CHAPTER THIRTEEN - MISCELLANEOUS NONFILED COMMERCIAL COVERAGES

 

The previous discussions about Inland Marine insurance has been generally about those forms that have been filed by the ISO and the AAIS.  Some of the forms, it has been noted, can be modified by using nonfiled forms in order to cover exposures that cannot be covered by the filed forms.  This chapter will be concerned about some of the more common nonfiled forms.

SALESMEN’S SAMPLES

 

Salesman Samples Floater covers sample merchandise while in the possession of a salesperson.  Under the Definition, article F.6 refers simply to “Salesmen’s Samples Floaters.”  In addition to “samples,” any property being shipped to and from the salespeople is also covered.

 

This form may be written with a schedule of individuals, each with a limit of insurance pertaining to the samples they carry; or it can cover a number (number must be stated) of sales representatives with a statement as to the insurance amount which applies to each one.  In addition, there is a catastrophe coverage if losses involve more than one salesperson.

 

The form frequently excludes jewelry and furs, as they can be insured under a Jewelers Block or Furriers’ Block policy.  The property that is to be insured is usually named in the policy and is provided while the goods are in the United States or Canada. 

COVERED PERILS

 

Coverage can be either on an All-Risks basis, or on a Named Perils basis.  If it is on an All-Risks basis, the following exclusions normally will apply:

1. wear and tear, moths, vermin, gradual deterioration, inherent vice, delay or loss or market;
2. mysterious disappearance, miscounting, misplacing or shortages;
3. employee dishonesty;
4. war;
5. nuclear risks.

Theft of property from an unattended vehicle, excluding property in the custody of a common carrier, may be one of the exclusions, but it can be replaced by a requirement that the vehicle either have an alarm system, or it has a fully enclosed body with windows and doors locked.

 

Generally, losses occur by theft from automobiles or from hotel/motel rooms.

 

 

 

LIVE ANIMAL FLOATERS

 

Under Definition Article F.8, “Live Animal Floaters” are considered as an Inland Marine class of business.  This floater is nonfiled, whereas the Livestock Floater discussed earlier is a filed class.  Animals that do not qualify for the filed Livestock Floater is eligible for coverage under this Floater.

 

Coverage is on death or destruction of animals because of particular perils (Named Perils) or it can be used to provide death or destruction from any cause.  Usually, the few companies that write this coverage will use the Named Perils approach.

 

During the discussion of the filed Livestock Floater it was noted that coverage under that plan did not apply to livestock on winter range.  Winter range feeding is common in Colorado, Nebraska, Kansas, New Mexico, and Oklahoma, and cattle and sheep being fed on winter range can be covered under this nonfiled form.

 

The application is rather extensive and requires detail as to the number and type of animals to be insured, the location of the livestock, average height and weight and where they were raised.  In addition, the insurer must know the number of full-time and part-time employees working with the cattle, and the experience the insured has in winter feeding the livestock.

 

Death, caused by Named Perils is covered, and the Named Perils are very similar to those in the Livestock Floater.  Frequently there will be additional coverages, such as death by freezing and death by suffocation as a result of a Named Peril.  In the Midwest and the Great Plains, during winter blizzards, livestock will “bunch up” for collective warmth and the winds can cause them to drift into a fence corner or similar area, where the weight of the snow and ice can cause the livestock to die by suffocation as much as from freezing.

 

Death by disease is usually excluded and death must occur within a specified time, such as 15 days, from a named peril.  Animals are not covered at birth, and usually there is a waiting period of around 60 days.  Sheep usually are required to have a 60-day fleece.  The company will usually not pay more than 75% of the cash value of the livestock involved in a loss, or the limit of insurance, whichever is less.

 

Besides Winter Range cattle, cattle on feedlots are not covered under the filed form, but may be covered under the nonfiled form.  Cattle on feedlots can be either All-Risks or Named Perils.  Under the Named Perils form, coverage is only for death resulting from :

 

1. fire and lightning;
2. windstorm;
3. accidental shooting;
4. drowning;
5. collapse of buildings or structures;
6. attacks by wild animals or wild dogs;
7. artificial electricity;
8. vandalism;
9. malicious mischief;
10. suffocation or freezing caused by snowstorm or blizzard;
11. collision by a vehicle;
12. loss by theft, (excludes escape and mysterious disappearance).

 

 

However, the All-Risks form covers death by any cause, including disease.  Exclusions are loss by escape, mysterious disappearance, improper medical veterinarian treatment, and action on the part of officials to prevent the spread of a disease (foot and mouth disease again).

 

There is usually a deductible, which can be expressed as a percentage of the value of one or more animals.

 

 

 

HORSES

 

The Horses Floater pertains to Racehorses and Show horses, as they cannot be covered under the filed Livestock Floater.  This particular form seems to be where the applicant lets the insurer know what coverages they need, and the insurer will the make an offer.  Under a Named Perils form, the exclusions are very similar to the Live Animal Floater described previously, except that since these animals are frequently trailered for long distances, collision, upset or overturn of the conveyance is covered.

 

Generally, while the covered animals are at a show, racetrack, fairgrounds, etc., they are not covered.  However this can be an extremely important coverage for many applicants, so usually they will provide coverage for an added premium.

 

Since the value of these animals vary considerably, the insured animals are usually scheduled with an individual amount of insurance applying to each animal.  The form can be modified to include the tack and similar equipment.

 

 

 

VETERINARIAN COVERAGE

 

A veterinarian or kennel owner can obtain coverage for the liability they have when animals are in their custody.  The Named Perils form cover the death or destruction caused by the covered perils, which are very similar to those covering racehorses and show horses.  Usually there is a limit of insurance on each animal, with a catastrophe limit also.

 

 

 

POULTRY

 

For insurance purposes, there are two classes of poultry:

1. Layers and
2. broilers, fryers, and roasters.

LAYERS

 

When layers are covered, the owner of the layers is named as the insured in nearly all cases.  Layers are usually insured on a flat premiums basis.  There is a limit of insurance per bird and for each brooder house. 

 

BROILERS, FRYERS AND ROASTERS

 

With broilers, fryers and roasters, the insured may be either the individual grower or the dealer or feed company that farms out the birds; or in some cases, both.  They are usually written on a reporting basis, and each flock is reported when acquired and premiums are for the flock during the full growing period – usually from 8 to 12 weeks.

 

Usually there is a separate valuation agreement with birds under a certain age, and those over that age.  The valuation of the younger birds is determined by their invoice worth when acquired, plus the expenses for feed, medicine, litter and fuel at the date of loss.  For the older birds, the market value prevails.  Broilers, fryers and roasters have a limit of insurance per bird, per brooder house, or both.  There are special limits for those policies covering feed companies, as there would be a limit of insurance in transit, as well as one per bird when the bird is on another party’s premises. 

 

Coverage is death or destruction due to the usual perils (fire, lightning, windstorm, etc.) and death must be within 48 hours of the loss.

 

Exclusions include loss by freezing, huddling or piling (turkeys, in particular, frequently suffer death or destruction by huddling), temperature or humidity change, stampede (just like cattle, except they are much easier to control), fright (birds can die of fright), and any loss caused by the failure or defect in any heating unit unless fire outside the unit ensues.

 

 

 

ANIMALS RAISED FOR FUR

 

This would provide coverage for such animals as minks and chinchillas and like other animals discussed here, this is a nonfiled class.  There is little call for this type of coverage, so there are no standard forms.  Generally there are large deductibles.  An unusual feature in these policies is death by cannibalism.  When one mink tells another that they look “good enough to eat”, they aren’t kidding.

 

 

 

ANIMAL LIFE INSURANCE

 

More technically known as “mortality” insurance, this form provides against death only.  Death by “intentional destruction for humane purposes,” can also be covered.  It is used mostly by boarding &/or breeding farms, veterinarians, and trainers, and usually is purchased to cover racehorses and show horses, and other animals and livestock in the custody and care of these farms or individuals.

 

If the animal is intentionally destroyed, it must be under the supervision of a veterinarian appointed by the insurance company.  Death by surgery or inoculation is excluded unless it was performed by a qualified veterinary surgeon who certifies that the destruction was caused solely by accident, disease, or illness.  Death or confiscation by a government authority is also excluded

 

This form is similar to Term life insurance on an individual and the animal is subject to underwriting standards and physical examinations to make sure they are in good physical condition before they are accepted by the insurance company.

 

 

 

INSTALLMENT SALES AND LEASED PROPERTY

 

The 1976 Marine-Wide Definitions, under article F.12, states:

“Installment Sales and Leased Property Policies covering property pertaining to a household and sold under conditional contract of sale, partial payment contract or installment sales contract or leased, but excluding motor vehicles designed for highway use.  Such policies must cover in transit but shall not extend beyond the termination of the seller's or lessor's interest.”

 

It should be noted that there must be a sales or lease contract in effect.  Anything that is sold on an open account is not subject for installment sales coverage.  Generally both forms are nonfiled. 

 

INSTALLMENT SALES

 

This form protects goods against loss during the time that it has been for sale on an installment basis, and therefore, can protect the manufacturer of the property, the sales organization or retail store that sells the property, and also the financial institution that finances the installment sale of the property.  It fills the gap between the time that the property is sold, and the time that it is fully paid for and title to the property passes to the purchaser without encumbrances. 

 

 

The policies can be written to protect the interest of the seller, or (dual interest) of the seller and the purchaser also.  Some states allow the insurer to issue “certificates” of insurance to the purchasers of goods under the dual interest policy, setting forth the goods to be covered, the location, premium, and a scale of benefit payments, terminating when the seller’s interest in the property ceases.

 

This policy may be issued on an All-Risks basis, or Named Perils.  Usual exclusions apply, with generally electrical damage and wear and tear specifically excluded.  Covered property is excluded if it is on the premises of the seller – such as performing repair or service work.

 

Notice, also, that motor vehicles designed for highway use are not insurable under this policy.  Other than that, most any property can be insured under this policy, including household goods, jewelry, musical instruments, contractors property and equipment, medical and high-tech equipment – in effect anything that is sold on an installment basis.

 

 

LEASED PROPERTY

 

The Leased Property coverage is quite similar in respect to underwriting, as the Installment Sales policy.  The Leased Property policy must depend upon the basic instrument involved, the lease itself, for details as to how coverage can be constructed.  Therefore, a copy of the lease must be submitted with the application and any changes must be filed with the insurer.

 

Many leases require that the lessee purchase and maintain certain insurance coverages on the property, such as fire, lightning, theft, and other hazards spelled out in the lease (or there could be a statement requiring the lessee to maintain a “comprehensive” coverage, or words to that effect).  Usually the insurance will apply only if the lessee complied with all provisions of the lease, such as purchasing other insurance or if the insurance was simply not sufficient.

 

This form is another “tailor-made” form, as each situation is different.  For instance,  if a firm leases equipment of all types and manufacturers, to be used for different purposes (such as a heavy equipment leasing company), the description of the insured property must be quite detailed (and probably “wordy”), whereas if the property leased is of a single type, or performs a single service, or manufactured by one company, etc., the description would be minimal.

 

As with the Installment Sales policy, only motor vehicles designed for highway use cannot purchase this coverage, leaving a wide field of commercial, business, industrial, medical, etc., equipment that can be leased, as a market for this coverage.

 

One of the underwriting problems is that there are many items that are leased where it is not possible to specify the location of the property at any one time.  In those cases, the premiums will obviously be higher than comparable equipment that is not mobile.

 

 

 

WOOL GROWERS

 

This policy covers wool, mohair and sheep pelts while it (they) are in a specified location, or in transit from the shearing houses, ranches or corrals where shearing occurs, to any place in the U.S. or Canada.  While it is in bales, bags or other methods or containers used for shipping, it is covered for fire, lightning, flood or explosion, plus the unusual peril of “cloudburst.”  While in transit, then it is also covered for collision, collision-overturn-upset of the conveyance, or bridges collapsing.  Coverage can also be extended to include theft, riots, civil commotion, etc.

 

 

 

TANKS AND CONTENTS OF TANKS

 

The Definitions (F.21) states “Domestic Bulk Liquids Policies, covering tanks and domestic bulk liquids stored therein” can be covered under an Inland Marine form.  This is a nonfiled class.

 

TANKS

 

For the purpose of this coverage, Tanks do not have to be metal (or other material) containers, but can also be storage areas underground, such as old salt mines, old oil wells, or underground caverns.  It can be either on a completed structure basis, or on a Builders Risk basis.  It can also cover the pipelines that feed into or from the tanks, including the pumps, filters and other such equipment.  Coverage can either be All-Risks or Named Perils.  Exclusions are the usual wear and tear, rust, corrosion, deterioration, inherent vice, etc.

 

CONTENTS OF TANKS

 

The content coverage can apply to either the owner of the material being stored, or it can be written on a bailee basis whose concern is the safety of the material being kept for the bailor.  It can be written either on an All-Risks basis or a Named Perils basis.  Named perils are leakage, rupture and collapse.  Exclusions are the usual wear & tear, mechanical breakdown, etc., with the addition of excluding any work that is done on the property, theft, shortage at inventory, etc.

 

The underwriting of Tanks and Contents can be “fraught with danger” and tough guidelines have been developed by Associations and trade organizations, particularly those in the petroleum business.  This is a specialized field, but the underwriting hazards that may be present are interesting.  A few underwriting concerns are as follows:

1. Whether the storage tanks are adequate in size, thickness, capacity, and age, to contain the particular volume, viscosity, and other characteristics of the material to be stored.
2. The foundation of the tank is as important, as the shifting of the foundation can easily rupture a storage tank. 
3. The closeness and movement of nearby bodies of water.
4. The vegetation and other growth around the tanks.
5. Are the tanks moved by vehicle?  What precautions are taken while loading, unloading?
6. The possibility of overloading and resulting spillage are always dangerous, as fire, explosion or release of noxious fumes can be the result.
7. Is the removal of debris from the tank when “empty” to be covered?  This can be a very costly process, and dangerous, particularly if the tank is near a body of water.

 

 

ELECTRONIC DATA PROCESSING POLICIES

 

Pursuant to F.23 of the Nation-Wide Marine Definitions, coverage can be provided to Electronic Data Processing policies.  It is interesting to note that because of the newness of this now-very-important field, it is the last of the classes under the 1976 Definition.  As with anything this new and this “high-tech” and continually evolving field, there has been a lot of interest in this area.  It is also interesting to note that this Definition, when written in 1976, did not cover (or contemplate, probably) the high-tech explosion into mini and microcomputers, but was designed to insure the large mainframe computers.  It is safe to say that the processing power in a 1976 mainframe would encompass an entire floor in a business building, and still not be able to compete with the PC that was used to write this text, in speed or capacity.  An individually owned PC today has more processing power than the computers that operated during the first moon landing, according to many sources.

 

If this class was to cover large, permanently-installed mainframes, then obviously the policies were written in the property departments of insurance companies, with Inland Marine coverage for equipment, machinery, etc., in transit.  Therefore, there has been little change from the property coverages reflected in the Inland Marine policies.  Today, there are many types of policies, some covering only the large mainframe computers located in large businesses or in data centers, laboratories, etc., others that cover just the minicomputers or microcomputers (generally called “Personal Computers today – or PCs), and some cover both. 

 

It is difficult to present an all-encompassing discussion of these important policies as there are so many different coverages, and the coverages change as the industry changes.  The discussions here will cover EDP policies that are owned by, leased to, or rented by, the insured, including property of others in the custody of the insured.  Also, the equipment would be used only at the insured’s premises.  Other coverage, such as leased equipment or equipment purchased on an installment plan, equipment in transit, etc., are covered under other types of policies, most, if not all, discussed elsewhere in this text.

 

COVERAGE

 

Coverage is also necessarily broad in scope, as it can cover not only equipment, but also data, extra expense and business interruption can also be covered.  Sometimes the policies will provide separate coverages for each, and sometimes they are combined into one policy, except for business interruption which has to be a separate policy by its very nature. 

 

Mainframe equipment, such as in a data-processing center, is usually scheduled with a list of options, whereas those covering PCs are more encompassing.  Those policies that cover both can cover the items under an automatic coverage, with options to purchase additional insurance.  The question arises as to what is “mainframe” and what is micro-minicomputers?  If a company offers separate policies for each, they will usually pick a value (such as $250,000) to make that determination. 

 

The particular property that is insured needs some definition.  Equipment, such as the computers, printers, scanners, monitors, etc., is considered as “hardware.”  Equipment may be insured either on a blanket basis, or on a schedule.

 

“Data” has been defined as “facts, concepts, or instructions converted to a form useable in data processing operation, including computer programs.”  (Inland Marine Insurance, Vol.II, McNamara, Laurence, Wood)  Programs are referred to as “software.”  Items such as flowcharts, reports, etc., are not considered as “data” unless they are transferred into the computer format.  Any material (“hardcopy”) such as bills or other documents, would be covered under another Inland Marine form.

 

“Media” is usually defined as the material upon which data are recorded (discs, CDs, magnetic tapes, and even the “old-fashioned” paper tapes and punch cards).  

 

The difficulty in determining what can be covered with Data or Media is that data or media that cannot be replaced are usually not covered.  However, a predetermined amount can be so stated, and that amount would be paid in case the data/media could not be replaced.  Otherwise, the cost of reproducing the lost or damaged data is covered, and the replacement cost of the media is covered.

 

EXTRA EXPENSE AND BUSINESS INTERRUPTION

 

The extra expense provision covers the expenses that are “extra” to the usual operation or replacement, or repair.  For instance, if the air conditioning is not working, the EDP equipment (in particular, the large mainframes) cannot operate until the air conditioning is working. 

 

 

BUSINESS INTERRUPTION

 

Business interruption usually only applies where there is a large mainframe in operation in a data center, and provides for loss of income because of the business not being able to use the computer for its normal business operations, either full-time or part-time.  It usually has an overall limit.

 

COVERED PERILS

Under the EDP policy, perils covered are risks of direct physical loss or damage.  Exclusions vary, and can vary widely, depending upon what coverage is needed.  Some of those exclusions in general use, are

1. wear & tear, gradual deterioration, depreciation, insects, vermin, etc.
2. dishonest, fraudulent or criminal acts of the employer, officers of the firm, or employees.  (Note:  Even the newest employee, or the one with the lowest salary, may, and probably will, operate expensive EDP equipment.  Think of the damage that one disgruntled employee can cause.  Therefore, while other Inland Marine policies similar in scope will exclude dishonesty, etc., by employees, the EDP policy generally does not make this exclusion.)
3. programming error (this can be specified in different ways, such as faulty instructions to a computer, etc.  Nearly all programs have “bugs” when they are first developed, but it has to be extremely difficult to underwrite this risk as the underwriter would have to go “into the programmers mind”, so to speak).
4. war, nuclear risks,
5. mechanical breakdown, faulty construction, etc.
6. short circuit or electrical disturbances – caused by OTHER than lightning.  Of course any (if not all) EDP operations have Voltage Surge Protectors all over the shop, including expensive models that will run the computers if there is a sudden surge that would otherwise shut the computer down.
7. processing or work upon the property covered.

 

The last three exclusions may be deleted from the policy, and a substitute provision, called a “breakdown coverage” would be included.  In essence, the breakdown coverage insures both data and media against electrical injury, including those that might erase or otherwise disturb, processed data from electrical problems or power failure within or near to the insured’s premises.  Often the breakdown coverage will insured damage caused by corrosion, rust or change in humidity/temperature if caused by air conditioning failure.

 

Coinsurance is usually required, ranging from 80% to 100%, and does not apply to data or media (too difficult to establish a value).  Equipment is usually covered for the cash value or replacement value.  A unique valuation for EDP policies is that it may also be valued at the “up-graded” value, which means it can be replaced with new “state-of-the-art” equipment that performs the same operation.  With the ever improving advance in technology in this field, this is a valuation worthy of consideration.

 

EDP policies will contain deductibles, with separate deductibles for equipment, for data & media and for extra expense.  Business interruption may have a waiting period of a number of days.

 

PLUGGING THE HOLES

 

Note:  Accounts Receivable, Valuable Papers and Records, can be written in conjunction with the EDP policy to cover those records and data that is not covered under the policy otherwise, such as information that will be entered into the computer system, or from which data is derived to be entered into the system, or used for programming purposes. 

 

In respect to damage caused by employees or others, such as fraudulent entry into a computer database, either by employees or by outside “hackers”, Computer Fraud insurance is available that covers fraudulent data input or fraudulent destruction of data in the system.  Unauthorized Computer Access insurance not only covers fraudulent access, but also accidental access and access by hackers.  These policies cover insured and the liability of the insured to third parties. 

 

There are a small number of companies that will write Errors and Omissions on EDP operations.  It protects the insured against any liability that occurs as a result of the negligence of the insured, or negligent acts, errors or omissions while performing data processing services for others.  Note, however, it does not provide coverage for errors and omissions resulting in a loss to the insured.

 

Underwriting is highly technical and is quite difficult.  The underwriting of a mainframe is quite different from underwriting an operation that is partially or entirely of PCs and their peripherals.  For instance, the location and environment of a mainframe is of considerable importance, whereas it is not of so much consequence for the PC operations.  Fires and electrical problems vary widely also.  Most large corporations that depend heavily upon their EDP department for their day-to-day operation (which is most of the companies), have “Disaster Recovery Plans” established that will help to recover from any type of disaster, which include such items as off-site backup computers (owned or leased), time-sharing or reciprocity with other firms.  Off site storage of critical data is another important part of such a plan.  For instance, many insurance companies store duplicate records of all important papers and data, in old salt mines in Kansas where the humidity and temperature are perfect for eternal storage.

 

 

 

STUDY QUESTIONS

 

1.  Bill is a travelling salesman.  He is insured under a Salesmen’s Samples Floater.  Which of the following is true regarding this coverage.

        A.  The policy does not cover his material or samples while it is being shipped to him.

        B.  The policy would (usually) provide coverage for jewelry if he was a jewelry salesman.

        C.  The policy may require that the car he uses in his business has a state-of-the-art alarm system.

        D.  If some of Bill’s samples need to be replaced periodically, they are not covered while being shipped back to his main office.

 

2.  The principal difference between the Live Animal Floater and the (Named Perils) Livestock Floater is

        A.  The Live Animal Floater does not cover horses and cattle.

        B.  The livestock grazing on the range is not covered under the Life Animal Floater.

        C.  The beef cattle grazing on the range are not covered under the Livestock Floater.

        D.  The Live Animal Floater would not cover Angora Sheep.

 

3.  Which of the following could be covered under a Horse Floater because they could not be covered under the filed Livestock Floater?

        A.  Betty’s horse Brandy, a Palomino mare used for pleasure riding.

        B.  Brutus, a bay Quarterhorse that is used for racing.

        C.  Pal, a working cowpony owned by the foreman of the ZX Ranch.

        D.  A Guernsey dairy cow used for milk for the ranch personnel.

 

4.  Barron’s Rentals leases television sets, computers and electronic equipment, radios/stereos and furniture.  They carry an Installment Sales and Leased Property policy.  If they know the people to whom they are leasing or selling under an installment purchase, they make verbal agreements with them and allow them to make payments depending upon what they can afford over the period of time that they have agreed to.  If they do not know the people, then they have a regular lease or installment contract.  Which is true?

        A.  In any event, the policy will cover any property leased or sold on an installment plan from the store.

        B.  The policy will only cover those items that are fully covered by contract, not verbal agreements.

        C.  The policy will only cover those items that are covered by the verbal agreements only.

        D.  Only the property that is not subject to rapid depreciation is covered.

 

5.  Under the “Tanks” covered under Domestic Bulk Liquid Policies in the Marine Definitions,

        A.  all of the tanks must be made of stainless steel.

        B.  pipelines cannot be covered under this type of policy.

        C.  tanks do not have to be metal, but can also be underground storage.

        D.  does not cover materials stored in old salt mines.

 

6.  The Wool Growers policy covers

        A.  all personal and business property located on a sheep ranch.

        B.  wool, mohair and sheep pelts.

        C.  sheep while grazing on the range.

        D.  liability of sheep ranchers.

 

7.  The original purpose of the Electronic Data Processing (EDP) policies was to cover

        A.  large mainframe computers.

        B.  micro-computers.

        C.  advanced adding machines.

        D.  liability arising from misuse of EDP cards.

 

8.  A data processing firm has both large mainframes and numerous “PC’s” and want to cover them all with the EDP policy.

        A.  The policy will probably schedule the mainframes, and provide blanket coverage for the PC’s and peripheral equipment.

        B.  It is not possible to cover both mainframes and PC’s in the same policy.

        C.  All of the equipment will need to be scheduled.

        D.  Peripheral equipment, such as printers and scanners, must always be scheduled.

       

9.  The “Extra Expense” coverage of an EDP policy, covers

        A.  the expense of installing EDP equipment, such as networking computers and other EDP equipment, purchasing and installing software to operate a system, etc.

        B.  any income lost because of a large mainframe going down and the business thereby loses income.

        C.  replacing hard copy data with software.

        D.  extra expenses that arise and are “extra” to the usual operation of the business, such as a breakdown of the air conditioning equipment used with a large mainframe.

 

10.  The DataLink is a data processing and actuarial firm that handles EDP work for several large insurance companies.  They are concerned that hackers will get into their system and obtain information about confidential information injurious to their clients or to themselves.  What can they do?

        A.  They can purchase either Computer Fraud insurance or Computer Access insurance, depending upon whether they want to also insure against accidental access.

        B.  The Electronic Data Processing Policies cover these situations.

        C.  There really is nothing that Datalink can do, but their clients can obtain coverage that protects their information  while in the hands of DataLink.

        D.  They can purchase Computer Fraud insurance, however that only covers data that has been inputted by an employee and during normal working hours.

 

ANSWERS TO STUDY QUESTIONS

 

1C     2C     3B     4B     5C     6B     7A     8A     9D     10A