1. Forms
2. IM
3. IM-7100

IM 7100 - Electronic Data Processing Coverage Form

The IM 7100 Electronic Data Processing (EDP) Coverage Form is a specialized Commercial Inland Marine policy designed to protect businesses against the risks of direct physical loss or damage to their electronic data processing equipment, data (including programs and software), and media. Crucially, it often extends coverage beyond what is typically provided in standard commercial property policies, which may have significant limitations or exclusions for these types of exposures. The form can also provide coverage for extra expenses incurred to continue operations and business interruption resulting from a covered loss to EDP systems.

Classes of Business It Applies To

This form is vital for nearly any modern business that relies on computer systems and electronic data for its daily operations. However, it is particularly critical for:

• Technology-dependent industries: Software developers, IT consultants, data processing centers, and web hosting services whose core business revolves around electronic data and systems. For example, a data hosting company would use this form to cover its servers and the data stored on behalf of clients.
• Businesses with significant data assets: Financial institutions, healthcare providers (subject to HIPAA considerations), law firms, accounting firms, and research facilities that handle and store large volumes of sensitive or valuable data. A medical clinic, for instance, would need this to protect its patient record systems and diagnostic equipment.
• Operations reliant on specialized EDP equipment: Manufacturers using computer-aided design (CAD) or computer-aided manufacturing (CAM) systems, engineering firms, architectural practices, and media companies (e.g., graphic design, video production). An architectural firm using high-powered workstations for rendering blueprints would find this coverage essential.
• Businesses with leased EDP equipment: Companies that lease their computer hardware may be contractually required by the lessor to carry specific insurance covering damage to that equipment.

Special Considerations

Several important factors should be considered when utilizing the IM 7100:

• Coverage Gaps in Standard Policies: Standard property policies often provide limited coverage for EDP equipment (typically for named perils only) and may severely restrict or exclude coverage for software, data, and losses due to electrical disturbances or temperature changes. The IM 7100 is designed to fill these gaps, often providing "all-risk" or "open perils" coverage subject to specified exclusions.
• Valuation: Determining the correct valuation for EDP equipment, and especially for data and software, can be complex. Options may include actual cash value, replacement cost, or even functional replacement cost for rapidly obsolescing technology. Data and media are often valued at the cost of blank materials plus the cost to transcribe or copy the data. It's crucial to ensure limits are adequate to cover the full cost of restoration.
• Perils Covered and Excluded: While broader than standard property forms, common exclusions might include losses due to programming errors, wear and tear, or certain types of utility interruption (unless specifically endorsed). Coverage for perils like hacking, computer viruses, and power surges (not originating from a utility company) are key features that differentiate EDP policies.
• Extra Expense and Business Income: The costs to continue business after an EDP system failure can be substantial, including leasing temporary equipment, outsourcing data processing, or recreating lost data. Business income coverage can protect against loss of earnings due to the interruption. These coverages are critical components of the IM 7100.
• Data Security and Backup: Insurers will often scrutinize an insured's data backup procedures, disaster recovery plans, and cybersecurity measures. Robust risk management in these areas can impact availability and pricing of coverage.
• Relation to CM 00 01: The CM 00 01, Commercial Property Conditions, typically provides the general conditions that apply to many commercial property coverage forms, including some inland marine forms. While the IM 7100 is a specific coverage form, it would often be used in conjunction with a general conditions form like CM 00 01 or a similar carrier-specific form that lays out the overall terms and conditions of the policy, such as duties in the event of a loss, cancellation provisions, and other policy-wide stipulations.

Key Information for Agents and Underwriters

Agents and underwriters should focus on the following when dealing with the IM 7100:

• Risk Assessment: This involves a thorough understanding of the insured's reliance on EDP systems, the types and values of hardware and software, the nature and criticality of the data, and the potential financial impact of a system outage. Key risk factors include susceptibility to power fluctuations, physical security of equipment, data backup frequency and off-site storage, cybersecurity measures, and employee training.
• Pricing and Rating: Pricing is typically judgment-rated based on the individual risk characteristics. Factors influencing the premium include the limits of liability, chosen deductibles, scope of coverage (e.g., inclusion of mechanical breakdown, flood, or earthquake), the business's industry, loss history, and the quality of its risk management practices.
• Coverage Customization: The IM 7100 can often be tailored with endorsements to meet specific needs. This might include adding coverage for newly acquired equipment, equipment in transit, off-site property, or enhancing coverage for specific perils. For example, an Upgrade Value Endorsement (like the IM 7213 mentioned in one source for a similar form) could provide for replacement with newer, better equipment.
• Underwriting Guidelines: Underwriters will typically require a completed ACORD application and may request detailed schedules of EDP equipment, software listings, and information about data backup and recovery procedures. For businesses with higher values (e.g., over $250,000 in total equipment values for some related forms), more detailed scrutiny and specific scheduling of limits per location might be required. A good loss history is generally preferred.
• Distinguishing from Cyber Liability: While the IM 7100 covers physical loss or damage to EDP property and the costs to restore data, it is not a substitute for a comprehensive Cyber Liability policy. Cyber Liability insurance addresses third-party liability arising from data breaches (e.g., notification costs, credit monitoring, legal defense) and other cybercrimes, which are generally beyond the scope of the IM 7100's property focus.