The world of farm property coverages is full of various forms, a number of which are required to be used with one another. For example, the FP 00 13 Farm Property—Farm Personal Property Coverage Form cannot be issued alone. It needs to coordinate coverage with other farm property forms such as the FP 00 90 Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions and the FP 10 60 Causes of Loss—Farm Property form.
Not so when it comes to the Mobile Agricultural Machinery and Equipment Coverage Form (MAMECF), FP 00 30 04 16. This form can be used monoline and does not rely on the Causes of Loss Form FP 10 60 nor the FP 00 90 for its use or interpretation. So, let's take a look at how this form does work and what is included when one uses the MAMECF. For our purposes, we will be looking at this specific form, FP 00 30 04 16, as provided by the good people of Verisk/Insurance Services Office, Inc. (ISO).
Coverage can be written in one of two ways.
ALL "mobile agricultural machinery and equipment" if a single limit of insurance is shown in the declarations
Providing coverage on a specific amount for specifically listed items of "mobile agricultural machinery and equipment shown in the Declarations"
This latter item (#2) includes property in one's care, custody, or control that has been borrowed or rented—regardless of whether a written contract was utilized—except when that property is on the owner's premises. Finally, one can show a single limit of insurance (again under item #2) for items like saddlery, harnesses, liveries, or blankets, and then coverage would apply for those things.
In other words, when using choice #2, one can use a specific amount of insurance for specifically listed items and include a single limit for items like saddlery, harnesses, liveries, or blankets. Note: The policy only lists those items as an example, not as a litany of the only items that can be covered there. Let your conscience and your agreement with your underwriter be your guide.
Property Not Covered
Of course, we are going to see certain items that are not eligible to be covered. That list includes the following five types or categories of equipment.
Aircraft, watercraft, and their equipment or parts; automobiles; dealers' demonstration equipment, machinery, and vehicles; and dirt bikes, house trailers, mobile homes, mopeds, motorcycles, motorized bicycles or tricycles, snowmobiles, trucks, and vehicles primarily designed and licensed for road use (other than wagons and trailers designed for farming purposes and used principally on the "insured location")
Bulk milk tanks, bulk feed tanks or bins attached to buildings or structures, barn cleaners, pasteurizers or boilers, and permanent fixtures within or attached to a building
Cotton pickers, harvester-thresher combines, and all-terrain vehicles not specifically declared and described in the declarations with a limit of insurance for each item
Contraband or property in the course of illegal transportation or trade
The laundry list shown in item #1 is obvious as to why items are not insured using this form—there are better places to insure them. These items are not considered "mobile agricultural equipment" and, as such, are better off insured under other coverage forms. Examples could include these policies: business auto, boat, and aircraft policies, where coverage is more specific and better designed for the coverage needs of the insured.
Item #2 shows things that can be provided for coverage under the FP 00 14, Barns, Outbuildings and Other Farm Structures coverage form.
Item #3 lists the following three specific items that need to be specifically listed and shown in the declarations for coverage to apply.
Harvester thresher combines
Item # 4 is short and sweet—not eligible for coverage is irrigation equipment.
Finally, and this should surprise no one, coverage will not be provided for contraband or property in the course of illegal transportation or trade. That is item #5.
"Mobile Agricultural Machinery and Equipment"
At this point, it seems to make sense to review the definition of "mobile agricultural machinery and equipment." It is quite different from that which you may think. In other words, it is not the definition used in either the business auto or the farm liability coverage forms. Remember, we are looking at a property form. Here is how it is defined.
3. "Mobile agricultural machinery and equipment" means mobile devices used in the everyday operation of the farm including:
a. Accessories, whether or not attached; and
b. Tools and spare parts that are specifically designed and intended for use in the maintenance and operation of the mobile devices.
This is a pretty inclusive list of items; it is intended to be. At this point, our items that can be covered are those that are not specifically excluded under the "Property Not Covered" and that do not meet the definition of "Mobile Agricultural Equipment and Machinery." Other than that, as we said previously, let your imagination and your underwriter's agreement be your guide!
What about the Causes of Loss?
Since this is a stand-alone form, the causes of loss are shown in the form, and we do not need to consult other farm property coverage forms for their opinions. Here's what the MAMECF says.
3. Covered Causes of Loss
Covered Causes of Loss means direct physical loss to Covered Property unless the loss is excluded or limited in this Policy.
Wow! We get open perils—or another way to state it, the insurer tells you what causes of loss are excluded. If it's not excluded, then it's covered!
So, what is excluded? Essentially, the things one may expect when looking at a "special form" type of causes of loss are excluded. As the movie director Bryan Singer would perhaps phrase it, "the usual suspects" are the following.
War and military action
Of course, one needs to review the exact language of the policy, but these are commonly excluded.
Other exclusions are then listed that delineate areas where some special consideration may be needed. Briefly, those issues addressed as being additional excluded causes of loss include the following.
Collapse—except as defined
Damage due to rain, snow, ice, or sleet to property in the open (protect your property at least a little bit)
The explosion of alcohol stills, et al., rupture, bursting of operation of pressure relief valves, or rupture or bursting due to expansion of contents of a building or structure
Unauthorized instructions to transfer property to any person or place
Dishonest or criminal acts of the insured or their employees
Foreign objects taken into machinery (use endorsement FP 04 20 04 16 to offset this exclusion)
Collision or overturn of the mobile equipment/machinery that only does damage to tires or tubes (use endorsement FP 10 57 04 16 to offset this exclusion). Note: if the overturn or collision of the mobile machinery/equipment also does damage to the machinery/equipment, then the insurer will pay for the damage to the tires/tubes without needing to use the endorsement.
Artificially generated electric current or arcing (unless a fire ensues, then the insurer will cover that)
Smoke, vapor, or gas from agricultural smudging of industrial operations
Then there are the following maintenance type exclusions (maintain your property because insurers are not going to pay for your maintenance or lack thereof).
Wear and tear
Rust and corrosion, etc.
Nesting or infestation, et al.
Dampness or dryness of the atmosphere
Changes in temperatures or extremes of heat and cold (including freezing)
Marring or scratching
Theft or vandalism to specific electronic items listed
Pollutant exposures unless they result in a "specified cause of loss"
And then, there are the following concurrent causation exclusions.
Acts or decisions, including the failure to act or decide
Faulty, inadequate, or defective—planning, zoning, design specifications, materials used in repair or construction or maintenance, etc.
Yes, this is a long list of exclusions. It must be, as the insurers are specifying what is not covered as a cause of loss. If it isn't excluded, then consider it covered!
Additional Coverages and Coverage Extensions
Seven additional coverages are listed in the form, along with two coverage extensions.
The Additional Coverages
The following are the seven additional coverages.
Collapse. This is the definition that has been in use for a number of years now and with which we should be familiar (e.g., "We will pay for an abrupt falling down or caving in of a building or part of a building if the building or part of the building cannot be occupied for its intended purpose"). The definition then goes on to list what is not considered to be collapse and also shares with us the direct physical loss or damage that insurers will pay for, subject to the policy language.
Damage to property removed for safekeeping. Any cause of loss is covered for 30 days as long as the covered property was removed from a building endangered by a covered cause of loss.
Debris removal. It is covered but is subject to the following considerations.
The limit of insurance
25 percent of the covered loss but subject to an additional amount of 5 percent of the limit of insurance (essentially, how it applies in the current farm property coverage forms)
Extra expense. If you showed a limit for extra expense on the declarations, then you have coverage for incurred extra expenses due to a covered cause of loss, up to the selected limit.
Fire department service charge
Reasonable repairs. These are ones that are used to protect covered property from further damage after a covered cause of loss has occurred.
Borrowed or rented "Mobile Agricultural Machinery and Equipment"—30-day limit. Up to $10,000 will be paid (unless a higher limit is shown on the declarations). This applies to items that you borrow or rent, regardless of whether there is a written contract. The following three additional criteria need to be met.
The items must be in your care, custody, or control at the time of loss or damage.
It must have been borrowed by the insured after the beginning of the policy period.
It must be equipment in which the insured has no interest as an owner or lienholder.
The Coverage Extensions
The following are the two coverage extensions.
Additional Acquired Property—Newly Purchased. Two things need to be considered here: (a) does the coverage form cover property specifically declared and described in the declarations, and (b) did the insured (during the policy period) acquire additional newly purchased machinery/equipment. If so, then the insurer will pay up to $100,000 for loss or damage to the newly acquired items. However, that $100,000 is part of—and not in addition to—the already applicable limit of insurance. This extension ceases 30 days after the date of acquisition or upon the policy expiration, whichever occurs first.
Additional Acquired Property—Replacement. When the insured acquires a piece of replacement equipment/machinery, they then enjoy the limit of insurance that applied to the piece of equipment being replaced plus an additional $75,000 of coverage. This additional amount of coverage expires when the policy expires or 30 days after the date of purchase of the replacement, whichever occurs first.
Farm Inland Marine Conditions
As this is a stand-alone form, it has its own set of loss conditions. Any reader familiar with a property coverage form will be aware of the need for these and what they address. So, we shall limit our discussion to a mere listing of these loss conditions.
Duties in the event of loss
Insurance under two or more coverages
Other insurance and service agreement
Pair, sets, or parts
Transfer of rights of recovery against others to us
Valuation—it's actual cash value
Finally, we should review the general conditions—especially those that have a special concern or consideration. There is a total of seven general conditions. Our discussion will focus on two of the more concerning ones.
Coinsurance. My good friend and scholar, Al Parizo, is fond of saying that "coinsurance is evil and must be destroyed." Alas, to his dismay and my dislike (or perhaps it is the other way around), the good people of ISO do not provide us with an opportunity to destroy coinsurance in this instance. So, let's see how it applies in the form.
You may recall that we have the ability to either specifically list machinery/equipment or provide it on a "blanket" basis per se. When we specifically list and insure items, coinsurance is not a concern. However, when items are "not specifically declared and described in the Declarations," an 80 percent coinsurance factor will apply. This can be significant in the case of a loss, and the insured needs to be counseled to properly select a limit of insurance to allow for the application of coinsurance.
Note: coinsurance does not apply to "mobile agricultural machinery and equipment" "that is not specifically declared and described in the Declarations and for which a Limit of Insurance is shown for coverage not exceeding $3,000 on any one item."
Policy period or coverage territory. Our coverage territory is the United States of America, Puerto Rico, and Canada. Note that coverage is not extended to US territories or possessions nor to Mexico.
A Final Consideration
The cost of mobile agricultural machinery and equipment is doing nothing if not getting more expensive for insureds to purchase and maintain. Because of these increasing values, the consideration of selecting a proper deductible should be addressed.
An insured's "skin in the game" is the deductible. This is also a very good risk management and loss-control tool to utilize. With the increasing expense of equipment, it is crucial to select an appropriate deductible. This allows insureds to better manage their insurance expense, share in a loss to an amount appropriate to the overall insurance limit, and to become more aware of properly maintaining their equipment. It makes no sense—and, in most cases, an insurer will not allow insureds—to select a $1,000 deductible on a piece of $300,000 equipment (or even greater amounts).
Agents need to help their insureds understand their part in the process of insurance by assisting them and counseling them in proper deductible selection and utilization; it's better for all concerned.
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