ISO VALUABLE PAPERS AND RECORDS COVERAGE FORM

(September 2009)

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INTRODUCTION

The Insurance Services Office (ISO) Valuable Papers And Records Coverage Form insures against direct physical loss or damage to covered property except for causes of loss indicated in Exclusions. It covers losses to inscribed, printed or written documents, manuscripts or records and abstracts, books, deeds, drawings, films, maps and mortgages.

This coverage form is not used as much as in the past because valuable papers and records coverage is an additional coverage or an extension of coverage with significant sub-limits in many filed commercial property coverage forms and policies. Businessowners and Capital Assets policies have significant sub-limits for valuable papers and records coverage and many independently filed company commercial property coverage forms and policies also include significant valuable papers and records coverage sub-limits as an extension of coverage. However, valuable papers and records coverage should not be dismissed or treated as unnecessary before thoroughly and carefully reviewing it. The coverage provided is usually broader than that offered as an additional coverage or an extension of coverage in most commercial property coverage forms.

POLICY CONSTRUCTION

The following forms are mandatory:

Note: Valuable papers and records coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

ELIGIBILITY

Valuable papers and records are broadly defined. They include documents that are inscribed, printed or written as well as manuscripts. Records covered include, but are not limited to, books, abstracts, deeds, drawing, films, maps and mortgages. Any party that owns valuable papers or has valuable papers of others in its care, custody or control is eligible.

CM DS 17–VALUABLE PAPERS AND RECORDS DECLARATIONS

CM DS 17–Valuable Papers And Records Declarations does not have a place for the name, mailing address and other named insured identifying information because that information is contained in CM DS 02–Commercial Inland Marine Declarations. CM DS 17–Valuable Papers And Records Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Premium For This Coverage Form

The premium for Valuable Papers And Records Coverage is entered in the space provided.

Limits Of Insurance

Separate limits of insurance must be entered in the spaces provided for each of the following if coverage is desired:

Deductible

The standard $500 deductible the named insured retains for each covered loss applies unless a different amount is entered in the space provided.

Description Of Receptacles

The address, receptacle manufacturer, class, label and the label issuer's name must be entered in the spaces provided for every receptacle at each covered premises.

Special Provisions

Special Provisions, if any, are indicated in the space provided.

A type of valuable paper that can be insured by this coverage form

FORM ANALYSIS–CM 00 67–VALUABLE PAPERS AND RECORDS COVERAGE FORM

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

CM 00 67 opens by stating that certain provisions restrict coverage and encourages the insured to carefully read it all to understand what is covered, what is not covered, and to determine its rights and duties. It points out that the insurance company uses the terms you and your to refer to the named insured indicated on the declarations and the terms we, us and our to refer to the insurance company providing coverage. It also directs attention to Section F–Definitions because understanding their special meanings is critical to understanding the coverage and exclusions that apply.

A. COVERAGE

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

This is the named insured's valuable papers and records and similar property of others in its care, custody or control.

Note: Valuable papers and records are any documents inscribed, printed or written, manuscripts or records, including abstracts, deeds, drawings, films, maps, mortgages and books but not money and securities or any data, converted data, programs and instructions used in electronic data processing operations, including materials that store the data.

2. Property Not Covered

There is no coverage for:

3. Covered Causes Of Loss

This means direct physical loss or damage to the named insured's accounts receivable records by covered causes of loss except those indicated in B. Exclusions.

Note: The words “risks of” before “direct physical” were removed in this edition.

4. Additional Coverage–Collapse

a. This is a sudden falling down or caving in of a building or a part of a building such that it cannot be occupied as intended.

b. The insurance company pays for direct physical loss or damage to covered property because of the sudden collapse of a building or a part of a building that contains covered to which this coverage form applies caused by any one or more of the following:

c. This coverage form's limits of insurance are not increased by this additional coverage.

Note: This change makes this additional coverage the same as in other ISO property coverage forms.

5. Coverage Extensions

a. Removal

Valuable papers and records removed to a different location from the named insured's premises because of imminent danger of loss or damage are covered. They are also covered while in transit to and from that location. The named insured must inform the insurance company of the removal within ten days of the date they are removed.

Note: The limit of insurance at the location from which the records were removed applies to this coverage extension.

Example: Errol of Errol's Engineering and Architects had numerous wealthy commercial clients whose projects he had worked on over the years, resulting in many documents that qualified as valuable papers and records. Because his coastal Alabama office was about to be hammered by a Category Four hurricane, Errol packed up as many of his computers as he could, put them and all his valuable papers and records into a box truck and drove inland. On the way his vehicle become stuck on a railroad crossing. Errol leaped from the truck just before the train hit it. All of his valuable papers and records were covered based on the premises limits and not the property away from premises limit.

b. Away From Your Premises

The insurance company pays up to $5,000 for loss or damage to covered property away from the named insured's premises, unless a higher limit is indicated on the declarations.

Note: This coverage extension limit is an additional amount of insurance.

Example: Due to the nature of his business, Errol must constantly take engineering studies and architectural drawings and plans out of the office to his clients' offices and building sites. When he or one of his associates does so, this coverage extension applies and those papers are covered when away from the designated premises.

B. EXCLUSIONS

1. These exclusions apply whether or not the loss event results in widespread damage or affects a significant geographical area and are essentially absolute. The insurance company does not pay for loss or damage caused directly or indirectly by any of these exclusions, regardless of any other cause or event contributing to the loss concurrently or in any other sequence.

a. Governmental Action

The insurance company does not pay for loss or damage caused by seizure or destruction of property by order of a governmental authority. This exclusion has an exception for loss or damage caused by or resulting from such ordered acts of destruction at the time of a fire in order to prevent the fire's spread if the insurance provided by this coverage form covers the fire.

b. Nuclear Hazard

There is no coverage for loss or damage from nuclear reaction, radiation, or radioactive contamination from any cause or source. This exclusion has an exception if the nuclear reaction, radiation or radioactive contamination results in fire. In that case, the insurance company pays for the direct loss or damage caused by the fire if the insurance provided by this coverage form covers the fire.

Note: The reference to weapons employing atomic fission/fusion in this edition are eliminated but are still excluded because of the comprehensive manner in which this exclusion is now written. By rewriting this exclusion, the fire exception applies to the weapons but did not in the previous edition.

c. War And Military Action

Loss or damage due to war is excluded. This includes undeclared, civil war or any warlike action by a military force, and actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.

2. The insurance company does not pay for loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions, conditions or limitations that should be noted carefully.

a. Delay, Loss Of Use And Loss Of Market

The insurance company does not pay for loss or damage caused by or resulting from these consequential or indirect losses that arise after direct loss or damage.

b. Dishonest Or Criminal Acts

There is no coverage for loss or damage caused by or resulting from dishonest or criminal acts that the named insured, its partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company commit. This also includes similar acts by anyone with an interest in the property, their employees or their authorized representatives, as well as anyone entrusted with the property. This exclusion applies whether the persons act alone or in collusion with others or if the acts occur during regular working hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured but loss due to theft of covered property by employees is excluded.

c. Errors Or Omissions In Processing Or Copying

Coverage does not apply to loss or damage caused by or resulting from errors or omission in processing or copying. However, if they result in a fire or explosion, the insurance company pays for the direct loss or damage caused by that fire or explosion, if the insurance provided by this coverage form applies to fire or explosion.

Example: Errol decided to have some of his oldest architectural drawings bound to put in his library. The individual doing the binding made several errors that damaged the drawing that would not have been covered but the final error was when the individual applied a highly flammable glue and then lit a cigarette. The ensuing fire destroyed the drawings. Because of the fire exception, payment was made for the drawings.

d. Electrical Or Magnetic Injury, Disturbance Or Erasure Of Electronic Recordings

Direct loss or damage to electronic recordings due to electrical or magnetic injury, disturbance or erasure is excluded if caused by programming errors, faulty machine instructions or faulty installation, maintenance of data processing equipment or components. However, direct loss or damage caused by lightning is covered.

Example: Many of Errol's plans and drawings lent themselves to electronic technology, especially as it evolved and improved to the level of sophistication needed for the work he did. While Errol always backed up these documents on other media, there were always times when any given plan "in the works" might not be completely duplicated. This became more of a problem as his business grew, staff was added and the number of projects "on the drawing board" increased. This situation reached a crisis point when a violent electrical storm accompanied by vivid displays of lightning made multiple strikes on Errol's premises, fried a number of his computers and ruined a number of projects in production that had not been completely backed up or duplicated. Errol's electronic data processing policy and the lightning exception to this exclusion covered these losses but he decided to install extensive power surge protection to minimize damage from similar occurrences in the future.

e. Voluntary Parting

Coverage does not apply to loss of covered property because the named insured or others entrusted with it were induced to voluntarily surrender it by a fraudulent scheme, trick, device, or false pretense.

f. Unauthorized Instructions

The insurance company does not pay for loss or damage caused by or resulting from instructions to transfer property to another person or place without proper authorization.

g. Neglect

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

There is no coverage for loss or damage caused by or resulting from failure of an insured to do everything possible at the time of loss and afterwards to save property and preserve it from further damage.

3. The insurance company does not pay for loss or damage caused by or resulting from any of the following loss events. In each case, if loss or damage by a covered cause of loss occurs as a result of one of these events occurring, coverage applies to the loss or damage caused by the resulting covered cause of loss event.

a. Weather Conditions

Coverage does not apply to loss or damage caused by weather conditions. This exclusion applies only if the weather condition contributes in any way with an excluded cause or event indicated in Paragraph 1. that produces the loss or damage.

b. Acts Or Decisions

The insurance company does not pay for loss or damage caused by or resulting from acts or decisions made by any person, group, organization or government entity that results in loss or damage. This includes failure to act or make a decision.

c. Faulty, Inadequate Or Defective Planning

There is no coverage for loss or damage caused by or resulting from erroneous planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. This also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.

d. Collapse

Collapse is excluded. This includes the following conditions in the property or any part of it:

Note: This exclusion does not apply with respect to the coverage provided under Additional Coverage–Collapse or to collapse caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, breakage of building glass, falling objects, weight of ice, sleet or snow, water damage, earthquake, weight of people or personal property on or in the building or structure or weight of rain collecting, pooling or accumulating on a roof.

e. Wear And Tear

Loss or damage caused by wear and tear is excluded. This also includes qualities in covered property that cause it to damage or destroy itself, as well as latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust, dampness, heat or cold.

C. LIMITS OF INSURANCE

The limits indicated on the declarations are the most paid for loss or damage in any one occurrence.

D. DEDUCTIBLE

The insurance company pays only the amount of loss or damage in any one occurrence that exceeds the deductible amount indicated on the declarations.

E. ADDITIONAL CONDITIONS

1. Valuation–Specifically Declared Items

This valuation clause is added to General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions. The value of specific property described on the declarations is the limit of insurance indicated for it.

Note: This is an extremely important condition. Many documents insured under this coverage form are dynamic and their values are subject to change. Others are unique or "one of a kind" and cannot be valued by normal valuation methods and techniques. Any time the named insured has unique and unusual papers or records with high values or values that may change, they should be earmarked and specifically scheduled with their own values and not lumped in with the values of other common documents, resulting in an inadequate overall value at the time of loss or damage.

2. Recoveries

This condition is added to Loss Condition H. Recovered Property in CM 00 01–Commercial Inland Marine Conditions.

Any recovery the named insured or the insurance company makes after a loss occurs and is paid must be reported to the other party promptly. The named insured has the option of having the property returned to it. In that case, the insurance company readjusts the loss or damage based on the amount the named insured received for the recovered property, subject to an allowance for any recovery expenses incurred.

Note: This is an important condition with respect to this coverage. Much time, effort and expense is expended to duplicate and replace lost valuable papers and records and doing so should be done only if replacing the document is absolutely necessary. If there is any chance that the document might be recovered, and if duplication can wait for a period of time, the named insured and the insurance company are well advised to wait and not rush into duplicating something that may be recovered at a later date.

3. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

a. Coverage Territory

The insurance company insures covered property within the named insured's premises, away from such premises while in transit within, or within premises of others located anywhere in the United States of America, its territories and possessions, Puerto Rico and Canada.

b. Protection Of Records

The named insured must keep all records of property insured by this coverage form in the receptacles indicated on the declarations at all times when the premises are closed for business or while it is actually using them.

F. DEFINITIONS

1. Valuable Papers And Records are any documents inscribed, printed or written, manuscripts or records, including abstracts, deeds, drawings, films, maps, mortgages and books but not money and securities or any data, converted data, programs and instructions used in electronic data processing operations, including materials that store the data.

2. Premises means the interior part of the building the named insured occupies at the address indicated on the declarations.

3. Money means traveler’s checks, register checks and money orders held for sale to the public and currency, coins and bank notes in or not in current circulation.

4. Securities are negotiable and nonnegotiable instruments and contracts that represent money or other property. It also includes tokens, tickets and various stamps currently in use or not in use and evidence of debt issued in connection with charge or credit cards that the named insured does not issue. It does not include money.

ENDORSEMENTS

One endorsement is available for use with the Valuable Papers And Records Coverage Form.

CM 67 02–Libraries

This restrictive endorsement is required when coverage is issued to a library. An important feature is that property off premises with a borrower or renter is considered Property Not Covered. These two exclusions further restrict coverage:

UNDERWRITING CONSIDERATIONS

Other than determining the location to be insured, the limits to be provided and the types of receptacles used, the most important issue in underwriting this coverage is in actually identifying the valuable papers to be insured. Is the insured aware of the types of papers and records that can and should be covered and are they listed or otherwise accounted for? The only way full recovery can be made for a unique document or record is to list it and provide a value for it. If the papers or records can be duplicated, are duplicates made and kept? If so, where are they kept?