Endorsement MS SM 01 modifies the CGL form, the commercial property form, and the causes of loss—special form. The modifications tailor these forms to the needs of the supermarket risk. The endorsement adds property and crime coverages and modifies the premium audit section of the CGL form. An endorsement is also available to add mechanical breakdown coverage. This endorsement is discussed later in this treatment. ISO's promotional material says that this program is “designed for stores that sell mostly grocery products and occupy a total area of 3,000 square feet or more, with $500,000 or more in annual sales.”

The commercial property form (CP 00 10 04 02) covers the building and business personal property of the insured and property of others that the insured has in his care. It also specifies several items as property not covered. One category of property not covered in the CP 00 10 is accounts, bills, deeds, evidences of debt, money, notes, and securities. The MS SM 01 adds an exception to that category by providing some money and securities coverage.

The supermarket form adds a category of property not covered. It removes coverage for certain types of property outside of buildings:

1.     Grain, hay, straw, or other crops; and

2.     Fences, signs. antennas, trees, shrubs, and plants. The form does make an exception for the stock of trees, shrubs, and plants. It also provides some coverage for the other items.

The MS SM 01 modifies the debris removal coverage, as well. While the CP 00 10 provides an added amount of $10,000, an additional amount of $25,000 is available on the supermarket form.

The MS SM 01 adds coverage for loss of money and securities, but emphasizes that the insurer will cover only theft, disappearance, or destruction of such property.

The MS SM 01 provides additional coverage (up to $5,000) under fire extinguisher systems expense. Like the CP 00 10, it pays the cost of recharging such systems if they are discharged on the premises. The MS SM 01 also pays for damage done by such a discharge to covered property – something not covered by the CP 00 10. However, the supermarket endorsement adds the caveat that no coverage applies if the discharge occurs while the system is being installed or tested.

A reward payment of up to $5,000 is insured for information that leads to the conviction of anyone damaging covered property. The supermarket endorsement adds the following additional coverages:

1.     Money orders and counterfeit paper currency in the amount of $5,000.

2.     $5,000 coverage for forgery or alteration of checks, drafts, etc.

3.     $10,000 for damage to outdoor signs.

4.     $25,000 for employee dishonesty.

5.     $25,000 to remove brands and labels from damaged merchandise.

6.     Covered equipment will be repaired or replaced if subject to an ordinance or law.

7.     $5,000 for replacement of locks, due to loss or theft of keys. A $100 deductible applies.

8.     Damage to computers caused by artificially generated electrical current.

9.     $10,000 for business income and $10,000 for extra expense incurred as a result of food contamination.

The MS SM 01 provides the following coverage extensions:

1.     Newly acquired property – adds coverage for newly acquired computers.

2.     $5,000 for personal effects of others ($2,500 in the CP 00 10).

3.     Valuable papers and records – $25,000 on premises and $10,000 off-premises.

4.     Property off premises is extended to cover computers.

5.     $5,000 for outdoor property.

6.     $5,000 for accounts receivable.

The MS SM 01 removes the ordinance or law exclusion to the extent that the coverage is provided in the additional coverages. It also specifies that the mechanical breakdown exclusion does not apply to computers.

However, the endorsement does add the following exclusions for computers only:

1.     Errors and omissions.

2.     Electrical disturbance.

3.     Computer-related losses. These include the failure, malfunction, or inadequacy of hardware and software.

4.     Computer advice or consultation.

The MS SM 01 adds two liability coverage agreements: delivery errors and omissions and merchandise withdrawal expenses. Delivery E&O covers the insured in the event that the insured or any employee fails to deliver an item or misdelivers such item. The policy agrees to pay any damages the insured is obligated to pay as a result of such misdelivery. Also insured for this coverage is any concessionaire who is trading under the insured's name. The agreement allows the insurer to investigate and settle any claim at its discretion. This coverage is subject to a an annual limit of $10,000 and a per occurrence deductible of $250.

Three exclusions apply to the delivery E&O coverage:

1.     Intentional error or misdelivery.

2.     BI, PD, or PI. The only damages the coverage responds to are economic damages.

3.     Discrimination.     

Sometimes a grocer faces a merchandise withdrawal, such as the cyanide-laced Tylenol pills of the early 1980″s. Even though there is no coverage for the actual merchandise that has to be withdrawn, the MS SM 01 does cover the insured's expenses that result from the withdrawal.

The product must be withdrawn because it has a known or suspected defect. Or, it must be withdrawn because it has already caused (or is expected to cause) injury or damage. The withdrawal may be initiated either by the insured or by government order. This coverage has a per occurrence limit of $25,000 and a $250 deductible.

Merchandise withdrawal expense coverage is subject to the following exclusions:

1.     Failure of the product to accomplish its intended purpose. This includes breach of warranty. However, the exclusion does not apply if the product has caused (or may cause) injury or damage.

2.     Infringement of intellectual property rights.

3.     If the product just transforms chemically. But this exclusion does not apply in the event of an error in the manufacture, design, etc. of the product nor if the product has been tampered with.

4.     If the shelf-life of a product has been exceeded.

5.     Withdrawal due to any known defect.

6.     Recall expenses for any product that is otherwise excluded.

7.     Recall expenses for any product that has been banned from the market.

8.     Any suit against the insured for withdrawal expense.

The definition of insured for liability is changed, as well. The supermarket form gives insured status to someone if the liability arises out of that person's control of the insured or premises the insured leases from that person.

The endorsement goes on to detail the insured's duties in the event of loss under either one of the added coverages. Both require the insured to notify the insurer; to record the names of witnesses; and to cooperate with and assist the insurer.

The MS SM 01 adds the following definitions:

1.     Computer: programmable electronic that the insured uses to store, process, or retrieve data. It includes other equipment used with the computer, but does not include data or media.

2.     Counterfeit: an imitation of a valid original.

3.     Defect: includes dangerous condition.

4.     Employee: includes furnished employees, but does not include agents or brokers, or leased employees.

5.     Forgery: signing the name of another person. It does not include signing one's own name with or without authority.

6.     Manager: a director for a limited liability company.

7.     Merchandise withdrawal: recall of items held for sale by the insured. The recall must be due to a known or suspected defect. If the withdrawal is due to product tampering, the definition of “merchandise withdrawal” is limited to just those products which the insured knows (or suspects) have been tampered with.

8.     Merchandise withdrawal expenses: includes the following eight items:

a.     Costs of notification.

b.     Costs of stationery, envelopes, production of announcements and postage or facsimiles.

c.     Costs of overtime paid to the insureds employees.

d.     Costs of computer time.

e.     Costs of hiring independent contractors and other temporary employees.

f.     Costs of transportation, shipping or packaging.

g.     Costs of warehouse or storage space.

h.     Costs of proper disposal of items held by the insured for sale or products that cannot be reused.

9.     Money.

10.     Perishable stock: stock that might suffer a loss if controlled conditions change.

11.     Securities: includes food stamps, redeemed lottery tickets, evidences of debt, etc.

The supermarket program offers the insured the opportunity to purchase mechanical breakdown coverage on form MS SM 02. This endorsement reads like boiler and machinery coverage in that it covers an “accident to an object.” Covered objects include boiler and pressure vessels and air conditioning and refrigeration units. An accident is a sudden and accidental “breakdown of the object.” For more on boiler and machinery, please refer to the Boiler and Machinery tab in the Fire and Marine volume.