Chapter 5

Question 1

Bailee for Hire

Answer 1

Is one 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

Ordinary Care

Answer 2

The legal duty imposed upon bailees which requires them to take the same care of the goods of others as would be taken by a prudent and diligent owner of such goods

Question 3

Common Carrier

Answer 3

Includes airlines, railroads, trucking companies and others that furnish transportation to any member of the public seeking their services

Question 4

Standard (Ordinary)

Answer 4

This bill of lading reflects the amount for which the common carrier will be held legally liable under the tariff

Question 5

Value Bill of Lading

Answer 5

When the Standard Bill of Lading does not accurately reflect the value of the property being transported, the owner can negotiate a new bill of lading with the carrier. The owner will pay an additional transportation rate or fee when the carrier’s liability is increased in this way.

Question 6

Contract Carrier

Answer 6

One that carries, for pay, the goods from certain customers only as contrasted to a common carrier that carries the goods of the public in general

Question 7

Private carrier

Answer 7

One who haul their own goods or goods entrusted to them as bailees or lesses and includes shippers who own or lease their vehicles and carry their own goods

Question 8

Catastrophe Limit

Answer 8

The maximum amount an insurer will pay in only one disaster or occurrence

Question 9

3 other reasons one might have temporary custody of the personal property of another

Answer 9

for repair or performance of work
for safekeeping or storage
for delivery to others

Question 10

Bailees can insure their legal and contractual responsibility for damage to customers’ goods in the following ways:

Answer 10

Include the value of customers’ property in the amount of stock insurance provided by their commercial property insurance policy

Purchase a separate policy insuring the legal liability of the bailee for loss

Purchase a specialized bailee’s customers policy

Question 11

What is Inland Transportation Insurance

Answer 11

Insurance, other than Marine Insurance, against loss of or damage to property while in transit or during delay incidental to transit

Question 12

Provide three examples of businesses in your community which have a bailee’s exposure

Answer 12

Dry cleaner, storage facility, seamstress

Question 13

What is the level of care required by law to be exercised by bailees of customers’ property?

Answer 13

The law defines the obligation owed by bailees of customers’ property to be that of ordinary care

Question 14

The bailee’s exposure can often be insured as part of the coverage provided for stock under most commercial property policies. Identify two other types of bailee’s policies which might be used to insure this exposure

Answer 14

A legal liability policy which insures the legal liability of the bailee for loss

A specialized bailees customers policy insuring direct loss of or damage to customers’ property regardless of fault

Question 15

Both the owner and the carrier can have a financial interest in property in transit. What two factors should be considered in determining who should purchase insurance coverage on a particular shipment

Answer 15

Establish (i) whether the owner or the carrier would be responsible for loss to the property and (ii) to what extent

Question 16

What is a common carrier?

Answer 16

Common carriers include airlines, railroads, trucking companies and others that furnish transportation to any member of the public seeking their services

Question 17

In general terms, what responsibility is owed to owners of property by common carriers?

Answer 17

Common carriers are liable to owners for the safe delivery of goods entrusted to them

Question 18

State three exceptions to responsibility owed to owners of property by common carriers

Answer 18

Acts of god or natural phenomena not reasonably foreseeable

Acts of public enemies

Acts of public authority

Neglect or default of the shipper

Inherent vice in the goods transported

Question 19

How do common carriers limit the amount of their liability to the owner of property?

Answer 19

They use bills of lading

Question 20

Identify three types of bills of lading used by common carriers and indicate when each would be used

Answer 20

Standard (ordinary) Bill of Lading - would be used when the owner of the property feels the tariff value is reasonable and does not wish to purchase extra insurance for the goods being shipped

Valued Bill of Lading - would be used when the owner feels the tariff value is too low & wants to pay an extra premium to increase the insured value

Released Bill of Lading - would be used when the value of the stock is less than the tariff value and the owner wishes to reduce his transportation rate by not insuring through Bills of Lading at all. It would also be used when the value of the goods is higher than the Ordinary Bill of Lading and rather than increase this value, will insure the entire shipment under a private insurer and benefit from a reduced rate

Question 21

Transportation Floater (Broad Form) can be used to insure property which is being transported in a variety of ways. In addition to coverage for goods being transported by the Insured’s vehicles, state three other forms of transportation which could be endorsed onto the policy

Answer 21

Railroad
Public or private truckman
Vehicles hired or leased by the insured
Airlines
Otherwise, excluding ocean going vessles

Question 22

Who would purchase a trip transit policy?

Answer 22

A business wishing to insure the transit exposure of a single shipment of property

Question 23

What factors are considered by the Insurer in determining the premium to be charged for trip transit?

Answer 23

Nature of the property, distance travelled, and method of transportation used, including experience of operators

Question 24

When does coverage apply on a Truckman’s Legal Liability Cargo Rider and how are limits of insurance selected by the insured?

Answer 24

From the time the goods have been loaded for shipment until they reach their destination

Limit is for each vehicle stated on the policy and payment is restricted to when the property is in or on those vehicles

Question 25

On a truckman's legal liability cargo rider, can coverage be added for temporary locations?

Answer 25

Policy can be endorsed to include coverage for property temporarily located at the Insured's terminal warehouse or loading station

Question 26

On a truckman's legal liability cargo rider, how does the insurer limit its liability for loss to shipper's property in any one disaster?

Answer 26

A catastrophe limit will be stated on the policy. the reason for this is to limit the Insurer's liability in the event of a serious loss and, for the purpose of this insurance, will be less than the total of the amounts of insurance for all vehicles.

Question 27

What is the co-insurance requirement for a truckman's legal liability cargo rider?

Answer 27

100% co-insurance

Question 28

what is the premium basis for a truckman's legal liability cargo rider

Answer 28

Available on either of a named perils or all risk basis

Question 29

State three reasons why an owner of property might not rely on a carrier's insurance

Answer 29

May not insure adequate amounts of insurance May not be broad enough in perils insured against May have been lapsed or cancelled

Question 30

State three advantages available to owners who purchase their own transportation insurance

Answer 30

Prompt recovery of losses is available directly from the insurer Perils insured against are often broader than those insured by the carrier Reduced cost of insurance

Question 31

Transportation Floater (Broad Form) can be used to insure both incoming and outgoing shipments. Who would purchase the coverages provided by this form?

Answer 31

Business owners who assume responsibility for the transportation of goods purchased by them from manufacturers, wholesalers or others are covered by this policy

Question 32

Identify three prospects for the tool floater rider

Answer 32

Contractors, mechanics and carpenters

Question 33

State two exclusions common to coverage under the tool floater rider

Answer 33

loss or damage to electrical apparatus caused by artificial electricity unless fire or explosion ensues Any mysterious disappearances

Question 34

Discuss two underwriting approaches commonly used when insuring contractor's tools

Answer 34

Scheduled - usually for tools having considerable value Blanket - used for assorted or miscellaneous tools and is usually subject to a 100% co-insurance clause

Question 35

Insurers commonly impose a catastrophe limit on coverage provided under the Contractor’s Equipment Floater. Explain why this is done and how it might influence the advice you give to your client.

Answer 35

Because of the high values involved, the Insurer will be concerned about the potential of a total loss. This limit encourages contractors to store their equipment in such a way that the entire values are not exposed to loss in any one occurrence

Question 36

Newly Acquired Equipment is automatically insured under this form. There are three provisions relating to this coverage extension which can, if not properly communicated to the Insured, create serious gaps in coverage. Identify each of these provisions and indicate what effect, if any, this might have on the advice you provide to your client.

Answer 36

Coverage is provided only for newly acquired equipment which is similar to that for which coverage is scheduled under the policy Coverage ceases after 30 days from the date of acquisition The amount of insurance is limited

Question 37

What is another common name given to Builders Risk insurance policies?

Answer 37

Course of Construction

Question 38

In whose name can a builders risk insurance policy be issued

Answer 38

Project owner or general contractor

Question 39

List three classes of property which can be insured on a builders risk- broad form policy

Answer 39

All materials owned by the Insured or others which will enter into and form part of the completed project Landscaping, growing trees, plants, shrubs or flowers all to enter into and form part of the project provided that the value of such property is included in the amount of insurance Temporary buildings, scaffolding, falsework, forms, hoardings, excavation, site preparation, and similar work, provided that the value of is included in the amount of insurance and then only to the extent that "replacement" or restoration is necessary to complete the project

Question 40

The payment of losses resulting from faulty or improper material, workmanship or design are excluded under this form. Discuss how the resultant damage coverage feature modifies this exclusion.

Answer 40

This feature provides coverage for the costs to reconstruct or replace resultant damage from faulty materials, workmanship or design

Question 41

The potential for loss to building materials extends beyond the location of the project itself. Discuss two other exposures which can be insured under this policy form.

Answer 41

In Transit Any other location

Question 42

When does coverage normally cease under the Builders’ Risk form? State two exceptions.

Answer 42

Normally ceases when the building comes into use or becomes occupied. Exception 1: the use of the building for other construction work which must be done to satisfy the contract Exception 2: When the building is occupied for office or residential purposes before construction is complete

Question 43

Builders Risk forms do not normally contain a co-insurance clause. How does the insurer deal with the potential for insureds to under-insure?

Answer 43

The premium adjustment provision allows the insurer to charge the total premium on the values that would have been required to complete the project

Question 44

State three coverages provided by the Installation Floater Rider

Answer 44

While in transit by most forms of land transportation, including the insured's vehicles While awaiting installation on site During Installation until accepted or the Interest of the Insured ceases, whichever first occurs

Question 45

Three prospects for an Installation Floater Rider

Answer 45

Plumbing firms Heating firms Air conditioning firms