7.2 - Floaters Flashcards
The Nature and Role of Floaters
-the term “floater” is less widespread than it was, and coverages that were once called floaters are now sometimes called endorsements
-a distinction between the two terms is still recognized and may be easier to see with a brief look at the past
-the term “floater” comes from inland marine insurance, which itself derived from ocean marine insurance
-inland marine insurance is not a distinct class of insurance under federal, provincial, or territorial insurance legislation
-its development and growth in Canada had its roots in the US, and it applies to, among other things, property in transit
-the transportation aspect of inland marine insurance was broadly interpreted to include personal property that could be moved from one location to another or was taken on trips
-wealthy insureds with multiple homes and always traveling, carried all-risks floaters that applied to all their personal property
-the policies, known as “personal property floaters”, carried specific limits of insurance for each known location and an overall amount on property anywhere in the world
-the term “floater” thus denotes coverage that insures, or floats over, the property wherever it may be - a natural concept for insurers that specialize in policies covering property on the move
-a floater may be issued as a separate policy in its own right, but more often a floater constitutes the third of three elements in a personal property policy, and a floater may also be attached to a commercial property policy
definition of “floater”
-additional coverage for movable items, like jewellery or antiques, beyond what’s included in the basic homeowners policy. Also called a “rider” or “endorsement”. A policy designed to cover property that floats or moves, from location to location
How Floaters Operate - 3 ways
- floaters enhance limits or perils for property insured in the policy wording
>some types of property, such as jewellery, collectibles, and fine arts, are more valuable or easily damaged and so pose greater risk of an insured loss. For many insureds with little or any such property, the special limits of insurance in their HO’s forms may be sufficient, but other insureds may wish to purchase a floater to increase limits or enhance perils
>appraisals are often required for property insured under a floater. Appraisals verify: the existence of the item to be insured; its value; its ownership; and its condition - Floaters provide coverage for scheduled items - that is, items of certain types of property shown on a schedule of insurance
>this allows the policy wording to provide coverage for unscheduled items of the same types of property - for example, the special limit of insurance for unscheduled items of jewellery in a homeowners form - Floaters offer coverage on property that might not be covered otherwise
Example - insured owns $30,000 of jewellery, $22K is for 2 specific scheduled items, the other $8K is covered under the special limits provided in the homeowners policy
Common Types of Floater
- Fine Arts Floater
- Personal articles Floater
- Scheduled Personal Property Endorsement
- Other Limited Property
- Watercraft Floaters
- Vacation or Recreational Trailer Floaters
“schedule of insurance”
a list of items individually covered by a policy; for example, a list of jewels under a jewellery floater, a list of cars under one automobile policy, or a list of buildings under a fire policy
Common types of Floaters:
1. Fine Arts Floater
-fine arts are personal property and are not excluded, but they are often fragile or easily damaged and HOs forms do exclude loss caused by scratching, abrasion, or chipping of personal property or breakage of fragile or brittle articles, unless such loss is caused by a specified peril; by accident to a land vehicle, watercraft, or aircraft; or by theft or attempted theft
-items may be irreplaceable, thus though the fine arts floater insures property against all risks, it excludes breakage of fragile articles unless the loss is caused by specified perils such as fire, falling objects, or vehicle impact
-due to the pricing fluctuations with fine art pieces (depends on the reputation of the artist) so under a fine arts floater, the insured may choose to insure the item on an agreed-value basis
-agreed-value basis usually requires proof of the value at the time of writing, and periodically thereafter, and insurer must pay the agreed value of the insured item, even if a comparable item can be found at a lower value
-When property is insured on this agreed-value basis, the schedule of items will indicate a “V” beside the item
-regardless of whether an item is insured on fine arts floater, property on exhibit is not covered unless and exception to that exclusion is specified in the policy, property on exhibit are especially at risk of theft. UWs may require warranties of the insured or impose other limitations due to the amount of exposure for this coverage
-personal property policies also contain limitations for parts, as well as pairs and sets; so does the fine arts floater, which means that LoD to any part of a set will not be construed to mean a total loss of the set
“Personal Articles floater”
A policy that covers certain kinds of personal property in a principal residence more broadly or for higher limits than do policies, such as a homeowners policy, of more general scope. A property appraisal is often required
Common types of Floaters:
2. Personal Articles Floater
-just as fine arts can increase in value over time, so, too, can items such as jewellery, coins, stamps, and collectible cards
-these items are valuable and easily transported and can be sold with few traceable identifiers
-theft and disappearance (whether mysterious or otherwise) pose the greatest risk of loss
-proof of ownership and quality are often difficult because many items are passed down through generations of family without documentation
-bicycle serial numbers can be removed or altered, and people generally don’t take note so unable to provide when stolen
-for these reasons, HOs forms include special limits of insurance on such property
-premium for personal articles floater may vary depending on the nature of the insured items, and UWs may require appraisals to verify ownership and value
-floaters may broaden the coverage - by adding perils or lower deductibles, but even in floaters, insurers may still place sublimits, for example, stamp and coin collections are usually limited to a max value per item ($250), unless a different value is selected on the schedule
-musical instruments may be insured on a floater, but coverage may apply only when the item is on the insured premises, unless otherwise specified on the dec page
Common types of Floaters:
3. Scheduled Personal Property Endorsement
-scheduled personal property endorsement and the personal articles floater are similar, but differ in the types of property insured under each form
-this endorsement is particularly beneficial for insuring small computers. Under the endorsement, the term “personal computer” means:
>the central processing unit and auxilliary equipment, including but not limited to the central processing unit (CPU); monitor; speakers; modems; keyboards; printers; disk tape, and hard drives; cassette tape recorders, and work-processing equipment
>media, comprising materials on which data are electronically recorded, such as but not limited to magnetic tapes, diskettes, disk packs, cassettes, USB flash drives, and portable hard drives; and
>software, comprising programs or instructions stored on media
-the computer must still be personally owned by the insured and not for example by a company owned by the insured, but the term personal computer as used in the endorsement does not mean that the computer must be exclusively for personal use
-computers covered under this endorsement are covered for losses on or off premises, even if the computer is used in whole or in part for business purposes
-as in HOs forms, there is no coverage for loss of “data”, and loss arising from a “data problem” is also excluded, but an exception is made to cover ensuing loss caused by fire, explosion, smoke or water damage
-as well, the endorsement will pay only the cost of reproducing information from duplicates or from originals of the previous generation of media
-the cost of gathering or assembling information or data for reproduction is not covered
-software is a form of intellectual property that is licensed and cannot be duplicated without the consent of the copyright holder
-even if software scheduled on the endorsement, the policyholder must still prove ownership of the license before being eligible for indemnity or reinstallation on a replacement computer
-possessing software that has not been legally acquired is called “copyright infringement” or “piracy” and is a violation of Canada’s Copyright Act
-some policy forms may require the insured to back up at a specified frequency in order to receive coverage
Differences between Personal Articles floater and the Scheduled Personal Property Endorsement
-the personal articles floater is suited for collectible items such as those listed in the special limits of insurance of a homeowners form
-an appraisal is often required before the offer of coverage
-alternatively, insureds may require enhanced coverage on property that is not subject to a special limit, but where exclusions under the homeowners form may unfavourably restrict coverage
-for additional premium, policyholders may purchase coverage under the floater for such items as cameras, furs, or jewellery
-Under the Scheduled personal property Endorsement, coverage for scheduled property is not restricted to the principal residence premises
-although there are exclusions, they are far fewer than in the homeowners forms
-for example, coverage for property on exhibit is excluded in both the endorsement and the homeowners forms, but coverage for water damage or property located in a storage warehouse for more than 90 days is not
Common types of Floaters:
4. Other Limited Property
-homeowners forms include 2 groups of special limits of insurance, some special limits apply only to loss caused by theft; others apply to loss caused by any insured peril (except concerning watercraft)
-for certain kinds of property, such as money and securities, insurers may be unwilling to enhance coverage beyond what is allowed by the special limits of insurance, for other kinds of property, insurers may offer a variety of options to insureds to enhance coverage beyond the special limits
-insurer may agree to enhance coverage on certain property in one of two ways:
1. Offer endorsements or floaters, which attach to the primary policy but provide independent coverage - for example, on watercraft and accessories
2. Increase the special limits of insurance without amending perils or deductibles, as might be done for property of students living away from home
-increased limits will generally cost additional premium
-the special limits of insurance in a personal property policy cover small losses on incidental items of property that might otherwise be covered on more specialized policies - for example, small amounts of biz coverage under certain conditions; broader coverage for significant amounts of business property should be purchased under a commercial property policy (other examples: watercraft, spare auto parts, tools, and computer software
-where a more specialized policy exists, coverage should be sought under that policy first, because the incidental coverage under a personal property policy is intended as excess coverage only
Common types of Floaters:
5. Watercraft Floater
-special limits in a HOs form includes a modest amount of coverage against named perils only, for watercraft and their furnishings, equipment, accessories, and motors, however, for insureds with motorized boats, that coverage is often not enough
-watercraft floaters generally list each component - for example, the hull, outboard motors, and trailers - separately, along with a value for each, rather than showing an aggregate value for the property as a whole, coverage is provided at actual cash value
-appraisals on boats called “marine surveys”
-Under Transport Canada’s “Canadian Register of Vessels”, a pleasure-craft license is required for any watercraft powered by an engine of 10 horsepower (7.5 W) or more, even if only for private recreational use
-in addition, watercraft operators must also be licensed under the Canadian “Competency of Operators of Pleasure Craft Regulations”
-unlike other property coverages, debris removal is not automatically included in the watercraft floater because when a boat sustains a loss while in the water and becomes submerged, recovery may be complex and arduous, and must be timely or the risk of pollutants entering the water from fuel tanks and lines escalates
-removal of wreck coverage for watercraft is part of the liability coverage under the watercraft floater
-many of the exclusions in a watercraft floater are similar to those in other property coverages; other exclusions are unique to this class of business - for example:
>Other property policies exclude damage by vermin and insects; watercraft floaters also exclude damage caused by marine life
>damage caused directly or indirectly by flood of any nature, waves, tidal waves, tsunami, high water, water-borne objects, or ice is not covered at all, which eliminates the potential for non-fortuitous losses to be covered
“marine survey”
appraisal of a boat for value, mechanical condition, safety, and evidence of damage
-valuation of boats requires special expertise
-following a loss, a marine surveyor may also hep prepare repair specifications or recertify the vessel following repairs
Common types of Floaters:
6. Vacation of Recreational Trailer Floaters
-HOs forms allow modest coverage of watercraft and their accessories under the special limits of insurance, but HOs forms exclude other types of vehicles entirely under Coverage C:
>motorized vehicles or equipment
>camper units, truck caps, trailers, or equipment
>aircraft or equipment
-when a trailer is being towed, liability coverage is extended from the powering vehicle, but physical damage is not
-coverage specifically for physical damage must be placed on the unit, and the premiums and coverage may vary depending on whether the unit is permanently located or regularly in tow
-on recreational trailer floaters, Coverage A represents the unit itself
-insurers offer named-perils or all-risks forms and territorial limitations generally apply to Canada and the continental US
-built in accessories/furniture that would require a tool to remove are considered part of the insured unit
-only equipment forming a permanent part of the trailer is covered (including, but not limited to, the sway-bar, the trailer hitch, and the stabilizer connected to the trailer), whereas exterior attachments, which are not attached to the trailer itself while in transit, are not
-most RV trailer floaters offer a modest limit for contents that are located inside the unit, which may be set as a % of the limit for Coverage A
-HOs forms offer coverage for items temp removed from the dwelling but may not cover loss to property that is stored off-premises, conversely, RV trailer floaters coverage items that may be stored in an RV year-round
-intent of an RV/trailer is to provide temp accomidation, thus if a loss renders the unit untenantable, some floaters may provide coverage for ALE
-insured is expected to mitigate the loss, but if the trailer is destroyed a substantial distance from home, the costs to return may be prohibitive
-when ALE is included, coverage is limited to the lesser of:
>Additional expenses while the unit is being repaired or replaced;
>the sublimits specified in the policy; or
>the anticipated duration of the vacation only
-alternatively, the insurer may cover the expenses to deliver the unit back to the insured’s residence
-Vacation trailer floaters typically exclude coverage for any trailer that is rented out or is used as a permanent residence
-trailers and camper units are designed to be transported so they do not have as much strength as permanently built structures, and may be especially vulnerable to losses due to:
>leakage and seepage
>dampness of atmosphere
>escape of water following freezing of supply or waste tanks; and
>insects, rodents and vermin
-furthermore the movement of the unit may pose additional risk or loosening or cracking of pipes and other fixtures
