Lesson 12: Ocean and Inland Marine Insurance - Protecting What We Move

Question 1

Ocean Marine Insurance, by legal definition

Answer 1

cargo, hull, freight plus protection, and indemnity

Question 2

Cargo insurance

Answer 2

is a policy that protects the policyholder from the loss of goods during shipment.

Question 3

Cargo insurance protects…

Answer 3

the owner or consignor of goods for possible physical loss or damage from external causes during shipping. The insurer would reimburse the policyholder for the value of the goods; if they incur damage or perish while in the hands of the shipper.

Question 4

Cargo can be written on a

Answer 4

named peril or an all-risk basis.

Question 5

Hull insurance

Answer 5

is insurance protecting owners against loss caused by damage or destruction of waterborne craft. Hull covers a variety of vessels, providing a broad range of coverage on physical damage to a vessel and any of its operating machinery and equipment.

Question 6

Protection and indemnity (marine)

Answer 6

broad form of marine legal liability insurance covers loss or damage of ships, cargo, or terminals. Protection & Indemnity is liability coverage for watercraft, protecting the insured from liability, bodily injury, and property damage arising from use or ownership of declared vessels. It covers loss of life, injury, and sickness of the crew, passengers and third parties, including liabilities under statutory compensation acts such as Workers’ Compensation, damage to cargo on board the vessel, wreck removal, collisions, and damages to docks and piers.

For example, under protection and indemnity, if a ship runs into a bridge while a train is crossing, the seaman, the train, and its passengers are all covered under liability.

Question 7

Freight Insurance

Answer 7

pays the cost of shipping charges For example, a $20 Million shipment of cargo and $2 Million of shipping cost is lost when a ship sank. Cargo insurance covers the direct loss of the $20 Million, while the indirect loss of $2 Million is covered by Freight Insurance.

Question 8

Implied warranties and ocean marine insurance coverages

Answer 8

Implied Warranties apply to ocean marine insurance coverages and must be strictly observed. They are not actual policies nor written into the contract, but carry the same weight as a written warranty. If a warranty is not adhered to, the insurance policy is void.

Question 9

Implied Warranty: Seaworthiness

Answer 9

In a marine insurance voyage policy, the implied warranty is that the vessel is seaworthy. Seaworthiness is a warranty in which the owner of the ship or insured agrees to provide a seaworthy vessel that is not overloaded and has a competent captain and crew.

Question 10

Implied Warranty: Condition of Cargo

Answer 10

Condition of Cargo the cargo owner is obligated to guarantee that the cargo is sound and properly packed for voyage.

Question 11

Implied Warranty: Legality of Voyage

Answer 11

The Legality of Voyage warrants the voyage is legal and no illegal activity will occur.

Question 12

Implied Warranty: Deviation in Voyage

Answer 12

No Deviation in Voyage warrants the ship will not detour while on the journey but follow an agreed upon route with no unnecessary delays.

Question 13

Perils ON the sea

Answer 13

forces of nature an insured may encounter in the course of an expedition such as sinking, collision of ships, stranding, high winds, heavy waves. It can happen on the sea or elsewhere (such as a fire)

Question 14

Perils of the sea (coverage)

Answer 14

includes the cause of losses occurring on board ships during the voyage

Question 15

Jettison (is a coverage)

Answer 15

intentionally throwing overboard cargo or portions of a ship attempting to save the vessel from sinking

Question 16

Barratry (a coverage)

Answer 16

fraud or wrongful acts committed intentionally by the master or crew without the shipowners knowledge

Question 17

Inchmaree clause

Answer 17

a clause in a marine insurance policy that covers damage or loss caused by the negligence of a vessel’s captain or crew or by any defect in the ship’s hull or machinery such as a boiler explosion.

Question 18

Categories of Marine Coverage (nationwide definitions)

Answer 18

There are six categories of eligible marine coverage: 1) imports, 2) exports, 3) domestic shipments, 4) instrumentalities of transportation and communication, 5) personal property floater risk, and 6) commercial property floater risk.

Question 19

General Average Loss

Answer 19

Average in marine terms means loss. General
average means a partial loss (as opposed to a total
loss of ship and cargo) which has resulted from a
voluntary and deliberate sacrifice made for the
benefit of all concerned. For example, if a ship is in
danger of sinking in a storm and a deck load of
heavy cargo is jettisoned in order to save the ship
and remaining cargo, all interests involved in the
voyage would share in the loss.

Question 20

Particular average

Answer 20

Particular average means a partial loss where there is not a requirement to share the loss, and where the loss will be borne
only by the party having an interest in the lost or
damaged property.

Question 21

Constructive total loss

Answer 21

a partial loss situation involving damage so extensive that repair costs would equal or exceed the value of the property

Question 22

Actual total loss

Answer 22

occurs when the damages or costs of repair clearly equal or exceed the value of the property

Question 23

Inland Marine insurance

Answer 23

indemnifies loss to movable or specialized types of property. Inland Marine insurance (all-risk basis/open perils) cover goods transported over land and offered for Commercial or Personal property. The inland marine insurance definition has evolved to cover a wide range of property and materials considered Property in Transit.

Question 24

Types of diverse risks

Answer 24

1) communications and transportation risks; 2) domestic transportation risks; 3) commercial property floaters; 4) personal property floaters

Question 25

Trip transit coverage

Answer 25

Trip transit insurance is a type of policy that provides protection for property in transit against certain perils during a specific trip via a specified means of transport. It only covers that particular shipment or transport for such perils as fire, disappearance, or theft. A customer will purchase this coverage when hiring a transportation company. It pays for losses regardless of fault.

Question 26

communications and transportation risks

Answer 26

Objects with fixed locations such as:

Bridges
Tunnels
Docks
Towers

Question 27

domestic transportation risks

Answer 27

Property in transit across domestic roads

Owners Forms : Owners of property using their vehicles for transportation

Question 28

Property in transit across domestic roads

Answer 28

A Truckers policy includes the following 2 types of forms:

1) Legal Liability Form – Only pays if the trucking company is at fault
2) Common Carriers transporting property belonging to customers

Question 29

Trip transit coverage

Answer 29

Customer hiring the transportation company will purchase this coverage. It pays for losses regardless of fault. Trip transit insurance is a type of policy that provides protection to property in transit against certain perils during a specific trip via a specified means of transport. It only covers that particular shipment or transport for such perils as fire, disappearance, or theft.

Question 30

commercial property floaters

Answer 30

Include: - Accounts Receivable
- Camera & Musical Instrument Dealers
- Floor Plan Merchandise
- Jewelry Dealers
- Musical Instruments
- Negative Film
- Photographic Equipment
- Physicians & Dentists Equipment

Question 31

commercial property floaters (exclusions)

Answer 31

• Dishonest Act
• War
• Pollution Damage
• Changes in temperature or humidity
• Loss of documents
• Strikes
• Suspension of leases, contracts, or orders
• Money and Securities
• Programming errors except for malicious software
• Stock in trade
• Wear and tear
• Mysterious disappearance
• Inherent vice
• Electrical or power supply disturbances
• Property loaned, leased, or rented to others
• Contraband

Question 32

personal property/articles floaters

Answer 32

Personal Articles Floater is a personal lines inland marine policy that is used to cover scheduled personal property on an all risks basis. The policy is particularly appropriate for a property that receives limited coverage under the homeowners’ forms, such as furs, jewelry, fine arts, silverware, cameras, musical instruments, stamp and coin collections, and similar property.

Question 33

additional types of inland marine coverage

Answer 33

Diverse properties in commercial lines
Bailee Form
Commercial property floaters
Pays for losses to a customer’s property regardless of fault.

Question 34

Bailee forms

Answer 34

Bailee’s customers’ insurance provides coverage for the legal liability of damage or destruction of a customer property while under the care, custody and control of a bailee. A bailee is a person or organization that has temporary possession of someone else’s personal property (dry cleaner, jewelers, repairers, etc.)

Question 35

Monoline Commercial Inland policy

Answer 35

is not made by a common valuation clause

Question 36

“Pair and Set” clause in property insurance contracts, notes that the loss of one item in the pair and set

Answer 36

Pays the difference between ACV of the property before and after the loss

Question 37

Block policy

Answer 37

A policy providing very broad coverage for dealers, whether the property is on the premises, being transported, or temporarily being tried by customers

Question 38

Personal articles floaters (PAFs) don’t cover

Answer 38

watercraft

Question 39

Under an ocean marine policy, freight insurance has been purchased. This will protect the insured against what type of loss?

Answer 39

Indirect Loss

Question 40

A contractors equipment floaters is commonly used to insure:

Answer 40

mobile equipment and construction machinery

Question 41

Ocean marine protection and indemnity coverage usually insures the ship owner against liability for all of the following losses, except:

Answer 41

Damage to or loss of the insured ship.