Chapter 5

Question 1

Nationwide Marine Definition

Answer 1

Statement of the types of property that may be insured on an inland marine and ocean marine forms.

Question 2

1-1 For what reason do states continue to use the updated Nationwide Marine Defintion?

Answer 2

To determine whether a particular coverage is marine insurance (either inland or ocean) under their firm and rate filing laws. Typically, commercial inland and ocean marine insurance is subject to less rate and form regulation that other lines of insurance.

Question 3

1-2 Distinguish between the characteristics of filed classes of inland marine and those of unfiled classes.

Answer 3

Filed: large number of potential insured’s and reasonably homogeneous loss exposures. Nonfiled classes are both characterized by a relatively small under of potential insured’s, diverse loss exposures, or both.

Question 4

1-3 Explain inland marine underwriters’ use of judgment rating.

Answer 4

Judgment rating is used by underwriters to underwrite one-of-a-kind risks. Judgment rating requires a thorough knowledge of the class of business for which coverage is being written. An inland marine underwriter might have to draw on experience in any of several specialized fields - such as, heavy equipment, construction, or communications – to determine an adequate rate for the unique risks that are eligible for coverage.

Question 5

DIC policy

Answer 5

Policy that covers an “all-risk” basis to fill gaps in the insured’s commercial property coverage, especially gaps in flood and earthquake insurance.

Question 6

2-1 What is the purpose of the rental reimbursement coverage that is often added by endorsement to contractors equipment floaters?

Answer 6

Pays the cost of renting substitute equipment when covered property has been out out of service by a covered cause of loss.

Question 7

2-2 What property does an inland marine builders risk policy typically cover other than buildings under construction?

Answer 7

Temporary structures at the building site and building materials while on the insured location, in transit, or in storage at another location.

Question 8

2-3 Describe the coverage territory of many transit policies.

Answer 8

Only the continental USA, Alaska, and Canada, including airborne shipments between these places.

Question 9

2-4 What are the reasons for buying a DIC policy?

Answer 9

A. To provide coverage for flood and earthquake exposures not covered by basic policies, B.. To provide excess limits over flood and earthquake coverages included in basic policies, C. To cover loss exposures not covered in basic policies, such as property in transit or loss of business income resulting from theft or transit losses, D. To cover property at overseas locations.

Question 10

2-5-a What type of inland marine policy would provide coverage for a construction company which owns several pieces of mobile equipment that remain at a construction site until the construction project is completed?

Answer 10

Contractor’s equipment floater.

Question 11

2-5-b What type of inland marine policy would provide coverage for a manufacturing company which regularly uses its own trucks to deliver finished products to consumers?

Answer 11

Annual transit policy.

Question 12

2-5-c What type of inland marine policy would provide coverage for a computer services company which owns several computers that it uses to develop software packages for local businesses?

Answer 12

Electronic data processing (EDP) equipment floater.

Question 13

2-5-d What type of inland marine policy would provide coverage for a warehouse which needs legal liability coverage for the property of others being stored on the premises?

Answer 13

Warehouse operator’s legal liability policy.

Question 14

2-5-e What type of inland marine policy would provide coverage for a dry cleaning business which wants to cover customers’ goods without regard to legal liability?

Answer 14

Bailee’s customer policy.

Question 15

3-1 What types of property, other than the insured’s professional equipment, materials, supplies, and books, can be insured under the physicians and surgeons equipment coverage form?

Answer 15

Office equipment and, if a tenant, improvements or betterments that the insured has made to a leased building.

Question 16

3-2 Why do businesses need the coverage provided under the Signs Coverage Form?

Answer 16

Commercial property forms severely limit coverage for signs.

Question 17

3-3 What coverage is provided by the filed Jeweler’s Block Coverage form?

Answer 17

Cover damage to the insured’s stock of jewelry, precious and semiprecious stones, watches, precious metals, and similar merchandise, along with other stock used on a retail Jeweler’s business, including similar property of others in the insured’s care, custody, or control.

Question 18

3-4-a Which inland marine form would cover a medical doctor who treats home bound patients to cover the contents of her medical bag?

Answer 18

Physician’s and surgeons equipment coverage form.

Question 19

3-4b Which inland marine form would cover a store owner who wants to insure his business records because he is concerned that damage to these records will make him unable to collect outstanding debts?

Answer 19

Accounts receivable coverage form.

Question 20

3-4-c Which inland marine form would cover a professional photographer who needs coverage for his cameras and other equipment?

Answer 20

Commercial articles coverage form.

Question 21

4-1 What property loss exposures do vessel owners face that can be covered by hull insurance?

Answer 21

The possibility that their vessels could be damaged or destroyed by fire,bear, breakage of machinery, the action of wind and waves, the striking of rocks or other vessels, and the shifting of cargo.

Question 22

4-2 When rating hull and protection and indemnity (P&I) insurance, what factors influence the judgment of underwriters?

Answer 22

Past loss experience, the size, type, and age of the insured vessel; the area of navigation; the trade in which the vessel is employed; the nation in which the vessel is registered; and the vessel owner’s reputation and quality of management.

Question 23

General average

Answer 23

A situation where some of the vessel’s cargo is thrown overboard or sacrificed in order to save the entire venture. Partial loss that must, according to marine law, be shared with all parties to a voyage (cargo owners and vessel owners). Also. If the vessel owner incurs certain expenses to ensure the safety of a voyage following collusion or other casualty, the vessel owner and all owners of cargo aboard the vessel will be required to share the expenses.

Question 24

5-1 How does a voyage cargo policy differ from an open cargo policy?

Answer 24

A voyage policy covers cargo for a single trip specified in the policy. An open cargo policy covers all goods shipped or received by the insured during the policy’s term

Question 25

5-2-a How does the Warehouse to warehouse clause affect the coverage provided in a cargo policy?

Answer 25

Covers the insured cargo during the ordinary course of transit from the time cargo leaves the point of shipment until it is delivered to its final destination, including inland transit.

Question 26

5-2-b How does the sue and labor clause affect the coverage provided in a cargo policy?

Answer 26

Covers the cost of reasonable measures that the insured is required to take to protect property from damage at the time of loss

Question 27

5-3 What causes of loss are typically covered by a hull insurance policy?

Answer 27

Perils of the sea; fire, lightning, and earthquake; baratry; all other like perils. If the policy includes the additional perils clause, it also covers several other perils, including electrical breakdown, bursting of boilers, breakage of shafts, latent defects, and negligence of the crew.

Question 28

5-4 Explain how property is normally valued under a hull policy.

Answer 28

Agreed value for a total. Cost to repair for partial.

Question 29

5-5 How does the collision liability clause affect the coverage provided by a hull policy?

Answer 29

Separate amount of insurance covering the insured’s liability for collision damage to other vessels and their cargo. Liability for BI from the collision is not covered. Defense costs are covered in addition to the limit of collision liability insurance.

Question 30

5-6 What types of claims may be covered by P&I insurance?

Answer 30

1) Damage to piers, wharves, and other structures along waterways’ 2) injury to passengers, crew, and other persons on the insured’s vessel, 3) injury to persons on other vessels, 4) damage to cargo of others aboard the insured vessel.

Question 31

5-7 The Steamer is a cargo vessel which ships under contracts. There is a hull policy with a collision liability clause and a P&I policy. The captain made an error and collided with another vessel. Both vessels and their cargoes were damaged. Three crew members on The Steamer were injured. Which policy covers each of these losses? A) collision damage to The Steamer, b) Damage to the other ship, c) damage to cargo of others aboard The Steamer. D) damage to cargo aboard the other ship, e) BI to The Steamer’s crew.

Answer 31

A.Hull policy covers damage to The Steamer, B. Damage to the other ship is covered under the hull policy’s liability clause. C. Cargo owned by others is covered by P&I, D. Cargo on the other ship is covered by collision liability clause of the hull policy. E. Injuries to the crew members will be covered by the P&I policy.

Question 32

6-1 SST, a satellite dish supplier, owns a building, 20 units of mobile equipment, a fleet of trucks, materials for installing equipment, satellite receivers, laptops, and a shop for storage. SST buys its materials and equipment from US suppliers. They are shipped by motor carriers to SST’s shop and SST Bears the risk of loss to a shipment in transit. SST has technicians who install and repair customers’ and their leased equipment at customers’ locations and in shop. Depending on the circumstances of each loss, SST could be held legally liable for damage to customers’ equipment while it is in SST’s care, custody, and control. A. What property loss exposure((s) could SST insure under ocean of inland marine coverages? B. What liability loss exposure(s) could SST insure under ocean or inland marine coverages? C. SST’s only loss exposure that can be covered by more than one the of inland marine coverage is its exposure toro pet in transit by Mott carriers. Assuming that SST ships on an occasional basis, which coverage best meets its needs..D For each of the remaining loss exposures, which inland marine coverage would you recommend?

Answer 32

A. Property loss exposures that could be insured are: mobile equipment; ate rials for installing satellite receiving equipment and satellite receivers; property in transit by motor carriers; and office computers and laptops, software, and electronic data. B. Liability for damage to customers’ equipment in its care, custody, and control could be handles by inland marine. C. Trip transit policies for each shipment is more cost-efficient since they only ship occasionally. D. Contractors equipment floater for mobile equipment exposure; instrumentalities of transportation and communication for exposure of materials for installing and receiving satellite receiving equipment and satellite receivers; an EDP floater for exposure to office computers and laptops. Software, and electronic date; and a bailees’ customer policy for its exposure to liability for damage to customers’ equipment in its care, custody, and control.