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Valuable Papers And Records Coverage Form (IM 7400)

The IM 7400 Valuable Papers And Records Coverage Form is a Commercial Inland Marine policy that provides coverage for direct physical loss or damage to valuable papers and records. This includes the cost to research, replace, or restore these critical documents. Unlike standard property policies that may offer limited coverage for valuable papers, the IM 7400 is designed to offer broader protection for these unique exposures. It covers inscribed, printed, or written documents, manuscripts, and records such as abstracts, books, deeds, drawings, films, maps, and mortgages. However, it's important to note that money, securities, and electronic data processing media, programs, or data are typically not covered under this form.

Classes of Business It Applies To

This coverage is crucial for businesses and professions that heavily rely on physical documents, where their loss or damage could significantly disrupt operations or lead to financial hardship. Examples include:

• Architects and Engineers: Blueprints, drawings, and project files. If an architect's office suffers a fire, destroying years of uncopied drawings and sketches, this policy would cover the cost to recreate them.
• Law Firms: Client files, court records, deeds, and contracts. Imagine a law firm whose physical client files are destroyed in a flood; this coverage would help with the immense cost of researching and reconstructing those case files.
• Accountants and Financial Planners: Financial statements, tax records, and client investment information.
• Medical and Dental Offices: Patient records (though increasingly electronic, physical copies may still exist and require coverage).
• Libraries, Museums, and Archives: Historical documents, rare books, and irreplaceable manuscripts. For instance, an original, irreplaceable manuscript of a famous author held by a museum would be a candidate for this coverage.
• Real Estate Companies: Property deeds, mortgage documents, and survey maps.
• Any business with critical paper records: This could include research and development firms with unique formulas or designs, or companies holding original patent or copyright documents.

Special Considerations

• Exclusion of Electronic Data: A significant consideration is that this form typically excludes electronic data and the media it's stored on. Businesses with critical electronic records need separate Electronic Data Processing (EDP) coverage.
• Property Not Specifically Described: Coverage may not apply to property that isn't specifically described on the declarations if it cannot be replaced with property of similar kind or quality (e.g., an irreplaceable historical document). For such unique items, specific scheduling and valuation are often necessary.
• Storage Requirements: Policies may have provisions requiring valuable papers to be stored in specific receptacles (e.g., fire-resistant safes or cabinets) when the premises are closed or when the documents are not in use. Failure to comply can jeopardize coverage.
• Coverage Territory: The form typically covers property at the premises listed on the declarations. There may be a sublimit for property temporarily away from the described premises, often up to $5,000, unless a higher limit is specified. Coverage can also extend to records removed from the premises to a safe location due to imminent danger, provided the insurer is notified within a specified timeframe (e.g., 10 days). However, property in permanent storage away from the declared premises is generally not covered.
• Relationship to Other Policies: While some standard property policies (like Businessowners Policies or Commercial Property Policies) may offer a limited amount of valuable papers coverage as an extension, the IM 7400 usually provides broader "all-risk" or open perils coverage and higher, more specific limits. It's crucial to assess if the base property coverage is sufficient or if this dedicated Inland Marine form is needed.
• Excluded Property: Besides electronic data and money/securities, the form also typically excludes contraband or property involved in illegal activities.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters need to assess the nature of the valuable papers, their concentration, susceptibility to loss, and the protective measures in place (e.g., fire-resistant storage, duplication practices). Businesses that maintain duplicates at a separate, remote location may have less need for high limits.
• Valuation: Determining the appropriate limit of insurance is critical. This should reflect the cost to research, reproduce, or restore the documents. For unique or irreplaceable items, an appraised value may be necessary, and these items might need to be specifically scheduled.
• Pricing: This form is often judgment-rated based on individual risk characteristics, requiring referral to the company for rating. Factors influencing premium include the limits of liability, deductibles, the type and volume of records, storage and protection methods, and the business's claims history.
• Coverage Gaps: Agents should highlight the exclusion of electronic data and ensure clients understand the need for separate cyber or EDP coverage if significant exposures exist in that area. Also, clarify the limitations for property away from premises and the conditions for coverage.
• Deductibles: A minimum deductible (e.g., $500) typically applies, with options for higher deductibles.
• Coinsurance: Coinsurance provisions may apply to property at scheduled premises, often 80%. It's important to ensure limits are adequate to avoid coinsurance penalties. Coinsurance usually does not apply to property in transit or at unscheduled locations.
• Related Forms: The IM 7400 is used in conjunction with Commercial Inland Marine Conditions forms (like the CM 00 01 Common Policy Conditions) and a declarations page.
• Market Trends: While dedicated Valuable Papers and Records coverage was once more common, it has seen some decline in popularity as broader property forms have started to include this as an additional coverage or extension, albeit often with lower sub-limits. However, for businesses with significant exposures, the standalone IM 7400 often provides superior and more tailored protection.