Bailees Customers Coverage Form
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
March 2, 2015
ISO Policy
Summary: The Insurance Services Office (ISO) offers the Bailees Customers Coverage Form, IH 00 85 12 13, that is part of its inland marine (IM) program for nonfiled commercial IM exposures. This article reviews the ISO coverage form, with its insuring agreement, exclusions, conditions, and definitions. This form was updated in 2013, and this discussion reviews that updated form.
Topics covered: Coverage Property not covered Causes of loss Additional coverages Exclusions Limits of insurance and deductible Additional conditions Definitions Declarations page
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 personal property of others that is in your care, custody or control.
Analysis
IH 00 85 declares that the insurer will pay for direct physical loss of or damage to covered property from any of the covered causes of loss. The property that is covered under this form is the personal property of others that is in the care, custody, or control of the named insured. Dry cleaners are a common example of bailees, as are furniture repairers that take the furniture to be repaired to their shop, and other such services. The coverage form applies to direct physical damage and not to any consequential losses, or loss of use. Damage must be to the actual property; for example the dress left at the dry cleaners must be damaged; the owner's inability to wear the garment to the ball because the cleaner was behind on his orders is not covered. The covered causes of loss are all risks of direct physical loss or damage except those causes of loss listed in the exclusions section of the policy; in other words, IH 00 85 is an open perils type coverage form, which is in keeping with an inland marine form.
2.Property Not Covered
Covered Property does not include:
a.Accounts, bills, currency, documents, records, deeds, evidences of debt, money, notes, securities or stamps;
b.Animals, birds or fish;
c.Automobiles, motor trucks, trailers or other vehicles that are licensed for use on public roads and are used to transport persons or property;
d.Aircraft or watercraft;
e.Furs, fur garments or garments trimmed with fur;
f.Jewelry, watches, precious or semiprecious stones, bullion, gold, silver, platinum or other precious metals or alloys;
g.Property while in the custody of other bailees unless the property is:
(1)At a premises described in the Declarations; or
(2)In the custody of a carrier for hire;
h.Property while waterborne except while on ferries operating on the navigable waters of the Continental United States other than to and from Alaska;
i.Property that you have accepted for storage or for which you have issued a storage certificate. But if a Limit Of Insurance is shown in the Declarations for storage, property that you have accepted for storage is covered at the described premises, if you have issued a storage certificate for such property;
j.Property shipped by mail; or
k.Contraband, or property in the course of illegal transportation or trade.
Analysis
The list of property not covered is extensive; much of the property is better covered under separate policies. Automobiles at a shop, for example, are covered under a garagekeepers or other commercial policy. Banks have special coverage for currency on deposit at their institution. Property while in the custody of other bailees is if the insured is a dry cleaner and sends customers' shirts off-premises to another dry cleaning company for processing; it is out of the bailee's hands, therefore this policy does not apply. This form does not provide coverage unless the property is at a premises described in the declarations, or in the custody of a carrier for hire.
3.Covered Causes Of Loss
Covered Causes of Loss means Direct Physical Loss Or Damage to Covered Property except those causes of loss listed in the Exclusions.
Analysis
As mentioned earlier this is an open perils policy; every type of peril is covered unless specifically excluded in the exclusions section of the form.
4.Additional Coverages
a.Misidentification Of Property We also will pay for loss or damage resulting from misidentification of the Covered Property caused by a Covered
Cause of Loss.
This Additional Coverage does not increase the Limit of Insurance.
b.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 25% of:
(a)The amount we pay for the direct physical loss or damage to Covered Property; plus
(b)The deductible in this Policy applicable to that loss or damage.
(3)Payment under this Additional Coverage will not increase the applicable Limit of Insurance, 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; we will pay up to an additional $5,000 in any one occurrence under this Additional Coverage.
(4)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.
Analysis
The coverage form covers loss or damage resulting from misidentification of the covered property caused by a covered cause of loss. If a bailee's shop burns, it may be difficult to sort out different customer's property correctly; this is covered. The form pays for expenses to remove debris of covered property caused by or resulting from a covered cause of loss that occurs during the policy period. There are some restrictions on this coverage that should be noted. The expenses will be paid only if they are reported to the insurer in writing within 180 days of the date of loss. The most that will be paid is 25 percent of the amount paid for the direct physical loss plus the deductible. Payment under this additional coverage does not increase the applicable limit of insurance, but if the debris removal expense exceeds the amount payable under the 25 percent limitation, the insurer will pay up to an additional $5,000 in any one occurrence. And, this additional coverage does not apply to costs to extract pollutants from land or water, or to remove, restore, or replace polluted land or water.
c.Pollutant Cleanup And Removal We will pay your expense to extract “pollutants” from land or water if the discharge, dispersal, seepage, migration, release or escape of the “pollutants” is caused by or results from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date on which the Covered Cause of Loss occurs. This 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 the “pollutants” from the land or water. The most we will pay under this Additional Coverage is $10,000 for the sum of all covered expenses arising out of Covered Causes of Loss occurring during each separate 12-month period of this Policy.
The limit for this Additional Coverage is in addition to the Limit of Insurance.
d.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.
This Additional Coverage does not increase the Limit of Insurance.
Analysis
Under another additional coverage, IH 00 85 does pay for the expense to extract pollutants from land or water if the discharge or dispersal or escape of the pollutants is caused by a covered cause of loss that occurs during the policy period. The most to be paid under this coverage is $10,000 for the sum of all covered expenses during each separate twelve-month period of the policy; this is in addition to the limit of insurance. What is not covered under this part of IH 00 85 is the cost to test for, monitor, or assess the existence or effects of pollutants.
The final additional coverage is for 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, IH 00 85 pays for any direct physical loss or damage to that property while it is being moved or while temporarily stored at another location. For the coverage to apply, the loss or damage must occur within thirty days after the property is first moved. This additional coverage does not increase the limit of insurance.
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.Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
c.Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused.
But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this Coverage Form.
Analysis
These exclusions and the next exclusion for war are preceded by the admonition that the exclusions apply regardless of any other cause or event that contributes concurrently or in any sequence to the loss; in other words, an attempt to prevent concurrent causation. This set of exclusions include ordinance or law, governmental action, nuclear hazard, and war and military action. The exclusions are standard language and are self-explanatory.
d.War And Military Action
(1)War, including undeclared or civil war;
(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3)Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
Exclusions B.1.a. through B.1.d. 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. Theft from any unattended vehicle unless at the time of theft its windows, doors and compartments were closed and locked and there are visible signs that the theft was the result of forced entry.
But this exclusion does not apply to property in the custody of a carrier for hire.
b.Delay, loss of use, loss of market or any other consequential loss.
c.Unexplained disappearance.
d.Shortage found upon taking inventory.
e.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.
This exclusion does not apply to acts of destruction by your employees (including temporary employees and leased workers) or authorized representatives; but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.
Analysis
Theft from any unattended vehicle is not covered unless, at the time of the theft, the windows, doors, and compartments of the vehicle were closed and locked; visible signs of forced entry are required to circumvent this exclusion. IH 00 85 does not apply to delay, loss of use, loss of market, or any other consequential loss. Unexplained disappearances and a shortage found upon taking inventory, as well as dishonest or criminal acts by the named insured, employees, or authorized representatives are all excluded under this form. New in the 2013 revision to this section is the exclusion of acts committed by temporary or leased workers. They were not included with partners, employees, officers, directors, trustees, or authorized representatives in the previous form but they have been added to this form. They are included in (3) as well, and also in the last section of acts of destruction. This narrows coverage for the insured, and temporary and leased workers are now treated the same as the insured's regular employees.
f.Pollution
Discharge, dispersal, seepage, migration, release or escape of “pollutants” unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the “specified causes of loss”. But if loss or damage by the “specified causes of loss” results, we will pay for the resulting damage, caused by the “specified causes of loss”.
g.Processing or work upon the property.
But if processing or work upon the property results in fire or explosion, we will pay for the direct loss or damage caused by that fire or explosion if the fire or explosion would be covered under this Coverage Form.
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; creating a short circuit or other electric disturbance within an article covered under this Coverage Form.
For the purpose of this exclusion, electrical, magnetic or electromagnetic energy includes, but is not limited to, electrical current, including arcing; electrical charge produced or conducted by a magnetic or electromagnetic field; pulse of electromagnetic energy; electromagnetic waves or microwaves.
But if artificially generated electrical, magnetic or electromagnetic energy, as described above, results in fire or explosion, we will pay for the direct loss or
damage caused by that fire or explosion if the fire or explosion would be covered under this Coverage Form.
This exclusion only applies to loss or damage to that article in which the disturbance occurs.
i.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.
j.Unauthorized instructions to transfer property to any person or to any place.
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.
l.The cost to research, replace or restore converted data, programs or instructions used in any data processing operations, including the materials on which the data is recorded.
m.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
IH 00 85 excludes loss or damage caused by pollution. Losses to covered property caused by processing or work upon the property are not covered, but the insurer will pay for direct loss or damage caused by a resulting fire or explosion. Artificially generated current creating a short circuit or other electric disturbance within an article covered under the bailees coverage form is another listed exclusion. If the insured voluntarily parts with any covered property due to any fraudulent scheme, trick, device, or false pretense, there is no coverage; and, in connection with this exclusion, loss due to unauthorized instructions to transfer property to any person or to any place is excluded. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss prevents coverage under IH 00 85. The cost to research, replace, or restore converted data, programs, or instructions used in any data processing operations is also not covered. Theft by any person to whom property is entrusted other than carriers for hire is a new exclusion; coverage is excluded whether the person is acting alone or with others, and it does not matter what time of day the loss happens, whether it is during normal hours of operation or during off times.
The final set of exclusions includes six causes of loss, but the policy declares that if loss or damage by a covered cause of loss results from these items, the loss or damage caused by that covered cause of loss will be covered. The exclusions here are: weather conditions; acts or decisions, including the failure to act or decide, of any person, group, organization, or governmental body; wear and tear; any quality in the property that causes it to damage or destroy itself, hidden or latent defect, or gradual deterioration; mechanical breakdown; and loss caused by insects, vermin, or rodents.
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. 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.Wear and tear.
d.Any quality in the property that causes it to damage or destroy itself, hidden or latent defect, gradual deterioration.
e.Mechanical breakdown.
f.Insects, vermin, rodents.
Limits of Insurance and Deductible
C.Limits Of Insurance
The most we will pay for loss or damage in any one occurrence is the applicable Limit Of Insurance shown in the Declarations.
D.Deductible
We will not pay for loss or damage in any one occurrence until the amount of the adjusted loss or damage before applying the applicable 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.
The Deductible does not apply to Covered Property in transit.
Analysis
The most that the insurer will pay for loss or damage in any one occurrence is the applicable limit of insurance shown in the Declarations, IH DS 85 12 00. As for the deductible, the insurer 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. The deductible does not apply to covered property in transit.
E.Additional Conditions
1.The Valuation General Condition in the Commercial Inland Marine Conditions is replaced by the following:
The value of Covered Property will be the least of the following amounts:
a.Actual cash value of the lost or damaged property;
b.Cost of reasonably restoring the property to its condition immediately before the loss; or
c.Cost of replacing the lost or damaged property with substantially identical property.
However, the value of Covered Property will:
a.Include the value of labor, materials or services furnished or arranged by you; but
b.Not exceed the amount shown for each item of property on receipts provided to customers.
In the event of loss or damage, the value of property will be determined as of the time of loss or damage.
2.The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
a.Coverage Territory
(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.Adjustment Of Loss By You
When the total loss or damage covered by this Coverage Form is not more than $500 in any one occurrence, you may settle and pay the loss or damage with the owners of that property.
You will have additional duties when you settle under this provision. You must:
(1)Fully comply with all provisions of this Policy in your settlement; and
(2)Promptly send us the properly completed statements of loss on the forms we have supplied to you.
We will reimburse you for any payment you make under this provision. We will do this within 30 days after we have received the statements of loss that we require.
Analysis
IH 00 85 replaces the valuation general condition that is found on the Commercial Inland Marine Conditions Form, CM 00 01. The valuation clause now says that the value of covered property will be the least of three listed amounts. The previous policy had included the amount for which the insured is liable, but that has been removed from the policy, restricting coverage somewhat. The three listed amounts are the actual cash value of the lost or damaged property, the cost of reasonably restoring the property to its condition immediately before the loss, or the cost of replacing the lost or damaged property with substantially identical property. The value of the covered property includes the value of labor, materials, or services furnished or arranged by the named insured. It is also not to exceed the amount shown for each item of property shown on receipts provided by customers; this is to prevent fraud and is new to the 2013 form. If the customer cannot produce receipts, then the customer does not get paid for the loss. And, in the event of loss or damage, the value of property will be determined as of the time of loss or damage.
IH 00 85 lists two other conditions that are added to those found on the Commercial Inland Marine Conditions Form and the Common Policy Conditions Form, (IL 00 17 11 98). IH 00 85 states that it covers property wherever located within the United States, Puerto Rico, and Canada, as well as property being shipped by air within and between points in these countries. IH 00 85 also discusses the adjustment of loss by the named insured. When the total loss or damage covered by IH 00 85 is not more than $500 in any one occurrence, the named insured is given permission to settle and pay the loss; the insurer will then reimburse the insured for the payment within thirty days after the insurer receives the statements of loss. The insured is required to fully comply with all the provisions of IH 00 85 in arriving at the settlement and promptly send completed statements of loss on the forms supplied by the insurer.
F.Definitions
1.”Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
2.”Specified Causes of Loss” means the following:
Fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; “water damage”.
a.Sinkhole collapse means the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite. This cause of loss does not include:
(1)The cost of filling sinkholes; or
(2)Sinking or collapse of land into manmade underground cavities.
b.Falling objects does not include loss or damage to:
(1)Personal property in the open; or
(2)The interior of a building or structure, or property inside a building or structure, unless the roof or an outside wall of the building or structure is first damaged by a falling object.
3.”Water damage” means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam.
Analysis
IH 00 85 contains three definitions that are fairly standard. “Pollutants” are any solid, liquid, gaseous or thermal irritant or contaminant, including waste.
Specified causes of loss are the following: fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice, or sleet; and water damage. The coverage form notes that the peril of falling objects does not include loss or damage to personal property in the open, or to the interior of a building or structure, or property inside a building or structure, unless the roof or an outside wall of the building or structure is first damaged by a falling object.
“Water damage” means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam.
“Sinkhole collapse” means the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite. Sinking or collapsing of land into man-made underground cavities is not included.
The Declarations page, IH DS 85 12 00, is the introductory page to the bailees customers coverage form. IH DS 85 lists five areas to which the coverage form applies and states limits of insurance for the five areas. Area one is the property at the named insured's premises; area two is for the property away from the premises; the third area is property in transit; the fourth deals with property in storage at the named insured's premises; and the final area is all covered property in any one occurrence.
There is also a spot on the dec page where the insured can list the deductible upon which the insured and the insurer have agreed.
The next part of IH DS 85 pertains to rates and premiums. There is a place to list the premium if the coverage is on a nonreporting basis. There is also a place for the premium under a reporting basis, with spaces for a deposit premium and a minimum premium. Also listed are spots for the reporting period and premium adjustment period. The premium base and rates per $100 also have a space on IH DS 85.
The final section of the declarations page is an open space where any special provisions modifying the Bailees Customers Coverage Form are listed.