1. Forms
2. CM
3. CM-99-02

What the form is

The CM 99 02 Reporting endorsement is attached to either the Equipment Dealers Coverage Form (CM 00 22) or the Camera and Musical Instrument Dealers Coverage Form (CM 00 21) when the insurance is written on a reporting basis. Its primary function is to outline the specific terms and conditions under which the insured must report the values of their covered property. This allows the premium for the policy to be adjusted based on the actual fluctuating values of inventory over the policy period, rather than a single, fixed amount. The endorsement details the frequency and due dates for these reports, the method for calculating the premium based on the reported values, and the minimum premium that will be charged. It also specifies how losses will be adjusted if reports are late or not submitted, and how coinsurance terms might be reintroduced in such cases.

Classes of business it applies to

This endorsement is specifically designed for:

• Equipment Dealers: Businesses dealing in mobile agricultural and construction equipment, whose inventory values can vary significantly throughout the year. For example, a tractor dealership might have higher inventory in spring and fall, and lower stock in other months.
• Camera and Musical Instrument Dealers: Retailers of cameras, musical instruments, and related accessories. A specialty camera store, for instance, might experience inventory surges before holidays or special sales events.

Essentially, any business covered under CM 00 22 or CM 00 21 that experiences notable fluctuations in inventory levels would benefit from this reporting form endorsement, as it helps align premium costs more closely with actual exposure.

Special considerations

Several important considerations apply when using the CM 99 02 endorsement:

• Reporting Compliance: The insured must adhere strictly to the reporting requirements (e.g., monthly reports). Failure to submit reports on time, or submitting inaccurate reports, can have significant consequences, potentially leading to underinsurance or claim payment reductions.
• Premium Adjustments: The final premium for the policy period is determined after all reports have been submitted and an audit is performed. This can result in either an additional premium due to the insurer or a return premium to the insured.
• Minimum Premium: The endorsement will specify a minimum premium, meaning that even if reported values are consistently low, the premium will not fall below this predetermined amount.
• Cancellation: The form includes provisions for final premium adjustment if the policy is cancelled before its normal expiration date.
• Coinsurance: If reports are not submitted at all, coinsurance penalties, which might otherwise be waived on a reporting form, can be re-imposed.

Key information for agents and underwriters

For insurance agents and underwriters, the CM 99 02 endorsement requires careful attention:

• Agent's Role: Agents must thoroughly explain the reporting provisions to the insured, emphasizing the importance of timely and accurate reporting to avoid potential coverage gaps or penalties at the time of a loss. They should also help the insured establish an adequate limit of insurance that reflects the maximum potential value at risk at any one time.
• Underwriting Considerations: Underwriters need to assess the insured's ability and commitment to comply with the reporting requirements. They will also determine the appropriate reporting interval (e.g., monthly, quarterly) based on the nature of the insured's business and inventory turnover. The endorsement provides for annual re-rating if the coverage is written for a term longer than one year.
• Risk Assessment: Late or missing reports can be an underwriting concern, potentially indicating increased risk or poor internal controls on the part of the insured.
• Premium Calculation: Understanding how the provisional premium, reported values, and final premium adjustment interact is crucial for both explaining the policy to the client and for internal accounting.