Chapter 11 Inland Marine Flashcards
Inland Marine
Inland Marine insurance is policy that covers losses to moving and movable property that occurs when it is transported across the continent. It is an outgrowth of ocean marine insurance, which provided similar coverage for property that was transported by sea.
Because of the sheer variety of cargo being transported, and the unique circumstances involved in the transportation, inland marine insurance policies are usually phrased broadly enough to allow flexibility other property-based insurance policies usually lack.
History of Inland Marine Insurance
For most of human history, the best way to transport cargo was by ships. They could haul large quantities of cargo without requiring nearly as much power as transporting it by land would. However, it did not offer the same protection while the cargo was loaded off the ships or while it was transported to its final destination by land. That was something property owners had to cover out of their own pockets.
The IM insurance was designed to fill this gap. Originally, inland marine insurance was designed to protect cargo while it was transported along rivers, channels, and other waterways, but by the 20th century, it expanded, providing coverage to every mode of transportation, including the docks and warehouses where property is stored.
Today it is entirely possible to get inland marine insurance even if the cargo doesn’t go on the water.
What IMI Covers
Generally speaking, property can be subject to IMI while it is in transit so long as it falls in one of the following categories:
- Imports and exports - cargo shipped from one country to another.
- Domestic shipments - cargo that is shipped within a single country’s borders;
- Individual property - personal property that belongs to individuals. This includes types of property that other types of insurance won’t automatically cover, such as jewelry, furs, and musical instruments, among other things; and
- Business property - property related to a particular business or occupation. This includes everything from office equipment to office supplies.
In most cases, the coverage will extend to cover that damage to any equipment or a piece of infrastructure involved in transporting the product; i.e. the truck and the bridge it is passing over.
When taking out IMI, property owners can choose between peril coverage or all-risk coverage. Peril coverage is specific named perils; all risk-covers all but exclusions.
How IMI works
The IMI covers the value of the property and the legal costs that may result from the damage to the property. The coverage will remain in force at every point of the cargo’s journey, regardless of whether or not it’s actually moving at the time. Unlike other types of property insurance, IMI policies provide the same coverage regardless of location. The fact that there are few laws regulating the field simplifies matters considerably.
IMI protection provides coverage for goods being transported from site to site. This includes rail and motor truck transportation exposures, inland waterway transportation exposures, and instrumentalities of transportation or communication (bridges.)
Nationwide Marine Definition
According to the Nationwide Marine Definition, a risk must include an element of transportation to be eligible for an inland marine contract. The property must actually be:
a. in transit;
b. held by a bailee;
c At a fixed location; or
d. a transportable property that is often in different locations.
Four Classes of IMI
On the basis of nationwide definition; the 4 divisions of IM coverage are:
a. property in transit;
b. bailee liability;
c. fixed transportation property (instrumentalities); and
d. personal and commercial floaters
Types of Policies
- Property in transit - transportation insurance covers a specific trip. It is similar to OM cargo coverage. This is a first party coverage covering the insured’s property frequently exposed to loss while it is in transit from one location to another. Coverage is provided for an insured’s property from the moment it leaves its initial point of shipment until it is delivered to its point of destination.
a. Annual transit policy - protects the shipper or receiver of goods against loss to goods in transit. Coverage is available on a named-peril basis, and covers all the insured’s incoming or outgoing shipments during the year;
b. Trip transit policy - similar to annual transit policy, however it is used to insure single shipments of goods for companies that have only occasional need. Coverage extends from point A to B.
c. Open cargo policy - insures the goods in transit and remains in force until cancelled by the parties involved. Defines the goods, the route, the limit of liability and perils covered. The insurer determines the premium using a monthly shipment report from the shipper.
d. Exclusions:
- loss by theft;
- robbery;
- civil commotion;
- war; and
- riot.
- Bailee liability - used to meet the needs of persons who have intentionally received temporary custody of goods or property belonging to others. A bailor, or customer, gives up possession of their property to the bailee, or business. This would reimburse the bailor if their property is lost or damaged while in the care, custody, or control of the bailee.
Types of businesses that would need bailee coverage include dry cleaners, tailors, and bicycle or television repair shops. Two common inland marine forms include the following:
a. Bailees customer policies - written on a named-peril basis & cover direct damage, without regard to legal liability, to goods in the care, custody, or control of the insured for services such as cleaning, laundering, or repairing. This type of policy may be adapted to the need of most businesses.
b. Motor truck cargo coverage - referred to also as carriers’ liability. Many states require licensed public truckers to purchase a prescribed minimum amount of legal liability coverage for their shipments. A motor truck cargo policy insures the trucker for legal liability as a carrier of goods belonging to others.
- Fixed transportation - Some inland marine forms may also provide coverage for bridges, tunnels & other instrumentalities of transportation and communication. These items qualify for inland marine coverage because they are held to be an essential part of the transportation system.
a. I.e. bridge insurance covers direct loss or damage to the bridge and its approaches, however the damage is covered, with a certain number of expectations;
b. piers, wharves, and docks may also be covered with this form.
- Floaters - This term is used to denote an inland marine policy that covers mobile property wherever it may be located as opposed to during a specific trip. These forms are divided into personal and commercial floaters.
a. Personal floaters – there are several types of personal floaters providing protection for property listed on a schedule;
b; personal property floater – this provides open perils coverage for personal property, not only away from the insured’s residence but in the residence as well. This contract insures virtually every piece of personal property, with some common exceptions, such as boats, autos, and business property;
c. Personal effects floater – this provides protection for an insured’s personal property away from the residence. This policy does not specifically list the personal effects to be covered, but it includes all property usually carried by travelers and tourists.
d. Personal articles floater - the inland marine floater provides all risk coverage on personal items such as furs, silverware, jewelry, cameras , fine arts, golfer’s equipment, and antiques.
- This coverage may be attached to an HOI policy or purchased as a separate contract;
- Each item will be listed separately (scheduled) in the contract with its value listed;
- The value of more expensive items, such as a diamond ring, must be verified by an appraisal;
- Fine arts would be covered by this type of contract on an agreed-value basis. In this situation, the insurer and the insured agree on the amount of coverage established for the fine arts to be protected;
- Newly acquired jewelry, watches, furs, cameras, and similar items are automatically covered for 30 days at ACV up to $10k or 25% of the amount already scheduled.
- Commercial floaters – these cover property frequently moved from place to place in connection with a business or profession.
a. Physicians’ & surgeons’ equipment floater – this is designed to cover a doctor’s professional instruments and equipment used in a practice. It is an all risk policy covering equipment even when moved from place to place;
b. Contractors equipment floater – provides coverage for a contractor’s equipment which at some time moves from one location to another, including small and large contractor’s tools, machinery, and automotive units not registered for road use. Policies are usually written on an all risk basis;
c. Installation floater - This is written for a number of businesses whose operations require the complete installation of their products, in working order, at the premises of the customer before delivery is considered complete. An example of an exposure where this policy is appropriate would be business specializing in retail store fixture installation.
A contract to remodel a specific location may require anything from a new storefront to interior decoration. This floater would cover any machinery or products partially installed or in transit.
d. Accounts receivable coverage – this provides all risk coverage for loss resulting from the damage or destruction of accounts receivable records. It may be written as a stated limit or reporting form policy.
Coverage includes:
- sums due but not collected;
- interest on loans;
- collection expenses; and
- other reasonable expenses.
Excluded:
- bad debts
- insured dishonesty;
- billing errors
- records alteration;
- war; and
- nuclear hazard.
e. valuable papers & records coverage – usually provides all risk coverage for loss to specific valuable papers and records. This policy pays up to $5k for expenses incurred to replace or restore the documents that are lost or damaged. Money is not covered. Typical covered property includes maps, blueprints, films, illustrations, and drawings.
f. Jeweler’s block policy – these are written for jewelers on an all risk basis, with a list of exclusions tailored to meet the needs of the specific classes of business being protected. This includes property that is:
- held for sale in the care of the insured;
- in transit by common carrier;
- on exhibit; and
- in the custody of outside salesmen.
g. Other block policies - These are written for furriers, camera or musical equipment dealers, and others, and closely resemble the coverages and exclusions of the jeweler’s block form.
h. Equipment dealers coverage form - This form is used to cover dealers of mobile equipment and construction equipment. It covers the dealer’s stock in trade consisting primarily of mobile agricultural equipment and construction equipment. It also covers property of others in the dealer’s care, custody, or control. It does not cover:
- autos, trucks, motorcycles, aircraft, and watercraft;
- money, securities, accounts, and bills;
- property in the course of manufacture;
i. Electronic data processing (EDP) - this form covers electronic equipment, including data & media. Covered property is also covered while in transit.
j. Commercial articles - this covers the interests of the owner of commercial cameras, musical instruments, and related equipment and similar property of others that is in the insured’s care. It provides open peril coverage worldwide.
k. Signs - this business floater insured businesses against loss to neon fluorescent, or mechanical electrical signs and lights. The form covers the insured’s signs and similar property of others in the insured’s care, custody, or control. Exclusions:
- breakage during transportation or during installation;
- repairing or dismantling; and
- artificially generated current that creates a short circuit or other electric disturbance.
