Commercial Articles Coverage Form—Archived Article
October, 2003
ISO Commercial Inland Marine Program
Summary: Professional or commercial use of photographic and musical equipment can be arranged under the commercial articles coverage form (CM 00 20 09 00) used with the Insurance Services Office (ISO) inland marine insurance program. This coverage form affords open perils coverage (subject to certain exclusions) for cameras and musical instruments owned by or in the care, custody, or control of the insured.
Generally, the form covers property used by such insureds as photography studios, motion picture production companies, professional musicians (individually or in groups), boards of education, and municipalities. The commercial articles form requires the scheduling of individual items, with a limit of insurance provided for each item. However, provisions (discussed later in these pages) exist for blanket coverage. And, as written under ISO's modular format, the commercial articles form is combined with a declarations page, a common policy conditions form, and an inland marine general conditions form to make a policy.
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, as used in this Coverage Form, means:
a. Cameras, projection machines, films and related equipment and accessories;
b. Musical instruments and related equipment and accessories; and
c. Similar property of others that is in your care, custody or control.
Analysis
The commercial articles coverage form defines covered property as cameras, projection machines, films, and related equipment and accessories. The commercial lines manual rules contemplate coverage for property used for commercial purposes, even though the form itself does not mention a requirement that property be used commercially in order to be covered. Therefore, there should be no question as to coverage where property insured under the form is used for other than commercial purposes.
Note that the manual rules state that television cameras and equipment, coin or token operated devices, property of camera dealers or manufacturers, and aerial or radar cameras are not eligible for coverage under this form; however, no corresponding exclusion pertaining to these types of property is contained in CM 00 20 itself. Therefore the underwriter's need to be familiar with this eligibility requirement is vital.
Musical instruments and equipment, including stationary organs to be used for remuneration or before the public are eligible for coverage under the commercial articles form. Note that instruments belonging to the members of any formally organized group of musicians, such as an orchestra, band, or chamber music ensemble, are also covered by the provisions of the commercial articles coverage form. In addition, unlike the former musical instruments floater, a combination of groups or individuals—several bands represented by the same booking agent or individual members of a music association, for example—can be rated together as one risk.
2. Property Not Covered
Covered Property does not include contraband, or property in the course of illegal transportation or trade.
3. Covered Causes Of Loss
Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE to Covered Property except those causes of loss listed in the Exclusions.
4. Additional Coverage—Collapse
We will pay for direct loss or damage caused by or resulting from risks of direct physical loss or damage involving collapse of all or part of a building or structure caused by one or more of the following:
a. Fire; lightning; windstorm; hail; explosion; smoke; aircraft; vehicles; riot; civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling objects; weight of snow, ice or sleet; water damage; earthquake; all only as insured against in this Coverage Form;
b. Hidden decay;
c. Hidden insect or vermin damage;
d. Weight of people or personal property;
e. Weight of rain that collects on a roof;
f. Use of defective materials or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.
This Additional Coverage does not increase the Limits of Insurance provided in this Coverage Form.
Analysis
These parts of CM 00 20 provide important, but not out of the ordinary, information to the insured. Obviously, contraband and illegal trade are not proper subjects for insurance coverage. The covered causes of loss clause tells the insured that coverage under CM 00 20 is on an open perils basis and that the loss to covered property must be direct and physical. The additional coverage of damage due to collapse of a building or structure is provided to the insured if caused by certain listed perils. Note that the current edition of the form adds “earthquake” as a covered cause of collapse.
Note also that, though the collapse coverage may be listed as additional coverage, the limits of insurance on CM 00 20 are not increased. In other words, collapse coverage will be limited to and included in the applicable limits of insurance shown in the declarations.
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.
a. Governmental Action
Seizure or destruction of property by order of governmental authority. But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
b. Nuclear Hazard
(1) Any weapon employing atomic fission or fusion; or
(2) Nuclear reaction or radiation, or radioactive contamination from any other cause. But if nuclear reaction or radiation, or radioactive contamination results in fire, we will pay for the direct loss or damage caused by that fire if the fire would be covered under this Coverage Form.
c. War And Military Action
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these. Exclusions B.1.a. through B.1.c. apply whether or not the loss event results in widespread damage or affects a substantial area.
2. We will not pay for loss or damage caused by or resulting from any of the following:
a. Delay, loss of use, loss of market or any other consequential loss.
b. Dishonest or criminal act committed by:
(1) You, any of your partners, employees, directors, trustees, or authorized representatives;
(2) A manager or a member if you are a limited liability company;
(3) Anyone else with an interest in the property, or their employees or authorized representatives; or
(4) Anyone else to whom the property is entrusted for any purpose.
This exclusion applies whether or not such persons are acting alone or in collusion with other persons or such acts occur during the hours of employment.
This exclusion does not apply to Covered Property that is entrusted to others who are carriers for hire or to acts of destruction by your employees. But theft by employees is not covered.
c. 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.
d. Unauthorized instructions to transfer property to any person or to any place.
e. Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
3. We will not pay for loss or damage caused by or resulting from any of the following. But if loss or damage by a Covered Cause of Loss results, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in Paragraph 1. above 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. Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or
(4) Maintenance; of part or all of any property wherever located.
d. Collapse except as provided in the Additional Coverage – Collapse section of this Coverage Form.
e. Wear and tear, any quality in the property that causes it to damage or destroy itself, gradual deterioration; insects, vermin or rodents.
Analysis
CM 00 20 has the usual nuclear and war exclusions, plus the wear and tear exclusion that applies so that the natural and gradual deterioration of a covered piece of property is not considered an insured loss. Delay, loss of use, loss of market, or any other consequential loss is specifically excluded to make the point that CM 00 20 applies to direct, physical loss to covered property. Losses by false pretense and dishonest acts committed by the named insured, partners, members, or employees are not covered. This is not so special in an inland marine form, but the insured should be aware of the fact that if an employee steals a camera or a musical instrument, such a loss is not covered by CM 00 20. This is emphasized by the presence in CM 00 20 of the dishonest or criminal act exclusion plus the specific warning that “theft by employees is not covered”.
Limits Of Insurance
The most we will pay for loss of or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.
Deductible
We will not pay for loss or damage in any one occurrence until the amount of the adjusted loss or damage before applying the applicable Limits of Insurance exceeds the Deductible shown in the Declarations. We will then pay the amount of the adjusted loss or damage in excess of the Deductible, up to the applicable Limit of Insurance.
Analysis
The rating information found in the commercial lines manual for the commercial articles coverage form contemplates a base deductible of $500; of course, the insured can have a higher or lower deductible if all parties to the insurance contract agree. But the point is, if the insured has a $500 deductible applicable to a loss in any one occurrence, the amount of the loss has to exceed $500 before CM 00 20 will kick in with its coverage. The insured has accepted the idea that it will absorb the first $500 (or whatever) of a loss and has paid a premium accordingly.
Additional Conditions
E. Additional Conditions
The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
1. Coverage Territory
We cover property wherever located.
2. Coinsurance
If a Coinsurance percentage is shown in the Declarations, the following condition applies to all items that are covered but not individually listed and described.
We will not pay the full amount of any loss if the value of Covered Property, except property in transit, at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property. Instead, we will determine the most we will pay using the following steps:
a. Multiply the value of Covered Property, except property in transit, at the time of loss by the Coinsurance percentage;
b. Divide the Limit of Insurance of the property by the figure determined in Step a.;
c. Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step b.; and
d. Subtract the deductible from the figure determined in Step c.
We will pay the amount determined in Step d. or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.
Analysis
These additional conditions are important for the insured to note.
The coverage territory is worldwide; that is, the insured can have its covered property anywhere in the world and payment for a “direct physical loss” will be made (unless an exclusion applies).
CM 00 20 will cover items not specifically listed on the declarations page, but those items have to be insured for their total value to avoid a coinsurance penalty should a loss occur. This raises the question of how the insurer can know that an individual item or a group of items are insured for the total value if such items are not listed and described. Obviously, there must be ethical conduct on the part of the insured and its agent or broker, but the inland marine conditions form does contain safeguards that the insurer can use to make sure coinsurance conditions are not violated by the insured. If there is a disagreement on the value of the property or the amount of loss, the conditions form, CM 00 01 09 00, has an appraisal clause that can be put to use. Besides, in the event of loss, CM 00 01 requires the insured to prove a loss and describe the lost or damaged property anyway; so even though CM 00 20 may not have a list and description of each piece of covered property, if that property is lost or damaged, the insurer will have a description of the item eventually and can check to make sure the 100% coinsurance clause has not been violated.
Additional Acquired Property
If during the policy period you acquire additional property of a type already covered by this form, we will cover such property for up to 30 days, but not beyond the end of the policy period. The most we will pay for loss or damage is the lesser of:
a. 25% of the total Limit of Insurance shown in the Declarations for that type of property; or
b. $10,000.
You will report such property within 30 days from the date acquired and will pay any additional premium due. If you do not report such property, coverage will cease automatically 30 days after the date the property is acquired or at the end of the policy period, whichever occurs first.
Analysis
Coverage for newly acquired property is anticipated by the commercial articles form. As long as the property is of a kind already insured by the form, automatic coverage is available on the new items for the lesser of 25 percent of the existing limit shown on the declarations page or $10,000. This coverage extension ends thirty days from the date of acquisition of the items, at which time the insured is required to submit a revised scheduled to the company.
Coverage Options
CM 20 02 List of Property on File. Use of this endorsement eliminates the need for a lengthy schedule of items to be attached to the commercial articles form. The endorsement specifies that a dated list be kept on file at the declared premises. The endorsement requires an authorized company representative to sign and date the schedule.
Blanket items. Property covered by the commercial articles form may be covered on a blanket basis at the discretion of the insurer. This can apply to all property covered or any part of it. When blanket coverage applies, the form contains a 100 percent coinsurance condition and the “additionally acquired property” provisions, noted above, are deleted.
The advisory commercial articles declarations is form CM DS 05 09 00 It contains a place to describe the following types of covered property:
1. Cameras, projection machines, films, and related equipment and accessories.
2. Musical instrument and related equipment and accessories.
The middle of the page indicates the deductible ($500 unless otherwise stated) and the coinsurance percentage. For those items that are not listed, the coinsurance percentage is presumed to be 100 percent unless otherwise stated.
The final section breaks down the rate and premium for each of the types of covered property.
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