Summary: Accounts receivable insurance, provided under inland marine forms and rules of the commercial lines program of Insurance Services Office (ISO), is actually a kind of consequential coverage. The risk insured by this coverage is loss resulting from the insured's inability to collect amounts due from customers due to loss or damage to the insured's records. Interest charges on loans required to offset amounts that the insured is unable to collect pending the insurer's payment of a loss, collection expenses in excess of the insured's normal collection expenses that are made necessary by the loss, and other reasonable expenses incurred by the insured to reestablish lost records of accounts receivable are also covered.

Topics covered:

Introduction

Insuring agreement

Exclusions

Limits of insurance

Additional conditions

Definitions

Endorsements

Introduction

 The ISO forms for insuring unscheduled business property—whether the Building and Personal Property Form or the Condominium Commercial Unit Owner Form—include coverage for damage to accounts receivable. Recovery is limited to the cost of blanks and, if the insured has duplicate records intact after the loss, the cost of transcribing the duplicates to the blanks. The Accounts Receivable Coverage Form, CM 00 66 01 13, is required if the insured wishes to obtain broader, consequential coverage. Coverage may be written on either a nonreporting or reporting basis, in which case the Reporting Endorsement, CM 66 06 04, must be attached.

 The Accounts Receivable Coverage Form is issued in conjunction with the Commercial Inland Marine Conditions Form, CM 00 01 09 04, and the Common Policy Conditions Form, IL 00 17 11 98. An accounts receivable declarations page, based on an ISO advisory form for that purpose, is also needed. The Advisory Accounts Receivable Declarations, CM DS 03 03 10, lists limits of insurance for different coverage offered by the accounts receivable form: coverage applicable at the named insured's premises, coverage away from those premises, and coverage applicable at all locations. CM DS 03 also contains a space for information on coinsurance, rates and premium, description of receptacles for the accounts receivable, and duplicate records.

 It should be noted that the accounts receivable exposure is highly responsive to loss control measures, the principal one being daily duplication of records and safekeeping of the records at another location. Safekeeping of records in vaults or safes is another method of loss control. ISO rules for the coverage form allow substantial rating credits for such measures.

 Insuring Agreement

 A.Coverage

1.We will pay:

a.All amounts due from your customers that you are unable to collect;

b.Interest charges on any loan required to offset amounts you are unable to collect pending our payment of these amounts;

c.Collection expenses in excess of your normal collection expenses that are made necessary by the loss or damage; and

d.Other reasonable expenses that you incur to re-establish your records of accounts receivable;

that result from Covered Causes of Loss to your records of accounts receivable.

 Analysis

 The form provides coverage for the cost of reestablishing records of accounts receivable as well as actual loss sustained due to the inability to collect sums due resulting from an insured loss or damage to the records. Coverage for collection expenses in excess of normal collection expenses necessitated by the loss, reasonable expenses incurred to reestablish records of accounts receivable, and interest charges on any loan the insured must obtain, pending the insurer's payment, to offset amounts unable to be collected are included.

 2.Property Not Covered