Installation Coverage Form
ISO Form IH 00 73
May 29, 2015
Summary: The Insurance Services Office (ISO) offers an Installation Coverage Form, IH 00 73 12 13 that is used to meet the needs of building owners, tenants, or contractors who require broad coverage for the property used in renovating or upgrading buildings. The form can be used in conjunction with CM 00 01 09 04, Commercial Inland Marine Conditions, and IL 00 17 11 98, Common Policy Conditions forms.
Topics covered: Introduction Insuring agreement Property not covered Covered causes of loss Additional coverages Coverage options Exclusions Limits of insurance Deductible; additional conditions Definitions Endorsements
Introduction
Installation Coverage Form, IH 00 73 12 13, is commonly used to provide broad coverage for building owners, contractors, or tenants who are renovating or upgrading buildings. The form differs from the builders risk coverage form in that the builders risk must have the applicable causes of loss form attached to provide coverage on a building under construction, while the installation coverage form provides open perils coverage on the materials to be permanently installed in a building. A building owner intending to remodel or renovate the building would be likely to purchase this coverage.
The form can be used in conjunction with CM 00 01 09 04, Commercial Inland Marine Conditions form, and IL 00 17 11 98, Common Policy Conditions form, to form a policy that will cover most of the insured's property on the construction site and in transit, as long as the property is intended to become a permanent part of the project. Thus, dry wall, trim boards, ducts, lighting, and even paint would be covered if they are intended to become a permanent part of the building.
Once the project has been completed—that is, the insured property has been installed in the building or project—other coverage (such as a commercial property policy) should be arranged.
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
Covered Property, as used in this Coverage Form, means property situated as specified in the Declarations for installation at any described premises.
Analysis
Although the bulk of the property to be insured will probably be on the described premises—that is, the project site—it is not uncommon to have property designated for installation that is located offsite until it is needed. The declarations page is used to indicate the required amounts of insurance for (1) property while at any one job site, (2) property at any location other than a job site, and (3) property in transit. Because, as will be discussed, the applicable limits as shown in the declarations apply to loss or damage in any one occurrence, limits must be carefully selected if there is any question as to location of the property.
2.Property Not Covered
Covered Property does not include:
a.Property on your premises unless intended to be installed at any described job site;
b.Plans, blueprints;
c.Accounts, bills, currency, deeds, evidences of debt, money, notes, securities, stamps, letters of credit;
d.Property that has been sold under a deferred payment sales agreement after installation is complete;
e.Tools and equipment owned by you or any subcontractor;
f.Contraband, or property in the course of illegal transportation or trade;
g.Property which is accepted by the purchaser; or
h.Property in which your interest has ceased.
Analysis
The intent of the form is clear in 2.a: property on the insured's premises is not covered unless it is intended to be installed. The Building and Personal Property Coverage Form, CP 00 10 10 12, is intended to cover existing property, such as a building and its contents. And, as is typical, accounts, bills, and the like are not covered. Plans and blueprints are not covered. If the insured has these for use in connection with the project, the architect or contractor should provide the coverage, or the insured can purchase Valuable Papers and Records Coverage Form, CM 00 67 01 13.
The policy does not cover the insured's own tools and equipment (whether used for the installation or not) or a subcontractor's tools and equipment. This is property that does not get permanently installed in the project. Contractors can purchase contractors equipment coverage form IH 00 68 12 13 to protect their tools and equipment. However, coverage for separate or subcontractors labor, materials, and supplies can be added to the policy. See Endorsements later in this article.
The property not covered items d., g., and h. make it clear that the form will not continue to provide coverage once the project has been completed, even if the insured is continuing to pay for the materials. Coverage then reverts back to the Building and Personal Property Coverage Form.
3.Covered Causes of Loss
Covered Causes of Loss means Risks of Direct Physical Loss or Damage to Covered Property except those causes of loss listed in the Exclusions.
Analysis
The coverage is on an open perils basis—that is, a loss is covered unless an exclusion applies. To be covered, the loss must be direct and physical; a consequential loss such as increased expense due to construction delay is not covered. (Coverage for “soft costs” can be added by endorsement. See Endorsements later in this article.)
4.Additional Coverages
a.Debris Removal
(1)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)The most we will pay under this Additional Coverage is the lesser of 25% of:
(a)The amount we pay for the direct physical loss or damage to Covered Property; plus the deductible in this policy applicable to that loss or damage; or
(b)The applicable Limit of Insurance for Covered Property:
(i)At the job site;
(ii)At a location other than the job site; or
(iii)In transit;
where the loss occurs, plus the deductible in this policy applicable to that loss or damage.
But this limitation does not apply to any additional debris removal limit provided in the Limits of Insurance Section.
(3)This Additional Coverage does not apply to costs to:
(a)Extract “pollutants” from land or water; or
(b)Remove, restore or replace polluted land or water.
b.Pollutant Clean Up And Removal
We will pay your expense to extract “pollutants” from land or water at the described premises 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 Additional Coverage 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 “pollutants” from the land or water.
The most we will pay under this Additional Coverage for each described premises 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.
c.Preservation of Property
If it is necessary to move Covered Property from the described premises to preserve it from loss or damage by a Covered Cause of Loss, we will pay for any direct physical loss or damage to that property:
(1)While it is being moved or while temporarily stored at another location; and
(2)Only if the loss or damage occurs within 30 days after the property is first moved.
d.Fire Department Service Charge
When the fire department is called to save or protect Covered Property from a Covered Cause of Loss, we will pay up to $1,000, unless a higher limit is shown in the Declarations. Such limit is the most we will pay regardless of the number of responding fire departments or fire units, and regardless of the number or type of services performed.
This Additional Coverage applies to your liability for fire department service charges:
(1)Assumed by contract or agreement prior to loss; or
(2)Required by local ordinance.
No Deductible applies to this Additional coverage.
Analysis
The provision for debris removal coverage is similar to that found in the Building and Personal Property Coverage Form, CP 00 10. Form IH 00 73 promises to pay the lesser of 25 percent of the amount paid for the physical loss plus the deductible, or the applicable limit of insurance for the covered property. Form CP 00 10 promises to pay the limit of insurance, but this amount is subject to a limit of 25 percent of the sum of the deductible plus the amount paid for direct loss. Both forms provide an additional amount of coverage, but form IH 00 73 indicates this amount—$10,000— in the limits of insurance, while form CP 00 10 indicates its additional amount—$25,000—in the additional coverage for debris removal itself.
Like the CP 00 10, IH 00 73 contains coverage of up to $10,000 for pollutant clean up and removal. The discharge or dispersal of the pollutants (a defined term; see Definitions later in this article) must be caused by or result from a covered cause of loss, and the expenses must be reported to the insurer within 180 days of the loss. This is an aggregate amount for all covered expenses occurring during each separate twelve-month period of the policy.
The additional coverages for fire department service charge was changed to allow a limit larger than $1,000. As long as it is listed in the declarations, the larger limit applies. This limit is the maximum regardless of the number of fire departments or units responding, or the type of services performed. If an insured has a four alarm fire, several units will respond, and the $1,000 limit may not be sufficient to cover all service charges.
e.Limited Coverage For “Fungi”, Wet Rot And Dry Rot
(1)The coverage described in Paragraphs (2) and (5) only applies when “fungi”, or wet or dry rot is the result of one or more of the Covered Causes of Loss, except fire or lightning, that occur during the policy period and only if all reason-able means were used to save and pre-serve the property from further damage at the time of and after the time of the occurrence.
(2)We will pay for loss or damage to Covered Property by “fungi”, or wet or dry rot. As used in this Limited Coverage, the term loss or damage means:
(a)Direct physical loss or damage to Covered Property caused by “fungi”, or wet or dry rot, including the cost of removal of the “fungi”, or wet or dry rot;
(b)The cost to tear out and replace any part of the building or other property as needed to gain access to the “fungi”, or wet or dry rot; and
(c)The cost of testing performed after removal, repair, replacement or restoration of the damaged property is completed, provided there is a reason to believe that “fungi”, or wet or dry rot is present.
(3)Unless a higher Limit of Insurance for this coverage is shown in the Declarations, the most we will pay is $15,000 for loss or damage to Covered Property. Regardless of the number of claims, this Limit of Insurance is the most we will pay for the total of all loss or damage arising out of all occurrences of Covered Causes of Loss (other than fire or lightning) which take place in a 12-month period (starting with the beginning of the present annual policy period). With respect to a particular occurrence of loss which results in “fungi”, or wet or dry rot, we will not pay more than a total of $15,000 even if the “fungi”, or wet or dry rot continues to be present or active, or recurs, in a later policy period.
If the Declarations indicate that the Separate Locations Option applies, then the amount of coverage ($15,000, unless a higher amount is shown in the Declarations) is made applicable to separate locations as described in the Declarations. For each location so described, the amount of coverage is an annual aggregate limit, subject to the terms set forth above in this Paragraph (3).
(4)The coverage provided under this Limited Coverage does not increase the applicable Limit of Insurance on any Covered Property. If a particular occurrence results in loss or damage by “fungi”, or wet or dry rot, and other loss or damage, we will not pay more, for the total of all loss or damage, than the applicable Limit of Insurance on the affected Covered Property.
If there is covered loss or damage to Covered Property, not caused by “fungi”, or wet or dry rot, loss payment will not be limited by the terms of this Limited Coverage, except to the extent that “fungi”, or wet or dry rot causes an increase in the loss. Any such increase in the loss will be subject to the terms of this Limited Coverage.
(5)The following, (5)(a) or (5)(b), applies only if Business Income and/or Extra Expense Coverage applies and only if the suspension of “operations” satisfies all terms and conditions of the applicable Business Income and/or Extra Expense Coverage Form.
(a)If the loss which resulted in “fungi”, or wet or dry rot does not in itself necessitate a suspension of “operations” but such suspension is necessary due to loss or damage to property caused by “fungi”, or wet or dry rot, then our payment under Business Income and/or Extra Expense is limited to the amount of loss and/or expense sustained in a period of not more than 30 days, or the number of days shown in the Declarations. The days need not be consecutive.
(b)If a covered suspension of “operations” was caused by loss or damage other than “fungi”, or wet or dry rot but remediation of “fungi”, or wet or dry rot prolongs the “period of restoration”, we will pay for loss and/or expense sustained during the delay (regardless of when such a delay occurs during the “period of restoration”), but such coverage is limited to 30 days, or the number of days shown in the Declarations. The days need not be consecutive.
Analysis
The coverage for fungi and wet or dry rot no longer includes bacteria. Coverage is limited to $15,000 in a twelve-month period (unless a higher amount of coverage is selected) for all loss or damage arising out of all occurrences. Fungi and wet or dry rot resulting from fire or lightning is exempt. Even if fungi is discovered in a later policy period and its presence can be tied to the event when the loss was first paid, no additional amount will be available. The coverage is similar to that found in, for example, CP 10 30 10 12, Causes of Loss – Special. In keeping, though, with the form's coverage for property at different locations, the coverage for fungi is also available for the different locations, as long as these are indicated in the declarations.
If a loss includes damage caused by a covered cause of loss as well as by fungi, then loss payment is not limited by the fungi limitation except to the extent that the limitation would otherwise apply. For example, say building materials, including lighting fixtures and several stacks of drywall, are accidentally damaged by a sudden hailstorm, with the result that the fixtures are broken and ruined and the wet drywall develops mold. The fixtures are covered (provided no other exclusion applies), but coverage for the moldy drywall is subject to the $15,000 limitation.
If the insured carries business income or extra expense coverage, the coverage for fungi will respond if operations are suspended due to loss or damage caused by the fungi. Coverage is limited to thirty days, which need not be consecutive. If the period of restoration is increased because remediation of fungi becomes necessary, the coverage pays for loss or expense sustained during the delay; however, coverage is limited to thirty days or the number of days shown in the declarations. Again, the thirty days do not need to be consecutive.
5.Coverage Options
a.Earthquake
If a Limit of Insurance for Earthquake is shown in the Declarations, the Earthquake Exclusion in the Exclusions Section is deleted. All earthquake shocks that occur within a 168 hour period will constitute a single earthquake occurrence. The expiration of this insurance will not reduce the 168 hour period.
This Coverage Option is included within the Limits of Insurance applicable to the Covered Property at the premises where the loss occurred.
b.Water Damage
If a Limit of Insurance for Water Damage is shown in the Declarations, the Water Damage Exclusion in the Exclusions section is deleted.
This coverage Option is included within the Limits of Insurance applicable to the Covered Property at the premises where the loss occurred.
Analysis
The insured can elect to eliminate either one or both the earthquake and water damage exclusions by purchasing these optional coverages. A separate endorsement is not necessary; coverage is triggered through indicating a limit of insurance for these in the declarations. Note, though, that neither of these optional coverages provides an additional amount of insurance; they are both included within the limit applicable to the covered property.
Purchasing these optional coverages provides extremely broad coverage, in that only those things against which it is impossible to insure—such as war, nuclear explosion, or contamination, or consequential loss such as delay to market—are excluded.
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 or damage.
a.Ordinance Or Law
(1)The enforcement of or compliance with any ordinance or law:
(a)Regulating the construction, use or repair of any property; or
(b)Requiring the tearing down of any property, including the cost of removing its debris.
(2)This exclusion applies whether the loss or damage results from:
(a)An ordinance or law that is enforced even if the property has not been damaged; or
(b)The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation, remodeling or demolition of property, or removal of its debris, following a physical loss or damage to that property.
b.Earthquake
But if earthquake, as described above, 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.
c.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.
d.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.
e.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.
f.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.
g.Fungi, Wet Rot And Dry Rot
Presence, growth, proliferation, spread or any activity of “fungi”, or wet or dry rot.
But if “fungi”, or wet or dry rot results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
This exclusion does not apply:
(1)When “fungi”, or wet or dry rot results from fire or lightning; or
(2)To the extent that coverage is provided in the Additional Coverage – Limited Coverage For “Fungi”, Wet Rot And Dry Rot with respect to loss or damage by a cause of loss other than fire or lightning.
h.Virus, Bacterium Or Other Microorganism
Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.
However, this exclusion does not apply to loss or damage caused by or resulting from “fungi”, wet rot or dry rot. Such loss or damage is addressed in the previous exclusion.
The terms of this exclusion, or the inapplicability of this exclusion to a particular loss, does not serve to create coverage for any loss that would otherwise be excluded under this Coverage Part.
This exclusion applies to all coverage under all forms and endorsements that comprise this Coverage Part, including but not limited to forms or endorsements that cover business income, extra expense or action of civil authority.
Exclusions B.1.a. through B.1.h. apply whether or not the loss event results in widespread damage or affects a substantial area.
Analysis
These exclusions are common to property coverage forms, where they are, as here, prefaced by anticoncurrent causation language.
With regard to the exclusion for ordinance or law, the insured property is covered if a covered cause of loss results in its damage or destruction, but if a change in building code dictates that the material is now unusable (e.g., elevator cables were damaged but now must be of a greater strength than those previously supplied), the exclusion applies to preclude the additional cost.
The nuclear hazard exclusion was slightly modified, and weapons are not mentioned. While the results of a nuclear weapons discharge such as radiation, reaction, or radioactive contamination are excluded, so is an incident such as the Fukushima plant in Japan discharging radiation following a 2011 earthquake and a tsunami.
The water damage exclusion was updated to specifically include tidal wave, tides, and storm surge. Also included is waterborne material carried or otherwise moved by any water. This is to exclude damage caused by floating objects in the water such as pieces of wood, vehicles, or anything that can be lifted by excessive amounts of water. The exclusion applies even if any of the excluded water or waterborne materials is caused by an act of nature or some other cause. This is due in part to the aftermath of Hurricane Katrina in 2005 where water damage claims were made due to the failure of dams, levees, and other.
The exclusion for loss from fungi and wet or dry rot was modified to remove bacteria. Although fungi and wet and dry rot are excluded, the exclusion does not apply if the fungi or wet or dry rot result from fire or lightning. For example, water used to suppress a fire could result in the growth of fungi, which would be covered. And, of course, the limited additional coverage for fungi provides coverage.
An exclusion was added for virus, bacterium, or other microorganisms. Any virus, bacterium, or microorganism that can cause physical distress, illness, or disease is excluded. This is geared more towards virus or bacteria that can affect people and not the mold that rots the drywall. With the rising threat of a pandemic, this is a significant change. Since fungi or wet or dry rot are excluded separately, they are not mentioned in this particular exclusion. However, the policy specifically states that no coverage is created by this exclusion for a loss that is excluded in another coverage part and that this exclusion applies to all forms and endorsements that make up this coverage part.
2.We will not pay for loss or damage caused by or resulting from any of the following:
a.Delay, loss of use, loss or market or any other consequential loss.
b.Unexplained disappearance.
c.Shortage found upon taking inventory.
d.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 or operation.
This exclusion does not apply to acts of destruction by your employees (including temporary workers or leased employees) or authorized representatives; but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.
e.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.
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.
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 person (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.
Analysis
Many of these exclusions pertain to a common cause of loss on construction sites: petty theft and pilfering by employees. The 2013 edition of the form made changes to the dishonest acts exclusion—the exclusion specifies that theft is included as a dishonest or criminal act; the term “employees” includes temporary and leased workers; the exclusion applies to officers; and with the exception of theft, the exclusion applies to authorized representatives of the insured. The 2013 revision also added 2.h, which excludes theft by any person to whom the insured entrusts property (except carriers for hire). This represents a broadening of coverage as previously dishonest and criminal acts committed by those to whom the insured entrusted property were excluded—the excluded act by those persons is narrowed to theft.
Exclusion e. was broadened and no longer excludes only electrical current that causes a short circuit or disturbance within a covered article. It excludes electrical, magnetic, or electromagnetic energy that damages, disrupts, or otherwise interferes with electrical appliances, wires, systems, networks, and 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.
Likewise, property that disappears because of unauthorized instructions (often referred to as “trick and device”) will not be covered. However, property in the charge of a carrier for hire is covered if a covered cause of loss results in loss or damage.
Property whose disappearance cannot be explained, or whose shortage is discovered upon taking inventory, is not covered.
Finally, insureds must use all reasonable means to preserve and protect property at the time of and after a 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.Wear and tear, depreciation.
b.Any quality in the property that causes it to damage or destroy itself, hidden or latent defect, gradual deterioration.
c.Mechanical breakdown.
d.Insects, vermin or rodents.
e.Rust or other corrosion, dampness, extremes of temperature.
Analysis
These are losses that often occur over time and are uninsurable. However, if any of these result in a covered cause of loss, the resulting damage will be covered. For example, if powder post beetles attack a stack of lumber intended to become roof trusses and upon use the trusses crumble causing the roof to give way and shingles are damaged, the cost to replace the shingles is covered but not the cost to replace the roofing trusses.
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.
Payments under the following Additional Coverages will not increase the applicable Limit of Insurance:
1.Preservation of Property; or
2.Debris Removal. But if:
a.The sum of direct physical loss or damage and debris removal expense exceeds the Limit of Insurance; or
b.The debris removal expense exceeds the amount payable under the 25% limitation in the Debris Removal Additional Coverage;
we will pay up to an additional $10,000 in any one occurrence under the Debris Removal Additional Coverage.
Payments under the other Additional Coverages are in addition to the Limit of Insurance.
Analysis
As noted in the Additional Coverages, form CP 00 10 provides an additional $25,000 for debris removal, but that additional amount is indicated in the debris removal coverage itself. Form IH 00 73 indicates the amount available in the limits of insurance.
Coverage for preservation of property and debris removal (with the exception noted) is included within the applicable limits of insurance; the other additional coverages are true additional coverages in that they are not controlled by the limit applicable to the covered property.
Deductible; Additional Conditions
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 Limit 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.
E.Additional Conditions
1.The Valuation General Condition in the Commercial Inland Marine Conditions is replaced by the following:
The value of property will be the lesser of the following amounts:
a.The cost of reasonably restoring that property to its condition immediately before the loss; or
b.The cost of replacing that property with substantially identical property.
In the event of loss or damage, the value of the 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
(1)We cover property wherever located within:
(a)The United States of America (including its territories and possessions);
(b)Puerto Rico; and
(c)Canada.
(2)We also cover property being shipped by air within and between points in Paragraph (1).
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 or damage if the value of the Covered Property at the time and location of the loss or damage times the Coinsurance percentage shown in the Declarations is greater than the Limit of Insurance for all Covered Property at that location.
Instead, we will determine the most we will pay using the following steps:
(1)Multiply the value of the covered Property at the time and location of the loss or damage by the Coinsurance percentage;
(2)Divide the Limit of Insurance for the Covered Property at the location by the figure determined in Step (1);
(3)Multiply the total amount of loss or damage at the location, before the application of any deductible, by the figure determined in Step (2).
(4)Subtract the deductible from the figure determined in Step (3).
We will pay the amount determined in Step (4) or the applicable limit of insurance, whichever is loss. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.
Analysis
The deductible provision makes it clear that the deductible is applied to the adjusted loss. Thus, if a coinsurance percentage is indicated, the deductible is applied after any coinsurance is accounted for. Then, the resulting adjusted loss must be in excess of the deductible in order for the claim to be paid. The standard deductible is $500; different deductibles may be selected.
The valuation condition in the Commercial Inland Marine Conditions form, CM 00 01 09 04, is amended. This form states the insurer will pay the least of (1) the actual cash value of that property, (2) the cost of reasonably restoring that property to its condition immediately before loss or damage, or (3) the cost of replacing that property with substantially identical property. But form IH 00 73 eliminates the “actual cash value” settlement provision and provides that valuation will be the lesser of the cost of reasonably restoring the property to its preloss condition or the cost of replacing the property with property that is “substantially identical.”
Form IH 00 73 amends the CM 00 01 condition E. policy period, coverage territory to state that the coverage territory is the United States of America (including territories and possessions), Puerto Rico, and Canada. Shipments of property by air within and between points in the coverage territory are also covered. Thus, property shipped to Hawaii or Guam from California is covered.
The coinsurance provision is common to commercial property forms. Essentially, it is the classic “did over should” formula. It is interesting that the policy declares that the insurer will pay the final determined amount or the limit of insurance, whichever is less—and then adds that the insured will have to rely on other insurance or “absorb the loss yourself.”
F.Definitions
1.”Fungi” means any type or form of fungus, including mold or mildew and any mycotoxins, spores, scents or by-products produced or released by fungi.
2.”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
These definitions are common to most commercial property forms. See, for example, CP 10 30 10 12, Causes of Loss – Special Form.
There are several endorsements that can be used with form IH 00 73. The first is IH 99 14 04 05, Mortgageholders. This endorsement operates as a separate contract to provide payment to any mortgagee in event of loss, even if the insured's claim is denied because of the insured's acts, omissions, or failure to comply with the terms of the coverage form. If the policy is cancelled, the mortgageholder receives at least ten-days notice in event of nonpayment, or thirty days for any other reason. In event of nonrenewal the mortgageholder will receive at least ten-days notice.
Form IH 99 12 07 99, Separate Or Subcontractors Coverage, may be attached to indicate a limit of insurance for an installation in the course of construction made by the contractor. Covered property includes labor, materials, and supplies. In the event of a covered loss, the coinsurance condition will include only the value of the described installation. The endorsement is used when separate coverage is sought for a portion of the project, such as the wiring done by an electrical contractor.
Form IH 99 13 07 99, Separate Or Subcontractors Exclusion, operates to exclude any property or labor of a subcontractor.
Form IH 99 15 07 99, Soft Costs, provides coverage for actual and necessary soft costs the insured sustains as a delay in the completion of construction operations. “Soft costs” are defined as additional interest expense on money the insured borrows to finance construction or reconstruction; real estate or property taxes; advertising and promotional expense; insurance expenses; commissions, legal, and accounting costs and fees and administrative expenses incurred because of a necessary renegotiation of a lease or leases; architectural fees, building inspection, and permit fees and charges; storage charges; and survey costs. “Construction operations” means the “construction, erection or fabrication of the structure described in the Declarations.”
The coverage is triggered when a covered cause of loss causes a delay in the completion of construction operations. There are two additional coverages: expense to reduce soft costs payment and expenses sustained resulting from of action of civil authority that prohibits access to the described property because of direct physical loss to property other than the described property.
There is no coverage for soft costs expense because of delay due to strikers; suspension or cancellation or lapse of a license, lease, or contract; or costs to test for or monitor pollutants.
Loss determination is based on a review of relevant information such as the insured's financial records and construction records and project progress reports.