September 23, 2013

Summary: The Insurance Services Office (ISO) has developed a market segments program providing specialized coverage for certain insurance markets. This program offers wrap around endorsements that are used to enhance the coverages provided by standard coverage forms, like the commercial property and general liability forms.

This article discusses pest control services and the form used is MS PE 01 10 13. This endorsement modifies the commercial property form by revising the pollutant clean up and removal limit of insurance and by adding additional coverages. MS PE 01 also makes changes to the CGL form.

Topics covered:

Changes to the commercial property form

Coverage extensions

Changes to the causes of loss form

Changes to the commercial general liability coverage

Definitions

Endorsements

Changes to the Commercial Property Form

The first change that MS PE 01 makes to the property form is to increase the pollutant clean up and removal limit of insurance from $10,000 for the sum of all covered expenses to $25,000.

The next change pertains to coverages that are added to the property form.

Money and Securities. MS PE 01 will pay for loss of money and securities used in the named insured's business while at a bank or savings institution, within the named insured's living quarters, at the described premises, or in transit between any of these places. The causes of loss are theft (meaning any act of stealing), disappearance, or destruction. The insurer will not pay for loss resulting from accounting or arithmetical errors or omissions, loss due to giving or surrendering of property in any exchange or purchase, or loss of property contained in any money-operated device. The most that will be paid under this coverage is $10,000 in any one occurrence for money and securities while in or on the described premises or within a bank or savings institutions; if the money and securities are anywhere else, the limit of insurance is $5,000.

Fire Extinguishing Systems Expense. The cost of recharging or replacing the fire extinguishers and extinguishing systems if they are discharged in the building is covered up to $5,000 in any one occurrence. The form also pays for loss or damage to covered property if such loss or damage is the result of an accidental discharge of chemicals (this loss or damage is included in the $5,000 limit of insurance).

Reward Payment. The insurer will reimburse the named insured for rewards paid as follows: up to $5,000 for information leading to the arrest and conviction of any person committing a crime resulting in loss or damage to covered property from a covered cause of loss; and, up to $5,000 for the return of stolen covered property when the loss is caused by theft. Note that no reward will be reimbursed unless and until the person committing the crime is convicted, or the covered property is returned.

Computer Fraud. The insurer will pay for loss of or damage to money securities and other property resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside a building at the describe premises or from any bank to a person outside those premises. The most that will be paid under this coverage in any one occurrence is $25,000 (unless a different limit of insurance for computer fraud is shown in the declarations form). Note that the coverage territory for this coverage is anywhere in the world.

Money Orders and Counterfeit Money. MS PE 01 will pay for loss resulting directly from the named insured having accepted in good faith, in exchange for merchandise, money, or services, money orders that are not paid upon presentation or counterfeit money that is acquired during the regular course of business. The most that will be paid under this coverage for any loss in any one occurrence is $25,000.

Forgery or Alteration. The pest control services endorsement will pay for loss resulting directly from forgery or alteration of checks, drafts, promissory notes, or similar written promises, orders, or directions to pay a sum certain that is made or drawn by or upon the named insured. If the named insured is sued for refusing to pay any instrument covered in this clause on the basis that it has been forged or altered, the insurer will pay for any reasonable legal expenses that the named insured incurs. The most that will be paid for any loss in any one occurrence under this additional coverage is $2,500.

Outdoor Signs. The insurer will pay for direct physical loss of or damage to all outdoor signs at the described premises that are owned by the named insured or in his care, custody, or control. The most that will be paid for loss or damage in any one occurrence is $5,000. Note that the provisions of this additional coverage supersede all other outdoor signs coverage references in the building and personal property coverage form.

Employee Dishonesty. The insurer will pay for direct loss of or damage to the named insured's business personal property and money and securities resulting from dishonest acts committed by any of the named insured's employees. The employee has to be acting with the manifest intent to cause the named insured to sustain loss or damage and to obtain financial benefit. This coverage also extends to clients' property while that property is inside the clients' premises. This coverage is for the benefit of the named insured and provides no rights or benefits to any other person or organization, including the clients. The most that will be paid under this additional coverage for loss or damage in any one occurrence is $15,000. The insurer will pay only for loss or damage the named insured sustains through acts committed or events occurring during the policy period and the insurer will pay only for covered loss or damage discovered no later than one year from the end of the policy period.

Ordinance or Law—Equipment Coverage. If a covered cause of loss occurs to equipment that is covered property, the insurer will pay the costs to repair or replace the equipment as required to comply with an ordinance or law. MS PE 01 will not pay for the costs associated with the enforcement of or compliance with any ordinance or law that requires the insured too test for, monitor, clean up, remove, treat or in any way respond to or assess the effects of pollutants.

Key and Lock Replacement. The insurer will pay for the cost to replace keys and/or locks at the client's premises due to theft or other loss to keys entrusted to the named insured by the client. The most the insurer will pay under this additional coverage for all loss or damage in any one occurrence is $5,000. No deductible applies to this coverage.

Artificially Generated Electrical Current. MS PE 01 will pay for loss or damage to computers due to artificially generated electrical current if such loss or damage is caused by or results from an occurrence that took place within 1,000 feet of the describe premises, or an interruption of electric power supply, power surge, blackout, or brownout if the cause of such occurrence took place within 1,000 feet of the described premises.

Coverage Extensions

Personal Effects and Property of Others. The named insured is permitted to extend the insurance that applies to his business personal property to apply to personal effects owned by the named insured, officers, partners, managers, and employees (coverage does not apply to theft). The extension can also be applied to personal property of others in the care, custody, or control of the named insured. The most that will be paid is $5,000.

Valuable Papers and Records. Coverage may be extended to apply to direct physical loss or damage to valuable papers and records that the named insured owns or that are in his care, custody, or control, caused by or resulting from a covered cause of loss. This extension of coverage includes the cost to research lost information on valuable papers and records for which duplicates do not exist. This extension does not apply to valuable papers and records that exist as electronic data. The coverage is limited to the specified causes of loss. The most that will be paid is $10,000 in any one occurrence at each described premises.

Accounts Receivable. Accounts receivable coverage is extended to direct physical loss or damage by any covered cause of loss to the named insured's records of accounts receivable. The most that will be paid under this extension of coverage is $10,000 at each described premises.

Employees Tools and/or Equipment. The insurance that applies to the named insured's business personal property can be extended to apply to tools and/or equipment owned by the named insured's employees located on the described premises. The most that will be paid is $2,500 for any one occurrence at each described premises. However, in no event will the insurer pay more than $500 for tools and/or equipment owned by any one employee.

Changes to the Causes of Loss Form

The ordinance or law exclusion in the exclusions section does not apply to the additional coverage offered in MS PE 01.

The mechanical breakdown exclusion in the exclusions section does not apply to loss or damage to computers.

The exclusion of dampness or dryness of atmosphere and the exclusion of changes in or extremes of temperature do not apply if such conditions result from physical damage caused by a covered cause of loss to an air conditioning unit or system.

The following exclusions are added to the exclusions section and apply only to coverage for computers: errors or omissions; electrical disturbance; computer-related losses; and computer advice or consultation.

The exclusions section does not apply to the employee dishonesty additional coverage offered by MS PE 01.

Changes to the Commercial General Liability Coverage

With respect to the insured's pesticide and herbicide spraying and application operations, the pollution exclusion pertaining to pollutants brought on or to premises in connection with the operations of the insured does not apply if such operations meet all standards of any statute, ordinance, regulation, or license requirements of the government.

When a limit of insurance for limited pollution liability—on premises coverage is shown in the supplemental schedule or the declarations, the pollution exclusion pertaining to the release or seepage or escape of pollutants at premises owned or occupied by the insured does not apply with respect to the storage of pesticides and herbicides used in the insured's spraying and application operations if such operations meet all standards of any statute, ordinance, regulation, or license requirements of the government.

Definitions

Client. This means an individual, company, or organization with whom the named insured has a written contract or work order for services for a described premises.

Client's Premises. This means the interior of that portion of any building the client occupies in conducting its business.

Computer. This is the named insured's programmable electronic equipment that is used to store, retrieve, and process electronic data. It does not include the electronic data and media.

Counterfeit Money. This is an imitation of money that is intended to deceive and to be taken as genuine.

Forgery. This means the signing of the name of another person or organization with intent to deceive.

Manager. This means a person serving in a directorial capacity for a limited liability company.

Member. This means an owner of a limited liability company represented by its membership interest.

Money. This is currency, coins, and bank notes in current use and having a face value, travelers checks, register checks, and money orders.

Other Property. This means any tangible property other than money and securities that has intrinsic value but does not include any property excluded under MS PE 01.

Securities. This means negotiable and nonnegotiable instruments or contracts representing either money or other property.

Theft. This means the unlawful taking of money, securities, or other property to the deprivation of the named insured's client.

Endorsements

MS PE 04. This endorsement states that exclusion (g), the aircraft, auto, or watercraft exclusion on the CGL form does not apply with respect to the discharge or seepage or release or escape of pesticides or herbicides from an auto while the auto is being used in connection with the insured's operations. However, this endorsement does not apply while such auto is at the premises of a client, or parked for longer than twenty-four consecutive hours in length anywhere other than at the named insured's premises.

MS PE 06. This endorsement mirrors MS PE 04, but states that the endorsement only applies while the auto is at the premises of a client, and is being used in connection with the insured's pesticide and herbicide spraying and application operations.

MS PE DS. This is the pest control services supplemental schedule. It has spaces to show a change in limits of insurance for those coverages checked in the supplement. It also has space for limited pollution liability, on premises coverage if the insured wants that coverage. The endorsement has a space for an aggregate limit and an each occurrence limit for the limited pollution liability coverage.