Summary: The Insurance Services Office (ISO) offers the Bailees Customers Coverage Form, IH 00 85 12 20, 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 2020, and this discussion reviews that updated form.
The purpose of the Bailees Customers Coverage Form is to insure customers' property in the custody of bailees for hire. There are two main reasons why this coverage might be sought:
1) bailees-for-hire are required to exercise a degree of care that a normal, prudent person would. If loss or damage occurs to the property because of a bailee's negligence, he or she can be held liable.
2) if a loss occurs due to circumstances beyond the bailee's control and he/she/they are not negligent, it is good business practice to indemnify customers, as they will likely want their property returned, or reimbursement of its cash equivalent.
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 tv and appliance repairers, furniture repairers, carpet cleaners, 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 suit left at the dry cleaners must be damaged; the owner's inability to wear the garment to court 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.
Property Not Covered
2. Property Not Covered
Covered Property does not include:
- Accounts, bills, currency, documents, records, deeds, evidences of debt, money, notes, securities or stamps;
- Animals, birds or fish;
- Automobiles, motor trucks, trailers or other vehicles that are licensed for use on public roads and are used to transport persons or property;
- Aircraft or watercraft;
- Furs, fur garments or garments trimmed with fur;
- Jewelry, watches, precious or semiprecious stones, bullion, gold, silver, platinum or other precious metals or alloys;
- 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.
l. "Data" or "media".
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.
Newly added to the list of property not covered in the 2020 form are "data" and "media", both defined terms in the policy, as these types of property are more appropriately covered under a commercial property or electronic data policy. "Data" is defined as data stored on "media"; and programming records used for electronic data processing or electronically controlled equipment. "Media" means electronic data processing, recording or storage media such as software, films, tapes, discs, drums or cells.
Causes of Loss
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.
Additional Coverages (Paragraph 4)
4. Additional Coverages
The Limits of Insurance shown in Paragraph A.4. Additional Coverages are provided within, not in addition to, the Limit Of Insurance stated in the Declarations as applicable to the Covered Property, except with respect to Debris Removal Additional Coverage in Paragraph A.4.b.(3).
Analysis:
New with the 12 20 edition of IH 00 85 are another section of additional coverages, with both paragraphs 4. and 5. containing additional coverages. Unless otherwise stated, the loss occurrence deductible will apply to the additional coverage.
In paragraph 4., with the exception of the additional debris removal limit described in (3)(b), the additional coverages are provided within the limit of insurance, and are not increased limits of coverage.
Paragraph 5. additional coverages are also provided within the limit of insurance, and are not increased limits of coverage, the difference being that there are no exceptions.
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.
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 $10,000 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. For example, if a bailee's shop burns, it may be difficult to sort out different customers' 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 $10,000 in any one occurrence, which is a newly increased limit in the 12 20 edition of the form. Further, 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.
For example, the coverage limit is $100,000. The insured suffers a fire loss and damage to property in the insured's custody is $40,000. The form will pay 25% of the amount paid for the damage, which would be $10,000, or 25% of the $50,000, which is the amount paid for damages.
c. False Pretense
We will pay for loss or damage to Covered Property when you, your agents, consignees or customers voluntarily part with Covered Property due to:
(1) Having accepted false bills of lading or shipping receipts; or
(2) Someone causing you to voluntarily part with the covered property by trick, scheme, device or under false pretense.
Coverage is excluded, for loss or damage to property which is otherwise covered, when the person committing the wrongful act is an employee.
The most we will pay under this Additional Coverage is $25,000 per occurrence, unless a different Limit Of Insurance is shown in the Declarations.
Analysis:
False pretense is a new additional coverage with the 12 20 edition of the form. Previously, there was no coverage against loss to covered property by voluntary parting – which could be through trick, fraudulent scheme, a device, or under false pretense. This additional coverage will provide such coverage under certain circumstances, for loss or damage to property when such voluntary parting is done by the insured, the insured's agents, or by consignees or customers of the insured.
For example, a tailor has altered some expensive ball gowns for a regular customer. Someone else comes in to pick up the gowns, and says they are running errands for the customer and were asked to pick up the gowns and perform other tasks. The tailor releases the gowns to the person only to later have the customer come in to pick up the gowns, and discover that her gowns had been taken.
d. Rewards
(1) We will reimburse you for rewards paid as follows:
(a) Up to $10,000 per occurrence, unless a different Limit Of Insurance is shown for this Additional Coverage in the Declarations, to an eligible person for information leading to the arrest and conviction of any person or persons committing a crime resulting in loss or damage to Covered Property from a Covered Cause of Loss. However, we will pay no more than the lesser of the following amounts:
(i) Replacement Cost of the Covered Property at the time of loss or damage, but not more than the amount required to repair or replace it; or
(ii) The amount determined by the loss settlement procedure applicable to the Covered Property.
(b) Up to $10,000 per occurrence, unless a different Limit Of Insurance is shown for this Additional Coverage in the Declarations, to an eligible person for the return of stolen Covered Property, when the loss is caused by theft. However, we will pay no more than the lesser of the following amounts:
(i) Replacement Cost based on the condition of the Covered Property at the time it is returned, but not more than the amount required to repair or replace it; or
(ii) The amount determined by the loss settlement procedure applicable to the Covered Property returned.
(2) This Additional Coverage applies subject to the following conditions:
(a) An eligible person means that person designated by a law enforcement agency as being the first to voluntarily provide the necessary information or return the stolen Covered Property, and who is not:
(i) You or any family member;
(ii) Your employee or any of his or her family members;
(iii) An employee of a law enforcement agency;
(iv) An employee of a business engaged in property protection;
(v) Any person who had custody of the Covered Property at the time the theft was committed; or
(vi) Any person involved in the crime.
(b) There will be no reimbursement for a reward paid unless and until the person(s) committing the crime is (are) convicted or the Covered Property is returned.
(c) The amount of the reward is the most we will reimburse under this Additional Coverage for loss in any one occurrence.
(d) The insured must have posted public notice of the reward prior to the person having been first to voluntarily provide the necessary information or return the stolen Covered Property.
Analysis:
Two new additional coverages are added with respect to rewards in connection with finding, arresting, and convicting perpetrators for the loss, damage or theft of covered property: 1) up to $10,000 for information leading to the arrest and conviction of anyone committing a crime if such crime results in loss or damage to covered property from a covered cause of loss; and 2) up to $10,000 for the return of stolen covered property. These limits apply per occurrence and can be increased, and the rewards are for the benefit of the person(s) providing such assistance. However, the amount of the reward benefit will not be greater than the replacement cost value of the covered property at the time of its return or recovery, based on its cost to repair or replace it; or the amount determined for its loss settlement.
The theft reward has additional requirements, which include a requirement that the insured post the reward amount publicly prior to obtaining the information or the recovered property, the perpetrator must be convicted of the crime or the property returned, and the reward is not available for the insured, the insured's employees or family members, anyone having custody of the property at time of its theft, any law enforcement person, anyone engaged in the business of property protection, nor of course anyone involved in the crime.
e. 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 90 days after the property is first moved.
Analysis:
This is the same type of coverage that is contained within the commercial property form. This additional coverage applies in the event of imminent danger to the property to keep it protected from loss. For example, if there is a large fire on the same block as the dry cleaners and so the insured moves the customers' items to a storage shed until such time as the area has been cleared from the fire. The coverage lasts up to 90 days from the date the property is first moved to the other location, and will also cover if the property is damaged during the move to the other location. So if a flood is imminent and the insured is moving the covered property to a secure location on higher ground, but is overcome by a flash flood damaging the property in the course of the move, this damage will be covered. It's important to note that this provides coverage for damage from any peril, and not just covered perils on the policy.
Additional Coverages (Paragraph 5)
5. Additional Coverages
The Limits of Insurance shown in Paragraph A.5. Additional Coverages are separate from, and will not reduce, the Limit Of Insurance shown in the Declarations as applicable to the Covered Property.
Analysis:
As stated previously, there are now two sets of additional coverages rather than just the ones listed in paragraph 4 above. Paragraph 5 contains new additional coverages as well as those that were contained within the previous edition of the form. These additional coverages are included within the limit of insurance, and are not additional limits of coverage. Unless otherwise stated, the per loss occurrence deductible will apply to these additional coverages.
a. Fire Department Service Charge
When the fire department is called to save or protect Covered Property from a Covered Cause of Loss, we will pay up to $10,000 for service, unless a different Limit Of Insurance is shown in the Declarations.
Such limit is the most we will pay regardless of the number of responding fire departments or fire units, and regardless of the number or type of services performed.
This Additional Coverage applies to your liability for fire department service charges:
(1) Assumed by contract or agreement prior to loss; or
(2) Required by local ordinance.
No Deductible applies to this Additional Coverage.
b. Fire Extinguishing Systems Expense
(1) We will pay:
(a) The cost of recharging your fire extinguishers and fire extinguishing systems (including hydrostatic testing if needed) or replacing the fire extinguishers or fire extinguishing systems, whichever is less, when the need to recharge or replace is caused by a Covered Cause of Loss; and
(b) For loss or damage to Covered Property if such loss or damage is the result of an accidental discharge of chemicals from a fire extinguishing system.
(2) No coverage will apply if the fire extinguishing system is discharged during installation or testing.
(3) The most we will pay under this Additional Coverage is $10,000 in any one occurrence, unless a different Limit Of Insurance is shown in the Declarations.
Analysis:
Two new additional coverages are provided in connection with fire, and these are also the same types of coverages contained within the commercial property form.
The first of these coverages is the $10,000 limit for fire department service charges (unless a higher limit is shown in the declarations). Note that no deductible applies to this additional coverage, regardless of how many times the fire department is called. Often a municipality or fire department charges a service fee when they are called to protect property. This fee may be required by ordinance, or there may be an agreement between the fire department and the insured that the fee will be paid whenever the fire department provides such service. As long as the agreement pre-dates the time the fire department provides the service, and the service is provided to save covered property from a covered cause of loss, it will be covered. This is a policy limit that once exhausted, there is no additional limit. So if the fire department is called one time during the policy term, or 10 times during the policy term, the limit is the most that will be paid. Also, if the fire department is called to service the property from a non-covered cause of loss, there will be no coverage. So if for example, a prankster pulls the fire alarm and there is no fire, there will be no coverage.
The next additional coverage is a $10,000 limit (or higher if shown in the declarations) for recharging or replacing fire extinguishing equipment or systems that were used to protect covered property from a covered cause of loss. This is a one-time limit for the policy term. Once a fire extinguisher is used, it has to be either recharged or replaced and undergo testing; this is what is covered. Also, if the accidental discharge of the extinguishig equipment damages property this damage will be covered. However, if the testing of the equipment when it is being installed, or during testing, causes damage to covered property, this is not covered. Sometimes the hydrostatic pressure builds up during testing of the equipment itself and may result in damage; this is not covered. Here again, no deductible applies to this coverage; more than likely the deductible will have been paid as part of the actual fire loss.
c. Inventory And Appraisal Expense
We will pay for reasonable inventory and appraisal expenses made at our request and not due to a disagreement.
We will not pay for any expenses incurred, directed or billed by or payable to any public adjuster or public accountants or any costs as provided in the Loss Conditions – Appraisal under the Commercial Inland Marine Conditions form.
The most we will pay under this Additional Coverage is $25,000 per occurrence, unless a different Limit Of Insurance is shown in the Declarations.
Analysis:
In connection with a loss to covered property, it is often required of the insured to submit an inventory and provide an appraisal of the covered property. The expenses involved with providing such information can be costly, and a limit of up to $25,000 per occurrence is provided for such expenses, as long as they are deemed reasonable by the insurer and are not part of the expenses by an adjuster, a public accountant, or those listed in the loss conditions that apply to appraisal under the inland marine conditions form. The insured may increase this limit for additional premium.
d. Newly Acquired Premises
(1) The insurance that applies to Covered Property is extended to apply to such property at any location you newly acquire other than at fairs, trade shows or exhibitions.
(2) The most we will pay for loss or damage under this coverage is $250,000 at each newly acquired location, unless a different limit is shown in the Declarations.
(3) Insurance under this coverage for each newly acquired location will end when any of the following first occurs:
(a) This Policy expires;
(b) 60 days, unless a greater number of days is shown in the Declarations, expire after you acquire the location; or
(c) You report the values to us.
(4) We will charge you additional premium for values reported from the date you acquire the location.
This Additional Coverage does not apply to property at any one unnamed premises.
Analysis:
The additional coverage for newly acquired property is an extension of the limit that already applies to covered property. This coverage is intended to allow the insured time to add newly obtained property to the policy, not as a coverage to apply to property the insured already has at other locations not on the policy. The insured will have up to 60 days to report the value of such new property and add it to the policy, as long as the policy is still in effect. The limit is $250,000 for this newly acquired property.
e. 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 $25,000 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.
f. Preservation Of Property
We will pay the necessary expenses incurred to move or store Covered Property to preserve it from loss or damage by a Covered Cause of Loss.
The most we will pay under this Additional Coverage is $10,000 per occurrence, unless a different Limit Of Insurance is shown in the Declarations. This Additional Coverage shall not exceed 90 days from the time the Covered Property is first moved.
Analysis:
Under another additional coverage, the form pays for the expense to extract pollutants from land or water if the discharge, 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 $25,000 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 is the cost to test for, monitor, or assess the existence or effects of pollutants. The $25,000 limit is an increase over prior forms, which provided for a $10,000 limit.
The final additional coverage is for the expenses involved in moving property to preserve it from loss. While at first glance this seems very similar to the coverage described in paragraph 4.e., that coverage is for the damage to the property that has been moved. This coverage is for costs incurred in moving the property. For example, an insured tailor is informed of an encroaching wildfire, and hires movers to move the customers' property out of harms way. He spends $5,000 in moving expenses. Those costs would be paid by this coverage. While at the secondary location the property that had been moved is damaged by a tornado. Those damages are covered under paragraph 4.e., 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, the form pays for those moving and storage costs up to $10,000, unless a different limit is shown in the declarations. For the coverage to apply, costs must occur within 90 days after the property is first moved. Therefore if the property is stored at the alternate location beyond 90 days, coverage for those storage costs ceases. This additional coverage does not increase the limit of insurance.
Exclusions
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:
(1) Its windows, doors and compartments were closed and locked and there are visible signs that the theft was the result of forced entry; and
(2) If the vehicle is equipped with an alarm, its alarm was actively engaged and maintained in the "on" position.
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, which indicates there must be visible signs of forced entry; or, if the vehicle is equipped with an activated alarm. The insured should take reasonable precautions to protect property. The exclusion also does not apply if the property was in the custody of a hired carrier at the time of theft.
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.
Dishonest or criminal acts, including theft, by You, your partners, employees, temporary and leased workers, officers, directors, trustees, or authorized representatives are excluded. Likewise, such actions by a manager or member if the insured is a limited liability company, or anyone else with an interest in the property or employees of anyone with an interest are excluded. The policy will not pay for theft and dishonest acts by those working for the company.
However, an exception exists for acts of destruction by the insured's employees including temporary and leased workers or authorized representatives. Theft by those listed workers however is still excluded. For example, a disgruntled worker goes into the office on a Saturday and vandalizes the desks belonging to senior managers, that would be covered.
f. 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 the discharge, dispersal, seepage, migration, release or escape of "pollutants" results in a "specified cause of loss", we will pay for the loss or damage caused by that "specified cause 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, except as provided in Additional Coverage A.4.c. 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. Virus, harmful code or similar instruction introduced into or enacted on Covered Property (including "data" or "media" used to operate such property) or a network to which it is connected, designed to damage or destroy any part of the system or disrupt its normal operation.
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.
The exclusion for voluntary parting has been revised with the 12 20 edition of the form to incorporate the additional coverage provided for false pretense.
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 prior exclusion for cost to research, replace, or restore converted data, programs, or instructions used in any data processing operations has been replaced in the 12 20 form with an exclusion for virus, harmful code or similar instruction. This makes it clear that cyber incidents are not covered under IL 00 85.
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.
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 (including rupture or bursting caused by centrifugal force), malfunction or failure to operate.
f. Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents or other animals.
g. Dampness or dryness of atmosphere.
h. Changes in or extremes of temperature
However, with respect to Paragraphs 3.e., 3.g. and 3.h., we will pay for such loss or damage caused directly by fire, lightning, explosion, windstorm or hail, vandalism, aircraft, rioters, strikers, theft or attempted theft, or by "accident" of the vehicle carrying the property if these causes of loss would be covered under this Coverage Form.
Analysis:
The final set of exclusions includes eight causes of loss, but the policy declares that if loss or damage by a covered cause of loss results from certain of these excluded causes, 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.
Further, with respect to the causes listed in 3. e., g. and h. (mechanical breakdown, atmospheric dampness or dryness, or extreme temperature changes), loss will be covered if caused directly by fire, lightning, explosion, windstorm or hail, vandalism, aircraft, rioters, strikers, theft or attempted theft, or by "accident" of the vehicle carrying the property.
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
1. 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.
2. In the event that more than one Deductible applies to loss or damage as a result of one occurrence, we will apply only the largest Deductible.
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 20.
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. If more than one deductible applies to the same loss, only the highest deductible amount will be applied. This is a new provision that was not included in the prior edition of the form.
Also, the clause stating that the deductible does not apply to covered property in transit has been removed from the form. So if the covered property is being moved from one location to another and is damaged while in transit, the deductible still applies.
ISO offers a standard deductible of $500, with higher options available.
Additional Conditions
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. Editions of the policy prior to 2013 had included the amount for which the insured is liable, but that has been removed from the policy. 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. 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.
The form also discusses the adjustment of loss by the named insured; when the total loss or damage covered is not greater 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 policy provisions in arriving at the settlement and promptly send completed statements of loss on forms supplied by the insurer.
Definitions
F. Definitions
1. "Data" means:
a. Data stored on "media"; and
b. Programming records used for electronic data processing or electronically controlled equipment.
2. "Media" means electronic data processing, recording or storage media such as software, films, tapes, discs, drums or cells.
3. "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.
4. "Specified Causes of Loss" means the following:
Fire; lightning; explosion; windstorm or hail; smoke (including the emission or puff back of smoke, soot, fumes or vapors from a boiler, furnace or related equipment); 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:
Two new definitions are added with the 12 20 edition of the form: data and media. These definitions are necessary definitions to enforce that electronic data or media are not the types of property this form is intended to cover, and they are now listed as property not covered. If the insured has these exposures they are more appropriately covered by an electronic data policy.
Pollutants are any solid, liquid, gaseous or thermal irritant or contaminant, including waste. This exclusion is meant to be all-encompassing of any type of pollution, regardless of its matter or form. Note that this definition is needed to identify pollutants that are shown in the exclusion for pollution. However, that exclusion contains an exception for pollutants that result in a specified cause of loss. Thus, the form contains a definition of such specified causes. These specified causes are fairly explanatory, but for clarification ISO has amended the definition in the 12 20 edition of IH 00 85 to clarify the types of smoke that are included as such covered causes of loss: the emission or puff back of smoke, soot, fumes or vapors from a boiler, furnace or related equipment.
"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.
Declarations
The Bailees Customer Coverage Declarations has been updated with the 12 20 edition to incorporate the new additional coverage limits. IH DS 85 12 20. IH DS 85 lists five areas to which the coverage form applies and states limits of insurance for the five areas. First is the property at the named insured's premises; second for the property away from the premises (except Newly Acquired); third is property in transit; fourth deals with property in storage at the named insured's premises; and fifth is all covered property in any one occurrence. Because the additional coverages are part of, and not in addition to, the limit of insurance, these limits are shown separately.
There is also a section 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. Areas are included 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 is an open space where any special provisions modifying the Bailees Customers Coverage Form are listed.
Application
The Bailees Customer Application IH AP 85 12 20 has also been enhanced and updated to address the additional coverage options.
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
Original 2015, updated 2018