1. Forms
2. FP
3. FP-05-31

What the Form Is

The FP 05 31 is an endorsement to farm insurance policies, specifically designed to modify coverage under forms like the FP 00 12 Farm Property–Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form. Its primary function is twofold: first, it introduces an exclusion for loss or damage caused by viruses or bacteria. Second, it provides a limited grant-back of coverage for loss or damage resulting from fungi, wet rot, dry rot, and bacteria.

The coverage for fungi, wet rot, dry rot, and bacteria is typically capped at a specific aggregate limit, often starting at $10,000 per annual policy period. This limit may be increased to a higher amount (e.g., $25,000) for an additional premium. It's important to note that this coverage does not apply to loss affecting livestock.

Classes of Business It Applies To

This endorsement is used in the agricultural sector for clients who have farm insurance policies covering:

• Farm Dwellings (the main farmhouse)
• Appurtenant Structures (e.g., detached garages, sheds used for personal purposes)
• Household Personal Property (contents within the dwelling)

Real-world example: A water pipe bursts in a farmhouse (covered under FP 00 12) leading to significant water damage. Several weeks later, mold (a type of fungi) is discovered growing on the walls and some personal belongings as a result of the moisture. The FP 05 31 endorsement would first clarify that damage from viruses or bacteria is excluded. Then, it would provide coverage for the mold remediation and repair to the dwelling and affected household personal property, up to the limit specified in the endorsement (e.g., $10,000), subject to the policy deductible and other terms. This coverage is an aggregate for the policy year.

Special Considerations

• Restrictive Nature: This is a restrictive endorsement because it introduces a broad exclusion for virus and bacteria. The coverage provided for fungi, wet/dry rot, and bacteria is a limited exception to a general exclusion of such perils or a specific grant-back after the virus/bacteria exclusion.
• Aggregate Limit: The limit of liability for fungi, wet/dry rot, and bacteria is an annual aggregate, meaning all claims for such damage during the policy year will be subject to this single, overall limit.
• Alternative to Full Exclusion: This endorsement is often used instead of an absolute exclusion for fungi, wet rot, dry rot, and bacteria, or in place of a broader virus/bacteria exclusion like the FP 01 60. If FP 05 31 is attached, FP 01 60 (Exclusion of Loss Due to Virus or Bacteria) would typically not be needed for the coverages it addresses, as FP 05 31 incorporates its own virus/bacteria exclusion before granting back limited fungi coverage.
• Property Specific: The coverage grant-back is specifically for farm dwellings, appurtenant structures, and household personal property. It does not extend to other farm property like barns (unless used as appurtenant structures as defined), equipment, or other agricultural products.

Key Information for Agents and Underwriters

• Risk Assessment: Properties in humid climates, older structures, or those with a history of water leakage are at higher risk for fungi/rot. Underwriters should carefully assess these exposures.
• Pricing: The standard limit (e.g., $10,000) is typically included in the pricing structure when this endorsement is used. Offering increased limits will require an additional premium.
• Coverage Explanation: Agents must clearly explain the virus and bacteria exclusion to the insured. It's crucial to emphasize that the fungi, wet/dry rot, and bacteria coverage is limited by a specific aggregate amount and is not comprehensive mold coverage.
• Underwriting Guidelines: Insurers will have guidelines on when this endorsement is mandatory or when higher limits can be offered. It's important to understand how this endorsement interacts with the base policy and other potential exclusions. Ensure it is attached to the appropriate underlying coverage form, such as FP 00 12.
• Documentation: Discussions with the insured regarding this limitation, the available limits, and any decision to purchase higher limits (or decline them) should be documented.