ISO Market Segments Program

Summary: Insurance Services Office (ISO) has developed a market segments program providing specialized coverages for certain specialty 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.

The Staffing Firms Market Segments Program provides coverage for all buildings and personal property and commercial general liability insurance. Eligible risks for the Staffing Firms segment include employment agencies and organizations that furnish workers for a fee to perform work for others.

This article provides information on the Staffing Firms coverage form, MS ST 01 07 13. The endorsement modifies the CGL forms, the Building and Personal Property Coverage form, and the Causes of Loss—Special form. For more information on these policies, see CGL Coverage Form—Coverage A; see CGL Coverage Form—Coverage B; see Medical Payments; see General Provisions of the CGL; see Building and Personal Property Coverage Form; and see Causes of Loss.

Topics covered: Introduction Changes to the Building and Personal Property Coverage Form Changes to the Causes of Loss—Special Form Definitions Endorsements

Introduction

Endorsement MS ST 01 07 13 modifies the CGL form, the Building and Personal Property Coverage form, and the Causes of Loss—Special form. The modifications tailor these forms to the needs of the staffing firms risk. Endorsements are also available to add mechanical breakdown coverage and hired and nonowned auto liability coverage.

In a circular introducing the endorsement, ISO stated, “With respect to this and other ISO Market Segments Programs, it should be noted that it is intended that the optional endorsements and state amendatory endorsements contained in the applicable monoline programs (Commercial Property and Commercial General Liability in the case of Staffing Firms) will also be available for use with the monoline component when writing a Market Segments policy. Additionally, each Market Segments Program is intended to be used in conjunction with other Coverage Parts in the formation of a Commercial Package Policy, subject to the rules of Division Nine – Multiple Line, Commercial Package Policy.”

Changes to the Building and Personal Property Coverage Form

The Building and Personal Property Coverage form, CP 00 10 10 12, covers the building and business personal property of the insured and property of others in the insured's care.

The endorsement increases the fire department service charge limit of insurance to $5,000, up from the $1,000 limit on the CP 00 10.

The endorsement adds the following additional coverages:

1.    $10,000 for money and securities while in or on the described premises or within a bank or savings institution; $5,000 for money and securities anywhere else as described in the policy.

2.    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 ST 01 also pays for damage done by such a discharge to covered property—something not covered by the CP 00 10. However, no coverage applies on the Staffing Firms endorsement if the discharge occurs while the system is being installed or tested.

3.    A reward payment of up to $5,000 is insured for information that leads to the conviction of anyone damaging covered property or for the recovery of stolen property.

4.    The limit for loss or damage resulting from computer fraud is $5,000.

5.    Money orders and counterfeit paper currency are covered up to $1,500.

6.    $2,500 is available for forgery or alteration of checks, drafts, promissory notes, or similar written promises, orders, or directions to pay a sum of money.

7.    Damage to outdoor signs is covered for $5,000.

8.    The additional coverage for employee dishonesty provides a limit of $5,000.

9.    Loss or damage to computers due to artificially generated electrical current is covered if the occurrence takes place within a thousand feet of the premises or if a brownout, blackout, power surge, or interruption of the power supply takes place within a thousand feet of the premises.

The MS ST 01 provides the following changes or additions to the CP 00 10 coverage extensions:

1.    The newly acquired property's period of recovery provision states that for newly acquired computers, coverage ends when specific computer coverage at the newly acquired business is obtained..

2.    The personal effects and property of others limit is increased to $5,000, up from $2,500 in the CP 00 10.

3.    A limit of $25,000 applies to on-premises valuable papers and records and $10,000 for off-premises valuable papers and records.

4.    Property off-premises is extended to cover computers.

5.    For outdoor property, the following limits apply: fences and retaining walls that are not part of the building—$2,500; outdoor radio, television, satellite, or other antennas, including their masts, towers, and lead-in and support wiring—$3,000; trees, shrubs, or plants (other than those that are stock or are part of a vegetated roof)–$2,500, but not more than $500 for any one tree, shrub or plant. In line with the changes to the debris removal additional coverage, the expense of removing debris of trees, shrubs, or plants that are the property of others is included, except when the insured is a tenant and such property is owned by the landlord of the described premises.

6.    Accounts receivable loss or damage at each described premises has a $5,000 limit; $2,500 if not at a described premises.

Changes to the Causes of Loss—Special Form

The MS ST 01 specifies that the mechanical breakdown exclusion does not apply to computers. The exclusions for dampness or dryness and for changes in or extremes of temperature do not apply if such conditions result from a covered cause of loss to an air conditioning unit or system which is part of or used with computers.

However, the endorsement adds the following exclusions for computers only:

1.     Errors or omissions.

2.     Electrical disturbance.

3.     Computer-related losses, which include the failure, malfunction, or inadequacy of hardware, software, application systems, operating systems, networks, microprocessors that are not part of any computer system, any other computerized or electronic components, and any other products, services, data, or functions that use or rely upon any of the items listed.

4.     Computer advice or consultation.

Only the following exclusions apply to the coverage for employee dishonesty in the endorsement: governmental action, nuclear hazard, and war and military action.

Only the following exclusions apply to the endorsement's coverage for outdoor signs: governmental action; nuclear hazard; war and military action; wear and tear; rust and other corrosion, decay, deterioration, hidden or latent defect; and mechanical breakdown.

The valuable papers and records and the accounts receivable coverage extensions are subject to only the following exclusions: governmental action; nuclear hazard; war and military action; computer-related losses; computer advice and consultation; continuous or repeated seepage or leakage of water, or the presence or condensation of humidity, moisture, or vapor occurring over a fourteen-day period; water, other liquids, powder, or molten material that leaks or flows from plumbing, heating, air conditioning, or other equipment (except fire protective systems) as a result of freezing; weather conditions; acts or decisions; faulty, inadequate, or defective planning, zoning, development, surveying, siting, design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction, materials used in repair, construction, renovation, or remodeling, and maintenance.

Exclusions for damage incurred in the concealment of the wrongful giving, taking, or withholding of money, securities, or other property; billing, accounting, or bookkeeping errors and omissions; or loss or damage requiring an audit or inventory computation to prove its existence are also applicable to the accounts receivable coverage extension.

Definitions

The MS ST 01 adds the following definitions:

1.     Client: an individual, company or organization with whom the insured has a written contract or work order for its services for a described premises and have billed for its services.

2.     Client's premises: as respects the coverage for clients' property under Employee Dishonesty coverage and property off-premises of this endorsement only, the interior of that portion of any building the insured's client occupies in conducting its business. For coverage provided by the personal effects and property of others, client premises means the interior of that portion of any building or structure the insured's client occupies in conducting business.

3.     Computer: means the insured's programmable electronic equipment that is used to store, retrieve, and process electronic data. It includes their component parts and dedicated air conditioning, fire suppression equipment, and electrical equipment used exclusively in the computer operations; and associated peripheral equipment that provides communication, including input and output functions such as printing or auxiliary functions such as electronic data transmission.

It does not include electronic data and media.

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

5.     Employee, as respects the coverage provided in this endorsement for money and securities and employee dishonesty only: any natural person while in the insured's service or for thirty days after termination of service; who the insured compensate directly by salary, wages, or commissions; and who the insured has the right to direct and control while performing services for it; or any natural person who is furnished temporarily to the insured for the following reasons: to substitute for a permanent employee, as defined in the endorsement, who is on leave; or to meet seasonal or short-term workload conditions while that person is subject to the insured's direction and control and performing services for the insured, while the person is subject to the insured's control. Also considered employees are leased employees; former employees, partners, members, managers, directors, or trustees; guest students or interns; employees of entities merged or consolidated with the insured prior to the effective date of the insurance; or managers, directors, or trustees while performing acts within the scope of usual employment, acting as a member of a committee of the insured's board of directors or board of trustees.

6.     In regards to the money and securities and employee dishonesty coverages only, employee does not mean:. any agent, broker, factor, commission merchant, consignee, independent contractor, or representative of the same general character.

7.     Forgery: 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, for any purpose.

8.     Manager, as respects the coverage provided in this endorsement for employee dishonesty only: a person serving in a directorial capacity for a limited liability company.

9.     Member: in regards to employee dishonesty coverage only, means an owner of a limited liability company represented by its membership interest.

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

11.     Occurrence, as respects the coverage provided in this endorsement for money and securities only: all loss caused by one or more persons and involving a single act or series of related acts.

12.     Occurrence, as respects the coverages provided in this endorsement for computer fraud and money orders and counterfeit money only: an act or series of related acts involving one or more persons; or an act or event, or a series of related acts or events not involving any person.

13.     Occurrence, as respects the coverage provided in this endorsement for forgery or alteration only: all loss caused by any person or in which that person is involved, whether the loss involves one or more instruments.

14.     Occurrence, as respects the coverage provided in this endorsement for employee dishonesty only: all loss caused by, or involving, one or more employees, whether the result of a single act or series of acts.

15.     Other property, as respects the coverage provided in this endorsement for clients' property under employee dishonesty only: any tangible property other than money and securities that has intrinsic value but does not include any property excluded under this policy.

16.     Securities: negotiable and nonnegotiable instruments or contracts representing either money or other property and includes food stamps, lottery tickets, redeemed coupons, tokens, tickets, revenue, and other stamps (whether represented by actual stamps or unused value in a meter) in current use; and evidences of debt issued in connection with credit or charge cards, which cards are not issued by the insured; but does not include money.

17.     Theft, as respects the coverage provided in this endorsement for clients' property under employee dishonesty only: the unlawful taking of money, securities, or other property to the deprivation of the insured's client.

Endorsements

The Staffing Firms program offers the insured the opportunity to purchase mechanical breakdown coverage on form MS ST 02 06 05. Loss or damage to covered property caused by mechanical breakdown or electrical failure to pressure, mechanical, or electrical machinery and equipment is covered.

The following exclusions in the Causes of Loss—Special Form were removed from the Staffing Firms – Equipment Breakdown Protection Coverage form: artificially generated electrical current; mechanical breakdown; and explosion of steam boilers, steam pipes, steam engines, or steam turbines.

The endorsement may amend the deductible provision in the Building and Personal Property Coverage Form respecting its applicability to the coverage provided by this endorsement. And, if the Business Income (and Extra Expense) Coverage Form is part of the policy, the seventy-two hour time period required in the period of restoration and the Civil Authority Additional Coverage in that coverage form may be amended as respects the coverage provided by this endorsement.

A basic limit of $300,000 for nonowned and hired auto liability coverage is also available under endorsement MS ST 03 06 05, Staffing Firms – Hired Auto And Non-Owned Auto Liability Insurance.

The ISO circular that introduced the endorsements states, “This endorsement has been created to provide a means of covering the vicarious liability of a named insured for the use of automobiles not owned or hired by the insured. Under the Commercial General Liability Coverage Part, there is no mechanism to provide hired and/or non-owned auto liability coverage. One must purchase a separate Business Auto Coverage Form to cover this exposure. To simplify this process, for the purposes of this program, we have developed this endorsement to provide either or both hired and non-owned auto liability coverage.”

The occurrence-based coverage is not subject to the Commercial General Liability Coverage Form's aggregate limit. The following exclusions of the Commercial General Liability Coverage Form are not included in the endorsement: bodily injury and property damage exclusions relating to contractual liability; liquor liability; employer's liability; aircraft, auto, or watercraft; mobile equipment; damage to property; damage to the named insured's products; damage to the named insured's work; damage to impaired property or property not physically injured; and product recall.

Three exclusions were added to state that coverage does not apply to bodily injury or property damage for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement; bodily injury to an employee of the insured arising out of and in the course of employment by the insured; or property damage to property owned or being transported by, or rented or loaned to the insured; or property damage to property in the care, custody or control of the insured.

Coverage is excess over any primary insurance covering the hired or nonowned auto. “Auto” is defined as it would be in the CGL form.

A supplemental schedule, MS ST DS, has also been created to provide appropriate modifications to the Staffing Firms endorsement, Staffing Firms Supplemental Schedule, MS ST DS 07 13 Optional limits of coverage may be listed for money and securities, computer fraud, money orders and counterfeit money, forgery or alteration, outdoor signs, employee dishonesty, personal effects and property of others, valuable papers and records (other than electronic data), property off-premises, and accounts receivable. Hired auto liability and nonowned auto liability limits can also be listed on the endorsement.