(June 2006)
The ISO Valuable Papers and Records Coverage Form covers direct physical loss or damage unless the loss or the property is excluded or limited. It provides insurance protection for the business papers of a commercial enterprise. The types of papers covered range from the deed to the property to the original copyright and/or patent rights to key products and many similar or related papers in-between. Few businesses can operate without acquiring a number of valuable papers and, if those papers are lost or damaged, the operation of the business could be seriously affected.
This form is being used less and less. This is because the coverage it provides is being included to an increasing degree as a regular additional coverage or coverage extension in many package policies, including the ISO Businessowners and Capital Assets Policies, as well as in a number of independently filed package policies.
Before discarding this coverage form and treating it as unnecessary, the covered causes of loss and other coverage features should be reviewed carefully. The coverage provided in the inland marine version of this form is usually broader than that available in most other property-coverage forms.
The following forms are mandatory for the valuable papers and records policy:
· Commercial Inland Marine Declarations Form CM DS 02
· Common Policy Conditions IL 00 17
· Commercial Inland Marine Conditions CM 00 01
· Advisory Valuable Papers and Records Declarations Form CM DS 17
· Valuable Papers Coverage Form CM 00 67
Valuable Papers and Records Coverage may be issued as a stand-alone, mono-line inland marine policy or as part of a commercial package policy.
Any commercial account that owns valuable papers or keeps valuable papers for others is eligible for this coverage.
The Advisory Valuable Papers and Records Declarations does not have a place for name, mailing address and other named insured identification information since it is part of and attached to a broader inland marine policy declarations. It does contain spaces for entry of the policy number, the coverage effective date or the effective date of an endorsement or coverage change, the rate and the premium charge for this coverage form.
This part of the declarations consists of two separate sections.
Section A., property at the insured's premises, has spaces for the insured to list up to two location addresses. Spaces are provided to list and describe specific types of valuable papers or records and to show a limit of insurance that applies specifically to them. Spaces are also provided for the insured to show an aggregate limit that applies to all other property at the location not specifically listed and described.
Section B. property away from the insured's premises, does not have the separate listings found in Section A. This section allows the insured to select a limit of insurance to apply to all valuable papers and records when they are removed and away from the insured's regular premises.
The standard deductible is $500 but different deductibles are available and, if selected, that deductible is shown in the space provided.
The insured is eligible for, and receives a significant rate or premium credit, if the valuable papers and records are kept in a rated receptacle, such as a safe or a vault. This section of the declarations requires the insured to provide the address of the premises containing the receptacle or receptacles. Other information that must be shown is the name of the manufacturer, the class, label and name of the entity issuing the rating for each receptacle.
If the policy is subject to any additional endorsements, coverages, conditions or other provisions, the details of them, if any, are shown in this area.
A. Coverage. The
insurance company pays for direct physical loss or damage to covered property
by a covered cause of loss.
1. Covered property means the insured's valuable papers and records, as defined in the form, or similar property of others in the insured's care, custody or control.
Note: This includes any documents inscribed, printed or written. It also includes manuscripts or records consisting of abstracts, deeds, drawings, films, maps, mortgages or maps.
2.
Property not covered includes four types or classes of property:
a. Property not described or declared if it cannot be replaced with related property of similar kind or quality;
b. Property held by the insured as samples or for delivery after it has been sold;
c. Property kept in storage at other locations away from the insured's premises; and
d. Illegal property, contraband or other property transported or traded illegally.
Note: The definition of valuable papers does not include money and securities or any data, programs and instructions used for electronic data processing operations. This includes the materials on which the data is stored. Other coverage forms are available that specifically cover these types of property.
3. Covered causes of loss are all risks of direct physical loss or damage except for events or causes of loss listed in the exclusions.
4. Additional coverage–collapse applies to covered property for direct physical loss or damage caused by collapse of a building or a part of a building where the property is located and that is insured under this coverage form. Coverage is limited to collapse caused by one or more of the following:
a. To the extent they are insured under this coverage form, fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, building glass breakage, falling objects, weight of ice, sleet or snow, water damage and earthquake.
b. Hidden decay that cannot be observed visually, unless the insured knows about the presence of the decay before the collapse occurs.
c. Insect or vermin damage that cannot be observed visually, unless the insured knows about the presence of such damage before the collapse occurs.
d. Excessive weight of property or persons.
e. Excessive weight of water that accumulates on a roof.
f. Defective materials or methods used in construction, remodeling or renovation if the collapse actually occurs during construction, remodeling, or renovation activities. However, if collapse occurs after the project is completed, and is caused by one of the causes of loss listed in the paragraphs above, the insurance company pays for the loss or damage, even if the use of defective materials or construction methods contributes to the collapse.
5.
Coverage Extensions
a.
Removal
Property removed from the insured's premises because of the threat of imminent danger of loss is covered at the new location and during its movement to and from the new location, if the insured tells the insurance company of the removal within ten days after the removal occurs. There is no restriction on the amount of time the covered property can be kept at that location and no stipulation as to the threatened cause of loss creating the imminent danger. Finally, this extension is included in the limits of insurance that apply to the premises from which the papers or records were removed.
Example: Errol's Engineering and Architects had a large number of wealthy commercial clients for whom he had worked on numerous projects over the years. As a result, Errol had a substantial number of documents that qualified for coverage treatment as valuable papers and records. His coastal Florida office was threatened by the imminent landfall of a category four hurricane he was sure would level his establishment. Errol packed up as much of his stock as he could, put them and all his valuable papers and records into a box truck, drove 80 miles inland and parked the truck in a storage facility owned by one of his clients. He called his insurance company after the truck was parked and let them know what he did just before the cell phone towers blew down and the conversation was cut short. Because of this coverage extension and Errol's quick action, coverage applied on his valuable papers and records at the temporary storage location for as long as it took him to rebuild his office and get back into business, much to the relief of his clients whose documents he held.
b.
Away From Your Premises
The insurance company pays up to $5,000 for loss or damage to covered property away from the insured's premises, unless a higher limit is shown on the declarations. If a higher limit is shown, that limit applies instead. This coverage extension limit is an additional amount of insurance.
Example: Due to the nature of his business, Errol must constantly take engineering studies and architectural drawings and plans out of the office to clients' offices and building sites. When he or one of his associates does so, this coverage extension applies and those papers and records are fully insured when away from the designated premises.
B. Exclusions
1. Tier 1 exclusions are essentially absolute and apply whether or not the loss event results in widespread damage or affects a significant geographical area. The insurance company does not pay for any direct or indirect loss or damage caused by any of the following events. These events are totally excluded, regardless of any other cause or event contributing to the event, either concurrently or in any other sequence.
a. Governmental action is the legal and authorized seizure or destruction of property by order of a government entity. An exception exists and coverage applies for loss or damage caused by or resulting from such acts of destruction ordered and done at the time of a fire and for the purpose of preventing the spread of the fire.
b. Nuclear hazard applies to any weapon that uses atomic fission or fusion. It also applies to nuclear reaction, radiation, or radioactive contamination from any cause or source. An exception applies for cases where the nuclear reaction, radiation or radioactive contamination results in a fire. In that case, the insurance company pays for the direct loss or damage caused by the fire, if this form covers fire.
c. War and military action applies to undeclared or civil war. This includes any warlike action by a military force or actions to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents. It also includes acts of insurrection, rebellion, revolution, usurped power or action taken by any government authority to hinder or defend against any of these actions.
2. Tier 2 exclusions apply to loss or damage caused by or resulting from any of the following. Some of these exclusions have exceptions that should be noted carefully.
a. Delay, loss of use, and loss of market are examples of consequential or indirect losses that arise after direct loss or damage and are not covered.
b. Dishonest or criminal acts committed by the insured, partners, employees, directors, trustees, authorized representatives or managers and members of a limited liability company are excluded. This includes anyone with an interest in the property, their employees or their authorized representatives, as well as anyone to whom the property is entrusted for any reason. This exclusion applies whether or not persons act alone or in collusion with others, or if the acts occur during regular employment hours. It does not apply to covered property entrusted to carriers for hire or to acts of destruction by employees of the insured. However, loss due to theft of covered property by employees is excluded.
c. Errors or omissions in processing or copying but if those errors or omissions result in a fire or explosion, the insurance company pays for the direct loss or damage caused by that fire or explosion, if this form covers fire or explosion.
Example: Errol had a customer who was constantly changing his mind about certain features of the building he was having constructed for his business. He was finally satisfied and settled on the final plan Errol had drawn. Unfortunately, the many revisions left a few electrical issues in question and one of those led to a fire that caused a considerable amount of damage to the building shortly after it was built. Because of the exception to this exclusion, Errol had coverage that applied to that fire damage and was able to avoid a potentially devastating errors and omissions claim.
d. Electronic records injured, disturbed or erased by electrical or magnetic injury are not covered but the insurance company pays for direct loss or damage for injury caused by lightning.
Example: Many of the plans and drawings Errol was involved with lent themselves to electronic technology, especially as that technology evolved and improved to the level of sophistication needed for the work he did. Errol always made sure he backed up these documents on other media but there were always times when any given plan "in the works" might not be completely duplicated. This became more of a problem as his business grew, staff was added and the number of projects in various stages of production "on the drawing board" increased. This situation reached a crisis point when a violent electrical storm accompanied by vivid displays of lightning made multiple strikes on Errol's premises, fried a number of his computers and ruined a number of projects in production to the extent of the part of the work that had not been backed up or duplicated. Errol's losses were completely covered by his electronic data processing policy and the lightning exception to this exclusion but he took the additional step of installing extensive power surge protection to minimize damage from any similar occurrences in the future.
e. Voluntary parting with covered property by the insured or anyone else entrusted with the property when they are induced to do so by a fraudulent scheme, trick, device, or false pretense is not covered.
f. Unauthorized instructions to transfer property to another person or place that results in the loss of the property transferred is excluded.
g. Neglect on the part of the insured to use every means available and at his or her disposal to save property and preserve it from further damage at the time a loss occurs as well as afterwards eliminates coverage.
3. Tier 3 exclusions apply to loss or damage caused by or resulting from any of the following. In every case, if loss or damage by a covered cause of loss results from the occurrence of one of these exclusions, coverage applies to the loss or damage caused by the resulting covered cause of loss.
a. Weather conditions but this exclusion applies only if the weather conditions contribute in any manner with one of the excluded causes or events listed in paragraph 1 above that produces the loss or damage.
b. Acts or decisions made by any person, group, organization, or government entity. This also includes the failure to act or make a decision.
c. Faulty, inadequate, or defective planning, zoning, development, surveying or siting of all or any part of any property, regardless of where it is located. The same also applies to design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction activities, as well as to materials used in repair, construction, renovation, remodeling or maintenance.
d. Collapse, except to the extent of coverage provided for this cause of loss under the Additional Coverage–Collapse section of this coverage form.
e. Wear and tear also includes the quality in any property that causes it to naturally damage or destroy itself over time, including but not limited to hidden or latent defect, gradual deterioration, depreciation or mechanical breakdown. It also includes loss or damage caused by insects, vermin, rodents, corrosion, rust, dampness, cold or heat.
C. Limits of insurance as shown on the policy declarations represent the most the insurance company pays for covered loss or damage in any one event or occurrence.
D. Deductible is
the amount of every covered loss retained by the insured. The insurance company
does not pay for any covered loss or damage until the adjusted amount of loss
or damage exceeds the deductible amount shown on the policy declarations. The
insurer then pays the adjusted amount of loss or damage that exceeds the
deductible amount, subject to and up to the applicable limit of insurance.
The limits on the declarations are the most available to respond to loss or damage related to any single occurrence.
E. Additional Conditions
1. Valuation–specifically declared items declared and described on the declarations is the limit shown on the declarations. This condition is in addition to General Condition F. Valuation in the Commercial Inland Marine Conditions.
Note: This is a critically important provision that must be given close attention. Many documents eligible for coverage under this form are dynamic and their value is subject to change. Others are unique or "one of a kind" and cannot be valued by normal valuation methods and techniques. Any time an insured has unique and unusual papers or records with unusually high or changing value, those records should be earmarked and specifically scheduled with their own value and not lumped in with other common documents where their value might be overlooked and the total value found inadequate at the time of loss or damage.
2. Recoveries made either by the insured or the insurance company after a loss that occurred and has been settled must be reported to the other party promptly. The insured has the option to have the property returned. If that option is exercised, the insurance company readjusts the loss or damage based on the amount the insured received for the recovered property, subject to an allowance for any recovery expenses incurred. This condition is in addition to Loss Condition H. Recovered Property in the Commercial Inland Marine Conditions.
Note: This is an important issue with respect to this coverage. A lot of time, effort and expense must be expended in duplicating and replacing lost valuable papers and records. It should not be done unless the document absolutely must be replaced. If there is any chance that the document might be recovered, and if duplication can wait for a period of time, the insured and the insurance company are well advised to wait and not hurry into duplication efforts that may later be found unnecessary because the lost document was recovered.
3. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
a. Coverage territory is the geographical location where insurance on covered property applies. It includes the United States of America, its territories and possessions, Puerto Rico and Canada.
b. Protection of records means all property covered by this form must be kept in the receptacles, if any, described on the declarations at all times when the premises is not open for business and at all other times except when the insured is actually using the property.
F. Definitions
This form contains four specific definitions that apply to it:
1. Valuable Papers and Records are any documents inscribed, printed or written, manuscripts or records that can include abstracts, deeds, drawings, films, maps, mortgages and books. The definition does not include money and securities or any data, programs and instructions used for electronic processing operations, including materials on which the data is stored.
2. Premises means the interior part of the building occupied by the insured at the address shown on the declarations.
3. Money includes traveler’s checks, register checks and money orders held for sale to the public and currency, coins and bank notes either in current circulation or not.
4. Securities
are negotiable instruments or nonnegotiable instruments and contracts that
represent money. It also includes tokens, tickets and various stamps, either in
current use or not, and various forms of evidence of debt issued in connection
with charge or credit cards not issued by the insured. The definition does not
include money.
One specific endorsement is available for use with this coverage form.
CM 67 02–Libraries
This endorsement is required when coverage is issued for libraries. It adds property away from the premises in the care, custody or control of a borrower or renter to Property Not Covered. It restricts coverage by adding two specific exclusions:
Other than determining
the location to be insured, the limits to be provided and the types of
receptacles used, the most important issue in underwriting this coverage is in
actually identifying the valuable papers to be insured. Is the insured aware of
the types of papers and records that can and should be covered and are they
listed or otherwise accounted for? The only way full recovery can be made for a
unique document or record is to list it and provide a value for it. If the
papers or records can be duplicated, are duplicates made and kept? If so, where
are they kept?