Includes copyrighted material of Insurance Services Office, Inc., with its permission.
The ISO personal property floater form PM 00 19 12 02 applies open perils coverage to most of the kinds of personal property found in a typical home, including, under certain circumstances, property of others. The insured's additions and alterations to the part of the residence occupied by the insured as a tenant, or to a condominium unit owned by the insured may also be covered. Modern homeowners, condominium, and renter's policies have primarily supplanted the need for separate personal property floater coverage; however, in some circumstances (for example, where the insured escrows payment for insurance as part of his mortgage arrangement, or has large collections of personal property which he or she does not want to cover under the homeowners form), the need for separate inland marine personal property coverage exists. The form could also presumably be used for a college student away from home with a large amount of personal property.
The equivalent AAIS form for personal property is IM-176. Following is a discussion of these forms.
Topics covered:
The personal property form was developed in the early part of the twentieth century, when increasing use of the automobile created the need for insurance coverage away from an insured's home. The fire insurance policies in force at the time provided an extension of 10 percent of the contents limit for property away from the residence. However, the two primary perils faced by a traveler—theft and the perils of transportation—were not covered. In Marine Insurance: Ocean and Inland (Prentice Hall; Englewood Cliffs, New Jersey; 1970) the writer says that a traveler would need "five insurance policies to give himself reasonably complete protection under the old monoline insurance concept of insurance." The five policies would be: "fire and extended coverage policy, a residence theft and burglary policy, a water damage policy, an earthquake policy, and a personal effects policy." In addition, a sixth policy might be needed for valuable personal articles.
But with the advent of homeowners insurance (which can provide open perils coverage on contents under form ISO HO 00 05 or AAIS Form 5.), the personal property form was relegated to being used principally for apartment and condominium dwellers.
The form provides blanket protection on unscheduled personal property as a class. Specific items may be taken out of the blanket protection and scheduled, using the appropriate separate form. See Personal Articles Form for a discussion of the various classes of property that may be scheduled. Jewelry and furs are often treated in this way, though they can be allowed to remain unscheduled if the insured is content with the more limited coverage available on that basis. Scheduling is discussed later on in this article.
Forms and rules treated in these pages are those promulgated by Insurance Services Office (ISO). The American Association of Insurance Services (AAIS) has a personal property floater (IM-176) that differs in some respects from ISO's. Where significant differences between the two programs exist, they are noted.
The ISO personal property form PM 00 19 is a simplified-language contract which is attached to and subject to the provisions of the common policy provisions form PM 00 01 12 02, the basic or skeleton form required for use in writing all personal inland marine coverages. (The common policy provisions are discussed elsewhere; see Personal Articles Form.
The personal property form may be used to insure the bulk of an insured's property—ordinary possessions—on an unscheduled basis. A separate amount of insurance applies to each of fourteen categories: silverware, goldware, and pewterware; clothing; rugs (including all floor coverings) and draperies; musical instruments and electronic equipment; objects of art; china and glassware; photographic equipment; guns and other sports equipment; major appliances; bedding and linens; furniture; all other personal property, plus professional books, instruments, and equipment while actually in the insured's residence; all other personal property including items as diverse as wine and garden tools and equipment; and building additions and alterations. This latter category is particularly important to a tenant or condominium unit owner. If the insured does not request insurance in a specific category, this must be indicated by entering "nil" or "none" where the amount would be entered. The ISO minimum coverage limit is $15,000 at the insured's principal residence; $10,000 is the minimum for property at another residence. AAIS sets no minimal limit; however, an individual insurer may impose a limit.
The amount of insurance indicated in the policy for each category represents the insured's aggregate limit of recovery for any one loss of property in that category. In older ISO forms for the personal property floater, all unscheduled property was written under a single amount of insurance; values were assigned to the separate categories of property insured, but only as estimates used in fixing the total amount of insurance. Theoretically, at least, the older policy's full amount of insurance could be applied even to a loss confined to one of the listed categories. Coverage under the present ISO form may be viewed as more restrictive in this respect. The AAIS personal property floater, like the older ISO contract, can provide a single amount of insurance, or the insured may elect to specify an amount of insurance for each class.
Any property insurable under a separate personal inland marine contract may be scheduled by means of the appropriate form (such as the fine arts form PM 00 17 12 02) attached to the PM 00 01 along with the personal property form. Scheduling is a particularly important option with respect to certain types of valuable property such as jewelry, furs, fine arts, etc. See When to Schedule later in this article.
The current personal property form PM 00 19 contains definitions intended to be added to those in the PM 00 01 (you and your; we, us and our; and insured). They are your residence, which means "the residence stated in the declarations or in the policy"; and residence employee, which means "1. An employee of an 'insured', or an employee leased to an 'insured' by a labor leasing firm, under an agreement between an 'insured' and the labor leasing firm, whose duties are related to the maintenance or use of 'your residence premises', including household or domestic services; or 2. One who performs similar duties elsewhere not related to the business of an 'insured'. A 'residence employee' does not include a temporary employee who is furnished to an 'insured' to substitute for a permanent 'residence employee' on leave or to meet seasonal or short-term workload conditions." These definitions are identical to those in the ISO homeowners 2000 forms. For a discussion, see ISO Homeowners Definitions.
A. Property Covered1. Property Owned or Used By An Insured
a. We cover one or more of the numbered classes of personal property described in the Schedule above only if:
(1) It is owned or used by an "insured"; and
(a) Normally kept at "your residence"; or
(b) Temporarily away from "your residence" anywhere in the world; and
(2) An amount of insurance is shown for the numbered class. That amount is the total amount of insurance for each loss for all property in that numbered class.
b. We also cover the classes of personal property described in (1), (2), and (3) below if owned or used by an "insured".
The limit shown for each class is the total limit for each loss for all property in that class.
(1) $100 on:
(a) Money, scrip, stored value cards and smart cards;
(b) Bullion, gold other than goldware, silver other than silverware, platinum other than platinumware; and
(c) Numismatic property.
(2) $500 on:
(a) Jewelry, watches, furs; and
(a) Precious or semi-precious stones or gems.
(3) $500 on:
(a) Securities, notes, accounts, bills, deeds, evidences of debt, letters of credit;
(b) Stamps, philatelic property; and
(c) Passports, documents, tickets, manuscripts, personal records or other papers of value.
This dollar limit applies to these classes regardless of the medium (such as paper or computer software) on which the material exists. This limit includes the cost to research, replace or restore the information from the lost or damaged material.
Analysis
There are six types of property that may be covered by the personal property form. The first of these, property covered, states that the classes of property as described earlier are covered only if they are indicated in the schedule. Further, the property must normally be kept at the insured's residence. "Your residence" is defined in the form (see earlier in this article), but the manual rules indicate that only the main residence and out buildings that are related to the activities of the main residence may comprise a single residence. Buildings adjacent to the main residence that can be occupied as a residence from time to time by persons other than the named insured are to be considered separate residences. Homes of relatives, therefore, even if adjacent to the named insured's dwelling, would constitute separate residences. Therefore, no coverage from this form would extend to that relative's property.
In common with other inland marine coverages, and with most standard homeowners policies, there is worldwide coverage for personal property. Remember, though, that coverage for all types of personal property is not automatic under the PM 00 19; coverage is only triggered when the category of property is indicated and an amount is entered on the declarations (for example, $5,000 for bedding and linen). The amount shown for any one category is the most that will be paid for all items within that category, no matter what the total amount of insurance is. For example, an insured may have $5,000 indicated for bedding and linen, $15,000 for clothing, and $50,000 for furniture. A total loss occurs, and the insured actually loses $7,000 in bedding, $14,000 in clothing, and $49,000 in furniture. The $5,000 is still the most he can collect for bedding, even though the other amounts of insurance were more than adequate for the remaining loss.
The list of items for which limited coverage is provided is similar to that found in the homeowners forms. Note that this does not mean $500 on jewelry, $500 on watches, and $500 on furs—it means a total of $500 for any one loss in one, two, or all three categories involving one, a few, or many pieces The limits for money and gold can be increased to $500; the limit for securities and notes increased to $1,000. No other limits are available. If the insured has property of greater value, such as a stamp collection or jewelry, then these items may be scheduled by attaching the pertinent coverage forms.
In the comparable provision of the AAIS form, this limitation for loss to jewelry, watches and furs does not apply to losses caused by fire, lightning, windstorm, hail, explosion, smoke, strike, riot, civil commotion, vehicles, aircraft, spacecraft and self-propelled missiles, including objects that fall from these items. The AAIS form limits coverage for money to $100, like the ISO, but the limit for valuable papers including securities is only $200. The AAIS limits may be increased to $500 for money, $1,000 for valuable papers and securities, and $2,000 for jewelry.
The second type of covered property includes the classes as described earlier.
2. Classes of Property Describeda. Silverware
This class includes the following:
(1) Silverware, silver-plated ware, goldware, gold-plated ware, pewterware, platinumware and platinum-plated ware; and
(2) Flatware, hollowware, tea sets, trays and trophies if made of or including silver, god, pewter or platinum;
b. Clothing
This class includes all "insured's" clothing.
c. Rugs And Draperies
This class includes all floor coverings.
d. Electronic Equipment And Musical Instruments And Accessories
This class includes but is not limited to:
(1) Pianos and organs;
(2) Radio, television and home entertainment systems;
(3) Computers, monitors, printers and scanners;
(4) Game machines;
(5) Compact disk and tape players and recorders;
(6) Compact and digital video disks, records and tapes; and
(7) Equipment and accessories related to the above.
e. Objects of Art
This class includes but is not limited to paintings, etchings, pictures, sculptures, tapestries and other objects of art.
f. China and Glassware
This class includes bric-a-brac [small ornamental articles, such as figurines].
g. Cameras
This class includes but is not limited to:
(1) Analog and digital motion and still cameras;
(2) Projection equipment such as movie, overhead, slide and multi-media projectors;
(3) Portable sound equipment related to the recording projection, reproduction and operation of motion or still pictures;
(4) Binoculars, telescopes, microscopes and the like which may be used with cameras or photographic equipment;
(5) Compact disks, digital video disks, diskettes, film, tapes used with photographic and projection equipment; and
(6) Related photographic accessories and equipment.
h. Sports Equipment And Supplies
This class includes but is not limited to golf, hunting, fishing and bowling equipment, guns and other sports equipment and supplies.
i. Major Appliances
This class includes but is not limited to:
(1) Air conditioners, clothes washers and dryers, dish washers; and
(2) Food and beverage blenders and mixers, ovens, stoves or ranges, trash compactors, refrigerators and freezers.
j. Bedding And Linen
This class includes but is not limited to blankets, comforters, covers, pillows, mattresses and springs and dining and bedroom linen.
k. Furniture
This class includes but is not limited to beds, chairs, chests, clocks, desks, lamps, mirrors, sofas and tables.
l. Professional Personal Property
This class includes but is not limited to professional books, instruments and equipment while actually in "your residence".
m. All Other Personal Property
This class includes but is not limited to books, wines, liquors, foodstuffs, garden, lawn and other tools and equipment, trunks, traveling bags, children's playthings, miscellaneous articles in basement and attic.
n. Building Additions And Alterations
This class includes building additions, alterations, fixtures, improvements or installations made or acquired at your expense:
(1) To that part of "your residence" you occupy as a tenant; or
(2) In a condominium unit you own.
Analysis
Note that virtually any and all kinds of personal property are included in the various categories. Remember, though, that coverage is not triggered for any of them unless an appropriate amount of insurance is indicated on the declarations. Therefore, the prudent agent, if selling this policy, might wish to review the classes of property with the client to make sure that there are no surprises. For example, the client might consider his television to be a major appliance when, in fact, it belongs to the electronic equipment class.
There are four other classes of property insured under the PM 00 19, as follows:
3. Newly Acquired Property—All ClassesWe cover newly acquired personal property of the type described in the Schedule.
The limit for this coverage is 10 percent of the total amount of insurance for all covered classes or $2,500, whichever is less.
This limit may be applied to any of the numbered classes described in the schedule. It does not increase the total amount of insurance.
4. Property Owned By Others
After a loss and at your request, we will cover unscheduled personal property owned by a guest or "residence employee" while the property is at "your residence".
This coverage is subject to the amounts of insurance shown in the Schedule for each numbered class.
5. Real Property At Your Residence
We cover the real property at "your residence" for an amount up to $2,500 for loss caused by:
a. Theft or attempted theft; or
b. Vandalism or malicious mischief to the inside of "your residence".
6. Property In A Newly Acquired Principal Residence
We cover property in a newly acquired principal residence for 30 days from the time you begin to move the property there.
This coverage is subject to the amounts of insurance shown in the Schedule for each numbered class.
Analysis
Newly acquired property is covered for up to 10 percent of the total amount of insurance or $2,500, whichever is less. The amount does not increase the total amount of insurance, but it does give the insured time to arrange an increase. To see how this works, say the insured has no coverage for guns. He buys a $1,000 shotgun, but on the way home it is stolen from his car. The total amount of insurance on all classes is $30,000, so he has 10 percent of $30,000 ($3,000) or $2,500 in this instance, available to apply to the loss. The limit may be applied to any of the numbered classes of property.
Similarly to the homeowners' forms, the insured can elect to cover a loss to a guest's or a residence employee's property while it is on the residence premises. However, unlike the homeowners, coverage is restricted not only by the amount shown for any particular class, but also restricted by whether the insured has purchased insurance for that class. For example, a guest brings his newly purchased shotgun to show the insured. There is a house fire, and the gun burns. There is no coverage unless the insured has indicated an amount of coverage for guns and sporting equipment.
Coverage under the AAIS form is available only for household employees. The property must be in the custody of the employee.
Real property at the insured's residence is covered up to $2,500 for loss caused by theft, attempted theft, or vandalism or malicious mischief to the interior of the residence. If a thief kicked open a door to gain access, the loss to the door would be covered. Coverage under the AAIS form is limited to 10 percent of the limit of coverage, or $2,500, whichever is less.
A special provision of the ISO personal property form concerns the period of time during which an insured is moving to a newly acquired principal residence. The form states that property is covered at the new residence—subject to the amounts of insurance for various listed categories—for thirty days after the insured begins moving it there. The AAIS form does not address this.
B. Property Not CoveredWe do not cover
1. Animals, fish or birds;
2. Aircraft, hovercraft, watercraft, trailers or campers;
3. Motor vehicles, motorcycles, motorized bicycles or scooters and any other motorized land conveyance designed for transportation or recreational use.
We do cover motorized land conveyances not required to be registered for use on public roads or property that are designed to assist the handicapped.
4. The accessories, equipment, and furnishings of the crafts, conveyances, or vehicles described in B.2. and 3. above.
We do cover such property if, at the time of loss, they are removed from the craft, conveyance or vehicle and at "your residence".
5. Property owned by an "insured" used primarily in a business, trade, profession or occupation engaged in on a full-time-part-time or occasional basis.
We do cover professional books, instruments and equipment at "your residence" at the time of loss.
6. Property normally kept elsewhere than at your residence throughout the year.
7. Articles separately described and specifically insured, regardless of the limit for which they are insured, in this or other insurance.
8. Contraband or property in the course of illegal transportation or trade.
In contrast, the AAIS form lists the following as property not covered:
1. property used for business. We do cover professional books, instruments and equipment owned by an insured that are on premises which you own or occupy.2. the property of a government.
3. the following:
a. self-propelled vehicles. This does not apply to invalid chairs or to a similar conveyance.
b. mobile homes.
c. aircraft.
d. watercraft.
e. trailers.
We do cover the parts and accessories of these items while they are removed from the item and are on premises that you own or use.
4. all animals, including birds and fish.
Analysis
Two items in the ISO form might lead to confusion. The first is the statement that the insurer will cover motorized land conveyances used to assist the handicapped, and the second is the statement that professional books, instruments, and equipment at the insured's residence are covered. They are, but only if coverage for these is specified in the declarations. On the ISO form, permanent coverage on property "normally kept elsewhere" than at the residence specified in the policy is available only by endorsement and for an additional premium (see Optional Coverages, later in this discussion). The inclusion as property not covered of property normally kept elsewhere than at the insured's residence throughout the year reemphasizes the floater's insuring agreement to cover only property normally located at the residence. By contrast, the AAIS form extends coverage up to 10 percent of the limit (which may be increased) shown for all covered property to personal property belonging to an insured that is normally kept at a residence other than the named insured's principal residence.
Both forms exclude coverage for boats, aircraft, trailers, campers, and motorized vehicles designed for transportation or recreational use, for obvious reasons. And, unlike the homeowners forms, the personal property forms do not automatically extend coverage to vehicles not subject to motor vehicle registration used to service the residence premises. (The ISO form includes a miscellaneous category for "all other personal property" and one of the examples given is "garden equipment." Possibly this might include a lawn tractor.)
Also excluded is equipment and furnishings of these excluded vehicles or conveyances, but there is coverage of equipment or furnishings while removed from a vehicle or conveyance and at the insured's residence. (Snow tires stored in the garage during the summer months and an outboard motor removed from the boat and kept in an outbuilding or the basement are examples. Here again an amount of coverage should be indicated under the "all other personal property" category.)
The personal property floaters exclude animals—the family pet or any other. (Damage by pets, as discussed later, is also excluded.)
Property pertaining to a business, profession, or occupation of the person whose property is insured is not covered. But an exception is made for professional books, instruments, and other professional equipment owned by an insured, if the property is actually within the stated residence of the insured at the time of loss and an amount of coverage indicated in the declarations. Generally, the insured possessing this type of property would obtain much broader coverage than that in the personal property floaters.
The ISO form does not cover contraband or property in the course of illegal trade; the AAIS form does not cover the property of a government.
There are two sets of exclusions in the ISO form. The first is similar to those in the homeowners comprehensive form (HO 00 05). The second set, the general exclusions such as that for earth movement, appears later in the policy. These are in addition to the exclusions in the PM 00 01 (common policy provisions) to which the PM 00 19 is attached. The PM 00 01 exclusions are for war, nuclear hazard, governmental action, intentional loss, and neglect. (For information, see Personal Articles Form The article is on page A.1.)
C. Perils Insured AgainstWe insure against risk of direct physical loss to covered property. However, we do not insure:
1. Breakage of eyeglasses, glassware, marble and bric-a-brac, statues, porcelain and similar fragile articles unless caused by:
a. Fire, lightning, windstorm, earthquake;
b. Explosion, collapse of the building, accident to conveyances; or
c. Rioters, strikers, theft, attempted theft, vandalism or malicious mischief.
2. Loss caused by:
a. Wear and tear, deterioration, latent defect, inherent vice or any quality in property that causes it to damage or destroy itself;
b. Insects or vermin;
c. Any work on covered property other than jewelry, watches and furs;
d. Marring or scratching;
e. Artificially generated electrical current that causes mechanical or structural breakdown of; or damage or failure to electrical apparatus.
Loss caused by fire is covered;
f. Dampness or extreme changes of temperature. Loss caused by rain, snow, sleet, hail or bursting of pipes or apparatus is covered;
g. Animals owned or kept by an "insured"; or
h. Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body. However, any ensuing loss not excluded is covered.
G. Exclusions
The following exclusions are added to this form and in Common Policy Provisions Form PM 00 01:
Earth Movement
Earth Movement means:
1. Earthquake, including land shock waves or tremors before, during or after a volcanic eruption;
2. Landslide, mudslide or mudflow;
3. Subsidence or sinkhole; or
4. Any other earth movement including earth sinking, rising or shifting;
caused by or resulting from human or animal forces or any act of nature unless direct loss by fire or explosion ensues and then we will pay only for the ensuing loss.
This exclusion does not apply to loss by theft.
Water Damage
Water Damage means:
1. Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind;
2. Water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump;
3. Water or water-borne material below the surface of the ground. This includes water which exerts pressure on, or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure structures;
caused by or resulting from human or animal forces or any act of nature.
This exclusion also applies if weather conditions contribute in any way with water damage to produce the loss.
Loss caused by fire, explosion, or theft resulting from water damage described above is covered.
Analysis
These exclusions when combined with the exclusions in the PM 00 01 are very similar to the exclusions in the ISO HO 00 05 or AAIS form 5. These forms, remember, provides special perils coverage for both dwelling and personal property. The excluded perils of the personal property floater are those commonly associated with open perils coverage.
The first set of exclusions deals primarily with those things that happen over time and are therefore uninsurable, such as wear and tear. There is an exclusion dealing with pet damage, referring to loss caused by animals owned or kept by an insured. (Damage done by a pet belonging to a guest or neighbor is not reached by the exclusion.)
The AAIS exclusions are somewhat narrower in that loss resulting from: (1) a process to repair or service the property; (2) electrical currents; (3) marring or scratching, or breakage of eyeglasses, glass, statuary, porcelains and similar brittle or fragile items is excluded. However, if fire or explosion results from one of the first two perils, that resulting loss is covered. And, if any of these losses are caused by: fire, lightning, windstorm, hail, earth movement, sinkhole collapse; volcanic action; explosion, smoke, sonic boom; aircraft; spacecraft; self-propelled missiles; falling objects; vehicles, including an accident to a transporting vehicle; strike; riot; civil commotion; vandalism; theft; attempted theft; sprinkler leakage; weight of ice, sleet or snow; collapse of a building or structure (unless the collapse is caused by an excluded peril), the resulting loss is covered. Loss caused by an animal owned by an insured is excluded unless fire, explosion or smoke results. The resulting fire, explosion or smoke loss is covered.
The forms exclude loss or damage caused by dampness of the atmosphere or extreme changes of temperature. However, this exclusion does not apply if the loss is caused directly by rain, snow, sleet, hail, or bursting of pipes or apparatus. The AAIS form also excludes coverage if the loss results from and is confined to an extreme of temperature.
There is the common exclusion found in most broad property forms for certain types of water losses. (For a discussion of that exclusion, see Water Exclusion Clause. The water damage exclusion applies even when weather conditions—heavy rains, for instance—contribute to the loss. Excluded as water damage are flood and other types of surface water; water backing up through sewers or drains; and water beneath the surface of the ground. Because the AAIS form is complete in itself, it contains the exclusions for war, nuclear hazard, and governmental action that the ISO program places in PM 00 01, common policy conditions.
In the ISO program, additional living expense coverage may be obtained by indicating the coverage on the declarations. The coverage is for any necessary increase in living expenses occasioned by a loss to the named insured's residence caused by a peril covered under the personal property floater. The increased living expense is intended to allow the named insured's household to maintain its normal standard of living while the residence is under repair. It applies, up to a stated limit, for the shortest time required to repair or replace the premises, or, if the premises are not reoccupied by the insured, the shortest time required for the insured's household to settle elsewhere. Coverage for additional living expense does not expire with the form itself, but continues in accord with the time limits described above. Unlike the homeowners forms, this coverage is not a percentage of the policy limit of insurance. Rather, the insured must select, in $1,000 increments, the amount of coverage desired. The AAIS program offers additional living expense by endorsement; attach IM-176-12.
Both programs allow coverage to be added for personal property contained at an additional residence. The AAIS form automatically extends 10 percent to property normally kept at a residence which is not the named insured's principal residence. This amount may be increased. ISO offers endorsement PM 02 03 to extend coverage. The AAIS program also allows coverage to be added by endorsement for: credit card forgery, outdoor antennas and towers, replacement cost coverage, and medical equipment. Under the ISO program, the insured can elect to have quarterly increases on the amount of insurance, beginning at 1 percent per quarter; attach endorsement PM 02 04 12 02.
The ISO personal property form requires a $100 deductible applicable to each separate loss. For a premium increase or credit, the amount of the deductible may be increased to full coverage, $50, $250 or $500. The AAIS form has no deductible; a deductible of $50 or $500 may be selected.
A special exclusion, with a premium credit, may apply to losses caused by windstorm or hail in the ISO program. ISO also offers alarm credits.
H. Loss ConditionsWith respect to the coverage provided in this form PM 00 19, Paragraphs D.1. Loss Settlement and D.2.
Loss Clause in Common Policy Provisions Form PM 00 01 are deleted and replaced by the following:
1. Loss Settlement
a. The value of the Property insured is not agreed upon but will be determined at the time of loss.
We will not pay more than the least of the following amounts:
(1) The actual cash value of the property at the time of loss;
(2) The amount for which the property could reasonably be expected to be repaired to its condition immediately prior to loss;
(3) The amount for which the property could reasonably be expected to be replaced with one substantially identical to it; or
(4) The amount of insurance.
b. In case of loss to a pair or set, we may elect to:
(1) Repair or replace any part to restore the pair or set to its value before the loss; or
(2) Pay the difference between the actual cash value of the property before and after the loss.
c. In case of loss to any part of covered property consisting of several parts when complete, we will pay for the value of the part lost or damaged.
d. If you or we recover any property for which we have made payment under this policy, you or we will notify the other of the recovery.
At your option, the property will be returned to or retained by you or it will become our property. If the recovered property is returned to or retained by you, we will adjust the loss payment based on the amount you received for the recovered property.
Analysis
The personal property floater states that, in the event of a covered loss, the company shall not be liable for more than the least of the actual cash value of the property at the time of the loss, the amount for which the property could reasonably be expected to be repaired or replaced with substantially identical materials, or the amount of insurance. As in most property insurance forms, this clause relates to actual cash value at the time of the loss—not at the time the policy was written. The loss conditions make clear that, unlike many inland marine forms, the personal property form does not provide coverage on an agreed value basis.
The loss conditions also address loss settlement in event of a loss to a pair or set. The insurer may elect to repair or replace any part of the pair or set to restore the value, or to pay the difference between the actual cash value prior to and after the loss.
There is a condition governing settlement when there is a loss to property consisting of several parts, as, for example, when a complete set of china is covered. In event of loss or damage, the insurer limits recovery to the value of the lost or damaged part.
Unlike the ISO form, the AAIS personal property floater provides the insured an option for replacement cost valuation. See Optional Coverages, discussed earlier. If the AAIS insured has not selected replacement cost, then loss settlement is the smallest of: "(1) that part of the loss over the deductible shown on the declarations; (2) the amount determined under 'Valuation' [the actual cash value of the property at the time of loss]; (3) the cost to repair, replace or rebuild the property with material of like kind and quality; (4) the amount of your [the named insured's] insurable interest in the property; or (5) the applicable limits of coverage shown on the declarations.
While the personal lines inland marine common policy provisions (PM 00 01) specifies that it is excess over other insurance, the personal property form amends that provision. It says that in the event of other insurance, the insurance provided by the personal property form will respond on a proportional basis. The AAIS form also responds on a proportional basis. The AAIS form also adds that if two or more coverages apply to a loss, the insurer will pay no more than the actual amount of the loss. A new provision in the ISO form—one known to those familiar with the ISO homeowners forms—is the service agreement provision. A service agreement is "a service plan, property restoration plan or other similar service warranty agreement, even if it is characterized as insurance." If such an agreement is in effect, then the personal property form becomes excess over any amounts payable under the agreement or plan.
Other provisions of the ISO personal property form include that "one or more volcanic eruptions that occur within a 72 hour period will be considered as one volcanic eruption." The AAIS form IM-176 contains many provisions that, in the ISO program, are found in the common policy provisions PM 00 01. Among these are the insured's duties following a loss, and the provision for voiding the entire policy if an insured commits misrepresentation, concealment, or fraud.
As has already been mentioned, it is sometimes to an insured's advantage to remove certain property from the unscheduled coverage available under the personal property form and insure it on a scheduled basis with the attachment of a personal articles form; see Personal Articles Form With respect to comparative quality of coverage, there are three advantages to scheduling.
1. No deductible clause applies to scheduled coverage.
2. Increased limits are available on certain classes of property.
3. There is no exclusion of loss by flood, surface and subsurface waters, etc., in the provisions for scheduled coverage.
Obviously, an article of jewelry or a fur coat worth more than $500 should be scheduled, because of the PM 00 19 policy limitation on unscheduled jewelry, watches and furs. Further, even though no particular piece of jewelry, etc., is worth more than $500, if the aggregate value of such items is above this figure, they should be scheduled, since all might be subject to a single loss.
Scheduling of fine arts items puts the coverage on a valued basis. Scheduling also opens the opportunity to avoid the marring and scratching portion of the breakage exclusion with respect to fine arts. Of course, the breakage exclusions on both the scheduled and unscheduled forms make similar, but different, exceptions for breaking caused by certain named perils such as fire, lightening, windstorm, and so on. Now, property other than fine arts may be insured on an agreed value basis. See "Personal Articles Form," Personal Lines Volume, Misc. Prop. Section for more information on this option.
June, 2004