Computer Systems Coverage Form
ISO Form IH 00 75
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
April 30, 2012
Summary: ISO developed form IH 00 75 09 09, Computer Systems Coverage, to provide broad coverage for computer equipment, data, and media associated with computer systems. 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 forms.
When combined, the forms cover computer systems against direct physical loss or damage. The most recent edition of the form has a few minor changes which are highlighted in the appropriate sections.
Topics covered: Introduction
Introduction
Various factors are considered in underwriting a Computer Systems Coverage form IH 00 75 12 02, including the devices used to protect the computer system from loss and location and transit exposures. ISO identifies fire, exposures from other occupancies and buildings, water, smoke and dust, theft, and electricity as the most critical factors to consider with respect to computer system exposures.
ISO also states that underwriters should evaluate the management of the applicant, paying particular attention to the following: "duplication of data and media; computer room should be locked at all times; computer room should have controlled access; records of maintenance of equipment; records of skill qualifications of personnel maintaining equipment; records of maintenance of protective devices; current status of labor relations; and past loss history."
We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.
1.Covered Property, as used in this Coverage Form, means:
a."Computer Equipment," "Data" and "Media" owned by you; and
b.Similar property of others in your care, custody or control.
Analysis
Covered property must suffer direct physical loss or damage from a covered cause of loss for coverage to apply. Computer equipment, data, and media are all defined terms that are discussed in the Definitions section of this article.
Covered Property does not include:
a.Property leased or rented to others while away from your premises described in the Declarations;
b.Accounts, bills, evidences of debt, valuable papers, abstracts, records, deeds, manuscripts or other documents, unless converted to "data" and then only in that form;
c.Portable personal computers, including laptops and notebooks;
d.Contraband, or property in the course of illegal transportation or trade;
e.Stock in trade.
Analysis
The form is not designed to cover computer systems that an insured rents or leases to others—only the insured's systems on premises and systems of others in the insured's care, custody or control are covered. And, as is typical, accounts, bills and the like are not covered, as well as contraband and stock in trade. Notebooks and laptops, including the insured's, are not covered.
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; that is, a consequential loss is not covered.
a.Additional Acquired Premises
If during the policy period you acquire an additional premises, we will provide coverage for Covered Property at such premises for up to 60 days. The most we will pay for loss or damage is the lesser of:
(1)25% of the total Limit of Insurance shown in the Declarations for all individually listed and described items; or
(2)$100,000.
You will report the values of such property to us within 60 days from the date you take possession and will pay any additional premium due. If you do not report such property, coverage will cease automatically 60 days after the date you take possession of the property or at the end of the policy period, whichever occurs first.
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 the lesser of 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
But this limitation does not apply to any additional debris removal limit provided in the Limits of Insurance Section.
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.Recharging The Fire Suppression System
We will pay up to $10,000 to recharge the fire suppression system protecting your premises if the system, for any reason, discharges.
e.Virus, Harmful Code Or Similar Instruction
(1)Under this Additional Coverage, 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.
(2) Subject to the provisions of this Additional Coverage:
(a)We will pay for the cost to replace or restore electronic data which has been destroyed or corrupted by a virus, harmful code or similar instruction; and
(b)Subject to the provisions of the Business Income Coverage Form, if applicable, you may extend insurance that applies to Business Income to apply to a suspension of "operations" caused by an interruption in computer operations due to destruction or corruption of electronic data due to a virus, harmful code or similar instruction; introduced into or enacted on a computer system (including electronic data) or a network to which it is connected, designed to damage or destroy any part of the system or disrupt its normal operation.
But there is no coverage for loss or damage caused by or resulting from manipulation of a computer system (including electronic data) by any employee, including a temporary or leased employee, or by an entity retained by you or for you to inspect, design, install, modify, maintain, repair or replace that system.
(3) To the extent that electronic data is not replaced or restored, the loss will be valued at the cost of replacement of the media on which the electronic data was stored, with blank media of substantially identical type.
(4) With respect to Business Income coverage, if applicable, this Additional Coverage . Virus, Harmful Code Or Similar Instruction does not apply to loss sustained after the end of the "period of restoration", even if the amount of insurance applicable in Paragraph (5) below has not been exhausted.
(5) Unless a higher Limit of Insurance for this coverage is shown in the Declarations, the most we will pay under this Additional Coverage . Virus, Harmful Code Or Similar Instruction is $5,000 for all loss or damage sustained in any one policy year, regardless of the number of occurrences of loss or damage or the number of premises, locations or computer systems involved. If loss payment on the first occurrence does not exhaust this amount, then the balance is available for subsequent loss or damage sustained in but not after that policy year. With respect to an occurrence which begins in one policy year and continues or results in additional loss or damage in a subsequent policy year(s), all loss or damage is deemed to be sustained in the policy year in which the occurrence began.
The $5,000 (or higher) Limit of Insurance applies separately to direct physical loss or damage and to Business Income loss, if applicable.
Analysis
Similar to the CP 00 10 04 02's additional coverage for your business personal property, the IH 00 75 provides the lesser of $100,000 or 25 percent of the total limit of insurance for covered property located at an additionally acquired premises for up to sixty days; values must be reported within sixty days.
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 75 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 $10,000, but form IH 00 75 indicates this in the Limits of Insurance., while form CP 00 10 indicates this in the additional coverage for debris removal itself.
The additional coverage for preservation of property is commonly found in commercial property and inland marine coverage forms.
The form provides up to $10,000 for recharging the fire suppression system, regardless of the cause of discharge. Thus, the discharge of the fire system does not need to be triggered by a covered cause of loss in order for the recharging of the system to be covered.
While the CP 00 10 contains an additional coverage of $2,500 for loss of electronic data resulting from any covered cause of loss, the IH 00 75 form provides $5,000 for loss of electronic data caused only by virus, harmful code, or similar instruction. The definition of "electronic data" is the same as in the Building and Personal Property Coverage form, but the Computer Systems Coverage form adds provisions applying to business income losses. It is important to note that the $5,000 limit applies separately to direct physical loss or damage and to business income losses. A higher limit may be specified in the declarations.
a.If a Limit of Insurance is shown in the Declarations, we will pay the actual and necessary Extra Expense you sustain due to direct physical loss of or damage to:
(1)Covered Property at your premises or in transit;
(2)The building in which the Covered Property is located if the building is damaged to an extent that prevents access to the Covered Property;
(3)The air conditioning system that specifically services your "Computer Equipment"; or
(4)The electrical system that specifically services your data operation if the damage to the system occurs inside, or within 100 feet of, the building housing your "Computer Equipment".
b.Extra Expense means the following necessary expenses you incur during the "Period of Restoration" that you would not have incurred if there had been no direct physical loss or damage to property:
(1)Expenses to avoid or minimize the suspension of business and to continue your business operations at:
(a)The described premises; and
(b)Replacement premises or temporary premises. These expenses include relocation expenses and costs to equip and operate the replacement or temporary locations;
(2)Expenses to minimize the suspension of your business if you cannot continue business operations; or
(3)Expenses to:
(a)Repair or replace any Covered Property; or
(b)Research, replace or restore the lost information stored on Covered Property; to the extent it reduces the amount of loss that otherwise would have been payable under this Optional Coverage.
c.The most we will pay for loss or damage under this coverage is the applicable Limit of Insurance shown in the Declarations.
Analysis
The optional coverage for necessary expenses incurred due to direct physical loss or damage applies to four specific categories: covered property at the insured's premises or in transit; the building where the covered property is located if access to covered property is blocked; the air conditioning equipment that services the insured's computer equipment; or the electrical system that services the insured's data operation, provided damage to the system occurs inside or within one hundred feet of the building.
A limit must be shown in the declarations in order for the optional coverage to apply. Extra expenses are those in addition to normal operating expenses that would be covered by business income insurance. The extra expenses must have been incurred to prevent the business from being closed or to minimize the amount of time the business is closed due to the direct physical loss or damage.
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.Governmental Action
Seizure or destruction of property by order or governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
b.Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused.
But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this coverage form.
c.War And Military Action
(1)War, including undeclared or civil war;
(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3)Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
Analysis
These exclusions are common to property coverage forms, where they are, as here, prefaced by anti-concurrent causation language.
The nuclear hazard exclusion has been modified slightly. Weapons are no longer directly mentioned and the results of a weapons discharge, radiation, reaction, radioactive contamination are what is excluded regardless of cause. For example the Fukushima plant that discharged radiation not because of a weapons discharge but because of a tidal wave resultant to an earthquake, that damage is excluded.
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.Dishonest or criminal act committed by:
(1)You, any of your partners, employees, directors, trustees, or authorized representatives;
(2)A manager or a member if you are a limited liability company;
(3)Anyone else with an interest in the property, or their employees or authorized representatives; or
(4)Anyone else to whom the property is entrusted for any purpose.
This exclusion applies whether or not such persons are acting alone or in collusion with other persons or such acts occur during the hours of employment.
This exclusion does not apply to Covered Property that is entrusted to others who are carriers for hire or to acts of destruction by your employees. But theft by employees is not covered.
c.Unauthorized instructions to transfer property to any person or to any place.
d. Virus, harmful code or similar instruction introduced into or enacted on a computer system (including "data") or a network to which it is connected, designed to damage or destroy any part of the system or disrupt its normal operation.
This exclusion applies except to the extent coverage is provided under Additional Coverage A.4.e. Virus, Harmful Code Or Similar Instruction.
e. Work upon the property.
But if work upon the property results in fire or explosion, we will pay for direct loss or damage caused by that fire or explosion if the fire or explosion would be covered under this Coverage Form.
f.Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
Analysis
While theft by outsiders is covered, theft that is committed by an employee, manager, or anyone else with an interest in the property is not covered. Likewise, property that disappears because of unauthorized instructions (often referred to as "trick and device") will not be covered.
Virus, harmful code, and similar instruction are excluded here, but the Virus, Harmful Code Or Similar Instruction Additional Coverage gives back $5,000 (or a higher amount if specified in the declarations) for this peril.
Loss or damage caused by work being done to the covered property is not covered unless it results in fire or explosion, which are covered if they are also covered by the form.
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.Corrosion or rust.
4.We will not pay for any Extra Expense loss caused by:
a.Programming errors; or
b.Incorrect instructions.
Analysis
Losses under paragraph 3 occur over time as natural, nonaccidental losses and are thus uninsurable. However, if any of these result in a covered cause of loss, the resulting damage will be covered.
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 Debris Removal Additional Coverage will not increase the applicable Limit of Insurance; but if:
1.The sum of direct physical loss or damage and debris removal expense exceeds the Limit of Insurance; or
2.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.
Analysis
As noted in the Additional Coverages, form CP 00 10 provides an additional $10,000 for debris removal, but that additional amount is indicated in the Debris Removal coverage itself. Form IH 00 75 indicates the amount is available in the Limits of Insurance.
Coverage for 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.
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:
a.The value of "computer equipment" will be:
(1)The cost of replacing the equipment with new property functionally identical to the damaged equipment if replaced; or
(2)Actual cash value if the property is not repaired or replaced.
In the event of partial damage to an item of "computer equipment", we will not pay more than the cost of reasonably restoring the property to its condition immediately prior to the loss.
b.The value of "data" will be the actual cost to reproduce. If the "data" is not replaced or reproduced, we will pay the cost of the value of the "media" with no stored "data".
c.The value of "media" will be the cost to repair or replace the "media" with substantially identical property.
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:
With respect to "computer equipment", we will not pay the full amount of any loss or damage if the value of "computer equipment" at the location where the loss occurred
at the time of loss or damage times the Coinsurance percentage shown in the Declarations is greater than the applicable Limit of Insurance for "computer equipment". Instead, we will determine the most we will pay using the following steps:
(1)Multiply the value of "computer equipment" at the time of loss or damage by the Coinsurance percentage;
(2)Divide the Limit of Insurance of the property by the figure determined in Step (1);
(3)Multiply the total amount of loss or damage, before the application of any deductible, by the figure determined in Step (2); and
(4)Subtract the deductible from the figure determined in Step (3).
We will pay the amount determined in Step (4) or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.
Analysis
The deductible provision in the form makes it clear that it is the adjusted loss to which the deductible is applied. 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 replaced. This form explains how the values of computer equipment, data, and media are determined.
Form IH 00 75 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 goes on to add the insured will have to rely on other insurance for the remainder or "absorb the loss yourself."
1."Computer Equipment" means:
a.Your programmable electronic equipment that is used to store, retrieve and process data. It includes their component parts and air conditioning, fire suppression equipment and electrical equipment used exclusively in your computer operations; and
b.Associated peripheral equipment that provides communication including input and output functions such as printing or auxiliary functions such as data transmission. It does not include "data" and "media".
2."Data" means:
a.Data stored on "media"; and
b.Programming records used for electronic data processing or electronically controlled equipment.
3."Media" means electronic data processing, recording or storage media such as software, films, tapes, discs, drums or cells.
4."Period of Restoration" means the period of time that:
a.Begins with the date of loss caused by or resulting from a Covered Cause of Loss at a covered location; and
b.Ends on the date when the property at the covered location should be repaired, rebuilt or replaced with reasonable speed and similar quality.
Analysis
The definitions of "computer equipment," "data," and "media" show clear distinctions between the equipment and the information that is stored on it. "Computer equipment" specifically excludes "data" and "media" from its definition.
The definition of "period of restoration" does not contain a time deductible that is often included on business interruption policies (e.g., the CP 00 30′s period of restoration does not begin until seventy-two hours after the time of loss for business income losses).