MS HM 01 is an endorsement that modifies the CGL forms, the commercial property form, and the causes of loss—special form; the provisions of these forms apply to the risk except as otherwise provided in MS HM 01. The endorsement enhances the coverages provided by the standard forms by offering additional property coverages, some crime coverages, and errors and omissions coverage. The limits of insurance offered by MS HM 01 are base limits that can be increased through the use of a supplemental schedule, MS HM DS. There is also insurance offered for hired and nonowned auto liability, for mechanical breakdown (boiler and machinery), and for extortion perpetrated against the insured.

The building and personal property coverage form considers the following as covered property: buildings, business personal property, and personal property of others in the care, custody, or control of the named insured. MS HM 01 adds fine arts to this category. Fine arts are covered whether owned by the named insured or by others, and the most that the insurer will pay under this coverage extension in any one occurrence is $25,000 at each described premises. MS HM 01 defines fine arts as including antiques, paintings, etchings, drawings, tapestries, sculptures, porcelains, china, and marble. Many highly rated hotels and some motels do contain antiques, tapestries, and sculptures that enhance the beauty (and the value) of the premises. This coverage extension provides open perils coverage for these items that otherwise might need inland marine insurance or a specialty type policy in addition to the commercial property form.

MS HM 01 does list some items that are not covered property: accounts, bills, currency, food stamps, money, notes, or securities. Also excluded are grain and other crops, fences, antennas, unattached signs, trees, shrubs, all except as provided in the additional coverages or coverage extensions part of the endorsement. These items are the same as the ones on the commercial property form (CP 00 10 04 02), but then, MS HM 01 adds that “property in storage away from the premises shown in the declarations” is considered as property not covered. Some coverage is later provided in the coverage extension section of this endorsement, but the coverage is limited to $10,000 in any one occurrence.

MS HM 01 changes some of the amounts available as additional coverages under CP 00 10, and adds other coverages.

Under the additional coverage of debris removal, the expense to remove debris of covered property caused by or resulting from a covered cause of loss is paid. MS HM 01 increases the amount available for this removal from $10,000 to $25,000. The formula that is applied to have this debris removal amount paid is the same under MS HM 01 as under CP 00 10, but the insured has more money available to him for the removal process. Considering the size of hotels and motels and the quantity of property in them that may be destroyed in a loss, it is reasonable to accommodate the particular needs of the insured by allowing the debris removal amount to be increased.

The fire department service charge when the department is called to save or protect covered property from a covered cause of loss is increased by MS HM 01 from $1,000 to $5,000. No deductible applies to this coverage.

There are fourteen other coverages that MS HM 01 adds to the additional coverage section of the commercial property form.

Money and Securities. The insurer will pay for loss of money and securities used in the business of the named insured, either on premises or off premises. The coverage is for loss due to theft, disappearance, or destruction. The most that the insurer will pay for all loss in any one occurrence is $10,000, unless a different limit for money and securities is shown on the declarations page. MS HM 01 notes that all loss caused by one or more persons and involving a single act or series of related acts is considered one occurrence. So, for example, if an employee steals cash out of the reception desk's drawer over a period of several months before being discovered, that is considered one occurrence for payment of loss purposes.

Fire Extinguisher Systems Expense. The endorsement offers up to $5,000 in payment of the cost of recharging or replacing (whichever is less) fire extinguishers and extinguishing systems. The discharge must occur on or within 100 feet of the described premises. The $5,000 is also available to pay for loss or damage to covered property if the loss is the result of an accidental discharge of chemicals from a fire extinguisher or extinguishing system. No deductible applies to this coverage.

Reward Payment. The insured can be reimbursed for rewards paid up to $5,000. This coverage is for an eligible person for information leading to the arrest and conviction of any person committing a crime that results in loss to covered property from a covered cause of loss. An obvious example would be a reward paid for information leading to the arrest and conviction of someone who started an arson fire in the insured hotel.

There are some restrictions to note under this coverage. The person eligible for the reward cannot be the named insured, a family member, an employee, an employee of a law enforcement agency, or an employee of a business engaged in property protection. And, no reward will be reimbursed unless and until the person who committed the crime is convicted, or the covered property is returned. So, if the night clerk reports a robbery and helps the police arrest a suspect, MS HM 01 will not reimburse the named insured if it gives the night clerk a reward for his efforts. If a customer of the hotel reports a robbery and helps the policy arrest a suspect, but there is no conviction, MS HM 01 will not reimburse the named insured if it has given the customer a reward.

Computer Fraud. Under this coverage, the insurer will pay for loss of or damage to money, securities, or other property resulting directly from the use of any computer to fraudulently cause a transfer of that property to a person or place outside the premises described on the declarations. For example, if someone hacks into the named insured's computer and has some monetary reserves transferred to an off-shore account, the insurer will pay for that loss. The coverage is up to $25,000 in any one occurrence, unless a different limit for computer fraud is shown on the declarations page.

Money Orders and Counterfeit Paper Currency. If a customer pays his lodging bill with counterfeit money, or if he uses a money order to purchase something from the hotel's gift shop and that money order is not honored upon presentation, MS HM 01 will pay for the loss the insured suffers. The most that will be paid is $1,500 in any one occurrence.

Forgery or Alteration. The insurer promises to pay for loss resulting directly from forgery (a defined term) or alteration of checks, drafts, promissory notes, or similar written promises to pay a sum certain in money. As an example, if a secretary in the hotel forges the signature of the manager, or if an accountant alters the amount of a check that is to be drawn against the hotel, and the insured hotel loses money due to the fraud, the insurer will pay for the loss. The most to be paid is $2,500 in any one occurrence. This amount includes legal expenses of the insured in case the insured is sued for refusing to pay the forged or altered instrument. For example, if the secretary used the check with the forged signature to purchase some item, and the hotel refused to honor that check when it was presented for payment, leading to a lawsuit against the hotel, MS HM 01 will pay any reasonable legal expenses incurred by the hotel in its defense. Of course, if the money loss and the defense costs amount to more than $2,500, the insured will assume the overrun unless a larger amount is chosen for forgery coverage by the insured on the supplemental schedule (MS HM DS).

Outdoor Signs. MS HM 01 offers up to $5,000 for direct physical loss or damage (in any one occurrence) to all outdoor signs at the described premises. The signs have to be owned by the named insured, or owned by others but in the care, custody, or control of the named insured. The policy will not pay for loss or damage caused by or resulting from wear and tear, hidden or latent defect, rust, corrosion, or mechanical breakdown.

Employee Dishonesty. The policy will pay for direct loss of or damage to the named insured's business personal property, money, and securities resulting from dishonest acts committed by any of the named insured's employees. The employees have to have the manifest intent to cause the named insured to sustain loss, and to obtain financial benefit. As an example, the employee intends to—and does—steal TV sets from the hotel rooms in order to sell them in the blackmarket for cash. The loss suffered by the insured will be paid up to $25,000 in any one occurrence. MS HM 01 declares that all loss or damage caused by one or more employees and involving a single act or series of related acts is considered one occurrence. As an example, if the employee takes five TVs over a period of three months, that is considered one occurrence for coverage purposes.

There are several limitations to this coverage.

MS HM 01 will not pay for loss or damage resulting from any dishonest or criminal act committed by the named insured, partners, members, officers, managers, directors, trustees, authorized representatives, or by anyone to whom the named insured entrusts the property that is taken or damaged. This limitation can lead to interesting contrasts. For example, if the employee steals TVs from the hotel rooms, that is covered; if the employee steals the TVs while taking them off premises for repair work, this is not covered as an employee dishonesty loss.

MS HM 01 will not pay for loss or damage, the proof of which as to its existence or amount, is based on an inventory computation or a profit and loss computation.

The policy will not pay for loss or damage that the named insured sustains through acts not committed during the policy period, and the coverage will apply only for loss or damage discovered no later than one year from the end of the policy period. The limits of insurance for this type of loss do not cumulate from policy period to policy period.

Finally, this additional coverage does not apply to loss caused by any employee after discovery by the named insured of any dishonest act committed by that employee before or after being hired by the named insured. If the named insured hires someone who it knows has been convicted of theft or fraud, and that employee then proceeds to steal from the named insured after being hired, the loss is not covered by MS HM 01.

Ordinance or Law—Equipment Coverage. If a covered cause of loss occurs to equipment that is covered property, the insurer will pay the additional costs to repair or replace the equipment as required by law. For example, if a covered cause of loss occurs to refrigeration equipment, the insurer will pay for the cost to reclaim the refrigerant as required by law, the cost to retrofit the equipment to use a non-CFC refrigerant as required by the Clean Air Act of 1990, and the increased cost to recharge the system with a non-CFC refrigerant. The terms of this coverage apply separately to each piece of covered equipment.

Lock Replacement. MS HM 01 will pay for the cost to repair or replace locks at the described premises due to theft or other loss to keys. The most the insurer will pay for all loss in any one occurrence is $5,000; however, there is a per occurrence deductible of $100. So, if an employee steals the set of master keys, MS HM 01 will pay the cost if the insured wants to have all the locks changed.

Artificially Generated Electrical Current. Speaking of computers, this policy will pay for loss or damage to computers due to artificially generated electrical current if such loss is caused by an occurrence that takes place within 1,000 feet of the described premises. For example, if something caused a power surge from the on-premises electrical generators into the insured's office computers, this policy will pay for the damage caused.

Guests' Property. The insurer will pay for loss of or damage to guests' property (a defined term) for which the named insured is legally liable; this includes while the property is in a safe deposit box, in the named insured's possession, or even while at the described premises. If the named insured is sued for refusing to pay for loss of or damage to the guest's property, the insurer will pay for any reasonable legal defense costs; the payment of defense costs is in addition to the limit of insurance for guests' property coverage shown on the declarations page. The limit of insurance for this coverage is $10,000 in any one occurrence, with a per guest limit of $1,000.

There are nine exclusions applying to this particular coverage. The insurer will not pay for loss or damage resulting from any dishonest or criminal act that the named insured commits. There is no coverage for loss resulting from liability assumed under any written agreement. There is no coverage for loss from fire. If the property is in a wall safe or other safekeeping container in the guest's quarters, there is no coverage. If the loss or damage is caused by the spilling, upsetting, or leaking of any food or liquid, there is no coverage. A guest's property in the named insured's care and custody for the purpose of laundering or cleaning is not covered for loss or damage. There is no coverage for loss or damage resulting from the named insured's release of any other person or organization from legal liability. Samples or articles carried or held for sale or delivery after sale are not covered. Finally, there is no coverage for any vehicle, its equipment and accessories, or any property contained in or on a vehicle.

Food Contamination. If the named insured is unable to provide food at the described premises by order of the Board of Health as a result of the discovery or suspicion of food contamination, MS HM 01 will pay extra expenses and business income expenses that the named insured incurs. Extra expenses include the cost to clean the equipment as required by the Board of Health, the cost to replace the contaminated food, and the cost of necessary medical tests or vaccinations for the employees of the named insured. The business income expenses are the actual loss of business income that the named insured sustains due to the necessary suspension of operations, and the cost of additional advertising to restore the reputation of the named insured. The coverage for business income and the cost of additional advertising begins twenty-four hours after the named insured receives a notice of closing, and applies for a period of up to ninety consecutive days.

Food contamination is defined as an incidence of food poisoning to one or more of the named insured's guests, patrons, or invitees as a result of tainted food, food that has been improperly stored, handled, or prepared, or as a result of a communicable disease transmitted through one or more of the named insured's employees.

The most the insurer will pay under this additional coverage for loss in any one occurrence is $10,000 for extra expense, and $10,000 for business income. The insurer will not pay any fines or penalties levied against the named insured by the Board of Health.

Spoilage Coverage. This coverage applies to loss to perishable stock, which is defined as personal property maintained under controlled conditions for its preservation, and that is susceptible to loss or damage if the controlled conditions change. The following causes of loss are covered: a change in temperature or humidity resulting from mechanical breakdown or failure of refrigeration, cooling, or humidity control equipment; contamination by a refrigerant; and power outage. The most that the insurer will pay for loss in any one occurrence is $50,000 (unless a different limit for spoilage coverage is shown in the declarations); this amount is available after the deductible is met.

The value of the perishable stock is the selling price, less discounts and expenses that the named insured would otherwise have had.

There are several exclusions that apply to this coverage. The coverage does not apply if the spoilage results from: earth movement; governmental action; nuclear hazard; war and military action; water; the disconnection of any refrigerating, cooling, or humidity control system from the source of power; the deactivation of electrical power by the manipulation of any switch; the inability of an electrical utility company or other power source to provide sufficient power due to lack of fuel or governmental order; the inability of a power source at the described premises to provide sufficient power due to lack of generating capacity to meet demand; and the breaking of any glass that is a permanent part of any refrigerating, cooling, or humidity control unit.

The named insured is required to maintain a refrigeration maintenance or service agreement. If the insured fails to do this and does not notify the insurer, the coverage is automatically suspended at the involved location.

MS HM 01 makes several changes to the coverage extensions section of CP 00 10.

Newly Acquired or Constructed Property. The first change is to the period of coverage for newly acquired or constructed property. MS HM 01 declares that coverage will end when any of the following first occurs: the policy expires; thirty days expire after the named insured acquires the property or begins construction; or with respect to computers, when specific insurance at the newly acquired premises is obtained; or when the named insured reports values to the insurer. If the newly acquired property is objects of art, the coverage period is thirty days from the date such property is acquired. The most paid for this coverage is $10,000 in any one occurrence.

Personal Effects and Property of Others. The coverage extension for personal effects and property of others is also changed. MS HM 01 offers up to $5,000 in any one occurrence for loss or damage to personal effects owned by the named insured and to personal property of others (except guests) in the care, custody, or control of the named insured. This extension does not apply to loss or damage by theft.

Valuable Papers and Records. When it comes to valuable papers and records (other than electronic data), MS HM 01 extends coverage to such papers and records that the named insured owns, or that are in the named insured's care, custody, or control. Coverage is for loss caused by or resulting from a covered cause of loss, and the coverage includes the cost to research lost information on valuable papers and records for which duplicates do not exist. The most that the insurer will pay for this coverage extension is $25,000 in any one occurrence at each described premises, or $10,000 not at a described premises. This extension does not apply to property held as samples or for delivery after sale, or to property in storage away from the premises shown in the declarations.

Property Off-Premises. The named insured may extend coverage to covered property while it is away from the described premises under certain conditions. The property must be temporarily at a location the named insured does not own, lease, or operate; the property must be in storage at a location leased by the named insured; or the property must be at a fair, trade show, or exhibition. This extension applies to computers for not more than ninety days while such property is in the course of transit, or is located at a premises the named insured does not own, lease, or operate. The extension does not apply to property in or on a vehicle (except for computers), or to property in the care, custody or control of the named insured's salespersons (unless the property is at a fair, trade show, or exhibition).

The most the insurer will pay for loss or damage under this extension is $10,000 in any one occurrence.

Outdoor Property. MS HM 01 will pay for loss or damage to fences and retaining walls that are not a part of a building; the most that will be paid in any one occurrence is $10,000. The endorsement will pay for loss or damage to outdoor radio, TV, satellite, or other antennas; the most to be paid for this extension is $5,000 in any one occurrence. Covered also are trees, shrubs, and plants other than stock; the most paid here is $5,000 for any one occurrence, but not more than $500 for any one tree, shrub, or plant. This coverage for outdoor property is only for the following covered causes of loss: fire, lightning, explosion, riot or civil commotion, and aircraft.

Accounts Receivable. The insurer will pay up to $10,000 for loss or damage to the named insured's records of accounts receivable in any one occurrence at each described premises. The amount paid is up to $1,500 for accounts receivable not at described premises.

The coverage extension applies to: all amounts due from the named insured's customers that cannot be collected; interest charges on any loan required to offset amounts that are not able to be collected; collection expenses in excess of the normal collection expenses made necessary by loss or damage; and other reasonable expenses that the named insured incurs to reestablish the records of accounts receivable.

MS HM 01 changes the valuation condition as it appears on CP 00 10. Reference to valuable papers and records is dropped from the valuation clause and replaced with data on the value of fine arts. This clause now states that the value of fine arts that are individually listed and described on the declarations page is the applicable limit of insurance shown in the declarations. The value of other fine arts is the least of the following amounts: the actual cash value; the cost to reasonably restore the property to its condition immediately before loss; or the cost of replacing the property with substantially identical property.

In the event of loss, the value of the fine arts property is determined as of the time of loss.

MS HM 01 adds six additional conditions to those found on CP 00 10.

The first additional condition applies to the computer fraud additional coverage. MS HM 01 applies to loss or damage caused by computer fraud during the policy period and within the coverage territory, which is defined as anywhere in the world.

As for the additional coverage of forgery or alteration, MS HM 01 declares that mechanically reproduced facsimile signatures are treated the same as handwritten signatures.

The next additional conditions apply to the guests' property additional coverage. The bankruptcy of the named insured does not relieve the insurer of the obligations established under MS HM 01. And, the insurance for guests' property is for the benefit of the named insured. The insurance provides no rights or benefits to any other person or organization, including the guest. Any claim for loss or damage must be presented by the named insured.

Another condition added by MS HM 01 is that the named insured must agree that fine arts will be packed and unpacked by competent packers. Just what a competent packer is is not defined on the endorsement. Perhaps the number of claims submitted due to packaging mishaps will determine the competence, or incompetence, of the packer to the satisfaction of the insurer.

Finally, in case of total loss of any items that are part of a pair or set that is individually listed and described in the declarations, the insurer agrees, as an additional condition to the coverage, to pay the full limit of insurance shown in the declarations for that pair or set. If the pair or set is not individually listed and described in the declarations, the insurer will, in case of a loss, repair or replace any part to restore the pair or set to its value before the loss; or, the insurer will pay the difference between the value of the pair or set before and after the loss.

MS HM 01 also modifies the causes of loss—special form, CP 10 30 04 02.

The first modification is that MS HM 01 states that the ordinance or law exclusion on CP 10 30 does not apply to the ordinance or law—equipment coverage that is provided as an additional coverage by this endorsement.

The exclusions on CP 10 30 that deal with mechanical breakdown and losses due to dampness or changes in or extremes of temperature are replaced. MS HM 01 declares that the insurer will not pay for loss or damage caused by or resulting from mechanical breakdown, including rupture or bursting caused by centrifugal force. There are two exception to this: the exclusion does not apply to computers or to a mechanical breakdown resulting in elevator collision. As for the extremes of temperature exclusion, MS HM 01 states that loss to personal property due to dampness or dryness of atmosphere, or changes in or extremes of temperature is not covered. The exception is if those conditions result from physical damage caused by a covered cause of loss to an air conditioning unit or system which is part of, or used with, computers.

MS HM 01 adds four exclusions that pertain only to the coverage for computers that the endorsement offers. These exclusions deal with loss by errors or omissions, electrical disturbance, computer-related losses, and computer advice or consultation.

Errors or Omissions. The endorsement does not apply to loss or damage caused by errors or omissions in processing, recording, or storing information on media or computers. However, the insurer will pay for direct loss or damage caused by resulting fire or explosion if these causes of loss would be covered by the endorsement.

Electrical Disturbance. Loss due to electrical or magnetic injury, disturbance, or erasure of electronic recordings is not covered. Direct loss or damage caused by lightning is covered.

Computer-Related Losses. The inability to correctly recognize, process, distinguish, interpret, or accept one or more dates or times is another cause of loss that MS HM 01 does not cover. This relates to the failure, malfunction, or inadequacy of the following: computer hardware, software, operating systems, networks, microprocessors (computer chips) that are not part of any computer system, and any other computerized or electronic equipment or components.

Computer Advice or Consultation. MS HM 01 will not respond to a loss or damage caused by any advice, consultation, design, evaluation, inspection, maintenance, repair, replacement, or supervision provided or done by or for the named insured in order to rectify or test for any potential or actual problems described in the computer-related loss clause.

If an excluded cause of loss as described in these four clauses results in a specified cause of loss (a defined term on CP 10 30), or in elevator collision resulting from mechanical breakdown, the insurer will pay for the loss or damage caused by these things.

The section B exclusions on CP 10 30 operate to eliminate coverage as specified, regardless of any other cause or event that contributes concurrently or in any sequence to the loss. MS HM 01 declares that the section B exclusions do not apply to the following coverages that are on the endorsement: employee dishonesty, outdoor signs, and valuable papers and records.

The following additional exclusions apply only to the accounts receivable coverage extension offered by MS HM 01. The insurer will not pay for loss or damage caused by or resulting from alteration, falsification, concealment, or destruction of records of accounts receivable done to conceal the wrongful giving, taking, or withholding of money, securities or other property. The exclusion applies only to the extent of the wrongful giving, taking, or withholding. The insurer also will not pay for loss or damage caused by or resulting from bookkeeping, accounting, or billing errors or omissions. And, the insurer will not pay for any loss or damage that requires any audit of records or any inventory computation to prove its factual existence.

The CGL form has three insuring agreements: coverage A, bodily injury and property damage liability; coverage B, personal and advertising injury liability; and coverage C, medical payments. MS HM 01 adds an insuring agreement covering services errors and omissions.

MS HM 01 promises to pay those sums that the insured becomes legally obligated to pay as damages because of a failure to provide facilities, goods, or services by the named insured, or any employee, or any concessionaire trading in the named insured's name. The most that the insurer will pay for the sum of all damages under this insuring agreement is $25,000 in any annual period; this limit applies separately to each premises described in the declarations. There is also a $250 deductible on this coverage.

This insurance applies only to errors in the providing of facilities, goods, or services that take place, or omissions in providing such goods, facilities, or services that should have taken place in the coverage territory, and during the policy period. This seems at first to be a rather broad statement of coverage. It could apply to the insured's failure to honor a reservation, to putting a customer in a smoking room after the customer ordered a nonsmoking room, to serving tainted food, to forcing the customer to carry his own luggage because of the lack of bellhop services, to damage done to a customer's car due to lack of security, or to injury to the customer himself who was attacked in the insured's parking lot. However, there are exclusions that apply to limit the scope of this coverage.

The insurance does not apply to bodily injury, property damage, or personal and advertising injury. These items are as defined on the CGL form; see Commercial General Liability Definitions. The insurance does not apply to intentional errors and omissions. And, the insurance does not apply to discrimination based on a guest's race, color, national origin, religion, gender, marital status, age, sexual orientation, physical or mental condition, or residence location. In effect, the broad scope of the insuring agreement is matched by the broad sweep of the exclusions.

MS HM 01 also modifies the who is an insured provisions of the CGL form by adding certain classes as insureds.

Any person or organization with respect to their liability arising out of their financial control of the named insured is added as an insured. If the person or organization owns or controls premises that the named insured leases or occupies, that person or organization is added as an insured.

Any other person who is a manager or lessor of premises is an insured, but only with respect to liability arising out of the ownership, maintenance, or use of that part of the premises leased to you and described in the declarations. Such person or organization is not an insured with respect to any occurrence that takes place after the named insured ceases to be a tenant.

Finally, any person or organization with respect to their liability as a concessionaire trading under the name of the named insured is an insured under MS HM 01.

There are nine definitions listed on MS HM 01.

Computer. A computer is defined as the named insured's programmable electronic equipment that is used to store, retrieve, and process electronic data. A computer includes component parts and dedicated air conditioning, fire suppression equipment, and electrical equipment used exclusively in the named insured's computer operations. It also includes associated peripheral equipment that provides communication, including input and output functions. However, a computer does not include electronic data and media.

Counterfeit. This means an imitation of an actual valid original that is intended to deceive and to be taken as the original.

Employee. This term is defined with respect to coverage provided under the money and securities and employee dishonesty clauses. An employee is any natural person while in the service of the named insured (or for thirty days after termination), who the named insured compensates directly by salary or wages or commission, and who the named insured has the right to direct and control while performing services for the named insured. An employee also includes any natural person who is furnished temporarily to the named insured to substitute for a permanent employee who is on leave, or to meet seasonal or short term work load conditions. An employee does not include any agent, broker, person leased to the named insured by a labor leasing firm, or independent contractor. Any manager, director, or trustee is not an employee except while performing acts coming within the scope of the usual duties of an employee.

Forgery. Forgery is the signing of the name of another person or organization with intent to deceive. It does not mean a signature that consists in whole or in part of one's own name signed with or without authority, in any capacity, or for any purpose.

Guests' Property. This is money, securities, and other tangible property having intrinsic value that belongs to the guest of the named insured.

Manager. This term is defined with respect to employee dishonesty coverage only and means a person serving in a directorial capacity for a limited liability company.

Money. Money is currency, coins, and bank notes in current use and having a face value, and travelers checks, and money orders held for sale to the public.

Perishable Stock. This is personal property maintained under controlled conditions for its preservation, and susceptible to loss or damage if the controlled conditions change.

Securities. Securities are negotiable and nonnegotiable instruments or contracts representing either money or other property. The term includes redeemed coupons, tokens, tickets, revenue, and other stamps in current use, and evidences of debt issued in connection with credit cards. The term does not include money.

There are two optional endorsements that can be used in the hotels, motels, and inns market segment program: MS HM 02 and MS HM DS.

MS HM 02 pertains to mechanical breakdown coverage, that is, coverage akin to boiler and machinery losses; this endorsement counteracts the mechanical breakdown exclusion that appears on MS HM 01. (For information on ISO's boiler and machinery coverage form, BM 00 20 07 01, see Boiler and Machinery Coverage Form.) Coverage under MS HM 02 is for direct damage to covered property caused by an accident to an object (a defined term). The object must be owned by the named insured, or in the care, custody, or control of the named insured, and it must be at the described premises.

An object means any of the following equipment: any boiler; any fired or unfired vessel subject to vacuum or internal pressure; any refrigerating or air conditioning system; any piping and its accessory equipment; any compressor, pump, engine, turbine, motor, generator, gear, fan, or blower; any transformer or electrical distribution equipment; and any other mechanical or electrical equipment used for maintenance or service of the premises. An object does not mean any of the following: oven, stove, or furnace; structure, foundation, or setting supporting or housing an object; insulating or refractory material; computer or data processing equipment; equipment for communication, lighting, advertising, display, testing, experimental, research, diagnostic, therapeutic, or pathological purposes; sewer piping; underground gas piping; piping forming part of sprinkler system; water piping; object that is being manufactured for sale; vehicle, elevator, escalator, conveyor, hoist, or crane; or other mechanical or electrical equipment used for processing or manufacturing.

MS HM 02 also defines an accident. It means a sudden and accidental breakdown of the object or a part of the object. At the time the breakdown occurs, it must manifest itself by physical damage to the object that necessitates repair or replacement. None of the following is considered to be an accident: depletion, deterioration, corrosion, or erosion; wear and tear; leakage at any valve, fitting, shaft seal, joint, or connection; breakdown of any electronic computer or electronic data processing equipment; breakdown of any structure or foundation supporting the object; the functioning of any safety or protective device; or the explosion of gases or fuel within the furnace of any object, or within the flues or passages through which the gases of combustion pass.

There are some exclusions that apply to this coverage. MS HM 02 will not pay for an accident to any object while being tested. MS HM 02 will not pay for damage caused directly or indirectly by the failure, malfunction, or inadequacy of any computer and its software, networks, and systems due to the inability to correctly recognize, process, or accept one or more dates or times. The endorsement will not pay for repair, replacement, or modification of any computer or its parts or systems to correct any deficiencies or change any features.

Whenever an object is found to be in, or exposed to, a dangerous condition, any of the insurer's representatives may immediately suspend the insurance against loss offered by this endorsement.

Endorsement MS HM DS is a supplemental schedule that deals with changes in limits that the insured may want to make, and with hired and nonowned auto liability insurance, coverage for loss to guests' autos, mechanical breakdown, and extortion coverage.

The first part of MS HM DS offers the insured the option of changing the limits for the various coverages listed in the hotels, motels, and inns endorsement. For example, MS HM 01 provides up to $10,000 in any one occurrence for loss of money and securities used in the named insured's business. MS HM DS allows the insured to choose a different limit if it so chooses. The same is true for all the following coverages: computer fraud; money orders and counterfeit paper currency; forgery or alteration; outdoor signs; employee dishonesty; food contamination; personal effects and property of others; spoilage; and valuable papers and records.

The second part of the supplemental schedule provides for hired and nonowned auto liability insurance. If the insured wants this coverage, a limit per occurrence is chosen and the insured has liability insurance for bodily injury and property damage exposures arising out of the use of hired and nonowned autos.

The insured can also choose to buy coverage for loss or damage to guests' autos. There are three options available under this coverage: direct primary coverage; legal liability coverage; or direct coverage for loss or damage to guests' autos and other property of guests. The direct primary coverage is similar to the direct primary option that an insured can purchase under garagekeepers legal liability coverage. (See Garage Liability Section III.) Direct primary coverage means that the insured has chosen to pay for damage to a guest's car without regard to the insured's legal liability; the coverage is primary. The legal liability coverage option, in contrast, requires the insured to be legally liable for the damage to the auto before MS HM 01 will provide payment for the damage. The last option of direct coverage for damage to guests' autos and other property probably is intended to provide excess insurance coverage for loss or damage to property not owned by the named insured, albeit while not requiring legal liability on the part of the insured for the coverage to apply.

Note that the intent is probable because the option does not specifically mention primary coverage as does the first option, and the coverage is for nonowned property which usually is on an excess coverage basis if there is no mention of primary coverage. And, note that the coverage is also for other property of guests which means that the insured will pay for loss to the auto equipment of the guests and to other property that the guests may have in their autos at the time of loss. For example, if someone vandalizes a guest's car and steals the battery and some Christmas presents that the guest had placed in his car's trunk, the losses of the battery and the presents are covered losses if the insured has chosen the third option offered in this part of MS HM DS. Finally, note again that the coverage does not require the legal liability of the insured in order for it to apply. The additional coverage for guests' property offered by MS HM 01 requires legal liability on the part of the named insured for the loss or damage; this optional coverage choice does away with this requirement.

The insured can choose a limit per event for these optional coverages. This limit is subject to a declared deductible amount for each guest's auto for loss or damage caused by theft or mischief or vandalism, subject to a maximum deductible for all such losses in any one event. As an example: the insured has chosen a $500 per auto deductible, with a maximum of $2,000 in any one event; vandals damage ten guests' autos one night; each auto is subject to the $500 deductible until the $2,000 maximum is met; so, if the maximum is met with the damage to only four cars, the rest of the damage is not subject to any deductible.

There is also a deductible for each guest's auto for loss or damage caused by collision.

Another choice available for the insured on the supplemental schedule is to include the limit of insurance for mechanical breakdown in the limit of insurance for buildings. MS HM 02, the mechanical breakdown coverage endorsement, does not discuss this item, so MS HM DS is used to clarify the matter.

The final option on MS HM DS pertains to extortion coverage. If the insured so chooses, it can have coverage for extortion for up to $25,000 per occurrence, with a maximum of $50,000 per occurrence for threats to captives. There is no explanation on the supplemental pertaining to this coverage, no reference to any ISO extortion endorsement (such as, CR 04 03 03 00), and no description of the coverage. Therefore, the insured would have to rely on the legal definition of extortion to see if this optional coverage would apply. Extortion is the obtaining of property from another, induced by wrongful use of actual or threatened force, violence, or fear. As an example, if someone threatens the insured hotel that its water supply will be poisoned unless $100,000 is paid, that is extortion. MS HM DS offers some coverage for such situations. For more information on extortion endorsements, see Optional Crime & Fidelity Endorsements.