is payable in accordance with the terms of Paragraph (3).
Example #2
| Limit of Insurance | $ | 90,000 |
| Amount of Deductible | $ | 500 |
| Amount of Loss | $ | 80,000 |
| Amount of Loss Payable | $ | 79,500 |
| ($80,000 – $500) | ||
| Debris Removal Expense | $ | 30,000 |
| Debris Removal Expense | ||
| Payable | ||
| Basic Amount | $ | 10,500 |
| Additional Amount | $ | 10,000 |
The basic amount payable for debris removal expense under the terms of Paragraph (3) is calculated as follows: $80,000 ($79,500 + $500) x .25 = $20,000; capped at $10,500. The cap applies because the sum of the loss payable ($79,500) and the basic amount payable for debris removal expense ($10,500) cannot exceed the Limit of Insurance ($90,000).
The additional amount payable for debris removal expense is provided in accordance with the terms of Paragraph (4), because the debris removal expense ($30,000) exceeds 25% of the loss payable plus the deductible ($30,000 is 37.5% of $80,000), and because the sum of the loss payable and debris removal expense ($79,500 + $30,000 = $109,500) would exceed the Limit of Insurance ($90,000). The additional amount of covered debris removal expense is $10,000, the maximum payable under Paragraph (4). Thus the total payable for debris removal expense in this example is $20,500; $9,500 of the debris removal expense is not covered.
b.Pollutant Clean Up And Removal
We will 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 or results from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date on which the Covered Cause of Loss occurs.
This Coverage Extension does not apply to costs to test for, monitor or assess the existence, concentration or effects of “pollutants”. But we will pay for testing which is performed in the course of extracting the “pollutants” from the land or water.
The most we will pay under this Coverage Extension is $10,000 for the sum of all covered expenses arising out of Covered Causes of Loss occurring during each separate 12 month period of this policy.
The limit for this Coverage Extension is in addition to the Limit of Insurance.
c.Theft Damage To Buildings
(1)We will pay for damage caused directly by theft or attempted theft to:
(a)That part of any building containing Covered Property; or
(b)Equipment within the building used to maintain or service the building;
only if you own the building or are legally responsible for the damage.
(2)But, we will not pay for damage:
(a)Caused by fire; or
(b)To glass or to lettering or art work on glass.
This Coverage Extension is included within the Limit of Insurance applicable to the Covered Property at the premises where the damage occurs.
Analysis
The coverage for debris removal is explained in length with sample calculations. Coverage is provided if the damage is caused by a covered cause of loss. Expenses must be reported to the company in writing within 180 days of the date of the loss. The removal costs do not apply to costs to remove pollutants from land or water, or to remove, restore, replace polluted land or water.
There is a separate pollution clean up and removal extension of coverage. This provides coverage that is not provided in the debris removal coverage. Here the cost to remove pollutants from land or water if the discharge is from a covered cause of loss is covered. As with the debris removal, expenses must be provided to the carrier in writing within 180 days of the date of the loss. However there is no coverage for testing, monitoring or assessing the existence, concentration or effects of pollutants. Testing is covered if it is performed in the course of extracting the pollutants. For example, if the state requires regular testing after a spill has been cleaned up to ensure that all the pollutant has been removed, that is not covered. During the process of clean up, testing is covered so the insured knows what further courses of action, and how much, are needed. This coverage is limited to $10,000.
The policy covers damage directly caused by theft or attempted theft to certain buildings. The building must contain covered property or equipment that is used to maintain or service the building. This extension applies if the insured owns the building or is legally responsible for the damage. Damage by fire or damage to glass or lettering/art work on glass caused by thieves or during a break-in is not coverage. The coverage is subject along with other covered property to the limit of insurance for covered property.
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
a. Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
b. Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused.
But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this coverage form.
c. War And Military Action
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
d.Water
(1) Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water,
overflow of any body of water, or spray from any of these, all whether or not driven by wind (including storm surge); or
(2) Waterborne material carried or otherwise moved by any of the water referred to in Paragraph (1).
This exclusion applies regardless of whether any of the above, in Paragraphs (1) and (2), is caused by an act of nature or is otherwise caused. An example of a situation to which this exclusion applies is the situation where a dam, levee, seawall or other boundary or containment system fails in whole or in part, for any reason, to contain the water.
But if any of the above, in Paragraphs (1) and (2), results in fire, explosion or theft, we will pay for the direct loss or damage caused by that fire, explosion or theft if these causes of loss would be covered under this Coverage Form.
This exclusion only applies to property at your premises.
2. We will not pay for loss or damage caused by or resulting from any of the following:
a. Delay, loss of use, loss of market or any other consequential loss.
b. Unexplained disappearance.
c. Shortage found upon taking inventory.
d. Dishonest or criminal act committed by:
(1) You, any of your partners, employees, directors, trustees, or authorized representatives;
(2) A manager or a member if you are a limited liability company.
(3) Anyone else with an interest in the property, or their employees or authorized representatives; or
(4) Anyone else to whom the property is entrusted for any purpose.
This exclusion applies whether or not such persons are acting alone or in collusion with other persons or such acts occur during the hours of employment.
This exclusion does not apply to Covered Property that is entrusted to others who are carriers for hire or to acts of destruction by your employees. But theft by employees is not covered.
e. Processing or work upon the property.
But, if processing or work upon the property results in fire or explosion, we will pay for the direct loss or damage caused by that fire or explosion, if the fire or explosion would be covered under this Coverage Form.
f. Artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs,
disrupts or otherwise interferes with any:
(1) Electrical or electronic wire, device, appliance, system or network; or
(2) Device, appliance, system or network utilizing cellular or satellite technology; creating a short circuit or other electric disturbance within an article covered under this coverage form.
For the purpose of this exclusion, electrical, magnetic or electromagnetic energy includes, but is not limited to, electrical current, including arcing; electrical charge produced or conducted by a magnetic or electromagnetic field; pulse of electromagnetic energy; electromagnetic waves or microwaves.
But if artificially generated electrical, magnetic or electromagnetic energy, as described above, results in fire or explosion, we will pay for the direct loss or damage caused by that fire or explosion if the fire or explosion would be covered under this coverage form.
This exclusion only applies to loss or damage to that article in which the disturbance occurs.
g. Voluntary parting with any property by you or anyone entrusted with the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
h. Unauthorized instructions to transfer property to any person or to any place.
i. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
3. We will not pay for loss or damage caused by or resulting from any of the following. But if loss or damage by a Covered Cause of Loss results, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss or damage.
b. Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.
c. Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or
(4) Maintenance;
of part or all of any property wherever located.
d. Collapse, including any of the following conditions of property or any part of the property:
(1) An abrupt falling down or caving in;
(2) Loss of structural integrity, including separation of parts of the property or property in danger of falling down or caving in; or
(3) Any cracking, bulging, sagging, bending, leaning, settling, shrinking or expansion as such condition relates to Paragraph (1) or (2).
This Exclusion, d., does not apply to the extent that coverage is provided under the Additional Coverage – Collapse or to collapse caused by one or more of the following:
Fire; lightning; windstorm; hail; explosion; smoke; aircraft; vehicles; riot; civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling objects; weight of snow, ice or sleet; water damage; earthquake; weight of people or personal property; weight of rain that collects on a roof.
e. Wear and tear, any quality in the property that causes it to damage or destroy itself, hidden or latent defect, gradual deterioration, depreciation; mechanical breakdown; insects, vermin, rodents; corrosion, rust, dampness, cold or heat.
Analysis
Most of the exclusions section of the equipment dealers form is similar to that of most of the other ISO inland marine forms. There are three sets of exclusions. The first applies to loss or damage caused directly or indirectly by governmental action, nuclear hazard, war and military action, and water. The nuclear hazard exclusion has been changed and no longer references nuclear weapons; nuclear reaction, radiation, or radioactive contamination include the results of a discharge of a nuclear weapon.
The water exclusion has changed since the last form. Tidal wave and tsunami are now included with the excluded flood, surface water, waves, tides, tidal water, overflow of any body of water, spray from any of these, whether or not driven by wind including storm surge. Also excluded is waterborne material carried or otherwise moved by any of the earlier mentioned water. This excludes coverage from debris from other structures floating in the water that subsequently damage the insured property. For example, an oil tank floating in the water crashes through the window and damages the insured's equipment held for sale. The exclusion now specifies that coverage is excluded if the water results from an act of nature or some other cause . The breaching of seawalls, levees, dams, or other containment systems is excluded for any reason. This includes faulty construction of the levee or the levee not being able to handle the volume of water present.
This first set of exclusions applies regardless of any other cause that may contribute to the loss or damage. The form also specifies that the first group of exclusions applies regardless of how widespread the loss is.
The second group excludes loss or damage caused by or resulting from delay, loss of market, or any other consequential loss. Similar to other property forms, unexplained disappearance, inventory shortage; dishonest acts by the insured (including the insured's partners, employees, members or authorized representatives of either); anyone with an interest in the property; or anyone entrusted with the property (but not to carriers for hire) are excluded. Processing or work on the property are also excluded but direct loss caused by resulting fire or explosion is covered, if those causes of loss are covered under the coverage form.
Exclusion f. has been broadened and no longer excludes only electrical current that causes a short circuit or disturbance within a covered article. It now excludes electrical, magnetic, or electromagnetic energy that damages, disrupts, or otherwise interferes with electrical appliances, wires, systems, networks, systems using cellular technology, or creates a short circuit or other electrical disturbance in a covered article. For example, if a short circuit or other electric disturbance in a camera accessory occurs and damages not only that accessory, but also the camera itself and perhaps some musical instruments, damage to the accessory only will not be covered under CM 00 22.
The exclusion then states that electrical, magnetic, or electromagnetic energy includes but is not limited to electrical current, arching, charge produced by a magnetic or electromagnetic field, pulse of electromagnetic energy or microwaves. However, as with other exclusions, if the electrical energy results in fire or explosion, the damage from that fire or explosion is covered.
Voluntary parting with property due to any fraudulent scheme, trick, device, or false pretense; and unauthorized instructions to transfer property to any person or place are also excluded.
The policy does make an exception to the exclusion and provides coverage for acts of destruction (theft excepted) by the insured's employees. This language clarifies that such acts are covered. Therefore, loss to covered property resulting from a fire set by a disgruntled employee is covered. However, if the employee steals covered property and then sets a fire to cover his tracks, there would be no coverage for the property or to the building under this form (as discussed under the theft damage to buildings coverage extension).
The neglect exclusion emphasizes that the insured must use all reasonable means to protect covered property from loss.
The third set of exclusions involves loss or damage by or resulting from (but exempting resulting loss or damage by a covered cause of loss): (a) weather conditions (applying only to weather as a contributing cause of a loss not included in the first group of exclusions listed above); (b) acts or decisions, including failure to act or decide, of any person, group, organization, or governmental body; (c) faulty, inadequate, or defective planning, design, materials, or maintenance; (d) collapse, except as provided by the collapse additional coverage, and (e) the wear and tear exclusion.
Exclusion 3.d., Collapse, has been greatly changed. In the prior policy it simply stated that collapse was excluded except for the coverage provided in the Additional Coverage section of the policy. Now collapse is defined as an abrupt falling down or caving in, and includes loss of structural integrity including separation of parts of the property, bulging, cracking, sagging, settling as relates to loss of integrity or abrupt falling down or caving in. The same exception for coverage provided under the Additional Coverage-Collapse section exists. This provides coverage for the standard listed perils of fire, lightning, windstorm, hail, et.al. but only if they cause a loss in conjunction with defective construction materials.
As an example of excluded weather conditions causing an excluded loss, consider excessive rainfall contributing to runoff of surface water that enters the insured's basement, damaging stock. Since surface water is excluded, the loss is excluded. However, if excessive rainfall builds up on and leaks through the roof, damaging stock, the loss is covered. In the same way, if faulty maintenance causes a furnace to malfunction, which in turn causes a fire, the resulting fire loss is covered, though the cost to repair the faulty job done on the furnace is not.
Limits of Insurance and Deductible
C. Limits of Insurance
The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.
D. Deductible
We will not pay for loss or damage in any one occurrence until the amount of the adjusted loss or damage before applying the applicable Limits of Insurance exceeds the Deductible shown in the Declarations. We will then pay the amount of the adjusted loss or damage in excess of the Deductible, up to the applicable Limit of Insurance.
Analysis
The most paid for any loss is the limit of liability shown in the Declarations. The deductible applies as follows: the insurer has no obligation to pay for loss unless the adjusted loss—before application of limits—is greater than the deductible. When the adjusted loss is greater than the deductible, the insurer will pay the amount of the loss—again, before application of limits—that is in excess of the deductible. This amount is payable up to the limit of liability.
E. Additional Conditions
1. Valuation
General Condition F. Valuation in the Commercial Inland Marine Conditions is replaced by the following:
a. Unsold Property. The value of unsold property will be the least of the following amounts:
(1) The actual cash value of that property;
(2) The cost of reasonably restoring that property to its condition immediately before “loss”; or
(3) The cost of replacing that property with substantially identical property.
b. Sold Property. The value of property sold but not yet delivered will be your net selling price after all allowances and discounts.
c. Property of Others. The value of property in your care, custody or control will be the lesser of:
(1) The amount for which you are liable, plus the value of labor and materials you have added; or
(2) Actual cash value, including labor and materials you have added.
In the event of loss or damage, the value of property will be determined as of the time of loss or damage.
2. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
a. Coverage Territory
We cover property wherever located within:
(1) The United States of America (including its territories and possessions);
(2) Puerto Rico; and
(3) Canada.
b. Coinsurance
If a Coinsurance percentage is shown in the Declarations, the following condition applies.
We will not pay the full amount of any loss if the value of Covered Property, except property in transit, at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property. Instead, we will determine the most we will pay using the following steps:
(1) Multiply the value of Covered Property, except property in transit, at the time of loss by the Coinsurance percentage;
(2) Divide the Limit of Insurance of the property by the figure determined in Step (1);
(3) Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step (2); and
(4) Subtract the deductible from the figure determined in Step (3).
We will pay the amount determined in Step (4) or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.
c. Records And Inventory
You will keep accurate records of your business and retain them for 3 years after the policy ends.
These records will consist of:
(1) An itemized inventory of your stock in trade;
(2) Records of all purchases and sales whether cash or credit;
(3) Records of property of others in your care, custody or control; and
(4) Records of property you send to others for any purpose.
You will also take a physical inventory of all your stock in trade at least every 12 months.
d. Protective Safeguards
You must maintain the protective safeguards stated by you to be in effect at a location when this coverage began.
If you fail to keep the protective safeguards:
(1) In working condition at a location; and
(2) In operation when you are closed to business;
coverage for which the protective safeguards apply is automatically suspended at that location. This suspension will last until equipment or services are back in operation.
Analysis
The equipment dealers policy is written with a coinsurance clause (amount to be shown in the declarations) that applies to the total value of all covered property at all locations except property in transit. If the value of the covered property at the time of the loss, when multiplied by the coinsurance percentage, is greater than the limit of liability, the amount paid is determined as follows. The limit of liability is $100,000 and the coinsurance is 80 percent. The value of the damaged property is $150,000. Step one is to multiply the value of the covered property by the coinsurance percentage, 150,000 x .80=120,000. Step two takes the result of step one and divides it into the total limit of liability, 100,000/120,000=.83. Then the total amount of the loss is multiplied by the result of step two, 150,000 x .83 = 124,500. Lastly, the deductible is subtracted from this amount and the lesser of the limit of liability or the result of the coinsurance calculation is paid. Anything that is not paid must be covered by other insurance or absorbed by the insured.
The conditions require the insured to keep accurate records for three years following the end of the policy period. Since the form provides coverage up to the policy limit for property of others, the records must include documentation as to any such property. And since, as is common with agricultural equipment dealers, much business is done on a credit basis, records detailing such transactions must be maintained. An inventory of stock in trade is required every twelve months.
The insurer may require protective safeguards, such as burglar or fire alarms or sprinkler systems. If this is the case, then the insured must maintain them in working order and in operation for coverage to apply to the perils addressed by the systems, such as fire and theft. If the insurer requires protective safeguards, then, according to the commercial lines manual (CLM), the policy must be endorsed to require the insured to notify the insurer if such systems become inoperative.
In keeping with the nature of the equipment dealers' business, the form's valuation clause recognizes that much of the business may consist of repairing equipment. Therefore, the provision for valuation of property of others includes, as part of the value, the value of labor and materials added by the equipment dealer.
F. Definitions
”Pollutants” means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed.
Analysis
In common with all current commercial forms, “pollutants” is a defined term. Coverage exists as discussed under coverage extensions. No other terms are defined in this policy.
The advisory equipment dealers declarations page is form CM DS 06 03 10. The first part breaks out the limits for the various types of covered property:
1. Property at the named insured's premises. Specific addresses must be shown. The limit at each address is then broken down into inside and outside a building.
2. Property at other premises the named insured acquires. This coverage is good for thirty days from the date of acquisition.
3. Property in transit.
4. Property not at the insured's premises and not included above.
5. A total of all covered property.
Again, the rates are broken into reporting and nonreporting.
The second page has places for the following information:
1. Deductible—$500 unless otherwise indicated.
2. Coinsurance—80 percent unless otherwise indicated.
3. Additionally covered property (applicable limits):
a. Furniture, fixtures, and office supplies.
b. machinery, tools, and fittings.
c. Patterns, dies, molds, and models.
d. Improvements and betterments.