1. Forms
2. IH
3. IH-68-01

What the form is

The IH 68 01 Tools and Clothing Belonging to Your Employees endorsement is an Inland Marine form designed to be attached to a primary coverage form, typically the Contractors Equipment Coverage Form (IH 00 68). Its purpose is to extend coverage to include tools and clothing that are owned by the employees of the named insured. This addresses a common coverage gap, as standard commercial property and equipment forms typically only cover property owned by the insured business.

Classes of business it applies to

This endorsement is most relevant for businesses whose employees use their own tools and bring personal clothing to job sites. Examples include:

• Construction Contractors: Electricians, plumbers, carpenters, and other tradespeople often use their own hand tools and power tools on job sites.
• Repair and Maintenance Services: Mechanics, technicians, and field service personnel who bring their personal tools to perform work at various locations.
• Landscaping and Arborist Services: Employees in these fields may use their own specialized tools and require protective clothing.

Real-world example: A construction company purchases a Contractors Equipment policy (IH 00 68). Their electricians regularly bring their own multimeters, drills, and hand tools to various construction sites. By adding the IH 68 01 endorsement, the company ensures that if these employee-owned tools are damaged by a covered peril (e.g., fire at the job site, theft from a company vehicle while in transit), there is coverage available, subject to the endorsement's terms and limits.

Special considerations

• Covered Locations: Coverage under this endorsement typically applies when the employee's tools and clothing are at a job site or in transit in the insured's vehicles. Loss occurring at an employee's home or in their personal vehicle may not be covered.
• Covered Causes of Loss: The endorsement generally covers risks of direct physical loss or damage, subject to the exclusions and limitations of the main policy and the endorsement itself.
• Limits of Insurance: A specific limit of insurance will typically apply to this coverage, which may be an aggregate limit or a per-employee limit. This is separate from the limits on the contractor's own equipment.
• Property Not Covered: The base Contractors Equipment Coverage Form (IH 00 68) typically excludes tools and clothing owned by employees, necessitating this endorsement. When this endorsement is added, the specific exclusion (e.g., Paragraph A.2.h. in a form like IH 00 68 05 17) is usually deleted or modified with respect to this specific coverage.

Key information for agents and underwriters

• Risk Assessment: Underwriters should assess the number of employees who use their own tools, the typical value of these tools, and the security measures in place at job sites and in company vehicles.
• Pricing: The premium for this endorsement will depend on the limit of liability selected, the nature of the insured's business, loss history, and the number of employees whose tools are to be covered.
• Coverage Gaps: Agents should explain that without this endorsement, there is likely no coverage under the business's policy for employee-owned tools. Employees might otherwise have to rely on their homeowners or renters insurance, which may have limitations for business use property or high deductibles.
• Documentation: In the event of a claim, documentation of ownership and value of the employee's tools and clothing will be important. Encouraging employees to maintain inventories can be beneficial.
• Moral Hazard: While providing valuable protection, underwriters might consider the potential for moral hazard if limits are very high or if there's a history of frequent small tool claims.