Contractors Equipment Coverage Form
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
May 12, 2015
ISO Form
Summary: The Insurance Services Office (ISO) offers the Contractors Equipment Coverage Form, IH 00 68 12 13, that is part of its inland marine (IM) program for nonfiled commercial IM exposures. The form covers contractors' machinery and tools.
Topics covered: Coverage Property not covered Covered causes of loss Additional coverages Exclusions Limits of insurance and deductible Additional conditions Definitions Declarations page
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 the following property described in the Declarations:
a.Your contractor's equipment; and
b.Similar property of others in your care, custody or control.
Analysis
The ISO Inland Marine Handbook lists several types of contractors equipment, which may be the subject of this coverage. Some examples include cranes, tractors with dumpers, and shovels used by roadbuilding contractors; road pavers, milling machines, and rollers used by paving-grading contractors; backhoes, trenchers, and welding equipment used by land clearer and sewer contractors; log loaders and chainsaws used by logging contractors; scaffolds, forms, and power tools of building contractors; and compressors, small hand tools, and portable generators used by small contractors.
Two categories of property are covered: the insured's equipment and similar property of others in the insured's care, custody, or control. Each piece of equipment is scheduled with a separate limit of insurance shown, but blanket coverage is available for miscellaneous items via endorsement IH 68 02 07 99.
Covered Property does not include:
a.Automobiles, motor trucks, trailers or other vehicles licensed for use on public roads;
b.Aircraft or watercraft;
c.Plans, blueprints, designs or specifications;
d.Property while waterborne, except while on ferries operating on the navigable waters of the Continental United States and Canada (other than to or from Alaska);
e.Property while underground or under water;
f.Property that you loan, lease or rent to others;
g.Contraband, or property in the course of illegal transportation or trade; or
h.Tools and clothing belonging to your employees.
Analysis
The policy makes clear that it is not intended to cover autos or other vehicles or aircraft or watercraft, which should be covered by auto, aircraft, or watercraft forms. Plans, blueprints, designs, or specifications are not equipment and do not fall within the scope of the coverage. Underground and underwater operations require special underwriting consideration and policy provisions that are outside the constraints of this form.
While coverage applies to borrowed, rented, or leased property in the contractor's care, custody, or control, property the contractor loans, lease, or rents to others is not covered, as well as tools and clothing belonging the contractors employees. Coverage for tools and clothing belonging to employees can be added with endorsement IH 68 01 12 00.
Covered Causes of Loss means Direct Physical Loss Or Damage to Covered Property except those causes of loss listed in the Exclusions.
Analysis
This is an open perils policy; every type of peril is covered unless specifically excluded in the exclusions section of the form.
a.Additionally Acquired Property
If during the policy period you acquire additional property of a type already covered by this Coverage Form, we will cover such equipment for up to 60 days, but not beyond the end of the policy period.
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 scheduled equipment; or
(2)$50,000.
You will report 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 the property is acquired or at the end of the policy period, whichever occurs first.
The Coinsurance Additional Condition does not apply to this coverage.
This Additional Coverage does not increase the applicable Limit Of Insurance shown in the Declarations.
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.
c.Preservation Of Property
If it is necessary to move Covered Property 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.
d.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.
Analysis
Of note in this list of typical property additional coverages is an additional $50,000 or 25 percent of the total limit of insurance—whichever is less—for additionally acquired property. Coverage is available for up to sixty days.
Be aware that the additional coverages, except pollutant cleanup and removal, do not increase the applicable limit of insurance. However, if the sum of direct physical loss or damage and debris removal expense exceeds the limit of insurance, or the debris removal expense exceeds the amount payable under the 25 percent limitation, up to an additional $5,000 in any one occurrence is available in addition to the limit of insurance.
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 of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
b.Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused. But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this Coverage Form.
c.War And Military Action
(1)War, including undeclared or civil war;
(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3)Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
Exclusions B.1.a. through B.1.c. apply whether or not the loss event results in widespread damage or affects a substantial area.
Analysis
Seizure or destruction of covered property as an act of governmental authority is not covered, except for destruction of property ordered to prevent the more general spread of fire when the fire itself would be a covered cause of loss. This rewording of the standard fire policy's "order of civil authority" exclusion is more precise in its application than the historical versions because it confines itself specifically to seizure or destruction rather than the more general "order of any civil authority."
The nuclear hazard exclusion eliminates coverage of loss by nuclear reaction, radiation, or radioactive contamination regardless of the cause. Ensuing fire loss is covered.
The war and military action exclusion applies to three related causes of loss: war (including undeclared or civil war); warlike action by any governmental military force; and acts of insurrection, rebellion, revolution, or usurped power.
2.We will not pay for loss or damage caused by or resulting from any of the following:
a.Delay, loss of use, loss of market or any other consequential loss.
b.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.
c.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.
d.Artificially generated electrical, magnetic or electromagnetic energy that damages, disturbs, disrupts or otherwise interferes with any:
(1 Electrical or electronic wire, device, appliance, system or network; or
(2)Device, appliance, system or network utilizing cellular or satellite technology; creating a short circuit or other electric disturbance within an article covered under this Coverage Form. For the purpose of this exclusion, electrical, magnetic or electromagnetic energy includes, but is not limited to, electrical current, including arcing; electrical charge produced or conducted by a magnetic or electromagnetic field; pulse of electromagnetic energy; electromagnetic waves or microwaves.
But if artificially generated electrical, magnetic or electromagnetic energy, as described above, results in fire 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.
e.Voluntary parting with any property by you or anyone entrusted with the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
f.Unauthorized instructions to transfer property to any person or to any place.
g.Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
h.Theft by any 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.
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.Insects, vermin, rodents.
d.Corrosion, rust.
e.Mechanical breakdown or failure of the Covered Property.
Analysis
The 2013 revision to the form updated the dishonest acts exclusion for consistency with updated policy language that has been included in other commercial property forms. 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.
One standout among this list of typical property exclusions is the exclusion for work upon the property. This form is designed to cover the contractor's equipment and tools but not the work done with those items. Some coverage is available, however, if work upon the property causes fire or explosion.
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.
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 Limits of Insurance exceeds the Deductible shown in the Declarations. We will then pay the amount of the adjusted loss or damage in excess of the Deductible, up to the applicable Limit of Insurance.
Analysis
The policy makes clear that the most that will be paid for any one occurrence is the limit shown in the declarations page.
In the Inland Marine Handbook, ISO states, "The most common deductible used with Contractors Equipment policies is $500. The rates found in the loss cost section reflect a $500 deductible."
The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
1.Coverage Territory
a.We cover property wherever located within:
(1)The United States of America (including its territories and possessions);
(2)Puerto Rico; and
(3)Canada.
b.We also cover property being shipped by air within and between points in Paragraph a.
2.Coinsurance
If a Coinsurance percentage is shown in the Declarations, the following condition applies: We will not pay the full amount of any loss or damage if the value of an item of Covered Property at the time of loss or damage times the Coinsurance percentage is greater than the Limit of Insurance for the item. Instead, we will determine the most we will pay using the following steps:
a.Multiply the value of the item of Covered Property at the time of loss or damage by the Coinsurance percentage;
b.Divide the Limit of Insurance of the property by the figure determined in Step a.;
c.Multiply the total amount of loss or damage, before the application of any deductible, by the figure determined in Step b.; and
d.Subtract the deductible from the figure determined in Step c.
We will pay the amount determined in Step d. or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself. This provision does not apply to blanket property or rented equipment.
Analysis
The coverage territory includes the airspace between points in the United States, Puerto Rico, and Canada for covered property in transit. If, for example, property were being shipped by air between Los Angeles and Honolulu, it is covered. If it was being shipped by air between Los Angeles and Guadalajara, Mexico, it would not be covered because Mexico is not part of the coverage territory.
"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.
Analysis
This definition is the typical definition of "pollutants" helps clarify exactly what is included in the additional coverages for pollutant cleanup and removal.