Summary: The Jewelers Block Coverage Form, written subject to commercial inland marine rules and forms promulgated by Insurance Services Office (ISO), provides open perils coverage specifically tailored for the needs of insureds in the retail jewelry trade. Coverage is written on a nonreporting basis using form CM 00 59 01 13 and is available at standard rates to retailers with average inventories no larger than $250,000. This article offers an analysis of the changes in the CM 00 59 01 13 from the earlier CM 00 59 03 10 form. Various risks are listed in the ISO Commercial Lines Manual, division eight, as ineligible for jewelers block coverage: retailers with average inventories of $250,000 or over; wholesalers and manufacturers; pawnbrokers; loose diamond risks; bullion and precious metal dealers; industrial diamond risks; auction dealers; fine arts and antique dealers; watch repair shops; and exhibitions, provided such risks are not on the premises of the insured. However, the policy may be extended by endorsement to cover exhibitions promoted or financially assisted by a public authority or trade association, such as trade shows. The premium for the extension of coverage is at the judgment of the underwriter and the endorsement must specify the site and duration of the exhibit.
Topics covered:
Coverage Exclusions Limits of insurance Deductible Additional conditions
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 of jewelry, precious and semi-precious stones, precious metals and alloys and other stock used in your business;
b. Such property sold but not yet delivered;
c. Similar property of others not in the jewelry trade in your care, custody or control; and
d. Similar property of others in the jewelry trade in your care, custody or control. But we only cover to the extent of money you have advanced or your legal liability for that property.
Analysis
Covered property includes the named insured's stock in trade, consisting of jewelry, precious and semi-precious stones, and precious metals and alloys. It also includes other stock used in the named insured's business, so things like porcelains and crystal in the insured's inventory are covered. The meaning of covered property applies as well to the stock that has been sold but is awaiting delivery.
Moreover, property of others that is similar to the named insured's stock in trade is considered covered property if in the care and custody of the named insured; this applies to those not in the jewelry trade and to those in the jewelry trade, although the coverage is treated differently for the two groups. For those not in the trade, coverage is viewed in the same light as the stock in trade of the named insured. For example, the insured has the property on consignment, and it is treated the same as if it is the property of the insured. But, if the property belongs to another jewelry dealer, the coverage is restricted to the amount of the insured's legal liability for the property or to the amount of the insured's investment in the other property. These two concepts are not mutually exclusive; an insured might be liable to another dealer to the extent of $500 on a piece of jewelry to which the insured had added another $200 before the loss occurred. The covered loss is $700.
Note that other categories of property may also be covered by the form but a separate endorsement, Additionally Covered Property, CM 99 01, is required. The other categories are furniture, fixtures, and office supplies; improvements and betterments; machinery, tools, and fittings; and patterns, dies, molds, and models. Furniture, fixtures, and office supplies and improvements and betterments, when insured, must be covered for their full actual cash value; the other items must be insured for at least 80 percent of their total value. See Commercial Inland Marine Endorsements for comments on the standard endorsement, CM 99 01 03 10.
2. Property Not Covered
Covered Property does not include:
a. Property sold under a deferred payment sales agreement after it leaves your premises;
b. Property while at any exhibition promoted or financially assisted by any public authority or trade association;
c. Property while exhibited in showcases or show windows away from your premises;
d. Property while being worn by you or one of the following:
(1) Any officer, director, employee, agent, member or messenger of your or any other organization engaged in the jewelry trade;
(2) Any member of the family, relative or friend of the above;
or while in your or their care, custody or control for the purpose of being worn.
But we do cover watches while being worn solely for the purpose of adjustment.
e. Property in transit by:
(1) Mail unless sent by U.S. Postal Service Registered Mail.
(2) Express carriers.
(3) Railroads, waterborne or air carriers.
But we do cover shipments under receipt of their passenger parcel transportation or baggage services.
Air carriers' passenger baggage service subject to air freight tariffs with delivery to the passenger at destination shall be considered as accompanied baggage and subject to the Limit of Insurance specified in the Declarations as applicable to “Property away from your premises and not included above”.
(4) Motor carriers.
But we do cover shipments:
(a) By a carrier operating exclusively as a merchant's parcel delivery service;
(b) By armored car service; or
(c) By parcel transportation or baggage services of passenger bus lines.
f. Contraband, or property in the course of illegal transportation or trade.
Analysis
Property that the insured has sold under a deferred payment sales agreement is not covered after it leaves the premises. If a bad credit risk develops, coverage does not reapply to the goods at risk until they come back into the insured's possession at the insured premises.
Except for watches that are being worn “solely for purpose of adjustment,” property is not covered while being worn (or even kept for the purpose of being worn) by the named insured or any officer, employee, agent, member, or messenger “engaged in the jewelry trade.” That includes friends and relatives of any of the foregoing. Notice that the connection of these persons with the insured is of no concern. If they are in the jewelry trade, or are friends or relatives of those who are, there is no coverage of property while these people are wearing the property in question.
Property in transit is covered but only under the circumstances defined by the limits described. In other words, property in the mail is not covered unless it is sent by registered mail. Property in the charge of express carriers is not covered. Property in transit by other carriers—such as armored cars and parcel delivery service—is covered, as long as the carriers are not railroads, waterborne, or air carriers. The insured has some transit coverage, but he must be careful in choosing a carrier; the transit guidelines set forth in CM 00 59 must be followed.
Property in the course of illegal transport or trade is not covered and neither are smuggled goods, such as contraband.
Property at exhibitions under the sponsorship of any public authority or trade association is not covered. And, property while exhibited in showcases away from the named insured's premises is not considered covered property. Such exposures are not under the control of the named insured and so bear an out of the ordinary risk of loss for which the standard jewelers block premium is not adequate. Individual underwriters may cover such exposures by endorsement when provided with the pertinent facts and proper premium.
3. Covered Causes of Loss
Covered Causes of Loss means Direct Physical Loss Or Damage to the Covered Property except those causes of loss listed in the Exclusions.
Analysis
CM 00 59 is an open perils coverage form, with coverage limited by the listed exclusions. CM 00 59 applies to direct physical loss and is not meant for consequential loss. The wording has been changed to cover direct physical loss or damage and not just the risk of direct physical loss or 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; 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 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. “Abrupt collapse” is 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 exclusion that appears later in the form adds some clarification: sagging, bulging, leaning, cracking, and other such conditions that may precede a collapse, but are not a collapse in and of themselves, and are excluded. In order to be covered, the property must completely collapse and not just sustain damage that may ultimately lead to collapse at some time in the future.
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 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.
5. Coverage Extension
Theft Damage to Buildings
a. We will pay for damage caused directly by theft or attempted theft to:
(1) That part of any building containing Covered Property; or
(2) Equipment within the building used to maintain or service the building; only if you own the building or are legally responsible for the damage.
b. But we will not pay for damage:
(1) Caused by fire; or
(2) 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
This coverage extension offers the insured some coverage for real property under a form that applies to personal property. If a thief damages the insured's building while stealing covered property, CM 00 59 will pay for that damage. The coverage is applicable only if the named insured owns the building that has been damaged or is legally responsible for the damage (e.g., through a lease or other contractual obligation). Such coverage is quite limited by the provisions of this clause and is included within the limits of insurance stated on the declarations page, but the coverage extension is a plus for insureds to consider.
6. Coverage Options
a. Show Windows
If Limits of Insurance for show windows are shown in the Declarations, we will pay for loss or damage to Covered Property in show windows at your premises from theft or attempted theft resulting from the smashing or cutting of your show windows.
b. Money
If a Limit of Insurance for money is shown in the Declarations, we will pay for loss or damage of money, in locked safes or vaults within your premises, by theft when the safes or vaults are broken open.
These Coverage Options are included within the Limit of Insurance applicable to the Covered Property at the premises where the damage occurs.
Analysis
The show window option is offered to the insured to delete an exclusion on CM 00 59 that blocks coverage for loss due to the smash and grab type of loss described here. This type of loss is difficult to guard against so an exclusion is sensible, but this coverage option allows the insured to take the risk that show windows present if the insured (and the insurer) are comfortable with that risk.
The money coverage option is an additional coverage since money is not included within the definition of “covered property.” In fact, money is more properly covered under a crime coverage form. However, if the insured wants the option, CM 00 59 will cover loss of money if, for example, a thief breaks into the insured's premises and, in the process of stealing jewelry or precious stones, also breaks into a locked safe and steals cash.
Even if the insured takes these coverage options, the applicable limits of insurance are not increased.
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. Earthquake
But if earthquake 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. This exclusion only applies to property while at your premises.
b. 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.
c. 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.
d. 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.
e.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.
Exclusions B.1.a. through B.1.e. apply whether or not the loss event results in widespread damage or affects a substantial area.
Analysis
These are standard exclusions under any inland marine form. Note the exceptions revolving around fire in the governmental action and nuclear hazard exclusions. Nuclear reaction, radiation, or radioactive contamination include the results of a discharge of a nuclear weapon. The earthquake exclusion and the water exclusion apply only to property at the named insured's premises; losses caused by those hazards are covered under CM 00 59 if the losses occur away from the insured's premises. Tsunamis, tidal water, and storm surge are included as excluded forms of water. Waterborne material that is carried or moved by water is excluded. For example, if a storm surge causes a vehicle to move and that vehicle damages the insured's building and showcases, there is no coverage. The exclusion also states that the exclusion applies regardless of the cause of the water and uses the rupture of a dam, levee, or seawall as an example of an excluded cause of water damage. Because of the significant storm activity in recent years, policies are becoming very specific about what is and is not covered regarding water losses.
Earthquake and flood perils may be covered by endorsement if the underwriter is willing to negotiate coverage.
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. Theft from any vehicle unless you, an employee, or other person whose only duty is to attend the vehicle are actually in or upon such vehicle at the time of theft. But this exclusion does not apply to shipments of Covered Property in the custody of the U.S. Postal Service or other carriers.
c. Unexplained disappearance.
d. Shortage found upon taking inventory.
e. Shortage of property claimed to have been shipped when the package is received by the consignee in apparent good condition with the seals unbroken.
f. Dishonest or criminal act (including theft) committed by:
(1) You, any of your partners, your employees, (including temporary employees and leased workers), officers, 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 (including temporary or leased workers) or authorized representatives;
Whether acting alone or in collusion with each other or with any other party.
This exclusion applies whether or not an act occurs during your normal hours of operation. This exclusion does not apply to acts of destruction by your employees (including temporary employees and leased workers) or authorized representatives; but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.
g. Theft or attempted theft of property in show windows at your premises resulting from the smashing or cutting of such windows. But if Limits of Insurance are shown in the Declarations for show windows, this exclusion does not apply.
h. 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 fire or explosion would be covered under this Coverage Form.
i. Insufficient or defective packing.
j. Breakage of fragile articles.
But we will pay for such loss or damage caused directly by fire, lightning, explosion, windstorm, vandalism, aircraft, rioters, strikers, theft or attempted theft, or by accident to the vehicle carrying the property, if these causes of loss would be covered under this Coverage Form.
k. 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.
l. Unauthorized instructions to transfer property to any person or to any place.
m. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
n. Theft by any person to whom you entrust the property for any purpose, whether acting alone or in collusion with any other party, except:
(1) When the property has been deposited for safe custody by you or any of your officers or members, or salesmen while traveling
(2) To shipments of Covered Property in the custody of the U.S. Postal Service or other carriers; or
(3) When the property is in the custody of a porter or helper not on your payroll.
This exclusion applies whether or not an act occurs during your normal hours of operation.
Analysis
Exclusion 2. a. simply reinforces the point that CM 00 59 offers coverage for direct physical losses and not consequential, indirect losses.
Property stolen from any vehicle is not covered unless the insured, an employee, or a person whose sole duty is to attend the vehicle is in or upon the vehicle when the loss occurs. There is no coverage if the insured, employee, or attendant leaves the vehicle unattended, even if it is locked. The attendant of a parking lot, who has other duties than just attending an individual car and who would be in the car only for the few minutes it might take to park it, would not serve to void the exclusion except during the time of actual operation of the vehicle. An exception to this exclusion with respect to “covered property in the custody of the U.S. Postal Service or other carriers” needs further examination. The exception can be misleading and is not as broad as a simple reading would indicate. In the property not covered section, the only time property is covered property while in the custody of the United States Postal Service is when it is shipped by registered mail. Similarly, property with other carriers is not covered property unless the carriers are those particular carriers detailed in the property not covered section of CM 00 59 as exceptions to the rule.
The nature of the property being insured under CM 00 59—tempting to thieves and easily misplaced—causes the drafters of the form to rule out coverage for certain hard to control exposures. For example, there is no coverage for unexplained disappearance, for inventory shortages, or for shipping shortages.
“Unexplained disappearance” has had many appearances in court under its former title “mysterious disappearance.” In general, the exclusion is perceived as an effort to distinguish between loss caused by a robber or burglar (covered) and loss caused by the insured's carelessness or by someone's underhanded dealings (not covered). If the insured's account of the loss as a covered event is less than persuasive, the unexplained disappearance exclusion provides the loss adjuster with a means for demanding greater proof, and for denying coverage if greater proof is not forthcoming. Ultimately, it is the obligation of the insurer to prove that the circumstances support its labeling the event an uninsured, “unexplained disappearance.”
The exclusion of loss discovered upon inventory is clear-cut and less often leads to misunderstandings between insurance company and insured. The same can be said of the exclusion for shortage of goods claimed to have been forwarded in a package apparently in good order and received by a consignee with the seals unbroken.
In a similar vein, the nature of the property being insured—high values in small, easily concealed form, and easily converted to cash—leads to some exclusions that try to curb the exposure to outright crime losses. Loss caused by dishonest acts by the insured or employees, authorized representatives, anyone with an interest in the property, or any person to whom the property may be delivered or entrusted is excluded. The form now includes theft along with dishonest acts and includes temporary or leased employees as employees whose dishonest or thieving actions are excluded. That includes loss caused by a customer who takes an item on trial and absconds with it. Moreover, in case the customer was a con artist from the outset, there is also an exclusion of loss by trick or deception or false pretense that causes voluntary parting with the property. Still another exclusion eliminates coverage for loss by following unauthorized instructions to turn over covered property to another person or place of deposit. The exceptions to this section have been moved, and appear in a new clause, under n., theft by any person to whom you entrust the property for any purpose, whether acting alone or in collusion with any other party. The exclusion applies whether the dishonest act was committed during normal hours of operation or not. The exception to dishonest or criminal acts is now for acts of destruction by employees, including temporary or leased workers or authorized representatives, but theft by any of them is still not covered. So, if an employee destroys gemstones, there is coverage. If the employee steals gemstones, there is no coverage.
Theft or attempted theft from breaking into show windows at the insured premises is also excluded. Remember also that loss to property exhibited in showcases or windows away from the insured's premises is not covered. However, in both situations, coverage may be obtained from the insurer for an additional premium, as previously noted.
Breakage of fragile or brittle articles is not covered unless caused by fire, lightning, explosion, windstorm, strikers, rioters, theft, or vandalism. Also excepted from the exclusion is loss caused by an accident to a conveyance of a type covered and carrying insured property.
There is now a separate exclusion for theft, n. Excluded is theft by a person to whom the insured entrusted the property for any purpose, whether the person acts alone or in collusion with someone else. There are three exceptions to this exclusion. The first is if a loss arises while the property is deposited for safekeeping by an authorized traveler or messenger. Next is if the loss occurs while the property is in the custody of the post office (as registered mail) or an accepted carrier, there is coverage. Lastly, if the loss occurs while the property is in the custody of a porter or helper who is not on the payroll of the insured, there is coverage. This last exception takes into consideration the fact that jewelry salespersons frequently use porters or helpers to carry sample cases and, since it is impossible to check the background and possible criminal record of such casual employees, the insurer accepts the risk of infidelity. The exclusion does apply whether or not the dishonest persons are acting alone or in collusion with others, and whether or not the dishonest acts occur during the hours of employment.
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; weight of people or personal property; weight of rain that collects on a roof.
e Gradual deterioration, hidden or latent defect, any quality in the property that causes it to damage or destroy itself; insects, vermin, or rodents; corrosion, rust, dampness, cold or heat.
Analysis
“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. Collapse is excluded except for the coverage provided in the Additional Coverage. 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, and the like, but only if they cause a loss in conjunction with defective construction materials.
Limits of Insurance
The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.
Analysis
The limits of insurance clause in CM 00 59 is not unusual—the insurer states that the most it will pay is the applicable limit shown in the declarations. However, the limits shown on the declarations page deserve comment.
The limits of liability set out in the declarations are more detailed than in many other forms of property insurance. The limits are developed from the Proposal for Jewelers Block Coverage Form—which is, itself, a part of the policy—CM 59 90 09 00; for more information on this endorsement, see Commercial Inland Marine Endorsements. The limits are described in terms of stock coverage at each of the insured's stores; property in transit by various means; property in vaults; property with other dealers, processors, and the like; and property off the insured premises in any circumstances not covered by the foregoing. If coverage during the various off-premises circumstances is not desired, the limits must be declared to be zero; in other words, zero dollars is “the most we will pay for loss in any one occurrence.” To illustrate, CM 00 59 declares, “We do cover shipments . . . by armored car service.” But such coverage is optional under the rules. If the insured does not desire to have it, then zero needs to be shown in the declarations as “the most we will pay” on property in transit by armored car.
The limit on stock at the insured's store is required to be equal to at least 80 percent of the average inventory values. These values are detailed in the proposal form and include an estimate for average daily values of property of others in the insured's care, custody, or control (except property of other dealers deposited with the insured only for safekeeping).
CM 59 90, the proposal form, requires the insured to disclose all locations in operation at the time the coverage is written (whether or not insured). Only those equipped with a limit are covered locations. If an insured takes on a new location during the policy term, the underwriter must be notified and appropriate coverage arranged.
If the limit required on goods in the custody of another dealer or dealers exceeds $50,000, the exposure is referred to the insurer for special rating purposes.
As for property in transit, separate limits are required for various modes of transport: (1) by registered mail, (2) by armored car, (3) by merchants parcel delivery service, and (4) by various other means of public transportation as covered by the form. This fourth item pertains to transport by way of baggage service or passenger parcel transportation of rail, boat, or air carriers or of passenger bus lines. Baggage that is checked by an airline passenger and subject to airfreight tariffs and receipt of the passenger at destination is treated separately. Values for such are not included in limit (4), being included instead in the separate limit for “property away from your premises and not included (in any other of the policy's various limits).” This limit relates, essentially, to the value of hand-delivered shipments by travelers or messengers who are members of the firm or its employees. If any such person will have more than $5,000 worth of insured goods exposed, the person must be named on endorsement CM 59 07 09 00, Limitation of Property Away from Premises. Also, exposure from all travelers exceeding $25,000 must be rated specially by the insurer.
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
Jewelers block coverage is written subject to a deductible of at least $500. Higher deductibles—of $1,000, $2,500, $5,000, $10,000, or a specified higher figure—may be employed. The deductible applies to the adjusted loss but before application of policy limits. When the actual cash value of lost property is determined, for example, the deductible is applied. If the limit of the coverage is less, then the limit controls the amount of recovery. For example, the loss is for $100,000, and the deductible is $5,000; the amount to be paid out is $95,000, depending on policy limits. If the limit is for $100,000 then the $95,000 is paid out; however if the limit is $80,000, then the amount paid out is only the $80,000; the deductible is removed from the amount of the loss before the limit is applied.
Another deductible clause is available by endorsement CM 59 03 09 00, Registered Mail Deductible. For such shipments, except to Canada , the deductible amount of $25,000 applies to each package.
1. Valuation
General Condition F. Valuation in the Commercial Inland Marine Conditions is replaced by the following:
The value of property will be the least of the following amounts:
a. The actual cash value of that property;
b. The cost of reasonably restoring that property to its condition immediately before loss or damage;
c. The cost of replacing that property with substantially identical property; or
d. The lowest figure you put on the property in your inventories, stock books, stock papers or lists existing as of the time of loss or damage.
The value of property does not include any antique or historical value.
In the event of loss or damage, the value of property will be determined as of the time of loss or damage.
Analysis
The valuation clause of the Jewelers Block Coverage Form provides for the adjustment of insured losses on the basis of the lowest of four values: the actual cash value of the property at the time of loss or damage, the cost of reasonably restoring that property to its condition immediately before loss, the cost of replacing the property with substantially identical property, or the lowest amount listed for the property on the insured's books at the time of loss. The clause specifically excludes antique or historical values from consideration in the adjustment process.
This valuation clause replaces the clause on the Commercial Inland Marine Conditions form, CM 00 01 09 04; .Introduction, General Rules, and Conditions. In doing so, the valuation clause on CM 00 59 adds paragraphs concerning inventory values and antique or historical values. Such items may be subjective in value and therefore have to be handled in an up-front manner, that is, before a loss occurs.
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 or between:
(1) The United States of America (including its territories and possessions);
(2) Puerto Rico; and
(3) Canada.
b. 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 to which the protective safeguards apply is automatically suspended at that location. This suspension will last until the equipment or services are back in operation.
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 all your stock in trade;
(2) Records of all purchases and sales whether cash or credit;
(3) Records of the property of others in your care, custody or control;
(4) A detailed listing of travelers stock; and
(5) Records of all other property away from your premises.
You will also take a physical inventory of all your stock in trade at least every 12 months.
d. Changes to Premises
Unless we agree in writing, we do not cover:
(1)Property where the risk of loss or damage has been materially increased by changes in your premises; or
(2)Property located in expansions of your premises shown in the Declarations.
e. Attachment of Proposal
The Proposal for Jewelers Block Coverage Form signed by you is attached to and made part of this Coverage Form.
Analysis
The form applies while covered property is anywhere within or in transit among the United States, Puerto Rico, and Canada . Rules permit extension of this territorial limitation for an additional premium at the judgment of the underwriter.
While this territorial statement is quite broad, detailed conditions clauses bind the coverage to specific locations or in transit situations within the broad territory. In fact, one of the conditions of the form (2. d.) makes it necessary to obtain the written permission of the insurance company in order to have coverage of property located within even an expanded area of the described premises. Written permission is also required if suspension of coverage is to be avoided whenever “risk of loss has been materially increased by changes in your premises.” This condition is not clarified as to what “materially increased” means, and both the insured and the insurer should be aware of that potential point of dispute.
Another condition addresses the continued operation of protective safeguards identified by the jewelers block proposal (attached to the policy) as being present when the policy was requested. If these protective safeguards (such as fire alarms and sprinkler devices) are not kept in working condition or are not in operation during nonbusiness hours, then any coverage pertinent to their operation is automatically suspended, and this suspension lasts until the equipment or services are back in operation. Burglary coverage is suspended, for example, while a burglar alarm described in the proposal is out of commission, but the suspension is lifted once the alarm is fixed.
The named insured is required to keep a detailed list of records and maintain these for three years after the expiration of the policy. The insured must take a physical inventory of all stock in trade at least every twelve months and this inventory record must be available to the insurance company. Other records that must be available to the insurer include records of all purchases and sales, whether cash or credit; records of all property of others held by the insured; records of travelers' stock; and records of all other property away from the insured premises.
The Jewelers Block Coverage Form is one of a few policies that include the Proposal for Jewelers Block Coverage Form, CM 59 90, as part of the policy. In most other forms the application is at best a representation on the part of the insured, but with the jewelers block policy, the proposal for coverage takes on an important role. The opening paragraph of the proposal states that a signed copy of the proposal will be attached to the coverage form, and a condition on CM 00 59 declares that the proposal is made part of the coverage form. A statement immediately above the signature on the proposal says that the proposal becomes a warranty if a policy is issued. The proposal should therefore be completed with care on the part of the insured or his representative.