Chapter 5

Question 1

Define “Bailee for Hire

Answer 1

Person or organization who has temporary custody of the personal property of another for a purpose other than sale and who is compensated as a condition of such custody.

Question 2

Identify three types of bailees and provide an example of each

Answer 2

i) Repair of personal property Example: Television repair shop
ii) Storage of personal property Example: Public storage warehouse
iii) Delivery of personal property Example: Courier service

Question 3

Define “Ordinary Care”

Answer 3

Requirement to take the same care of the goods of others as would be taken by a prudent and diligent owner of such goods.

Question 4

When could bailees be responsible for damage to customer’s property?

Answer 4

Bailees may be responsible for damage to customer’s property when negligent in common law or in contract.

Question 5

Other than stock coverage found on bailee’s commercial property policies, what are two other policies that could be used to insure customer’s property?

Answer 5

i) Separate policy covering legal liability of bailee
ii) Specialized policy insuring customer’s property which ignores requirement for legal liability

Question 6

By knowing answers to certain questions, brokers should understand whether the carrier or the owner of property should purchase insurance when selling Inland Transportation Insurance. What are these questions?

Answer 6

i) Who would be responsible for loss to property?
ii) What is the extent of responsibility?

Question 7

Define “Common Carrier”

Answer 7

Common carriers are those transportation companies that will provide transportation services to any person needing their services.

Question 8

What is the general rule regarding the responsibility of common carriers?

Answer 8

Common carriers are responsible for the safe delivery of property in their care

Question 9

Common carriers will not be held responsible for all losses to goods in their possession. Identify five of these losses.

Answer 9

i) Acts of God reasonably foreseeable
ii) Acts of public enemies
iii) Acts of public authority
iv) Neglect or default shipper
v) Inherent vice of property transported

Question 10

What documents are used by common carriers to limit their liability to owners

Answer 10

Bills of lading

Question 11

Describe the 3 types of Bill of Ladings

Answer 11

i) Standard (ordinary) Bill of Lading - The carries liability is limit to the tariff for that class of goods
ii) Valued Bill of Lading - Increases the carriers liability to the negotiated amount
iii) Released Bills of Lading removes carrier from any responsibility for the shipment.

Question 12

Define a ‘Contract Carrier’

Answer 12

Contract carriers will carry the goods of contracted customers only, unlike common carriers that will carry anybody’s property.

Question 13

Define a ‘Private Carrier’.

Answer 13

Private carriers carry their own goods or goods given to them as bailees

Question 14

When property is insured by a Transportation Floater Broad Form, when does coverage begin and when does coverage end?

Answer 14

Coverage begins when property leaves premises and continues until property is unloaded at final destination.

Question 15

When would insureds purchase a Trip Transit Policy?

Answer 15

When clients only require coverage for a single shipment.

Question 16

What is a catastrophe limit and why is it used?

Answer 16

Catastrophe limits are the most an insurer will pay in any one occurrence of loss. Insurers, to limit coverage in large losses, use catastrophe limits.

Question 17

What are four problems which occur when owners rely on carrier’s insurance?

Answer 17

i) Carriers may not have amounts of coverage needed to properly insure customer’s property
ii) Carriers may have limited perils insured
iii) Carriers may have violated policy condition which negates coverage
iv) Carriers may not have renewed policy or may have canceled policy

Question 18

What are four advantages for owners when they purchase their own insurance on goods being transported?

Answer 18

i) Owners are able to claim from own insurers which speeds claims settlement
ii) Owner’s policy will insure actual value of shipment, not amount carrier is responsible by law for bill of lading
iii) Coverage provided by owner’s policy may insure more perils than carrier’s insurance
iv) Owners will have lower premiums than carriers insurance

Question 19

What are two key exclusions found in the Tool Floater?

Answer 19

i) Loss or damage to electrical apparatus caused by artificial electricity
ii) Loss caused by mysterious disappearance

Question 20

Identify types of property insured by Contractor’s Equipment Floaters?

Answer 20

Contractor’s Equipment Floaters insure all kinds of moveable equipment owned, rented, or leased by clients.

Question 21

Why would insurers impose a catastrophe limit on contractor’s equipment?

Answer 21

Insurers are worried about large losses because of the high values insured.

Question 22

What guidance should brokers provide when catastrophe limits are used on Contractor’s Equipment policies?

Answer 22

Brokers should advise clients not to store all of their equipment in ways that may expose all equipment to one occurrence.

Question 23

What are three conditions of coverage on Newly Acquired Equipment found on Contractor’s Equipment Floaters?

Answer 23

i) Equipment insured by this extension must be similar to what’s insured on policy
ii) Coverage for this newly acquired equipment is insured only for 30 days from date of acquisition
iii) Amount of coverage for newly acquired equipment is limited as to the amount

Question 24

Indicate covered or not covered on Contractor’s Equipment Floater: Damage caused when a front-end loader lifts a load above its designated lifting capacity.

Answer 24

Not covered

Question 25

Indicate covered or not covered on Contractor’s Equipment Floater: Damage to helicopter used in insured’s business.

Answer 25

Not covered

Question 26

Indicate covered or not covered on Contractor’s Equipment Floater: Loss of plans and blue prints in fire at construction site.

Answer 26

Not covered

Question 27

Indicate covered or not covered on Contractor’s Equipment Floater: Loss of crane which sank in muskeg.

Answer 27

Not covered

Question 28

Indicate covered or not covered on Contractor’s Equipment Floater: Damage to bucket of front-end loader when it collided with rock at construction site.

Answer 28

Covered

Question 29

Indicate covered or not covered on Contractor’s Equipment Floater: Damage to radiator of steam roller when temperature fell to minus 45 degrees Celsius

Answer 29

Covered

Question 30

Indicate covered or not covered on Contractor’s Equipment Floater: Rust damage to backhoe.

Answer 30

Not Covered

Question 31

Indicate covered or not covered on Contractor’s Equipment Floater: Damage to steam roller from fire.

Answer 31

Covered

Question 32

Indicate covered or not covered on Contractor’s Equipment Floater: Damage to engine in front-end loader from mechanical breakdown.

Answer 32

Not covered

Question 33

Indicate covered or not covered on Contractor’s Equipment Floater: Resulting fire damage to steam-roller from short circuit.

Answer 33

Covered

Question 34

What are three types of property insured by Builder’s Risk policies?

Answer 34

i) All materials which will enter into and from part of the completed project
ii) All landscaping including growing trees, plants, or shrubs which will form part of completed project
iii) Temporary buildings and structured required to complete project to the extent these temporary buildings and structures are needed for project completion

Question 35

What are two key exclusions found in Builder’s Risk policies?

Answer 35

i) There is no coverage for contractor’s tools and equipment
ii) There is no coverage for cost of making good faulty or improper material, workmanship, or design. Resultant damage is insured

Question 36

When does coverage normally cease on Builder’s Risk policies?

Answer 36

Coverage ends when project comes into use or is occupied.

Question 37

When will coverage automatically cease on Builder’s Risk policies?

Answer 37

i) When project is left unattended for more than 30 consecutive days
ii) When there has been no activity for more than 30 consecutive days

Question 38

What limit of insurance must be purchased when buying Builder’s Risk policies?

Answer 38

Completed Value

Question 39

When is coverage provided by Installation Floaters?

Answer 39

i) While in transit
ii) While awaiting installation
iii) During installation until work accepted or until client’s interest ends, whichever is first

Question 40

How are premiums calculated on Installation Floaters?

Answer 40

Premiums are based on gross annual receipts of clients