Technology allows the on-going miniaturization high value audio/visual (AV) movie, television and other production and editing equipment. As such equipment shrinks, more and more of it moves out of the studio and into the field, creating a serious and often undetected risk for insureds whose livelihood is based around this equipment. Much of the equipment is critical in generating income and can be hard to replace quickly.

Most insurance policies do not provide adequate coverage for the unique exposures associated with high value AV equipment. While property forms provide coverage for equipment while it resides on the named premises, once the equipment leaves the premises coverage is no longer extended or is severely limited.

Use of an inland marine (IM) policy is the common solution to this coverage challenge. IM policies generally extend coverage to only scheduled and described equipment. Meeting the criterion requires regular updating of the schedule. Normally equipment not listed is not covered.

Another challenge is insuring the income generating potential of the equipment. This is an especially critical issue for AV equipment rental dealer. Damaged or stolen equipment cannot be rented and if it's not rented it is not generating revenue. An unmodified insurance policy can leave the insured with a large uncovered loss of income, potentially a business- ending event.

Many clients working with high value AV equipment find it necessary to work overseas. Most coverage, if provided by unmodified insurance policies, ends as soon as the equipment leaves the United States.

Clients that own high-valued equipment used in either sound/video production or rented to others, must look for several coverage extensions to fill the gaps listed above:

• Coverage for equipment away from the insured's premise;
• Loss of income due to damage or theft of covered equipment; and;
• Coverage overseas.

Specialized insurance for high-value AV equipment can include risk-specific extensions of coverage. IM coverage is not standard and many coverage variations are available; agents armed with the necessary product knowledge will be better able to meet the client's needs.

Specific Questions

Damage, theft and mysterious disappearance of this critical equipment can result in large losses related to extra expense, expediting expense and loss of income (an often uncovered loss). Much of this equipment is valued at more than $100,000 per item and there is an established black market ready to pay cash for stolen equipment.

To make sure insureds are properly protected, the agent should ask the following questions:

1. Is there a separate insuring agreement for business income, extra expense and expediting expense? An ISO property form will not provide the needed coverage.
2. Does the policy form provide coverage for the above perils when the equipment is off the scheduled premises? An ISO property form will not provide the business income coverage needed even if the equipment is damaged on the scheduled premise.
3. Does the policy cover cross and sub-rented equipment? Look for language similar to: …property of others for which you are legally liable and which is lost, stolen, damaged or destroyed.
4. Is coverage written on an "all risk" or named peril basis? Look for "all risk" (risk of direct physical loss) coverage.
5. Valuation is critical so read the valuation section. Look for language that allows for repair or replacement without depreciation. When dealing with high valued equipment it is often aggressively depreciated for accounting purposes even though it is still a solid money maker. If equipment is valued on a depreciated basis, the insured will be unhappy.

The entertainment/presentation industry is a class of business that requires specialized knowledge. To make sure the client is well served look for an insurance company or program manager that specializes in the industry. Always ask the five questions listed above as even insurance companies that specialize in the entertainment industry do not offer all the coverages addressed.