CRIS - Property - Ch. 9 - Contractors Equipment: Covered Locations, Covered Property, and Additional Coverages

Section 9. 1 - Overview
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Definition of Contractors Equipment: Scheduled contractors equipment policies really do not need a definition of covered property, why?the coverage grant clearly establishes that coverage applies only to the items that are listed in the policy schedule.Definition of Contractors Equipment: In blanket contractors equipment policies, the definition of covered property is important. Why?Some forms include a very broad, general definition that encompasses virtually any type of mobile machinery, equipment, and tools that are used in the insured's operations or projects. Other forms use a definition that is more specific and narrower in scope.Blanket coverage is often provided by entering the phrase ___________________________ on the policy's schedule of covered equipment, rather than by means of a form that is specifically designed to provide blanket coverage."Blanket contractors equipment"Definition of Contractors Equipment: How to properly ensure you have coverage for certain items on a Blanketed Policy.- request an endorsement that establishes what types of property qualify for coverage under the policy. - to cover any property that might not be considered contractors' equipment, coverage should be specifically arranged and added by endorsement. Example: Porta PottiesOffice and Utility Trailers: In determining whether office and utility trailers are covered, the language of the ___________ exclusion should also be checked.vehicle - In some forms, the vehicles exclusion applies to trailers. On the other hand, there are many contractors equipment policies that contain automatic coverage extensions or coverage options that can be elected to provide coverage for office and utility trailers.Tools, Accessories, and Spare Parts: Another issue that may require clarification is coverage on accessories and spare parts that are used in conjunction with the covered equipment and on tools that are used by contractors. Why is this an issue?Some contractors equipment policies explicitly extend coverage to accessories and spare parts; others are silent on this point. Similarly, some contractors equipment policies clearly cover miscellaneous tools, whereas others are silent.Tools, Accessories, and Spare Parts: Coverage is provided for these items if...?- policy has a broad definition of contractors equipment - a coverage option that applies only if elected by the insured - an unscheduled tools coverage option is sometimes included in a policy form that otherwise provides scheduled contractors equipment coverage.Tools, Accessories, and Spare Parts: Why might coverage not be necessary for these items?For some contractors, the value of tools, accessories, and spare parts is small enough that insurance on these items is not needed. Also, the policy deductible would probably prevent loss recovery in many instances.Coverage on unscheduled tools is often provided subject to a relatively small per-item limit, such as $________.1,000.Property of Others: Some blanket contractors equipment policies specify that coverage applies to all equipment *owned* by the insured. These forms may include leased and borrowed equipment coverage options that can be triggered by appropriate entries on the declarations page. If they do not, what needs to be done?they must be endorsed to provide coverage for property of others.Other blanket contractors equipment policies specify that coverage applies to equipment owned by the insured and equipment owned by others that is....?in the insured's care, custody, and control. - These policies provide coverage on equipment that has been loaned or leased to the insured without the need for an endorsement.The coverage provided on leased or borrowed equipment is subject to....?special sublimits.Newly Acquired Equipment: Most contractors equipment policies—both scheduled and blanket—contain provisions addressing coverage for items acquired by the insured after the policy. These provisions usually extend temporary automatic coverage to newly acquired equipment for a specified number of days from the date of acquisition (typically, between _____________ days).30 and 90Newly Acquired Equipment: Limits of Coverage?In some forms, the coverage on newly acquired equipment is subject to a specified per item or per occurrence newly acquired property limit. In others, the limits is the lesser of a percentage of the policy limit (25%, for example) or a specified per item or per occurrence limit.Some blanket contractors equipment policies do not contain any newly acquired property provisions. These policies do not impose any special limitations on coverage for newly acquired property. (T/F)?trueA scheduled contractors equipment policy that does not contain any provisions addressing newly acquired property.....?probably does not provide coverage, since coverage would otherwise apply only to the items described on the policy schedule.Section 9. 5 - Excluded Property...Contractors Equipment Common Excluded Property Types- Property loaned or rented to others - Vehicles licensed for road use - Watercraft - Aircraft - Waterborne property - Airborne property - Underground property - Property under water - Plans, blueprints, designs, and specifications - Property designed to become part of a structureProperty Loaned or Rented to Others: Some insurers will agree to delete the exclusion, particularly for larger insureds. If the exclusion cannot be deleted, the insured would be wise to require the borrower (or lessee) to....?cover the equipment under its own contractors equipment policy as a condition of the loan (or lease). - Keep in mind that the care, custody, and control exclusion in the borrower's (or lessee's) general liability policy would probably prevent it from responding.Vehicles: Nearly all contractors equipment policies contain some sort of exclusion of coverage on vehicles licensed for road use. However, this exclusion usually does not affect coverage for equipment .....?permanently mounted on these vehicles.Contractors routinely attach generators, compressors, welding units, and other similar equipment to trucks to facilitate transportation of the equipment. In this situation - Physical damage coverage on the truck would be provided by the insured's _______ policy - Physical damage coverage for the attached equipment would be provided by ____________________ policy.1) Auto 2) the contractors equipmentIf the vehicles in question are used exclusively to transport the equipment, and on-the-road use is completely incidental to the normal operation of the unit, coverage for the vehicles is....?often added to the contractors equipment policy by endorsement. - In fact, in some forms, the vehicles exclusion contains an exception that provides coverage for such vehicles without the need for an endorsement.Aircraft Property: Coverage for Drones can be added by....?Endorsing a contractors equipment policy, commercial property policy, builders risk policy, or be insured on a separate policy.Waterborne Property: Most contractors equipment forms contain an exclusion of waterborne property; often there is an exception for....?property in transit on a regular ferry, lighter, or car float.Waterborne Property: If the insured's operations involve the use of equipment from a barge or other watercraft,....?coverage is usually available by means of a built-in coverage option or extension or an endorsement to the policy. - Usually there is a special waterborne equipment sublimit and sometimes a separate waterborne equipment deductible as well.Waterborne Property: PremiumWhen blanket coverage on waterborne property is provided, the premium may be a flat charge or a provisional premium that is adjusted on the basis of periodic reports of the values of over-water equipment. Since waterborne property losses are often constructive total losses, the premium for waterborne property coverage is usually relatively high.Section 9. 6 - Debris Removal and Pollutant Cleanup...Most—but not all—contractors equipment policies include a debris removal coverage extension that provides coverage for the cost of removing the debris of covered property when it is damaged by a covered cause. (T/F)?trueWhile this coverage is probably less important in a contractors equipment policy than in a commercial property policy, there are some contractors equipment loss situations that might involve significant debris removal expense. Give an example of a large loss scenario:Suppose, for example, that a piece of equipment ends up at the bottom of a lake. Even if all concerned parties are willing to abandon the equipment as a constructive total loss, it may be necessary to retrieve it to avoid any possibility of leakage from the fuel tank into the lake. Also, removal of damaged scaffolding covered under the contractors equipment policy might be costly enough to make debris removal coverage desirable. These are just some examples where significant debris removal expense might be involved.Debris removal coverage may be provided as additional insurance, or it may be part of the insurance that applies to the damaged equipment. Usually the limit is.....?the lesser of a stated dollar amount or a stipulated percentage of the overall policy limit (for example, 10 percent of the policy limit, or $100,000, whichever is less).Some contractors equipment forms also contain a pollutant cleanup coverage extension similar to the pollutant cleanup coverage extension found in standard commercial property forms. A pollutant cleanup coverage extension usually grants a small amount of coverage ......?such as $10,000 for the cost of removing pollutants from land or water when the release of the pollutants is the result of a covered loss9. 7 - Additional Coverages....Many insureds need one or more of the following additional coverages.- Leased equipment coverage - Borrowed equipment coverage - Rental cost reimbursement coverage - Coverage for employees' tools and work clothingThese coverages are available from most contractors equipment insurers, but the method used in providing the coverage varies. What are the methods?- endorsement - built-in provisions addressing these coverages Note: The built-in provisions may be coverage extensions or additional coverages that apply automatically, subject to a relatively small limit that is stated in the text of the provision. Alternatively, the policy in question may include coverage options that apply only when a limit of insurance for that coverage option appears on the policy's declaration page.Leased Equipment: If the insured leases equipment from others, where should it be covered?under its own contractors equipment policy. Reminder: contractor that leases equipment to the insured may not have coverage under its own contractors equipment policy, because of the exclusion of equipment rented or loaned to others.Leased Equipment: Variances between coverage forms.- Some contractors equipment forms explicitly cover not only equipment owned by the insured but also equipment owned by others that is in the insured's care, custody, and control. - Other forms (particularly those that provide blanket coverage) restrict coverage to equipment that is owned by the insured. (must endorse these to include coverage for rented equipment) - Some blanket or combination forms include an unscheduled leased equipment coverage option that applies when there are appropriate entries on the declarations page.Leased Equipment: Limits of Insurance 1) Scheduled policies 2) Blanket/Combination policies1) Scheduled policies -simply the limits shown for each piece of equipment in the schedule. 2) Unscheduled leased equipment coverage in blanket or combination policies is usually subject to a separate leased equipment sublimit.Premium for unscheduled leased equipment coverage is....?provisional at policy inception and adjusted at the end of the policy term by applying a specified rate to the insured's total expenditures on equipment rental fees.Rates for leased equipment coverage are generally _______________________ than the rate for owned equipment.two to three times greaterBorrowed Equipment: An insured contractor that borrows equipment from others can sometimes be held liable for any damage to the equipment, even if there is no contractual agreement to that effect. (T/F)?true - the business that loans the equipment may not have coverage under its own contractors equipment policy because of the exclusion of equipment rented or loaned to others.Borrowed Equipment: Variances between coverage forms.- If the insured's contractors equipment policy provides scheduled coverage, borrowed equipment can usually be covered simply by scheduling it. - Some blanket or combination forms include an unscheduled borrowed equipment coverage option that applies when there is a borrowed equipment sublimit on the declarations page. - Otherwise, blanket contractors equipment policies may not cover equipment owned by others that is in the insured's care, custody, and control, and therefore would have to be endorsed to provide the coverage for borrowed equipment.Borrowed equipment coverage options and endorsements are very similar to leased equipment coverage options and endorsements except that the premium is based on....?the value of the borrowed equipment rather than the rental cost.insurers may be less willing to provide blanket coverage on borrowed equipment than on leased equipment, because....?the informality of most short-term equipment loan arrangements may mean that there are no records that would serve as an accurate exposure basis for rating purposes.Rental Reimbursement: If a particularly important piece of construction equipment is damaged, the insured may find it necessary to rent a temporary replacement until repairs can be made or new equipment can be acquired. Rental reimbursement coverage pays....?the cost of renting temporary replacements for equipment that has suffered a covered loss.Rental Reimbursement: Limits & DeductiblesRental reimbursement coverage is often subject to both a per-day and an annual aggregate limit of liability. A waiting period deductible (typically 48 or 72 hours) usually applies. When the coverage is written on a blanket basis, the loss recovery is often limited to a specified percentage (such as 80 or 90 percent) of the loss.Employees Tools and Work Clothing: Many contractors equipment forms include an employees tools coverage extension or optional coverage; employees' work clothing is sometimes included as well. These items are typically covered only while....?located on job sites or in transit to and from job sites in the insured's vehicles.Employees Tools and Work Clothing: Limits & DeductiblesUsually the coverage on employees tools is subject to both a per employee and a per occurrence limit (commonly, $500 per employee and $5,000 per occurrence). A separate, lower deductible may also apply, so that the otherwise applicable deductible does not effectively negate the coverage.