Because of the nature of the coverage, there are some natural similarities with the NFIP plan. Causes of loss including overflow of inland and tidal waters, rapid accumulation of surface waters from any source, and collapse or sinking of land along the shore of a body of water caused by flooding are all familiar to those familiar with the NFIP plan.

Instead of a thirty-day waiting period for coverage to take effect, the ISO program has a 72 hour waiting period, unless prior flood coverage was in effect for at least 72 hours preceding the inception date of the policy without a lapse in coverage. Time element coverage is included, and a number of endorsements are available to modify coverage as required. The form is Commercial Flood Policy FC 00 01 04 18

 Various provisions in this Policy restrict coverage. Read the entire Policy carefully to determine rights, duties and what is and is not covered.

 Throughout this Policy, the words "you" and "your" refer to the Named Insured shown in the Declarations. The words "we", "us" and "our" refer to the company providing this insurance.

 Other words and phrases that appear in quotation marks have special meaning. Refer to Section K. Definitions.

 NOTICE: This Policy provides private flood insurance, meaning that it is not underwritten by the Federal government. Similar flood insurance coverage may be available under the National Flood Insurance Program (NFIP) through an insurance agent licensed to represent that Program. Detailed information about the NFIP is provided at www.floodsmart.gov or the website of the Federal Emergency Management Agency (FEMA).

The form begins like most standard form with a statement that certain provisions restrict coverage and that the policy should be read in its entirety. The standard definitions of "you" "your" and "we" "us", and "our" are presented. Then a notice is presented, advising that this is private coverage and not underwritten by the Federal government, and advising that similar coverage may be available through the government program and that information may be found on the government website or through an agent licensed to represent the program.

 A.Coverage For Damage To Covered Property

We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from Flood as described and limited in this Policy.

1.Covered Property

Covered Property, as used in this Policy, means the type of property described in this section, A.1., and limited in A.2. Property Not Covered, if a Limit Of Insurance is shown in the Declarations for that type of property.

a.Building, meaning the building or structure described in the Declarations, including:

(1)Completed additions;

(2)Fixtures, including outdoor fixtures;

(3)Permanently installed:

(a) Machinery; and

(b) Equipment;

(4)Personal property owned by you that is used to maintain or service the building or structure or its premises, including:

(a) Fire-extinguishing equipment;

(b) Floor coverings; and

(c) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;

(5)If not covered by other insurance:

(a) Additions, alterations and repairs to the building or structure, except that any portion of the building or structure not fully enclosed by walls and roof is not Covered Property;

(b) Materials, equipment and supplies used for making additions, alterations or repairs to the building or structure, when located in such building or structure or in a fully enclosed building or structure within 100 feet of the described premises.

The policy provides direct physical loss or damage to covered property by flood as defined in the policy. The term is not defined in the normal sense; it is not presented as a defined term in quotation marks. It is described as the peril in the policy as the covered cause of loss. Flood includes inundation of normally dry land due to the overflow of inland or tidal waters from a natural or man-made body of water, including waves, tidal wave and tsunami, storm surge, spray from any such overflow of waters, all whether driven by wind or not. Note that it includes man-made bodies of water, so artificial lakes that overflow would be considered a source of flood. Also considered a flood is the unusual or rapid accumulation or runoff of surface waters from any sources, including release of water from a dam, levee, seawall or similar containment system. Some flooding from Hurricane Harvey was blamed on a release of water too fast from a dam. Mudslides or mudflows caused by any of the before referenced causes are included as part of a flood. A mudslide or mudflows involves a river of liquid and flowing mud on the surface of normally dry land areas; for example when earth is carried by a current of water and deposited along the path of the current. This frequently happens after wildfires; vegetation has been burned off and if strong rains occur, mudflows are not unusual.

An important different exists between this and the NFIP definition of flood. The NFIP form requires the inundation of two or more acres of dry land, or two or more properties, one of which is the insured's. The ISO form has no such requirement; if only the insured's building is affected by waves, or storm surge, or mudflows, then there will be coverage. The ISO form also includes man-made bodies of water that the NFIP form does not.

Also appearing only in the ISO coverage is damage to covered property from water or waterborne materials that back up or overflow or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment, as long as the discharge results from flooding as defined above. That again is the overflow of waters from waves and storm surge, or unusual or rapid runoff of surface waters from a number of containment systems. Also, water under the ground surface pressing on, flowing through, or seeping through covered property, as long as the pressure, seepage or flowing results from flooding as defined, the damage is covered. When the ground is saturated enough from floodwater that water can come up through the floors in a building. This coverage tries to dovetail with the common water exclusions in the standard policy form.

Collapse or sinking of land along the shore of a body of water is similar between the ISO and the NFIP forms. The NFIP form restricts it to subsidence of land along a lake or similar body of water, while the ISO form simply covers the sinking of land along the shore of a body of water. No type of body of water is specified. The collapse must be due to erosion or undermining caused by waves or currents that exceed the cyclical levels and cause flooding as defined. The ISO form does not provide coverage for restoring or remediating the land, while the NFIP does not mention such in the definition of flooding. The ISO form specifies that all flooding in a continuous or protracted event will constitute a single occurrence of flood. If a hurricane comes through a territory, and there is a lull while the eye passes over and then more flooding occurs once the rest of the storm passes over, that would be considered one flood.

Covered property is broken down into building, business personal property, and personal property of others. The building is the building or structure listed in the declarations, including completed additions, indoor and outdoor fixtures, and permanently installed machinery and equipment. Also included as part of the building is personal property owned by the insured that is used to maintain the building such as fire extinguishing equipment, floor coverings, and appliances such as refrigerators, dishwashers, stoves, ovens, and ventilating equipment. Additions, alterations, and repairs to the building or structure are covered if they are not covered under other insurance, and unless they are not fully enclosed by walls and a roof. Partially constructed property is not covered. A separate complete building away from the main building is covered unless it is covered by other insurance.

Materials, equipment and supplies used for additions, alterations or repairs to the building or structure are covered as long as they are located in the building or structure, or a fully enclosed premises within 100 feet of the described premises. If the insured is remodeling the office and has building supplies in a shed 50 feet away from the building, those supplies are covered from loss by flood. Note that the property must be inside a building and cannot be laying on the ground nearby. The risk of property being carried away by water is too great.

In the NFIP form, if the insured is a condominium association, the coverage A includes improvements with the individual units, if the units are owned in common by all unit owners. Most condominiums have the units owned individually by the unit owners, and only the common areas are jointly owned. The NFIP form lists a number of fixtures, machinery and equipment listed under coverage A.

Business Personal Property

b.Your Business Personal Property consists of the following property located in the building or structure described in the Declarations:

(1)Furniture and fixtures;

(2)Machinery and equipment;

(3)"Stock";

(4)All other personal property owned by you and used in your business;

(5)Labor, materials or services furnished or arranged by you on personal property of others;

(6)Your use interest as tenant in improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:

(a)Made a part of the building or structure you occupy but do not own;

and

(b)You acquired or made at your expense but cannot legally remove;

(7)Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Personal Property Of Others.

c.Personal Property Of Others that is:

(1)In your care, custody or control; and

(2)Located in the building or structure described in the Declarations.

However, our payment for loss of or damage to personal property of others will only be for the account of the owner of the property.

Analysis

Seven types of property are listed as business personal property. They are identical to the business personal property listed in the commercial property form, and four are identical to those found in the NFIP form. Both the ISO and NFIP forms include furniture and fixtures, machinery and equipment, stock and other personal property owned by you and used in your business. A difference is that with other personal property, the NFIP form states that coverage is subject to section IV Property Not Covered.

Use interest as a tenant in improvements and betterments is covered, as is leased personal property for which the insured has a contractual responsibility to insure, unless it is provided for under personal property of others. Use interest in the interest in the use of modifications made to a premises that are not removable; counters, shelves, display areas that an insured might add to a property for his operations. Likewise, leased property is considered business personal property unless it is covered under personal property of others. The insured might lease a piece of equipment where the lessor requires the insured to provide coverage for it. On the other hand, the insured could lease equipment that is kept in the premises and is in the insured's care, custody or control. An insured might lease medical equipment. In event of a loss to personal property of others, payment is only for the benefit of the owner of the property.

Property Not Covered

2.Property Not Covered

Covered Property does not include:

a.Accounts, bills, currency, food stamps or other evidences of debt, money, notes or

securities. Lottery tickets held for sale are not securities;

b.Animals, unless:

(1)Owned by others and boarded by you, while inside the fully enclosed building;

or

(2)Owned by you as "stock", while inside the fully enclosed building;

c.Automobiles held for sale;

d.Bridges, roadways, walks, patios or other paved surfaces;

e.Contraband, or property in the course of illegal transportation or trade;

f.The cost of excavations, grading, backfilling or filling;

g.Land (including land on which the property is located), water, growing crops or lawns;

h.Trees, shrubs and plants, except as "stock" inside the fully enclosed building;

i.Personal property not inside the fully enclosed building;

j.Tanks and their contents, and outdoor fences;

k.Personal property while airborne or waterborne unless such transportation is in accordance with the terms of the Additional Coverage – Preservation Of Property;

l.Bulkheads, wharves or docks;

m.Pilings or piers, except those which support the building;

n.Retaining walls that are not part of the building;

o.Property that is covered under another policy in which it is more specifically described, except for the excess of the amount due (whether you can collect on it or not) from that other insurance;

Analysis

The list of property not covered is standard. Accounts, bills, currency, animals unless property of others and boarded by the insured in fully enclosed buildings, or owned by the insured and stock in fully enclosed buildings are not covered. Because this is a flood policy, fully enclosed buildings are a requirement for many types of property. If property is not in a fully enclosed building, it is apt to be damaged or washed away, and the policy does not want to cover easily lost property.

Autos held for sale, bridges, roadways and other paved surfaces, contraband, cost of excavations, grading and filling, land, including water, growing crops or lawns, trees, shrubs and plants unless as stock inside a fully enclosed building, and personal property not inside a fully enclosed building, are all property not covered. Again, some property is covered only while in a fully enclosed building. Tanks and their contents, outdoor fences, personal property while airborne or waterborne unless meeting certain conditions, bulkheads, wharves, docks, pilings, piers, unless supporting the building and retaining walls not part of the building are not covered.

 p.Any building or structure located on or over a body of water, and any property in or on such building or structure;

q.Electronic data, except as provided under the Coverage Extension for Electronic Data. Electronic data means information, facts or computer programs stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software), on hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other repositories of computer software which are used with electronically controlled equipment. The term computer programs, referred to in the foregoing description of electronic data, means a set of related electronic instructions which direct the operations and functions of a computer or device connected to it, which enable the computer or device to receive, process, store, retrieve or send data. This paragraph, q., does not apply to your "stock" of prepackaged software, or to electronic data which is integrated in and operates or controls the building's elevator, lighting, heating, ventilation, air conditioning or security system;

r.The cost to replace or restore the information on valuable papers and records, including those which exist as electronic data. Valuable papers and records include but are not limited to proprietary information, books of account, deeds, manuscripts, abstracts, drawings and card index systems. Refer to the Coverage Extension for Valuable Papers And Records (Other Than Electronic Data) for limited coverage for valuable papers and records other than those which exist as electronic data;

s.Vehicles or self-propelled machines (including aircraft or watercraft) that:

(1)Are licensed for use on public roads; or

(2)Are operated principally away from the described premises.

This paragraph does not apply to the following while inside the fully enclosed building:

(a)Vehicles or self-propelled machines or autos you manufacture, process or warehouse;

(b)Vehicles or self-propelled machines, other than autos, you hold for sale;

or

(c)Vehicles used to assist the handicapped.

Analysis

The list of property not covered continues with buildings or structures over a body of water or property in such buildings. Buildings over water are particularly susceptible to flooding, even with the best preventative steps taken. For some properties, the risk is still too great to be assumed by private carriers.

Unless covered under the Extension for Electronic Data, all electronic data is excluded. This includes computer programs stored on a variety of storage devices from CDs to tapes, drives, cells, or other devices. However not included in this exclusion is the insured's "stock" of prepackaged software or data that is integrated in and operates or controls the building's lights, heat, air conditioning, and security or elevator systems. Programs operating the building are different from programs operating the office computers.

Likewise, the cost to replace or restore information on valuable papers or records, and electronic data, is excluded. Valuable papers and records include proprietary information, accounts, deeds, manuscripts, and other record types.

As is typical with any property form, vehicles, including aircraft or watercraft are excluded. An exception exists for vehicles or autos the insured manufactures, processes or warehouses, and vehicles other than autos that the insured holds for sale, or vehicles used to assist the handicapped.

Covered Cause of Loss – Flood

B.Covered Cause Of Loss – Flood

1.Flood means a general and temporary condition of partial or complete inundation of normally dry land areas due to any of the following:

a.The overflow of inland or tidal waters from a natural or man-made body of water, including:

(1)Waves, such as tidal wave and tsunami;

(2)Storm surge; and

(3)Spray from any such overflow;

all whether driven by wind or not;

b.The unusual or rapid accumulation or runoff of surface waters from any source, including release of water from a dam, levee, seawall or similar boundary or containment system; or

c.Mudslides or mudflows which are caused by flooding as defined in B.1.a. or B.1.b. above. For the purpose of this Covered Cause of Loss, a mudslide or mudflow involves a river of liquid and flowing mud on the surface of normally dry land areas as when earth is carried by a current of water and deposited along the path of the current.

2.This Covered Cause of Loss also includes damage to Covered Property caused by or resulting from:

a.Water or waterborne material that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment, provided such discharge results from flooding as defined in B.1. above;

b.Water under the ground surface pressing on or flowing or seeping through Covered Property, provided such pressure, flow or seepage results from flooding as defined in B.1.a. or B.1.b. above; or

c.Collapse or sinking of land along the shore of a body of water as the result of erosion or undermining caused by waves or currents of water which exceed the cyclical levels and cause flooding as defined in B.1.a. above. However, coverage under this Policy does not include the cost of restoring or remediating the land.

3.All flooding in a continuous or protracted event will constitute a single occurrence of Flood.

Analysis

Because this is a flood policy, there is one cause of loss, flood. The form defines flood at length; first, it is a general and temporary condition, of partial or complete inundation, of normally dry land due to specified causes. The specified causes include the overflow of inland or tidal waters from a natural or man-made body of water. This includes, but is not limited to, waves, tidal waves and tsunamis, storm surge, spray from any such overflow, and all whether driven by wind or not. Floods are often the result of hurricanes or other storms, and the winds can have a great impact on waves or storm surge, or create spray from the overflow of water. According to the National Hurricane Center, storm surge is an abnormal rise of water generated by a storm over and above the predicted astronomical tides. Astronomical tides are simply the tides caused by gravitational effects of the earth, sun and moon. A storm tide is the combination of a storm surge and the astronomical tide. When storm surge combines with normal high tide, storm tides can reach up to 20 feet or more.

Another cause of flood is the unusual or rapid accumulation of runoff of surface waters from any source, including release from dams, levees, seawalls or similar containment systems. Note that the runoff must be unusual or rapid. Normal runoff from typical spring storms would not be considered a flood. Storms that bring several inches of rain in a short period would create a rapid accumulation of water that could generate runoff.

Mudslides or mudflows caused by flooding as defined are also part of the flooding cause of loss. Mudslides or mudflows involves a river of liquid and flowing mud over the surface of normally dry land when earth is carried along by a current of water and is deposited along the path. A river of mud flowing through a town that leaves a layer of mud over everything is a mudflow.

Not all causes of flood are above ground. Included is damage from water or waterborne materials that backup or overflow from a sewer, drain, sump, sump pump or related equipment as long as the discharge is from flooding as defined. Likewise, water under the ground that presses, flows or seeps through covered property, as long as the pressure is caused by flooding as defined is a covered cause of loss. The ground can become so saturated that the water will come up under the flooring. Land that collapses along the shore of a body of water due to erosion or undermining, caused by floodwater, may also damage property and is a cause of loss. All flooding in a continuous event is a single flood occurrence.

Exclusions

C.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.Ordinance Or Law

The enforcement of or compliance with any ordinance or law:

(1)Regulating the construction, use or repair of any property; or

(2)Requiring the tearing down of any property, including the cost of removing its debris.

This exclusion, Ordinance Or Law, applies whether the loss 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 to that property.

b.Governmental Action

Seizure or destruction of property by order of governmental authority.

c.Nuclear Hazard

Nuclear reaction or radiation, or radioactive contamination, however caused.

d.Utility Services

The failure of power, communication, water or other utility service supplied to the described premises, however caused.

Failure of any utility service includes lack of sufficient capacity and reduction in supply. Communication services include but are not limited to service relating to Internet access or access to any electronic, cellular or satellite network.

However:

(1)This exclusion, Utility Services, does not apply to direct physical loss or damage to Covered Property caused by power, heating or cooling failure, provided that:

(a) Such failure results from damage by Flood to power, heating or cooling equipment situated at the described premises; and

(b) Such equipment does not rely on a power source away from the described premises.

(2)If power failure results in sump pump failure, we will pay for loss or damage

caused by water or waterborne material that backs up or overflows or is otherwise discharged from the sump, sump pump or related equipment, but only if such discharge results from Flood as defined in Paragraph B.1. of the Covered Cause Of Loss – Flood.

Analysis

The exclusion section starts out with the standard anticoncurrent causation language. If a covered loss occurs with or in any sequence with an excluded cause, there is still no coverage for that excluded cause of loss. If a fire occurs before or during a flood, the flood is not covered just because fire is a covered peril. However, some states use the Efficient Proximate Cause doctrine, which negates even this exclusion.

The first exclusion is for ordinance or law. The enforcement or compliance with any ordinance or law regulating construction, use, repair, tearing down of any property including the cost of debris removal is excluded. This applies even if the property has not been damaged and the law is enforced, or the increased costs comply with an ordinance or law in the course of construction, repair, renovation, or debris removal following a loss to the property. Optional ordinance or law coverage is available, but it must be selected and shown on the declarations page in order to be considered part of the policy.

Common exclusions for governmental action, nuclear hazard, and the failure of utility services such as power, communications or water are in the policy. The utility service exclusion has some exceptions. It does not apply to direct physical loss or damage to covered property caused by power, heating or cooling failure as long as the failure results from damage by flood to power, heating or cooling equipment at the described premises, and the equipment does not rely on power sources away from the described premises. If a sump pump failure occurs because of power failure, loss or damage caused by the resultant water backup or overflow is covered as long as the discharge results from flood as defined. Because of flooding, the power goes out; the sump pump can no longer function, and water backs up into the house damaging the carpet and flooring in the basement. The sump pump discharge is directly related to the flood and is covered. The policy is not designed to provide coverage for generic water backup and sump issues; it is designed only to provide coverage in event of a flood.

 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.

Exclusions B.1.a. through B.1.e. 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.Any Flood that begins before the inception date of this Policy or within 72 hours after the inception date of this Policy. However, this exclusion does not apply to a particular location if other Flood insurance was in effect for that location for at least 72 hours immediately prior to the inception date of this Policy, provided that this Policy replaces such previous Flood insurance without a lapse in coverage. With respect to a location that is added at the time of renewal of this Policy or at any time during the term of this Policy, we will not pay for loss or damage caused by or resulting from any Flood that begins before coverage for that location incepted under this Policy or within 72 hours after coverage for that location incepted under this Policy. However, this exclusion does not apply with respect to such a location if other Flood insurance was in effect for that location for at least 72 hours immediately prior to the date on which coverage for that location incepted under this Policy, provided that coverage under this Policy replaces such previous Flood insurance without a lapse in coverage. The previous Flood insurance referenced in this Paragraph a. could have been issued under another policy by us or by another insurer (including a policy issued under the National Flood Insurance Program).

If you request and we provide an increase in the stated Limit of Insurance for Flood during the term of this Policy, with the exception of an increase at the time of renewal of the Policy, the increase will not apply to loss or damage from any Flood that begins before or within 72 hours after your request was made.

If the Flood is due to the overflow of inland or tidal waters, then the Flood is considered to begin when the water first overflows its banks.

b.Water or waterborne material that originates from any of the following buildings and results from any condition substantially confined to such buildings:

(1)The insured building(s); or

(2)Any other building(s) at the site of the insured building(s) if the condition at such other building(s) is within your control.

Such conditions include but are not limited to:

(1)Design, construction or mechanical defect; and

(2)Failure, leakage or breakage of water or sewer pipes, drains, pumps, fixtures, appliances or equipment.

But this exclusion, C.2.b., does not apply with respect to coverage provided under the terms of Paragraph B.2.a. or Paragraph C.1.d.(2).

Analysis

Most policies exclude war and military action and this one is no exception. The standard exclusion for war, warlike action, insurrection, rebellion, and similar actions is included in the form.

The next exclusion is for flood that occurs before the inception date of the policy and within 72 hours of the inception date of the policy. This is exceedingly generous, as the NFIP policy requires a 30-day waiting period. This is to avoid adverse selection. However, if another flood policy existed immediately prior to the inception date of this policy and there is no lapse in coverage between the previous and this policy, then coverage applies. For example, the policy is effective June 1 at 12:01 a.m. The insured had no prior flood coverage. A flood occurs on June 2 at 4:30 p.m. damaging the covered property. There is no coverage for this loss because it is within the 72-hour waiting period. However, if the loss did not occur until June 4 at 11:00 a.m., there would be coverage as that is beyond the waiting period. Likewise, if the insured had a policy that expired June 1 at 12:01 a.m. right when the new policy took effect, that June 2 loss would be covered.

It works the same way if a location is added to the policy at either renewal or any time during the policy period. There is a waiting period of 72 hours after the property is added, unless there was flood coverage on that location immediately before being added to this policy. If an increase in limits is requested, the increase will not apply within 72 hours of the time of the request. Again, this avoids allowing the insured to raise limits when a hurricane is expected and the insured is predicting a loss to his property. In order to know when a flood begins and when to start the waiting period, if the flood is due to the overflow of inland or tidal waters, then the flood is considered to begin when the water first overflows the banks.

Water or waterborne material that originates from the insured buildings or any other buildings at the site is excluded if the buildings are within the insured's control. The conditions include, but are not limited to design, construction, or mechanical defect, failure, leakage or breakage of water or sewer pipes, drains, pumps, fixtures, appliances or equipment. If the flood originates from the insured structure there is no coverage, unless it falls under the backup coverage as listed earlier or the power failure that results in sump failure listed earlier. For example, if the premises processes soda and a water tank ruptures damaging the premises, there is no coverage.

 c.Delay, loss of use or loss of market;

d.Fire, explosion or theft;

e.Wind, hail, rain, snow, ice (including the pressure or weight of ice), sleet or their spray, or freezing or thawing;

f.Earthquake, landslide, mine subsidence, sinkhole collapse, earth sinking, earth rising, earth shifting, volcanic eruption, volcanic explosion or volcanic effusion, regardless of whether any of these is caused by an act of nature or is otherwise caused. But if any of these excluded causes of loss results in Flood, we will pay for the loss or damage caused by that Flood;

g.Destabilization of land arising from the accumulation of water in subsurface land areas, but such exclusion does not apply to the situation addressed in Paragraph B.2.b. of the Covered Cause Of Loss – Flood.

h.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:

(a) Electrical current, including arcing;

(b) Electrical charge produced or conducted by a magnetic or electromagnetic field;

(c) Pulse of electromagnetic energy; or

(d) Electromagnetic waves or microwaves.

i.Discharge, dispersal, seepage, migration, release or escape of "pollutants" unless the discharge, dispersal, seepage, migration, release or escape is itself caused by Flood. (When the discharge, dispersal, seepage, migration, release or escape of "pollutants" is itself caused by Flood, a special limitation applies to the amount of such coverage, in accordance with Paragraph G.2.b. of the Sub-limits.)

j."Fungus", wet rot, dry rot or bacteria that results primarily from failure to inspect and maintain the property after the Flood recedes.

k.Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.

3.When the Optional Coverage – Time Element Insurance is indicated in the Declarations as being applicable under this Policy, the following exclusions are added with respect to such insurance:

We will not pay for:

a.Any loss caused by or resulting from:

(1)Damage or destruction of "finished stock"; or

(2)The time required to reproduce "finished stock".

This exclusion does not apply to Extra Expense.

b.Any loss caused by or resulting from direct physical loss or damage to radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers.

c.Any increase of loss caused by or resulting from:

(1)Delay in rebuilding, repairing or replacing the property or resuming "operations", due to interference at the location of the rebuilding, repair or replacement by strikers or other persons; or

(2)Suspension, lapse or cancellation of any license, lease or contract. But if the suspension, lapse or cancellation is directly caused by the "suspension" of "operations", we will cover such loss that affects your Business Income during the "period of restoration" and any extension of the "period of restoration" in accordance with the terms of the Extended Business Income coverage.

d.Any Extra Expense caused by or resulting from suspension, lapse or cancellation of any license, lease or contract beyond the "period of restoration".

e.Any other consequential loss.

Analysis

Many of this next series of exclusions are perils that are normally covered in a property policy. Because this is a flood policy, perils such as fire, explosion, theft, wind, hail, rain, snow or ice are excluded. Delay, loss of use, or loss or market is excluded as well. Earthquake and destabilization of land, unless caused by flood, are excluded.

Artificially generated electrical, magnetic or electromagnetic energy that damages or disrupts electrical wires, devices, appliances, networks using cellular or satellite technology is excluded. Included in such energy is electrical current including arcing, charge produced or conducted by a magnetic or electromagnetic field, pulse of electromagnetic energy or electromagnetic waves or microwaves. This is different from the utility services exclusion. That excludes coverage when there is a failure from the utility service that affects the premises, with certain exceptions. This exclusion is for various types of generated electrical or magnetic energy that interferes with or damages existing appliances, systems, networks or devices. An excess of current could cause arcing or damage to wires or equipment, as could pulses of electromagnetic energy. Remember that artificially generated energy is man-made; solar flares and lightning are natural, and as such are not excluded.

The standard pollution exclusion exists although there is an exception for pollutants released due to a flood. In such a situation, there is a cap on covered damages. Fungus however is excluded when it results from the failure to inspect and maintain the property after the flood recedes. Fungal growth is a known issue after flooding, especially in areas that tend to have significantly high humidity. The insured should be proactive in working to mitigate any damage. Likewise neglect to preserve all property from further damage after a flood is excluded as well.

Specific exclusions apply when the optional time element coverage is selected. Loss caused by damage or destruction of, or time required to reproduce "finished stock" is excluded. However, this does not apply to extra expense. Loss caused by or resulting from damage to radio or television antennas and lead-in wiring, towers or masts is excluded. In addition, any increase of loss that results from delays in rebuilding, repairing, replacing the property, or resuming operations due to strikes by employees or others, or suspension or lapse or cancellation of a lease or contract is excluded. However, if the suspension is caused by the suspension of operations, the loss is covered as it affects the business income during the period of restoration. The insured leases space to a number of tenants for their shops. Because of the flood, some of the tenants leave and cancel their leases. Since the loss of the leases is directly due to the damage from the flood, the loss of income from the lost leases will be considered a business income loss. Any extension of the restoration period will be covered according to the terms of the extended business income coverage. The final two exclusions under the optional time element coverage are for extra expense caused by suspension, lapse or cancellation of a license, lease or contract beyond the period or restoration, or any other consequential loss.