Form IM 7000: Contractors Equipment Coverage Form
The IM 7000 Contractors Equipment Coverage Form is a specialized commercial inland marine policy designed to protect mobile agricultural machinery and equipment, as well as construction equipment. This coverage applies whether the equipment is owned by the insured or is in their care, custody, or control. Essentially, it's an "open perils" policy, meaning it covers direct physical loss or damage to the scheduled equipment unless the cause of loss is specifically excluded. The form is crucial because standard commercial property policies often provide limited or no coverage for equipment that is mobile, in transit, or at various job sites. Similarly, commercial auto policies typically don't cover equipment not designed or licensed for road use.
Classes of Business
This form is vital for a wide range of businesses that rely on mobile equipment. Key industries and business types include:
- Construction Contractors: This is the primary class, including general contractors, builders, and various trade contractors like excavators, road pavers, carpenters, electricians, plumbers, and roofers. Their expensive machinery like bulldozers, cranes, backhoes, and concrete mixers are covered.
- Agricultural Operations: Farms and ranches using mobile machinery like tractors, harvesters, and other specialized agricultural equipment.
- Municipalities and Government Agencies: Cities, towns, and other government entities that use mobile equipment for road maintenance, snow removal, and other public works.
- Landscaping, Logging, and Mining Operations: Businesses involved in these sectors often have significant investments in specialized mobile equipment. Note that underground mining operations are typically excluded.
- Artisan Contractors: Smaller contractors such as self-employed carpenters or masons who use various tools and equipment on different job sites.
Real-world example: A construction company's bulldozer is vandalized while parked at a job site overnight. The IM 7000 form would cover the repair costs, subject to the policy's deductible and limits.
Real-world example: A farming cooperative's combine is damaged in a fire while being transported between fields. This form would respond to such a loss.
Special Considerations
Several important factors should be considered when using the IM 7000 form:
- Scheduled vs. Unscheduled Equipment: The form typically requires equipment to be specifically listed (scheduled) with details like make, model, serial number, and value. Some versions may offer limited coverage for newly acquired property or smaller unscheduled tools.
- Valuation: Policies can be written on an Actual Cash Value (ACV) or Replacement Cost Value (RCV) basis. The IM 7000 form may offer RCV if indicated on the schedule of coverages. It's crucial to ensure accurate valuation to avoid underinsurance and potential coinsurance penalties.
- Coverage Territory: While generally broad, coverage is typically restricted to the United States and Canada. Waterborne property (except on ferries in continental US/Canada) and property underground or used in tunneling are usually excluded.
- Leased or Rented Equipment: The form can cover equipment leased or rented from others if the insured is legally liable under a written agreement. However, property the insured loans, leases, or rents to others is typically excluded unless an optional coverage is selected.
- Excluded Property: Common exclusions include automobiles licensed for road use, aircraft, watercraft, contraband, and tools/clothing belonging to employees (though some limited coverage for employee tools may be available as an additional coverage or endorsement).
- Relationship to CM 00 01: The CM 00 01 (Commercial Inland Marine Conditions) form contains general conditions that apply to inland marine coverage parts, including the IM 7000. It's essential to read both forms together to understand the full scope of coverage.
Real-world example: A contractor rents an excavator for a specific job. If the rental agreement makes the contractor responsible for damage and the excavator is damaged by a covered peril, the IM 7000 (if properly endorsed or if the base form includes it) would cover the loss, provided the equipment was scheduled or falls under a specific coverage extension for leased/rented equipment.
Key Information for Agents and Underwriters
Agents and underwriters should focus on the following when dealing with the IM 7000:
- Risk Assessment: Thoroughly evaluate the contractor's type of work, experience, loss history, and maintenance/security measures. High-risk operations like logging or work in catastrophe-prone areas may require special attention and rating.
- Accurate Scheduling and Valuation: Emphasize to the insured the importance of providing a complete and accurate schedule of equipment with current values. This is critical for proper rating and ensuring adequate coverage at the time of loss. Consider if an "agreed amount" endorsement is appropriate for certain high-value items.
- Coverage Gaps:
- Be mindful of the exclusion for equipment loaned, leased, or rented to others. If this is an exposure, ensure the appropriate optional coverage is added.
- Employee tools are generally excluded, but some forms offer a modest sublimit as an additional coverage. Higher limits may be needed via endorsement.
- Damage from wear and tear, mechanical breakdown (unless resulting from a covered peril), and lack of maintenance are typically not covered.
- Underwriting Guidelines:
- The Nationwide Marine Definition provides guidance on what qualifies as "mobile or floating nature" and cannot be on sale/consignment, in manufacture, or designed for highway use (with some exceptions).
- Consider the storage and transit exposures. Is equipment stored securely? What are the typical transit routes and distances?
- Deductibles can be used to manage premium and minor losses.
- The financial condition of the insured can be an indicator of their commitment to maintenance and risk management.
- Pricing: Rates are typically based on the total value of the scheduled equipment, modified by factors such as the type of equipment, the nature of the work performed, loss experience, and deductible levels.
- Related Forms and Endorsements: Be familiar with the corresponding Schedule of Coverages (e.g., IM 7005 for AAIS IM 7000) which details limits, deductibles, and specific coverages. Various endorsements can modify coverage, such as adding Replacement Cost valuation or covering specific excluded perils.
Real-world example for underwriters: An underwriter reviewing an application for a logging operation would likely assess the terrain, safety protocols, operator experience, and fire prevention measures more stringently due to the higher inherent risks compared to a contractor working primarily in urban areas.
Real-world example for agents: An agent should advise a client who frequently rents out their owned cranes to other contractors that the standard IM 7000 likely excludes this exposure and recommend an endorsement to cover leased or rented equipment to others.