(October 2008)
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.
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.
AAIS Electronic Data Processing
Equipment or Business Computer coverage requires at least these four forms:
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.
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.
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.
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.
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.
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.
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.
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:
Coverage
applies to risks of direct physical loss or damage unless the loss is limited
or caused by an excluded peril.
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.
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.
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.
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.
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.
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.
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.
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.
The
term Computer Coverage in IM 7201 replaces the term Electronic Data
Processing–Equipment Coverage Part in IM 7200.
Two
definitions are added and three are eliminated. The new definitions are:
The definitions eliminated are:
One
item is changed and one item is eliminated.
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.
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.
There
are four changes to coverage extensions.
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:
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:
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:
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:
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.
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.
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:
The
Income Coverage Appraisal condition is added but it only applies if Income
Coverage is selected on the schedule of coverages.
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.
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.
The
definition for Computer Hacking is more restrictive since it does not
include intrusion into a web site.
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.
Three
coverage extensions are changed.
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:
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.
The
coinsurance condition is eliminated.
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.
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.
The
term Business Computer Coverage in IM 7203 replaces the term Electronic Data
Processing–Equipment Coverage Part in IM 7200.
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.
Software
is similar but more narrowly defined, limited and condensed.
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.
One
item is added and one is eliminated.
Two
items are changed and two are eliminated. The two items changed are:
The
two items eliminated are:
Three
items are changed and 12 items are eliminated. The three items changed are:
The
12 items eliminated are:
Five
exclusions are added and eight are changed. The five exclusions added are:
The
eight exclusions changed are:
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:
The following two items are
eliminated:
The reference to Virus And
Hacking Coverage in restoration of limits is eliminated.
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.
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.