Summary: The Signs Coverage Form, CM 00 28 01 13, is included in the Insurance Services Office's (ISO) inland marine program. According to ISO's manual, it affords open perils coverage only for neon, fluorescent, automatic, or mechanical electric signs and lamps. Billboards or ordinary fixed signs, whether or not they are directly illuminated by electric lights are ineligible for coverage.
Under the inland marine program's modular format, a complete signs policy is formed by combining a Signs Coverage Form with a declarations page—where all covered property is scheduled with limits of insurance—a common policy conditions form, and an inland marine general conditions form. Alternately, these forms may be added to forms and endorsements of the other commercial lines programs to form a commercial package policy.
Topics Covered: Coverage Exclusions Limits of insurance Deductible Additional conditions
Coverage
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 signs; and
b. Similar property of others in your care, custody or control.
2.Property Not Covered
Covered Property does not include contraband, or property in the course of illegal transportation or trade.
Analysis
Under the Signs Coverage Form, covered property includes the insured's signs and similar property belonging to others that is in the insured's care, custody, or control. It does not include contraband or property in the course of illegal transportation or trade.
Even though the coverage form makes no mention of it, the manual states that the form covers only neon, fluorescent, automatic, or mechanical electric signs and lamps. It does not cover ordinary wooden signs or billboards, even if they are illuminated by electric lights. The manual also stipulates that this form must be written on a nonreporting basis.
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.
4.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
Property is insured against direct physical loss or damage subject to the exclusions as explained in the Exclusions section of this article. Note the emphasis on the loss being direct and physical. The major example of an indirect loss is loss of income. Thus, if the insured suffered lost income due to his neon sign being blown down, this form provides no coverage for the lost income. The loss also must be physical. If the neon sign was scheduled to be installed by the date of the grand opening but was delayed in shipment, the loss of the sign is not 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.
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 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.
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.
Exclusions B.1.a. through B.1.c. apply whether or not the loss event results in widespread damage or affects a substantial area.
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.Breakage during transportation, or breakage during installation, repairing or dismantling.
But we do insure against such loss or damage caused directly by fire, lightning, or by accident to the vehicle carrying the property if these causes of loss would be covered under this Coverage Form.
c.Dishonest or criminal act (including theft) committed by:
(1)You, any of your partners, 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; or
(3)Anyone else with an interest in the property, or their employees (including temporary employees and 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.
d.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, 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 loss or damage to that article in which the disturbance occurs.
e.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.
f.Unauthorized instructions to transfer property to any person or to any place.
g. Neglect of an insured to use all reasonable means to save and preserve property from further
damage at and after the time of loss.
h.Theft by any personal (except carriers for hire) to whom you entrust the property for any purpose, whether acting alone or in collusion with any other party.
This exclusion applies whether or not an act occurs during your normal hours of operation.
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; mechanical breakdown; dampness, cold or heat.
Analysis
The exclusions, which define the coverage in an open perils coverage form, come in three sections. The first section excludes governmental action, nuclear hazard, and war and military action. These three exclusions are subject to the concurrent causation language found in property policies, which says that the exclusions apply regardless of any other cause or event that contributes concurrently or in any sequence to the loss. Thus, if the building holding up the sign collapses because a mortar fired in military action hits it, the insured cannot claim coverage under the named collapse peril of falling objects.
However, the first two exclusions in the first group contain exceptions that allow coverage. The form does pay for loss caused by destruction ordered by a governmental authority to prevent the spread of a fire. Similarly, the nuclear hazard exclusion allows coverage for resulting fire. 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 remaining two groups of exclusions are not subject to the concurrent causation language. The second group lists a number of nonphysical type losses, such as delay, loss of use, dishonest or criminal acts, short circuits and other electrical disturbances within the sign, voluntary parting, and unauthorized instructions to transfer the sign. Some of these exclusions allow coverage if fire results, but in general they are nonphysical types of losses.
In the 2013 revision, the dishonest or criminal act exclusion was updated to emphasize that theft is included as a dishonest or criminal act. Language was also added to specify that the term “employees” includes temporary employees and leased workers and stating that officers of the insured are among those to whom the exclusion applies. Language was also added to show that the exclusion applies only for theft to authorized representatives of the insured. A separate paragraph was added (2.h.) relating to those to whom the insured entrusts property, which has been narrowed to apply to theft only.
Exclusion e. was 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.
The exclusion 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.
Exclusion 2.b.—breakage during transportation, installation, or repair or dismantling—implies that the contractor doing the work should be responsible for the coverage. Exclusion 2.c. excluding dishonest or criminal acts, allows coverage for signs that are entrusted to carriers for hire or acts of destruction by the insured's employees, partners, directors, and trustees. Yet, theft by an employee is not covered.
The third group of exclusions except covered causes of loss from the effect of the exclusions. This general exception, found in the introductory paragraph, serves to narrow the effect of the exclusions. With the exception of weather conditions, these exclusions are often subject to concurrent causation wording in property forms. That they are not in this form confirms that the exclusions are to be applied only when a covered cause of loss does not result. Thus, wear and tear and mechanical breakdown, for example, are excluded only when no direct physical accidental damage occurs. This is quite a different exclusion from its counterpart found in property forms.
Exclusion 3.d., Collapse, was changed significantly in the 2010 revision. Prior policies 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.
It may seem strange to exclude weather conditions such as wind and the weight of snow, but this exclusion applies only if the weather is a contributing factor in a governmental action, nuclear hazard, or a war loss.
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.
Analysis
This clause is straightforward and common. However, the manual states that standard rates may be applied to risks with total values of less than $100,000 and to individual signs valued at less than $25,000. Insureds with coverage needs outside these parameters should request special rates from the company. Further, there is a 50 percent reduction in rates for signs located inside buildings.
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
According to the manual, an optional 5 percent deductible is applicable to this form. Thus, the insured will absorb the first part of the loss equaling 5 percent of the coverage limit, and the insurer will pay the balance of the loss up to the limit of liability.
E. Additional Conditions
The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
1.Coverage Territory
We cover property wherever located within:
a.The United States of America (including its territories and possessions);
b.Puerto Rico; and
c. Canada .
2.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:
a.Multiply the value of Covered Property, except property in transit, at the time of loss by the Coinsurance percentage;
b.Divide the Limit of Insurance of the property by the figure determined in Step a.;
c.Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step b.; and
d.Subtract the deductible from the figure determined in Step c.
We will pay the amount determined in Step d. 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.
Analysis
In addition to the conditions on the inland marine and the common policy conditions forms, these conditions also apply to covered property on the signs coverage form. The territory covered by the form is standard for most inland marine forms.
The signs coverage form has a coinsurance percentage listed in the declarations. The coinsurance clause details the amount that the insurer will pay for loss if the value of the covered property at the time of loss times the coinsurance percentage shown in the declarations is greater than the limit of insurance for the property—in other words, if the insured does not have insurance to value. Property in transit is excepted from this coinsurance discussion. The coinsurance clause applies before the deductible is applied to the loss.