142.6

AAIS ELECTRONIC DATA PROCESSING EQUIPMENT AND BUSINESS COMPUTER COVERAGE FORMS

(October 2008)

INTRODUCTION

Insurance coverage for electronic data processing and business computer equipment and media lies primarily in the inland marine realm. While some states require that it be handled as property insurance and subject it to form and rate regulation, most states recognize that the type of equipment and limitations and exclusions in many traditional property insurance coverage forms make it more appropriately treated as inland marine coverage. Electronic data processing equipment and its software is particularly susceptible to loss or damage from electrical or magnetic disturbance and from changes in temperature and humidity. Standard all-risk property coverage forms and policies exclude these perils.

Coverage applies to hardware, broadly defined as a network of electronic machine components or microprocessors that accept instructions and information and process it according to instructions. Coverage also applies to software. Software includes media, defined as disks or cartridges containing instructions and information and data records, which includes the insured's files, documents, or other information stored on media. It also includes programs and applications, which refers to "off the shelf" software products such as operating programs and applications and proprietary programs designed and created specifically for the insured. Coverage is available for standard all risk perils as well as for hacking, defined as unauthorized computer system access, computer viruses, web sites, power shortages, outages and overloads.

Electronic data processing equipment or business computer coverage is not a controlled line of insurance and no standard form is available for use. In the past, each insurance company designed its own coverage form or policy and provided its own unique coverages and other features. However, AAIS has a reputation for developing excellent inland marine coverage forms used in whole or in part by its members and subscribers. AAIS coverage forms are used here as the model to analyze, evaluate and explain the various electronic data Processing equipment and business computer coverage forms.

AAIS has developed four electronic data processing equipment and business computer coverage forms, each having its own corresponding schedule of coverages. This analysis outlines and discusses each of these forms.

ELIGIBILITY

Any business that owns and/or uses computers and other data processing equipment is eligible for this coverage. IM 7200 is used for businesses with more than $250,000 in total equipment values and coverage is written for scheduled limits at scheduled locations. IM 7201 is used for businesses with values up to $250,000 and with coverage, including income coverages, written for scheduled limits at scheduled locations. IM 7202 is used for businesses with total values over $250,000 and with coverage written on a blanket basis at all scheduled locations. IM 7203 is used for businesses with total values up to $100,000 that require coverage for hardware, limited software and extra expense coverage written for scheduled limits at scheduled locations.

POLICY CONSTRUCTION

AAIS Electronic Data Processing Equipment or Business Computer coverage requires at least these four forms:

SCHEDULE OF COVERAGES

The various Schedule Of Coverages forms do not have spaces in which to enter the name, mailing address or other named insured information. That and other information is indicated on IM 7900–Inland Marine Declarations.

IM 7205–SCHEDULE OF COVERAGES–ELECTRONIC DATA PROCESSING–SCHEDULED LIMITS

This Schedule Of Coverages is used with IM 7200–Electronic Data Processing Equipment Coverage Form–Scheduled Limits.

Note: IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7205 contains the following information:

Described Premises

The location number and address of each covered location must be indicated in the spaces provided. Use
IM 7208–Electronic Data Processing–Additional Locations Schedule to schedule additional locations.

Location Limits

The following information must be indicated for each covered location:

Web Site Server Limits: (if applicable)

Limits must be indicated as follows:

On-Site Server

On-Site Server Coverage Under Hardware And Software

Off-Site Server

Equipment Coverage Part

Coverage Extensions

The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:

Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Note: It must be noted that Earthquake, Flood and Sewer Backup Coverages have no default coverage. Coverage applies only when the appropriate box is checked and a limit indicated.

Deductible

Deductible amounts must be entered for:

Note: The deductible entered applies to all covered locations.

Note: Under Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage boxes are checked, a deductible that applies specifically to that selected coverage must be entered. That deductible applies instead of the deductible that applies to all covered locations.

Coinsurance

One of the following coinsurance options must be selected with respect to Hardware, Media, Programs And Applications Data Records And Proprietary Programs:

Income Coverage Part

Income Coverage Options

One of the following income coverage options must be indicated:

Income Coverage Extensions

Supplemental Income Coverages

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Indicate the limit, the waiting period (hours) and whether Overhead Transmission Lines are excluded.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Indicate the limits in any one occurrence and during any one 12-month period and the waiting period (hours).

Income Coverage Options

Income Coverage Waiting Period

Coinsurance

Optional Coverages And Endorsements

This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.

FORM ANALYSIS–IM 7200–ELECTRONIC DATA PROCESSING EQUIPMENT COVERAGE PART–SCHEDULED LIMITS

AGREEMENT

This section states that the insurance company provides the coverage described in the coverage form and in the schedule of coverages in return for the insured's premium payment, subject to all the terms, conditions, endorsements and definitions of the coverage form.

DEFINITIONS

Defined terms are used throughout the policy. Restricting their meaning to the definition in it provides the means for all parties involved with the policy to have a clearer understanding of the coverage intended. Twenty-eight terms are defined:

1. You and your are the parties indicated on the declarations as the insured.

2. We, us and our refer to the insurance company providing the coverage.

3. Computer hacking is the unauthorized intrusion by any party into the insured’s hardware, software, Web site or computer network, resulting in, but not limited to, the numerous types and forms of damage listed.

4. Computer virus is any type of any malicious and self-replicating electronic data code introduced into the insured's computer equipment or software resulting in, but not limited to, the numerous listed types and forms of damage listed.

5. Data records are files, documents and any information stored on media in an electronic format.

6. Electrical disturbance is magnetic or electrical damage or disturbance to, or erasure of, electronic recordings.

7. Flood includes flood, surface water, waves, tidal water or overflow of bodies of water. It also includes spray resulting from these, whether driven by wind or not.

8. Hardware is a network of electronic machines components, such as microprocessors, that perform a variety of computing functions. It includes, but is not limited to, computers, servers, personal computers, workstations, various portable computing devices and peripheral data processing equipment. It does not include software, telecommunications or reproduction equipment, protection and control systems or servers, whether on-site or off-site.

9. Limit is the amount of coverage that applies to the insured property.

10. Mechanical breakdown is failure or improper functioning of moving or electronic parts or components, including faulty installation or blowout.

11. Media is any object or device used with hardware to process, record or store information. It includes but is not limited to films, tapes, cards, discs, drums, cartridges or cells.

12. Off-site server is a server for the insured's Web site at a premises not indicated on the schedule of coverages and maintained or operated by others acting as the insured's Web host or other Internet service provider.

13. On-site server is a server for the insured's Web site located at a premises occupied by the insured and indicated on the schedule of coverages and maintained or operated by the insured or others acting as the insured's Web site consultant.

14. Pollutant is a broad and expansive term. It includes solids, liquids, thermal or radioactive contaminants and irritants including, but not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor and waste. Waste also includes materials intended for recycling, reclamation and reconditioning, as well as for disposal. Visible and invisible electrical or magnetic emissions and sound emissions are also considered pollutants and are included.

15. Power supply disturbance is any type of change in power or interruption of power. It also includes power surge, blackout or brownout.

16. Programs and applications are operating programs and applications purchased by the insured and stored on media or pre-installed in hardware.

17. Proprietary programs are proprietary programs and applications developed by or for the insured and stored on media or installed in hardware.

18. Protection and control systems include air conditioning and fire protection and suppression equipment used exclusively with hardware. This includes manual and automatic fire suppression equipment and smoke and heat detectors. It also includes uninterruptible power supply systems, line conditioners and voltage regulators.

19. Reproduction equipment is a network of equipment and software designed to scan, copy, store and retrieve paper documents.

20. Schedule of coverages is any page labeled as such that contains coverage information, including declarations or supplemental declarations.

21. Sinkhole collapse is the sudden settling or collapsing of the earth's surface into an underground opening created by water acting on limestone or some other rock formation. It does not include the value of the land or the cost to fill sinkholes.

22. Software is media, data records, programs, applications and proprietary programs as defined elsewhere in this section.

23. Specified perils are the named perils of aircraft, civil commotion, explosion, falling objects, fire, hail, fire extinguishing equipment leakage, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action, water damage, weight of sleet, snow or ice and windstorm. Falling objects excludes loss to personal property stored in the open or to the interior of buildings or personal property stored in buildings unless the building's exterior is first damaged and opened by a falling object. Water damage is sudden or accidental discharge or leakage of water or steam directly resulting from the breaking or cracking of a part of the system or appliance holding the water or steam.

24. Telecommunications equipment is telephone components and equipment used to transmit or communicate. Examples include  It includes, but is not limited to, telephone switchgear, telephone operating programs and related software, facsimile transmission equipment, video conferencing equipment and other related telephone hardware that could include computers dedicated to voice mail.

25. Terms are all policy provisions, limitations, exclusions, conditions and definitions that apply to this coverage.

26. Volcanic action is airborne volcanic blast or shock waves, including ash, dust and particulate matter. It includes lava flow but does not include the cost to remove dust, ash or particulate matter that does not directly damage covered property.

27. Website server is any on-site or off-site server.

28. Website software is media, data records, purchased programs and applications stored on media or in Web site servers and proprietary applications and insured developed programs stored on media or in Web site servers.

PROPERTY COVERED

Three broad classes of property are covered unless limited or excluded elsewhere in the coverage form:

1. Hardware

The insurance company covers direct physical loss or damage caused by or resulting from a covered peril to the insured's hardware and similar property of others in its care, custody or control when a limit for hardware is indicated at a location shown on the schedule of coverages.

Example: Charlie's Champion Computers is insured for its building and business personal property, including its stock of computers and related products held for sale, under a Businessowners (BOP) Policy. It insures the computers it uses to run its business under the AAIS Electronic Data Processing Equipment Coverage Part–Scheduled Limits Form, along with a variety of computer equipment belonging to others it has for repairs. Over the weekend, a fire from a short circuit overwhelms the fire suppression system and destroys every bit of personal property inside the building, as well as causing extensive damage to the building itself. The loss is adjusted satisfactorily because the BOP covers the building and the merchandise held for sale and the AAIS Electronic Data Processing Equipment Coverage Part–Scheduled Limits Form covers the insured's own computers and the computer property of others in for repairs.

2. Software

Media, programs and applications and similar property of others is covered against direct physical loss or damage caused by or resulting from a covered peril when a limit for media, programs and applications is indicated at a location shown on the schedule of coverages.

The insurance company covers the cost of research or other expenses necessary to reproduce, replace or restore lost files or codes on lost or damaged data records and proprietary programs and similar property of others caused by or resulting from direct physical loss or damage by a covered peril when a limit for data records and proprietary programs is indicated at a location shown on the schedule of coverages.

3. Web Site Server

The insurance company covers direct physical loss or damage caused by or resulting from a covered peril to an on-site server and the software housed on it but only when a limit for on-site server and Web site software is indicated at a location shown on the schedule of coverages.

Coverage applies for an on-site server as part of 1. Hardware, and for Web site software housed on an on-site server as part of 2. Software but only when an entry indicating that coverage applies is made on the schedule of coverages. The limits that apply to Hardware and Software are not increased when this property is included under their respective sections.

The insurance company covers direct physical loss or damage caused by or resulting from a covered peril to an off-site server that the insured owns or leases and is required to insure. Coverage also applies to the Web site software housed on the off-site server. Coverage applies only when a limit for off-site server and Web site software is indicated on the schedule of coverages.

Web site software is covered only if a duplicate or back-up copy is stored in a building at least 100 feet away from the on-site or off-site server is hosted.

PROPERTY NOT COVERED

Seven types of property are specifically listed as not covered:

1. Accounts, Bills Or Documents are excluded. Evidence of debt, records, abstracts, deeds, manuscripts, program documentation and other documents are also excluded except for such documents stored in software form.

2. Checked Luggage. Coverage does not apply to loss due to theft or disappearance of any type of portable computer while in transit as checked luggage.

3. Contraband is goods prohibited by law or treaty from being imported or exported. It also includes legal property in the course of illegal transportation or trade.

4. Loaned, Leased Or Rented To Others is property the insured loans, leases or rents to others.

5. Money and Securities means a number of different types of property. It includes currency, food stamps, and lottery tickets not held for sale, in addition to money, notes or securities. This property is more correctly insured under commercial crime coverage forms. Please refer to PF&M Section 251.4-2, Commercial Crime Coverage Analysis, for more information and a detailed analysis of commercial crime coverage forms.

6. Stock In Trade is goods available for sale at a store or shop, tools and materials used in carrying on a trade or a business and any resources, practices or devices characteristically employed by a given person or group.

7. Loss Of Internet Service Provider Or Web Host. There is no coverage for loss to the insured's Web site server or software caused by or resulting from the bankruptcy, liquidation or other cessation of business activities by the insured's Internet service provider or Web host.

Example: Charlie's Champion Computers is not extremely computer savvy and uses Wally's Website Wonders as its Internet provider. Charlie comes to work on the Tuesday after a long holiday weekend, turns on his computer and gets nothing but a blank screen. After doing all the trouble-shooting he can, he calls Wally but gets no answer. Since Wally's location is only a few miles away, Charlie drives there and discovers the location completely vacant, all equipment removed and Wally apparently long gone. Charlie has to foot the bill to get a new Internet provider and re-establish service.

COVERAGE EXTENSIONS

Provisions That Apply To Coverage Extensions

There are six coverage extensions. The limit for each is either the limit indicated on the schedule of coverages or the default limit included in the coverage form if no limit is entered on the schedule of coverages. These coverages are part of the applicable limit for covered property and not in addition to it, unless otherwise indicated. These limits are not added to or combined with limits for any other coverage extension or supplemental coverage and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Debris Removal

The insurance company pays costs incurred to remove debris caused by the occurrence of a covered peril but the amount is limited to 25% of the amount paid for the actual direct physical loss or damage. The combined value of the direct loss or damage and the debris removal cannot exceed the limit of insurance for the covered property. An additional $10,000 is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property. Debris removal expenses must be reported to the insurance company within 180 days of the loss date in order for this extension to apply.

Note: This coverage extension does not apply to any pollutant cleanup, extraction, removal, restoration or replacement involving either land or water.

2. Electrical And Power Supply Disturbance

Coverage applies to direct physical loss or damage to covered property caused by or resulting from electrical disturbance or power supply disturbance as defined in the coverage form.

3. Emergency Removal

This covers direct physical loss or damage to covered property while being moved or stored elsewhere to avoid loss or damage caused by a covered peril. Coverage applies for up to 365 days after the property is first moved but does not extend past the expiration date.

Example: Charlie's Champion Computers fears that the approaching line of wild fires may damage or destroy his computer business. He very concerned about his owned computer equipment and software so he packs it all up and drives it to a location out of the direct line of the fires. While there a mudslide occurs and destroys the storage building and the computers. Even thought mudslide is excluded under the policy, since the equipment was removed because of a fire, they are covered.

4. Emergency Removal Expenses

If the insured moves covered property to another location to protect it from loss or damage by a covered peril, this coverage extension pays the expenses to do so for up to 365 days after the property is first moved, but not past the expiration date. The most paid for such expenses in any one occurrence is $2,500.

Note: This is a separate limit. It is not part of the limit that applies to coverage described under Property Covered.

5. Fraud And Deceit

The insurance company covers theft of covered property when the insured or its agents, consignees or customers part with it because of the fraudulent actions of persons falsely representing themselves as the proper persons to receive it. This includes accepting fraudulent bills of lading or other shipping receipts. The most paid in any one occurrence is $2,500.

Example: Charlie orders new office computers to replace the ones destroyed in the mudslide. However before he loads on the software, he receives an e-mail message from his supplier informing him that the computers are faulty and that they should be returned immediately. He dutifully sends them to the “Return Center” referred to in the notice and waits for the replacements to arrive. After a two-day wait, he contacts the supplier and discovers that it did not send the notice. By then, the computers are long gone and Charlie sadly realizes that he has been swindled. This coverage provides funds to buy replacements.

6. Mechanical Breakdown Coverage

Coverage applies to loss or damage to covered property caused by mechanical breakdown as defined in the coverage form.

SUPPLEMENTAL COVERAGES

Provisions That Apply To Supplemental Coverages

There are 15 supplemental coverages. The limit for each is either the limit indicated on the schedule of coverages or the default limit included in the coverage form if no limit is entered on the schedule of coverages. If there is no limit for a supplemental coverage, coverage is provided up to the full limit for the applicable covered property unless a different limit is indicated on the schedule of coverages. Limits indicated for any supplemental coverage are separate from and not part of the applicable limit for coverage as indicated for covered property.

The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit indicated for a supplemental coverage and the limit for coverage described under property covered. The limits are not added to or combined with limits for any other supplemental coverage or coverage extension and are not subject to any coinsurance provisions that apply elsewhere in the policy.

1. Acquired Locations

The insurance company covers direct physical loss or damage caused by or resulting from a covered peril to covered property at new locations acquired during the policy period. The most it pays for covered property at such locations is $500,000, unless a different limit is indicated on the schedule of coverages. Coverage applies for up to 60 days after the acquisition date or until the location is reported to the insurance company, whichever occurs first. Coverage does not extend past the expiration date and additional premium for the new acquisition is due from the date it was acquired.

2. Earthquake Coverage

The insurance company covers direct physical loss or damage to covered property caused by earthquake and volcanic eruption but only if the box indicating that coverage applies is checked and a limit is indicated on the schedule of coverages, subject to that limit and any deductible amount indicated.

Note: There is no default limit for this coverage. For this reason, coverage applies only if a limit is entered on the schedule of coverages. Since this could be confusing, if earthquake coverage is not provided, the word "none" should be indicated in the limits space on the schedule of coverages.

3. Flood Coverage

The insurance company covers direct physical loss or damage to covered property caused by flood but only if the box indicating coverage applies is checked and a limit is indicated on the schedule of coverages, subject to that limit and any deductible amount indicated.

Note: There is no default limit for this coverage. For this reason, coverage applies only if a limit is entered on the schedule of coverages. Since this could be confusing, if earthquake coverage is not provided, the word "none" should be indicated in the limits space on the schedule of coverages.

4. Newly Purchased Or Leased Hardware

Coverage applies to direct physical loss or damage caused by or resulting from a covered peril to additional hardware, pre-installed programs and applications purchased or leased during the policy period. The most the insurance company pays in any one loss is the lesser of $500,000, unless a different limit is indicated on the schedule of coverages, or the actual cash value of the covered property. Coverage applies for up to 60 days after the date of purchase or lease and ends at the expiration date, 60 days after the acquisition date or when the acquisition is reported to the insurance company, whichever occurs first. Additional premium for the newly acquired property is due from its acquisition date.

5. Off-Site Computers

The insurance company covers direct physical loss or damage caused by or resulting from a covered peril to covered property in the custody of the insured's officers, partners or employees when temporarily at their residences or other temporary locations, or while in transit between the insured's locations and such other locations. The limit is $5,000 in any one occurrence, unless a different limit is indicated on the schedule of coverages.

6. Pollutant Cleanup And Removal

The insurance company pays the insured's expenses to extract pollutants from land or water if their release or discharge in any manner was caused by a covered peril that occurred during the policy period. The expenses to extract pollutants are paid only if reported to the insurance company within 180 days of the date of loss. Costs related to testing, evaluating, observing or recording pollutants are not covered but the costs of testing necessary to extract pollutants from land or water are covered. The most paid is $10,000 for all such expenses caused by a covered peril that occurs during each separate 12-month policy period, unless a different limit is indicated on the schedule of coverages.

7. Property in Transit

Coverage applies to direct physical loss or damage caused by or resulting from a covered peril to covered property in transit. The most paid in any one occurrence is $10,000, unless a different limit is indicated on the schedule of coverages.

8. Protection and Control Systems

This supplemental coverage pays for direct physical loss or damage caused by or resulting from a covered peril to protection and control systems at locations indicated on the schedule of coverages. The most paid is $10,000, unless a different limit is indicated on the schedule of coverages.

9. Recharge of Fire Extinguishing Equipment

The insurance company pays for expenses incurred to recharge discharged hand-held or automatic fire extinguishing equipment. The discharge must have occurred while fighting a fire, as a result of the occurrence of a covered peril or due to an accidental discharge. Coverage does not apply to recharging because of discharge during testing or installation. The insurance company has the option of replacing discharged equipment if it is less expensive than recharging the equipment. The most paid is $15,000, unless a different limit is indicated on the schedule of coverages.

10. Reproduction Equipment

Damage to reproduction equipment is covered if caused by or resulting from a covered peril at a location listed on the schedule of coverages. The most paid in any one occurrence is $10,000 unless a different limit is show on the schedule of coverages.

Coverage applies to direct physical loss or damage caused by or resulting from a covered peril at locations indicated on the schedule of coverages. The most paid in any one occurrence is $10,000.

11. Rewards

If the insured has a covered arson, theft or vandalism loss, this coverage provides a reward for information leading to the conviction of whoever caused the loss. The payment limit of $1,000 is based on the occurrence, not the number of persons who provide information. The limit can be increased on the schedule of coverages.

Note: Vandalism includes, but is not limited to, computer hacking and computer virus.

12. Sewer Backup And Water Below The Surface

Coverage applies to direct physical loss or damage to covered property caused by water damage from the backup of a sewer or drain or from sub-surface water pressure on or leakage through or into a covered building or structure but only if the box is checked indicating coverage applies and a limit is indicated on the schedule of coverages, subject to that limit and any deductible amount indicated.

Note: There is no default limit for this coverage. For this reason, coverage applies only if a limit is entered on the schedule of coverages. Since this could be confusing, if earthquake coverage is not provided, the word "none" should be indicated in the limits space on the schedule of coverages.

13. Software Storage

The insurance company pays for direct physical loss or damage by a covered peril to duplicate and back-up software stored at a software storage location. The location must be at least 100 feet away from a location listed and described on the schedule of coverages. The most paid in any one occurrence is $50,000 unless a different limit is indicated on the schedule of coverages.

14. Telecommunications Equipment

This supplemental coverage pays for direct physical loss or damage caused by or resulting from a covered peril to telecommunications equipment as defined at locations indicated on the schedule of coverages. The most paid in any one occurrence is $10,000 unless a different limit is indicated on the schedule of coverages.

15. Virus and Hacking Coverage

The insurance company covers direct physical loss or damage to hardware, software and website server and software caused by or resulting from a computer virus or computer hacking. The limit is $25,000 in any one occurrence but not more than $75,000 for all covered losses during each separate 12-month policy period. There are four coverage limitations or exclusions:

PERILS COVERED

Coverage applies to risks of direct physical loss or damage unless the loss is limited or caused by an excluded peril.

PERILS EXCLUDED

1. The first group of exclusions is essentially absolute. Subject to specific exceptions, loss or damage by each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or resulting from any of these events.

a. Civil Authority

There is no coverage for loss resulting from the order of any civil or government authority, including seizure, confiscation, destruction or quarantine of property. Coverage does apply for loss or damage resulting from such acts when done to prevent the spread of fire, as long as the fire resulted from a covered peril.

b. Earth Movement Or Volcanic Eruption

Coverage does not apply to loss or damage caused by earth movement or eruption, explosion or effusion of a volcano. Coverage does apply to direct loss or damage by fire, explosion or volcanic action resulting from any of these events.

Note: Earthquake coverage applies if a limit is indicated on the schedule of coverages for the earthquake supplemental coverage. Coverage also applies for loss or damage caused by sinkhole collapse and to covered property in transit.

c. Flood

The insurance company does not pay for loss or damage caused by flood. It does cover direct loss or damage caused by fire, explosion or sprinkler leakage resulting from a flood occurrence.

Note: Flood coverage applies if a limit is indicated on the schedule of coverages for the flood supplemental coverage. This exclusion does not apply to covered property in transit.

d. Nuclear Hazard

The insurance company does not insure against loss or damage caused by or resulting from any nuclear reaction, radiation or contamination, whether the nuclear incident was controlled or not or was caused by any means. Any loss caused by the nuclear hazard is not treated as a loss caused by fire, explosion or smoke. However, coverage applies to direct loss or damage caused by fire resulting from the nuclear hazard.

e. Sewer Backup And Water Below The Surface

Coverage does not apply to loss or damage caused by water backup from a sewer or drain or from water below the surface of the ground that exerts pressure on covered buildings or structures, except as provided under Supplemental Coverages–Sewer Backup Coverage.

Note: Fire, explosion and sprinkler leakage losses that result from such backup or hydrostatic pressure are covered.

f. War And Military Action

The insurance company does not pay for loss or damage caused by any act of war including undeclared and civil war or warlike action by a military force. It includes actions taken 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, or unlawful seizure of power taken by any government authority to prevent or defend against any of these. If any action within the terms of this exclusion involves nuclear reaction, radiation or contamination, this exclusion applies in place of the nuclear hazard exclusion.

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

a. Computer Virus Or Computer Hacking

There is no coverage for direct or indirect loss or damage or loss of access, use or functionality caused by computer virus or computer hacking, other than as provided under Supplemental Coverages-Virus and Hacking Coverage.

b. Criminal, Fraudulent, Dishonest Or Illegal Acts

Coverage does not apply to loss caused by or resulting from criminal, fraudulent, dishonest or illegal acts, committed alone or in collusion with another, by any of the following:

Note: If the covered property is in the custody of carriers for hire, this exclusion does not apply.

Note: Coverage applies if employees destroy property. It does not apply to acts of theft done by employees.

c. Loss Of Use

There is no coverage for loss caused by or resulting from delay, loss of use or loss of market.

d. Pollutants

There is no coverage for loss or damage caused by or resulting from any release, discharge, seepage, migration, dispersal or escape of pollutants, unless the event is caused by a specified peril. Coverage applies to the resulting loss or damage to covered property caused by a specified peril.

e. Temperature/Humidity

Loss or damage to covered property caused by dryness, dampness, humidity, changes in or extremes of temperature is not covered.

Note: Coverage does apply to direct physical loss or damage to covered property caused by or resulting from a covered peril to the air conditioning system that services covered hardware.

Example: Pet Labs, Inc. has a mainframe computer in a separate, temperature-controlled room with its own circuit breaker and air conditioning system. A disgruntled software engineer tampers with the air conditioning system so that it stops working. The computer overheats and a loss occurs. The loss is covered because the air conditioning system was damaged by a covered peril.

f. Voluntary Parting

Loss or damage caused by or resulting from the insured voluntarily parting with either title to or possession of any covered property because of a fraudulent scheme, trick or false pretense is not covered, except as provided under Coverage Extensions–Fraud Or Deceit.

3. There is no coverage for loss or damage caused by or resulting from one or more of the following exclusions. However, if loss by a covered peril results, the insurance company pays for the resulting loss.

a. Contamination Or Deterioration

Loss or damage caused by contamination or deterioration is excluded. This includes corrosion, decay, fungus, mildew, rot, rust or any quality, fault or weakness in covered property that causes it to damage or destroy itself.

Note: This exclusion does not apply to loss or damage caused by or resulting from mechanical breakdown.

b. Wear And Tear Or Obsolescence

There is no coverage for loss caused by wear or tear, depreciation or obsolescence of covered property.

WHAT MUST BE DONE IN CASE OF LOSS

1. Notice

The insured must give prompt notice of a loss to the insurance company or its agent and include a description of the property lost or damaged. In addition, the appropriate law enforcement agency must be notified if the event causing the loss is a crime.

Note: The insurance company may also require that the notice be in writing.

2. You Must Protect Property

During and after a loss, all reasonable steps must be taken to protect covered property from further loss. The insurance company pays reasonable costs the insured incurs to do so, subject to the insured keeping records of such costs incurred. However, coverage does not apply for any repairs or emergency measures performed on property not already damaged by a covered peril.

3. Proof Of Loss

The insured must send the insurance company its prescribed proof of loss forms within 60 days of its request to do so. The information provided must include the time, place and circumstances surrounding the loss and information on any other insurance coverage that may apply. It must also include the interest of the insured and others with respect to the property involved, including lienholders, loss payees and mortgages. Any changes in title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require to adjust and settle the loss.

4. Examination

Examination under oath may be required in matters relating to the loss as often as reasonably requested by the insurance company. The company has the right to examine each individual and receive statements separately and not in the presence of others, if more than one person is examined.

5. Records

The insured must maintain and produce any records relating to the loss and allow the insurance company to make copies and take extracts of them as often as it reasonably requests. Records include, but are not limited to, tax returns and bank microfilms of all cancelled checks.

6. Damaged Property

Both damaged and undamaged property must be made available for the insurance company's inspection as often as reasonably necessary. It must also be allowed to take samples of the property to the extent necessary to adjust and settle the loss.

7. Volunteer Payments

If the insured voluntarily makes any payments, assumes any obligations, pays or offers rewards or incurs any other expenses without the insurance company's express approval, except to protect covered property from further damage, it does so at its own expense.

8. Abandonment

Abandoning damaged property to the insurance company without its written consent is prohibited.

9. Cooperation

The insured must cooperate with the insurance company in all matters and in performing all acts required.

VALUATION

1. Hardware And Website Servers

The value of these items is based on the cost to replace them with new equipment functionally comparable to the equipment being replaced. If not replaced, the value is the actual cash value on the date of loss. Payment does not exceed the reasonable cost of restoring partially damaged equipment to the condition that existed immediately before the loss or damage occurred.

2. Software

Programs and applications are valued at the cost to reinstall them from the licensed discs originally used to install them. If the original licensed discs are not available, the value is based on the cost of the most current version of the programs or applications.

Proprietary programs are valued at the cost of reproduction from duplicate copies. This includes the cost of labor to copy or transcribe from duplicate copies. If there are no duplicate copies, the value is based on the cost of research or other expenses necessary to reproduce, replace or restore lost proprietary programs.

Data Records are valued at the cost of reproduction from duplicate copies including, but not limited to, the cost of labor to copy or transcribe from duplicate copies. If there are no duplicate copies, the value is based on the cost of research or other expenses necessary to reproduce, replace or restore lost files, documents or records.

Media is valued at the cost to repair or replace it with material of substantially the same kind and quality.

3. Other Equipment

Telecommunication equipment, reproduction equipment and protection and control systems are valued at their replacement cost with no deduction for depreciation. This is limited to the cost to repair or replace them with similar materials on the same site and for approximately the same purpose. Payment does not exceed the amount actually spent to replace the damaged or destroyed property. Replacement cost does not apply until the damaged or destroyed property is actually repaired or replaced. The insured can make a claim for actual cash value before repair or replacement takes place, and can apply for replacement cost later, if it informs the company of its intent to do so within 180 days after the loss.

4. Pair Or Set

The value of a loss that involves damage or loss of one part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. Loss of one part of a pair or set is not considered a total loss.

Note: This provision does not apply to software that comes in sets. If a part of a software set cannot be replaced, the loss is considered a total loss of the set.

5. Loss To Parts

The value of a lost or damaged part of property consisting of several parts is the cost to repair or replace only the lost or damaged part.

HOW MUCH WE PAY

1. Insurable Interest

The insurance company does not pay more than the insured's insurable interest in the covered property at the time of loss.

Note: Insurance is meant to restore a person’s pre-loss financial position, not to improve or enhance it.

2. Earthquake Period

Earthquakes or volcanic eruptions that occur within a 168-consecutive hour period are considered a single loss. This time period is not limited by the policy expiration date.

3. Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount indicated on the schedule of coverages.

4. Loss Settlement Terms

The insurance company pays the lesser of the amount determined under Valuation, the cost to repair, replace or rebuild the property with material of similar kind and quality to the extent possible, or the limit of insurance that applies to the covered property. If the schedule of coverages indicates a catastrophe limit, and a covered peril causes loss at more than one premises listed on the schedule, the most the insurance company pays in any one occurrence is either the sum of the limits for covered property at all locations where the loss occurred or the catastrophe limit, whichever is less.

5. Coinsurance

When coinsurance applies to a coverage provided, the insurance company pays only part of the loss if the limit is less than the percentage of the value of covered property indicated on the schedule of coverages. The three steps in determining the amount of the loss to be paid are:

a. Multiply the value of the damaged property by the percentage indicated on the schedule of coverages.

b. Divide the limit for the damaged property by the result in step a.

c. If step b is less than 1.00, multiply the amount of loss after application of any deductible by the percentage determined in step b.

The insurance company pays no more than the amount determined in step c or the policy limit, whichever is less. If more than one limit is indicated on the schedule of coverages, this procedure applies separately to each limit. If only one limit is indicated on the schedule of coverages, this procedure applies to the total of all covered property to which that limit applies.

Note: These conditions and procedures apply only if a coinsurance percentage is shown on the schedule of coverages.

6. Insurance Under More Than One Coverage

If two or more coverages in the coverage form apply to the same loss, the insurance company pays no more than the value of the actual claim, loss or damage sustained.

7. Insurance Under More Than One Policy

a. Proportional Share

If the insured has another policy subject to the same terms as this coverage, it pays only its share of the covered loss. That share is the proportion that its limit of insurance bears to the limits of insurance on all policies that cover on the same basis.

b. Excess Amount

If the insured has another policy covering the loss other than as described above, this coverage form pays only the amount of covered loss that exceeds the amount due from that other policy, whether collectible or not, subject to the applicable limit of insurance.

LOSS PAYMENT

1. Loss Payment Options

a. Our Options

The insurance company has four loss payment options if a covered loss occurs. It can pay the value of the lost or damaged property, pay the cost of repairing or replacing the lost or damaged property, rebuild, repair or replace the property with similar property, to the extent possible and within a reasonable period of time, or take any part or all of the property at the agreed on or appraised amount.

b. Notice Of Our Intent To Rebuild, Repair Or Replace

The insurer must notify the insured of its intent to rebuild, repair or replace within 30 days after receiving a properly completed proof of loss.

2. Your Losses

a. Adjustment And Payment Of Loss

The insurance company adjusts all losses with the insured and pays the insured, unless another loss payee named in the policy is involved.

b. Conditions For Payment Of Loss

The insurance company pays a covered loss within 30 days after it receives a properly prepared proof of loss and the amount of loss is established. This is done through either a written agreement between the insurer and the insured or after an appraisal award is filed with the insurer.

3. Property Of Others

a. Adjustment And Payment Of Loss To Property Of Others

The insurance company can adjust and pay losses involving property of others with either the insured acting on behalf of the property owner or with the property owner, at its discretion.

b. We Do Not Have To Pay You If We Pay The Owner

When the insurer pays the property owner, it is not obligated to pay the insured. In addition, if the property owner sues the insured, the company has the option of defending the insured in that suit.

OTHER CONDITIONS

1. Appraisal

The insurance company and the insured may not always agree on the value of a covered claim. This condition provides one method to solve disputed claims.

Either party can request an appraisal to determine the value of a disputed claim. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and supply the appraiser's name to the other party. The two appraisers then have 15 days to select a competent impartial umpire. If they cannot agree on an umpire within 15 days, either can request that a judge in the court of record in the state where the property is located appoint one.

The appraisers then determine the value of the claim. Any differences are submitted to the umpire. Once any two of the three parties agree, the amount of loss is set.

Each party pays its own appraiser. Both parties share the cost of the umpire and other expenses.

2. Benefit To Others

The insurance provided does not directly or indirectly benefit any other party having custody of the insured's property.

3. Conformity With Statute

Any condition in this coverage form that conflicts with any applicable law is amended to conform to that law.

4. Estates

Note: This condition applies only if the insured is an individual.

a. Your Death

If the insured dies, the person having custody of the insured's property is an insured until a qualified legal representative is appointed. At that point, the insured’s legal representative becomes an insured. Both are insureds but only with respect to the property insured under this coverage form.

b. Policy Period Is Not Extended

This coverage does not extend past the coverage expiration date.

5. Misrepresentation, Concealment Or Fraud

This coverage is void if any insured at any time willfully concealed or misrepresented a material fact relating to the insurance provided, the property covered or its interest in the property, or if fraud or false swearing by any insured took place concerning the insurance provided or the property covered.

Note: The insured must deal with the insurance company honestly. If the insured intentionally misrepresents or conceals a material fact or information, its rights of recovery may be voided. This means that the insurance contract is treated as simply having never existed versus a particular claim being denied.

6. Policy Period

Only covered losses that occur during the policy period are paid.

7. Recoveries

Payment of the loss does not end the obligations of the insured and the insurance company toward one another. If the insurance company pays a loss and the lost or damaged property is subsequently recovered or the parties responsible for the loss pay for it, additional provisions apply.

Either party recovering property or payment must inform the other. Recovery expenses incurred by either party are reimbursed first. If the insured keeps the recovered property, it must refund the amount of the claim the insurance company paid, unless a different amount is agreed to. If the claim paid is less than the agreed loss due to application of a deductible or other limitations, any recovery is prorated between the insured and the insurer based on the insurer's respective interest in the loss.

8. Restoration Of Limits

Payment of a claim does not reduce the policy limit available for future claims except as indicated under Virus And Hacking Coverage.

9. Subrogation

The insurance company acquires the insured's rights of recovery from third parties after it pays a loss. The insured must assist the insurance company in securing those rights. If it hinders or impairs those rights, the insurer is not obligated to pay the loss.

Note: The insured can agree in writing to waive recovery rights from others before a loss occurs.

10. Suit Against Us

The insurance company cannot be sued by anyone for any coverage until all the terms of the coverage form have been met. Suits must be brought within two years after the insured first had knowledge of a loss. If a state law invalidates this condition, any suit brought must comply with the provisions of that law and begin within the shortest period of time allowed by law.

Note: It is normal for a basic coverage form to be modified by mandatory state-specific endorsements addressing issues that relate to that specific state.

11. Territorial Limits

Covered property must be located in the United States, its territories and possessions, Canada or Puerto Rico in order for coverage to apply.

IM 7206–SCHEDULE OF COVERAGES–ELECTRONIC DATA PROCESSING–SCHEDULED LIMITS

This Schedule Of Coverages is used with IM 7201–Computer Coverage.

Note: IM 7206–Schedule Of Coverages–Computer Equipment does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7206 contains the following information:

Described Premises

The location number and address of each covered location must be indicated in the spaces provided. Use
IM 7208–Electronic Data Processing–Additional Locations Schedule to schedule additional locations.

Location Limits

The following information must be indicated for each covered location:

Income Coverage Options

One of the following income coverage options must be indicated:

Coverage Extensions

The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:

Indicate if the 500 Feet Limitation is waived or not waived.

Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Note: It must be noted that Earthquake, Flood and Sewer Backup Coverages have no default coverage. Coverage applies only when the appropriate box is checked and a limit indicated.

Income Coverage Extensions

Supplemental Income Coverages

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Indicate the limit, the waiting period (hours) and whether Overhead Transmission Lines are excluded.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Indicate the limits in any one occurrence and during any one 12-month period and the waiting period (hours).

Deductible

Deductible amounts must be entered for:

Note: The deductible entered applies to all covered locations.

Note: Under Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage boxes are checked, a deductible that applies specifically to that selected coverage must be entered. That deductible applies instead of the deductible that applies to all covered locations.

Coinsurance

One of the following coinsurance options must be selected with respect to Hardware, Media, Programs And Applications and Income Coverage:

Coverage Option

One of two valuations must be selected:

Income Coverage Waiting Period

One of two waiting period options must be selected:

Optional Coverages And Endorsements

This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.

FORM ANALYSIS–IM 7201–COMPUTER COVERAGE

This coverage form is similar to IM 7200–Electronic Data Processing Equipment Coverage Part–Scheduled Limits analyzed above except for changes in fourteen sections. This analysis addresses only the differences in the fourteen sections.

AGREEMENT

The term Computer Coverage in IM 7201 replaces the term Electronic Data Processing–Equipment Coverage Part in IM 7200.

DEFINITIONS

Two definitions are added and three are eliminated. The new definitions are:

The definitions eliminated are:

PROPERTY COVERED

One item is changed and one item is eliminated.

INCOME COVERAGE

This is a coverage option provided by IM 7201 not provided by IM 7200. The coverages available apply during the restoration period when the business is partially or completely interrupted because of the occurrence of a covered peril to covered property at locations indicated on the schedule of coverages. A limit for the coverage must be indicated for the location on the schedule of coverages. A box must be also checked indicating not more than one of the following:

To avoid confusion, the word "none" should be entered in the income coverage limits space when the income coverage not provided box is checked.

PROPERTY NOT COVERED

The new item not covered is Web Site Servers

The item eliminated is Loss of Internet Service Provider Or Web Host. This was eliminated because web site servers are not covered property.

COVERAGE EXTENSIONS

There are four changes to coverage extensions.

SUPPLEMENTAL COVERAGES

One supplemental coverage is added, seven are changed and four are eliminated.

The coverage added is Proprietary Programs And Data Records. It covers the cost of research necessary to reproduce or restore lost files or codes on lost or damaged data records and proprietary programs of the insured and of others in the insured's care, custody or control. Coverage applies only when loss or damage is caused by a covered peril and occurs at locations indicated on the schedule of coverages. The limit is $5,000 in any one occurrence.

Note: This supplemental coverage is not provided in IM 7200 because Data Records And Proprietary Programs are included as covered property in that coverage form.

The coverages changed are:

The coverages eliminated are:

INCOME COVERAGE EXTENSIONS

The section is new because IM 7200 does not offer business income coverage. These coverage extensions apply only if the Income Option is selected on the schedule of coverages. The Coverage Extensions in this section are:

SUPPLEMENTAL INCOME COVERAGES

The section is new because IM 7200 does not offer business income coverage. These coverage extensions apply only if the Income Option is selected on the schedule of coverages. The supplemental income coverages in this section are:

PERILS EXCLUDED

Exclusion 2. is changed and exclusion 4. is added. The changes to Exclusion 2 are:

The new exclusion applies to loss of earnings or extra expense only and only applies if Income Coverage is selected.

4. There is no coverage for loss or earnings or extra expense due to any of the following:

WHAT MUST BE DONE IN CASE OF LOSS

When Business Income coverage is provided, the new Intent To Continue Business–Income Coverage condition applies. It requires the insured to resume as much of its operations as possible as soon as possible if it intends to continue in business.

VALUATION

One item is replaced, two items are added and one item is eliminated.

Hardware And Web Site Servers is replaced with Hardware. It reflects a more traditional replacement valuation and no longer mentions web site servers. Hardware must be repaired or replaced before payment is made and the replacement must be with similar material used for the same purpose. The insured can request actual cash value initially and then request replacement cost valuation as long as the company is notified of the change within 180 days of the date of loss. In addition, actual cash value applies if indicated on the schedule of coverages.

The two items added are:

Other Equipment valuation is eliminated.

HOW MUCH WE PAY

One item is changed and three items are added. The item changed is Coinsurance. It becomes Coinsurance, Hardware and Software. The name is changed by the condition but is very similar.

The following three items added apply only if the Income coverage Part option is selected on the schedule of coverages:

OTHER CONDITIONS

The Income Coverage Appraisal condition is added but it only applies if Income Coverage is selected on the schedule of coverages.

IM 7207–SCHEDULE OF COVERAGES–ELECTRONIC DATA PROCESSING–BLANKET LIMITS

This Schedule Of Coverages is used with IM 7202–Electronic Data Processing Equipment Coverage Part–Blanket Limits.

Note: IM 7207–Schedule Of Coverages–Electronic Data Processing Equipment Coverage Part–Blanket Limits does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7207 contains the following information:

Described Premises

The location number and address of each covered location must be indicated in the spaces provided. Use
IM 7208–Electronic Data Processing–Additional Locations Schedule to schedule additional locations.

Limits

Catastrophe Limit: (The Most Paid For Any Combination Of Or Total Losses In Any One Occurrence).

Equipment Limits:

Software Limits:

Income Coverage Limit: (The Most Paid For Loss At Any One Location)

Web Site Server Limits: (if applicable)

Limits must be indicated as follows:

On-Site Server

On-Site Server Coverage Under Hardware And Software

Off-Site Server

Coverage Extensions

The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:

Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Deductible

Deductible amounts must be entered for:

Note: The deductible entered applies to all covered locations.

Note: Under Supplemental Coverages, if earthquake, flood, and/or sewer backup coverage boxes are checked, a deductible that applies specifically to that selected coverage must be entered. That deductible applies instead of the deductible that applies to all covered locations.

Coinsurance

One of the following coinsurance options must be selected with respect to Hardware, Media, Programs And Applications, Data Records and Proprietary Programs:

Income Coverage Part

Coverage Options

One of the following income coverage options must be indicated:

Income Coverage Extensions

Supplemental Income Coverages

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Check the appropriate box to indicate Coverage Provided, Coverage Not Provided or Refer To Earthquake, Flood And Sewer Backup Endorsement.

Indicate the limit, the waiting period (hours) and whether Overhead Transmission Lines are excluded.

Indicate the limits in any one occurrence and during any one 12-month period and the waiting period (hours).

Income Coverage Options

Income Coverage Waiting Period

Coinsurance

Optional Coverages And Endorsements

This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.

FORM ANALYSIS–IM 7202–ELECTRONIC DATA PROCESSING EQUIPMENT COVERAGE PART–BLANKET LIMITS

This coverage form is identical to IM 7200–Electronic Data Processing Equipment Coverage Part–Scheduled Limits analyzed above except for six sections. This analysis addresses only the six sections that are different.

DEFINITIONS

The definition for Computer Hacking is more restrictive since it does not include intrusion into a web site.

PROPERTY COVERED

Item 1.is changed from Hardware to Equipment and is broadened to include protection and control systems, telecommunications equipment and reproduction equipment and similar property of others in the insured's care, custody or control in addition to hardware.

COVERAGE EXTENSIONS

Three coverage extensions are changed.

SUPPLEMENTAL COVERAGES

Five supplemental coverages are added and five are changed. The coverages added are:

Example: Charlie has a personal computer with a Windows 95 operating system. All his hardware and programs work fine. His PC is damaged by a covered peril and it is replaced with a new PC with a Vista operating system. Charlie attempts to work with all his peripherals and, while undamaged, they are not compatible with the new PC. As a result, Charlie purchases new equipment to work with the new PC since doing so is less expensive than attempting a conversion. This supplemental coverage pays for the new equipment needed to resolve this incompatibility problem.

The coverages changed are:

PERILS EXCLUDED

The Sewer Backup And Water Below The Surface exclusion is restricted to apply to sidewalks, driveways, foundations, swimming pools or other structures in addition to covered buildings or structures.

HOW MUCH WE PAY

The coinsurance condition is eliminated.

IM 7220–SCHEDULE OF COVERAGES–BUSINESS COMPUTER

This Schedule Of Coverages is used with IM 7203–Business Computer Coverage.

Note: IM 7220–Schedule Of Coverages–Business Computer does not have spaces in which to enter the name, mailing address or other named insured information. That and other information appear on IM 7900–Inland Marine Declarations. IM 7220 contains the following information:

Described Premises

The location number and address of each covered location must be indicated in the spaces provided. Use IM 7208–Electronic Data Processing–Additional Locations Schedule to schedule additional locations.

Hardware And Software Limits

The following information must be indicated for each covered location:

Extra Expense Limits

Extra Expense Coverage

The following information must be indicated for each covered location:

Extra Expense And Income Coverage

The limit for extra expense is included in the income coverage limit. Refer to the Income Coverage Schedule for the Extra Expense Coverage And Income Coverage Limit.

Catastrophe Limit

Catastrophe Limit: (For Hardware, Software, Extra Expense and Income Coverage, if applicable)

Coverage Extensions

The limits on the Schedule Of Coverages for the following coverages apply to all covered locations:

Indicate if the 500 Feet Limitation is waived or not waived.

Note: Each of these extensions applies. If a limit is not entered, the full policy limit applies, subject to any limitations in the coverage extension. Any entry under Additional Debris Removal Expenses reduces coverage. Emergency Removal coverage is limited to 10 days but the number of days can be increased.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

Coinsurance

Hardware

Software

Hardware Valuation

Optional Coverages And Endorsements

This section of the schedule of coverages indicates coverage endorsements and forms included at the time of policy issuance.

FORM ANALYSIS–IM 7203–BUSINESS COMPUTER COVERAGE

This coverage form is identical to IM 7200–Electronic Data Processing Equipment Coverage Part–Scheduled Limits analyzed above except for eleven sections. This analysis addresses only the eleven sections that are different.

AGREEMENT

The term Business Computer Coverage in IM 7203 replaces the term Electronic Data Processing–Equipment Coverage Part in IM 7200.

DEFINITIONS

Three definitions are added, six are changed and three are eliminated. The following definitions are added.

Note: The restoration period is not limited by the policy expiration date.

The following definitions are changed.

The following definitions are eliminated.

PROPERTY COVERED

Software is similar but more narrowly defined, limited and condensed.

EXTRA EXPENSE COVERAGE

This is a new optional coverage and is effective only if selected on the schedule of coverage. It applies during the restoration period when the business is partially or completely interrupted because of the occurrence of a covered peril to covered property at premises listed on the schedule of coverages.

PROPERTY NOT COVERED

One item is added and one is eliminated.

COVERAGE EXTENSIONS

Two items are changed and two are eliminated. The two items changed are:

The two items eliminated are:

SUPPLEMENTAL COVERAGES

Three items are changed and 12 items are eliminated. The three items changed are:

The 12 items eliminated are:

PERILS EXCLUDED

Five exclusions are added and eight are changed. The five exclusions added are:

The eight exclusions changed are:

VALUATION

Two items are added, three are changed and two are eliminated. The two items added are:

The three items changed are:

The two items eliminated are:

HOW MUCH WE PAY

The following two items are eliminated:

OTHER CONDITIONS

The reference to Virus And Hacking Coverage in restoration of limits is eliminated.

ENDORSEMENTS AND SCHEDULES

AAIS has developed the following endorsements and schedule forms for use with the various coverage forms:

IM 7208–Electronic Data Processing–Additional Locations Schedule

This schedule is used with only IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits and IM 7200–Electronic Data Processing–Equipment Coverage Part–Scheduled Limits to schedule additional locations and the limits that apply to each additional location for the coverages selected.

IM 7209–Computer Coverage–Additional Locations Schedule

This schedule is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage to schedule additional locations and the limits that apply to each additional location for the coverages selected.

IM 7210–Electronic Data Processing–Additional Premises Schedule

This schedule is used with only IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits to schedule additional locations. This schedule has no spaces for limits for these locations because the limits are indicated on a blanket basis on IM 7207.

IM 7213–Upgrade Value Endorsement

This endorsement is used with all coverage forms. It provides the option of replacing damaged or destroyed hardware with equipment of greater processing ability and greater cost after a total loss to covered property by a covered peril. Replacement hardware and the hardware being replaced must be described on IM 7214–Upgrade Value Schedule.

IM 7214–Upgrade Value Schedule

This schedule is used with all coverage forms. It provides a description and limit for current hardware and a description and limit for upgraded hardware. It is used with IM 7213–Upgrade Value Endorsement.

IM 7215–Electronic Data Processing–Income Coverage Part

This income coverage part is used with IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits and IM 7200–Electronic Data Processing–Equipment Coverage Part or IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits. It provides income coverage, consisting of earnings and extra expense, and is designed for use with these coverage forms. Additional built-in coverages include a number of Income Coverage Extensions and Supplemental Income Coverages.

IM 7222–Web Site Coverage–Extension Endorsement

This endorsement is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage to extend coverage under Hardware and Software described under Covered Property to an on-site server. It also adds income coverage to include loss of earnings because of an interruption of the insured's web site and Supplemental Coverage for Virus And Hacking to Computer Coverage and Income Coverage.

IM 7223–Electrical And Power Supply Disturbance Limitation

This endorsement is used with IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits–and IM 7200–Electronic Data Processing–Equipment Coverage Part–Scheduled Limits or IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits. It adds a 500 foot limitation for electrical disturbance and power supply disturbance and excludes losses caused by these disturbances that occur over 500 feet away from the premises where the loss occurred.

IM 7224–Incompatible Hardware And Media

This endorsement is used with all coverage forms. It adds coverage for the cost to modify or replace undamaged hardware or media that is no longer compatible with hardware or software, such as programs, applications and records, that were damaged or destroyed by the occurrence of a covered peril.

IM 7226–Foreign Transit And Location Coverage

This endorsement is used with all coverage forms. It extends coverage to include personal computing devices that the insured or its employees take with them during business travel to foreign countries. Coverage applies in transit to and from the foreign country, as well as for the period of time spent in the country.

IM 7227–Reproduction Equipment

This endorsement is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage. It extends coverage to apply to reproduction equipment, such as scanners and photocopying machines, at scheduled locations.

IM 7228–Telecommunications Equipment

This endorsement is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage. It extends coverage to include defined telephone equipment, such as switchgear, PBX systems, facsimile machines and video conferencing equipment, at scheduled locations.

IM 7229–Interruption Of Web Site–Income Coverage

This endorsement is used with IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits and IM 7200–Electronic Data Processing–Equipment Coverage Part–Scheduled Limits or IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits. It extends the coverage provided under IM 7215–Electronic Data Processing–Income Coverage Part to include loss of earnings resulting from interruption of the insured's Web site, if the interruption is due to direct physical loss or damage to the insured's off-site server. The endorsement includes a 12-hour waiting period and coverage is limited to 14 days after the end of the waiting period, unless endorsed to reflect different terms.

IM 7230–Functionally Comparable Hardware–Valuation

This endorsement is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage. It amends coverage so that the valuation of hardware becomes replacement cost for new, functionally comparable equipment.

IM 7231–Coinsurance Provisions

This endorsement is used with only IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits. It amends the coverage by adding coinsurance provisions that apply to hardware and software by entering the coinsurance percentage that applies on the schedule of coverages.

IM 7232–Power Protection Equipment

This endorsement is used with only IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage. It extends coverage to apply to power protection equipment, such as surge protectors, at scheduled locations.

IM 7233–Production Equipment Exclusion

This endorsement is used with all coverage forms. It adds another exclusion to Property Not Covered for computerized production equipment used in manufacturing operations.

IM 7234–Calendar Date Or Time Failure Exclusion

This endorsement is used with all coverage forms. It excludes any loss resulting from two-digit coding of four-digit calendar year dates. If loss or damage caused by or resulting from a covered peril occurs, the resulting loss or damage is covered.

IM 7235–Web Site Server Coverage And Interruption of Web Site

This endorsement is used with IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage or IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It provides coverage for a web site server, whether on-site or off-site, and for loss of earnings due to interruption of the insured's web site.

IM 7236–Web Site Server Schedule

This schedule is used with IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage or IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used with IM 7235–Web Site Server Coverage And Interruption Of Web Site to indicate the coverages, limits and deductible amount that applies.

IM 7237–Interruption Of Web Site Schedule

This schedule is used with IM 7205–Schedule Of Coverages–Electronic Data Processing–Scheduled Limits and IM 7200–Electronic Data Processing–Equipment Coverage Part–Scheduled Limits or IM 7207–Schedule Of Coverages–Electronic Data Processing–Blanket Limits and IM 7202–Electronic Data Processing–Equipment Coverage Part–Blanket Limits. It is used with IM 7229–Interruption Of Web Site–Income Coverage to indicate coverages, limits and the waiting period that applies.

IM 7238–Earthquake, Flood And Sewer Backup Endorsement

This endorsement is used with all coverage forms except IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It provides coverage for earthquake, flood and/or sewer backup on a sub-limits basis.

IM 7239–Earthquake, Flood And Sewer Backup Schedule

This endorsement is for use with all coverage forms except IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used with IM 7238–Earthquake, Flood And Sewer Backup Endorsement to indicate the coverages that apply, whether coverage applies to income coverage or not, the occurrence, catastrophe and aggregate limits and the locations to which coverage applies.

IM 7240–Business Computer–Income Coverage Part

This coverage part is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It provides income (earnings) coverage at designated locations on a scheduled or blanket basis and also adds Income Coverage Extensions and Income Supplemental Coverages.

IM 7241–Business Computer–Income Coverage Schedule–Scheduled Location Coverage

This schedule is used with IM 7240–Business Computer–Income Coverage Part to indicate the locations where coverage applies and limits, with the option to include extra expense. It also lists the additional Income Coverage Extensions, Income Supplemental Coverages and Income Coverage Options.

IM 7242–Business Computer–Income Coverage Schedule–Blanket Coverage

This schedule is used with IM 7240–Business Computer–Income Coverage Part to indicate that blanket coverage and a single limit, with the option to include extra expense, for all locations applies. It also lists the additional Income Coverage Extensions, Income Supplemental Coverages and Income Coverage Options.

IM 7243–Additional Coverages Schedule

This schedule is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used with IM 7244–Additional Coverages Endorsement to indicate the additional coverages that apply and the corresponding limit for each.

IM 7244–Additional Coverages Endorsement

This endorsement is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It broadens coverage to include loss to covered property as a result of fraud and deceit or virus and hacking. It also includes coverage for expenses for emergency removal and recharge of fire extinguishing equipment. It adds coverage for reward for recovery of stolen equipment and for software storage. Earnings and/or extra expense coverage is extended to include loss to covered property because of utility service interruption that occurs off premises and by virus and hacking.

IM 7245–Additional Property Schedule

This schedule is used with IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage or IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used with IM 7246–Additional Property Endorsement to indicate the additional coverages that apply and the corresponding limit for each.

IM 7246–Additional Property Endorsement

This endorsement is used with IM 7206–Schedule Of Coverages–Computer Coverage and IM 7201–Computer Coverage or IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It extends coverage to include accounts receivable, power protection equipment, reproduction equipment, telecommunications equipment and valuable papers.

IM 7247–Additional Locations Schedule–Business Computer

This schedule is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used to schedule additional locations and to indicate the coverages and limits that apply. It also includes an option to include extra expense coverage in the income coverage limit.

IM 7248–Earthquake, Flood And Sewer Backup Endorsement–Business Computer

This endorsement is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage to provide coverage for the perils of earthquake, flood and/or sewer backup.

IM 7249–Earthquake, Flood And Sewer Backup Schedule–Business Computer

This schedule is used with only IM 7220–Schedule Of Coverages–Business Computer and IM 7203–Business Computer Coverage. It is used with IM 7248–Earthquake, Flood And Sewer Backup Endorsement–Business Computer to indicate coverages that apply, whether or not coverage applies to income coverage, the occurrence, catastrophe and aggregate limits and the locations to which coverage applies.

UNDERWRITING CONSIDERATIONS

Since most property covered by electronic data processing and computer coverage forms and policies is situated at fixed locations, underwriting the coverages provided involves evaluating the nature of the physical characteristics at the risk location in addition to determining the extent of management involvement to properly maintain and protect the property. Computer equipment is extremely sensitive and highly susceptible to loss or damage caused by fire, smoke, temperature change and water. Since some computer property is mobile in nature, transit and unnamed locations exposures must also be considered. In addition to the evaluation of location and transit exposures, the protective devices and services used to protect computer systems from loss or damage must also be evaluated.

Underwriting the electronic data processing needs of a given insured begins with obtaining a complete inventory of all equipment. This is more involved than merely checking out various office machinery and equipment since the property could be used in any or all of an insured's operations.

The limits selected for protecting the equipment must be realistic and reflect current market conditions. Equipment more than five years old may have little or no residual value. Property lost or damaged is usually handled on a replacement cost basis with equipment of like kind and quality. A computer purchased five years ago for $10,000 may now be worth less than $1,000.

Once the equipment inventory is complete, the insured must decide how to insure it. Options include doing so as business personal property under a standard property policy. It could also be covered as electronic data processing equipment or business computers under an inland marine coverage form. Both options cover hardware and equipment but an inland marine coverage form is usually broader as well as more expensive.

Arrangements relating to covering software must be handled carefully. With older computer systems, it is more likely that the software has been customized and altered internally. The result is that the documentation to assist in reproducing it after a loss occurs may be inadequate. Backup copies of any altered or customized software should be made in addition to the original software. All software should be backed up and duplicated regularly. The duplicates must be stored at a different location so that both are not involved in the same loss.

Virus and hacking coverage requires protective measures such as firewalls and other security features so that the insured's operations are not interrupted by either of these activities. All equipment should have current virus protection software that is updated regularly or replaced as needed.

Surge protection and similar, related devices must be effective. It does no good to plug a grounded protective device into an unprotected outlet. Telephone equipment and connections also need to have similar surge protection to reduce or eliminate the chance of the modem being destroyed.

Business assets exposed at off-site locations and property in various forms of transportation between premises is commonplace. Employees are frequently supplied with computers in order to work from home or during travel. The simple question of where the computers are located can lead in a number of different directions and present perplexing coverage dilemmas to resolve. However, this portion of an operation's exposures deserves as much care in underwriting as its fixed location considerations.