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mortgageholder's claim will not be impaired. At our option, we may pay to the mortgageholder the whole principal on the mortgage plus any accrued interest. In this event, your mortgage and note will be transferred to us and you will pay your remaining mortgage debt to us. f. If we cancel this policy, we will give written notice to the mortgageholder at least: (1) 10 days before the effective date of cancellation if we cancel for your nonpayment of premium; or (2) 30 days before the effective date of cancellation if we cancel for any other reason. g. If we elect not to renew this policy, we will give written notice to the mortgageholder at least 10 days before the expiration date of this policy. 3. No Benefit to Bailee No person or organization, other than you, having custody of Covered Property will benefit from this insurance. 4. Policy Period, Coverage Territory Under SECTION I — PROPERTY: a. We cover loss or damage commencing: (1) During the policy period shown in the Declarations; and (2) Within the coverage territory or, with respect to property "in transit", while it is between points in the coverage territory. b. The coverage territory is: (1) The United States of America (including its territories and possessions); (2) Puerto Rico; and (3) Canada. 5. Protective Devices a. If you received a discount to the property premium of this policy because of the existence of one of the following protective devices, you are required to maintain that protective device. Existence of an applicable protective devices credit can be found on the Declarations Page. b. Protective devices include Automatic Sprinkler Systems including related supervisory services, Automatic Fire Alarms and Central Station Security Alarms. c. We will not pay for loss or damage caused by a Covered Cause of Loss which a device is intended to protect against if you: (1) Knew of any suspension or impairment in any protective device and failed to notify us of that fact; or (2) Failed to maintain any protective device over which you had control in complete working order. If part of an Automatic Sprinkler System is shut off due to breakage, leakage, freezing conditions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48 hours. 6. Increase in Hazard We will not pay for loss or damage when there has been a material increase in hazard that is within your knowledge or control. This condition applies to any and all portions of a claim. G. Property Definitions 1. "Accident" a. "Accident" means a fortuitous event that causes direct physical damage to "covered equipment". The event must be one of the following: (1) Mechanical breakdown, including rupture or bursting caused by centrifugal force; (2) Artificially generated electrical current, including electric arcing, that disturbs electrical devices, appliances or wires; (3) Explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control; (4) Loss or damage to steam boilers, steam pipes, steam engines or steam turbines caused by or resulting from any condition or event inside such equipment; or (5) Loss or damage to hot water boilers or other water heating equipment caused by or resulting from any condition or event inside such boilers or equipment. b. None of the following is an "accident": (1) Defect, programming error, programming limitation, computer virus, malicious code, loss of data, loss of access, loss of use, loss of functionality or other condition within 391-1003 08 16 Includes copyrighted material of Insurance Services Office, Inc., with its permission. Page 52 of 81