Chapter 5 Flashcards
Bailee for Hire
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
Ordinary Care
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
Common Carrier
Includes airlines, railroads, trucking companies and others that furnish transportation to any member of the public seeking their services
Standard (Ordinary)
This bill of lading reflects the amount for which the common carrier will be held legally liable under the tariff
Value Bill of Lading
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.
Contract Carrier
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
Private carrier
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
Catastrophe Limit
The maximum amount an insurer will pay in only one disaster or occurrence
3 other reasons one might have temporary custody of the personal property of another
for repair or performance of work
for safekeeping or storage
for delivery to others
Bailees can insure their legal and contractual responsibility for damage to customers’ goods in the following ways:
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
What is Inland Transportation Insurance
Insurance, other than Marine Insurance, against loss of or damage to property while in transit or during delay incidental to transit
Provide three examples of businesses in your community which have a bailee’s exposure
Dry cleaner, storage facility, seamstress
What is the level of care required by law to be exercised by bailees of customers’ property?
The law defines the obligation owed by bailees of customers’ property to be that of ordinary care
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
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
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
Establish (i) whether the owner or the carrier would be responsible for loss to the property and (ii) to what extent
What is a common carrier?
Common carriers include airlines, railroads, trucking companies and others that furnish transportation to any member of the public seeking their services
In general terms, what responsibility is owed to owners of property by common carriers?
Common carriers are liable to owners for the safe delivery of goods entrusted to them
State three exceptions to responsibility owed to owners of property by common carriers
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
How do common carriers limit the amount of their liability to the owner of property?
They use bills of lading
Identify three types of bills of lading used by common carriers and indicate when each would be used
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
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
Railroad
Public or private truckman
Vehicles hired or leased by the insured
Airlines
Otherwise, excluding ocean going vessles
Who would purchase a trip transit policy?
A business wishing to insure the transit exposure of a single shipment of property
What factors are considered by the Insurer in determining the premium to be charged for trip transit?
Nature of the property, distance travelled, and method of transportation used, including experience of operators
When does coverage apply on a Truckman’s Legal Liability Cargo Rider and how are limits of insurance selected by the insured?
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
On a truckman’s legal liability cargo rider, can coverage be added for temporary locations?
Policy can be endorsed to include coverage for property temporarily located at the Insured’s terminal warehouse or loading station
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?
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.
What is the co-insurance requirement for a truckman’s legal liability cargo rider?
100% co-insurance
what is the premium basis for a truckman’s legal liability cargo rider
Available on either of a named perils or all risk basis
State three reasons why an owner of property might not rely on a carrier’s insurance
May not insure adequate amounts of insurance
May not be broad enough in perils insured against
May have been lapsed or cancelled
State three advantages available to owners who purchase their own transportation insurance
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
Transportation Floater (Broad Form) can be used to insure both incoming and outgoing shipments. Who would purchase the coverages provided by this form?
Business owners who assume responsibility for the transportation of goods purchased by them from manufacturers, wholesalers or others are covered by this policy
Identify three prospects for the tool floater rider
Contractors, mechanics and carpenters
State two exclusions common to coverage under the tool floater rider
loss or damage to electrical apparatus caused by artificial electricity unless fire or explosion ensues
Any mysterious disappearances
Discuss two underwriting approaches commonly used when insuring contractor’s tools
Scheduled - usually for tools having considerable value
Blanket - used for assorted or miscellaneous tools and is usually subject to a 100% co-insurance clause
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.
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
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.
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
What is another common name given to Builders Risk insurance policies?
Course of Construction
In whose name can a builders risk insurance policy be issued
Project owner or general contractor
List three classes of property which can be insured on a builders risk- broad form policy
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
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.
This feature provides coverage for the costs to reconstruct or replace resultant damage from faulty materials, workmanship or design
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.
In Transit
Any other location
When does coverage normally cease under the Builders’ Risk form? State two exceptions.
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
Builders Risk forms do not normally contain a co-insurance clause. How does the insurer deal with the potential for insureds to under-insure?
The premium adjustment provision allows the insurer to charge the total premium on the values that would have been required to complete the project
State three coverages provided by the Installation Floater Rider
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
Three prospects for an Installation Floater Rider
Plumbing firms
Heating firms
Air conditioning firms
