Includes copyrighted material of Insurance Services Office, Inc., with its permission.
February 9, 2015
After a home and car, for many people jewelry is the next most valuable item they own. As jewelry and furs are personal property they are covered on a named perils basis, but they are susceptible to many unnamed perils that are more likely to occur due to the nature of the items. This is where the inland marine forms come in. They provide broader coverage and scheduled limits of coverage. The ISO form PM 00 11 is specifically developed to provide coverage for jewelry and furs.
Topics covered
The endorsement allows the insured to schedule particular items of jewelry and fur for specified amounts. Important in this coverage is an accurate, detailed appraisal of each item. Gemstones need to be identified by type, cut, clarity, color, and karat size, and settings must be identified by type and grade of metal. Furs need appraisals as well and should include type of fur, quality, type and style of garment, and percentage of fur on the garment. As the value of jewelry and furs changes over time, is important to advise the insured to have the appraisals regularly updated, roughly every five years unless the carrier has specific appraisal update requirements.
A. Property Covered
We cover the property insured under this policy that is owned by an "insured" while it is anywhere in the world.
1.Scheduled Jewelry And Furs
We cover scheduled articles of jewelry and furs only if an amount of insurance and premium is shown for that property in the Schedule above. The amount of insurance shown for such property is limited by Paragraph D.1. Loss Settlement in Common Policy Provisions Form PM 00 01.
2.Newly Acquired Property
We cover newly acquired jewelry and furs subject to the following:
a. The limit for this coverage is 25% of the amount of insurance for that type of property or $10,000, whichever is less; and
b. You will report to us such newly acquired property within 30 days of when you acquire it and pay an additional premium from that date.
If you fail to do so, coverage will cease automatically 30 days after you acquired the property or at the end of the policy period, whichever occurs first.
Analysis
Like most personal property coverages, this form covers scheduled property while it is anywhere in the world. So the insured can travel with her diamonds and the coverage follows. The property that is covered is only what is listed on the schedule unless it fits the newly acquired property provisions.
The loss settlement conditions that apply appear in the Common Policy Provisions, PM 00 01, section D.1. The scheduled form has no settlement provisions; it is designed to identify specific property and what the agreed amounts are.
Section D.1 of the Common Policy Provisions form states that the value scheduled is not an agreed upon amount, but that the value will be determined at the time of loss. In event of a loss, no more than the lesser of four amounts will be paid: the actual cash value of the article at the time of loss, the amount for which the article could be reasonably repaired to its condition immediately before the loss, the lesser of the amount for which the article could be reasonably replaced with one substantially similar to it, or the agreed value of the item. This allows the carrier to return the insured to her pre-loss condition at the lowest cost to the carrier but to still prove proper indemnity. It is important to make this clear to the insured; just because an item is scheduled does not mean that is what the insured will get in event a piece of jewelry is damaged or lost. Carriers routinely have access to gemstones at less than retail cost, and if an exact duplicate or substantially identical stone can be gotten at such a price, the carrier will do so.
Because of the potential value of the property, newly acquired property is covered for a limited amount for a limited time. New property is covered for either 25 percent of the insurance for that type of property or $10,000, whichever is less. Also, such property must be reported to the carrier within thirty days of acquisition, and any additional premium must be paid. The carrier does not want to provide coverage for what could be expensive items without collecting premium for them. If the carrier is not notified, then coverage ceases at the earliest of thirty days or the end of the policy period, whichever comes first. If an insured purchases a diamond necklace on February 1 for Valentine's Day, the policy expires on February 18, and the property is lost or damaged on February 20, there is no coverage.
B. Property Not Covered
We do not cover:
1.Unmounted gems;
2.Bullion, gold, silver and other precious metals;
3.Goldware, gold-plated ware, pewterware, platinumware, platinum-plated ware, silverware, and silver-plated ware;
4.Flatware, hollowware, tea sets, trays and trophies made of or including gold, pewter, platinum or silver; and
5.Contraband, or property in the course of illegal transportation or trade.
Analysis
Unmounted gems are incredibly easy to lose, so they are not covered. Several thousand dollars could be lost if just one tiny box was accidently thrown away, lost, dropped on the carpet, or subject to other types of loss. An unmounted sapphire dropped on a dark blue carpet is virtually gone forever.
Coverage for goldware, silverware, flatware, hollowware, and those types of items are covered under a separate form, PM 00 15, the Silverware form. Bullion is covered on the Personal Property form, PM 00 19, but is limited to $100 of coverage. With gold currently trading at $1,289.60 per ounce, the personal property form is not giving the insured any real coverage. Bullion is best kept in a safe deposit box or depository. There are specialty policies designed for bullion stored in depositories that account for the high and often rapidly changing values of precious metals. Contraband is of course not covered as it is illegal.
C. Perils Insured Against
We insure against risk of direct physical loss to the covered property.
We do not insure against loss caused by:
1.Wear and tear, deterioration, inherent vice or any quality in property that causes it to damage or destroy itself; or
2.Insects or vermin.
D. Deductible
We will pay only that part of the total of all loss payable under this policy that exceeds the deductible amount shown in the Declarations.
E. Options
One or more of the following options apply to this policy only if the box for that option is checked in the policy Declarations, or is otherwise indicated elsewhere in this policy.
1.Jewelry Pair Or Set Broad Coverage (Applies only to scheduled articles of jewelry
subject to Paragraph D.1.a. Standard Loss Settlement in Common Policy Provisions Form PM 00 01.)
Paragraph D.1.a.(3) in Common Policy Provisions Form PM 00 01 is deleted and replaced by the following:
(3) Loss To A Pair, Set Or Parts
If there is a loss to a scheduled article of jewelry that is a pair or set, or consists of several parts when complete:
(a) We will pay the full amount shown in the Schedule for that article; and
(b) You will surrender it to us if not lost or stolen.
Analysis
This is an open perils form, so only what is specifically excluded is not covered. Excluded perils are wear and tear, inherent vice or any property that causes the property to damage or destroy itself, or insects or vermin. Jewelry can wear overtime, and certain gemstones are more apt to fracture than others. Opals are known for fracturing due to stress, and jewelers often do not recommend putting them in rings. Many types of stones have natural fractures that may split over time. Settings are known for thinning and wearing, especially for jewelry that is worn daily. Prongs can break off or bend, and a problem with a prong can lead to the loss of a stone. Furs are susceptible to insect or vermin damage, which is why properly storing them in the off season is so important. Many furriers provide cold storage to customers during the off season.
The form has a few unique options. For any of the options to apply, the box must either be checked on the declarations or indicated elsewhere in the policy. Since jewelry may consist of paired earrings or rings, or a complete set of matching ring, earrings, and necklace, there is the option for modifying the loss settlement options for such pairs or sets. The option is that the full amount shown in the schedule will be paid and that the remaining parts will be surrendered to the company if the property is not lost or stolen. For example, a pair of emerald earrings is damaged beyond repair; using this option, the insured would surrender the earrings to the carrier and would receive the scheduled amount for the loss. The insured would not be held to receiving the lesser of the four conditions that normally would apply. The insured may have jewelry that is antique and irreplaceable—due to craftsmanship duplication may even be out of the question. This is where this option is to the benefit of the insured, as long as the jewelry in question is a pair or set or consists of multiple parts. This could apply to a string of pearls; they consist of multiple parts, and as pearls are generally matched, it may be difficult to find a matched pearl to complete a broken strand.
2. Jewelry In Vault Credit
a.You agree:
(1)To keep the jewelry articles described and marked with a number symbol (#) in the Schedule in a vault; and
(2)That such vault is on the premises of the bank or security institution declared in the Declarations or elsewhere in this policy for this Option.
b.We will not cover these articles if they are removed from the premises of that bank or security institution unless you:
(1)Notify us in advance of removal; and
(2)Pay an additional premium for the time they are away from such premises.
3.Additional Person Insured-Engagement Ring, Wedding Ring Or Guard Ring Only
We agree that the person named in the Declarations or elsewhere in this policy for this Option has an interest in the jewelry article(s) described as applying to this Option. You agree that such person is not an "insured" under this policy.
Analysis
Because jewelry is so valuable and is so easily lost or damaged, the form provides the option of a reduced premium if the insured stores the jewelry in a vault. The vault cannot be on premises and cannot be just a fireproof box owned by the insured. The vault must be in a bank or other security institution. The items in the vault are to be listed in the schedule, and the carrier will adjust the premium accordingly. When the insured removes items from the vault, the insured is to notify the carrier. The premium will be adjusted for the length of time the property is out of the vault, so the insured must again notify the carrier when the property is returned to the vault.
A significant coverage that is not available in the homeowners form or the scheduled personal property form is coverage for an additional person who has custody of an engagement, wedding, or guard ring. Engagement rings are traditionally given to the affianced, and that person may or may not have a schedule on their policy. This fixes the issue of insurable interest when the ring transfers from the giver to the receiver.