INLAND MARINE INSURANCE

Inland Marine insurance first developed as an extension of Ocean Marine insurance to provide coverage for cargo that travels over land instead of by sea. From there, however, Inland Marine insurance branched out to provide very broad coverage on a wide variety of portable property in addition to the coverage it continues to provide for cargo in transit.

To help identify the kinds of risks that are eligible for either Ocean or Inland Marine insurance, the insurance industry developed the Nationwide Definition. The Definition lists six categories of eligible Marine risks:

* Imports

* Exports

* Domestic Shipments

* Instrumentalities of transportation or communication

* Personal property floater risks

* Commercial property floater risks

The first two categories, imports and exports, are covered by Ocean Marine insurance. Personal property floater risks are covered by Personal Inland Marine insurance. The three remaining categories represent risks eligible for Commercial Inland Marine insurance:

* Domestic shipments

* Instrumentalities of transportation or communication

* Commercial property floater risks

A wide variety of seemingly unrelated risks falls into the categories eligible for Commercial Inland Marine coverage. Usually, the characteristic that makes them eligible is an element of portability, although there are exceptions. But as a general rule, Inland Marine insurance does not cover stationary property such as real estate, furniture, fixtures, or merchandise while it is being manufactured.

Domestic shipments are covered through a variety of Inland Marine Transportation forms that cover property being transported.

Instrumentalities of transportation or communication include forms that cover property related to transportation or communication, such as bridges, pipelines and television towers.

Commercial property floater risks embrace a number of subcategories of Inland Marine forms, including Bailee’s Customer forms, Equipment forms, Business floaters, and Dealers policies.

Filed and Nonfiled Forms

Since Inland Marine insurance can cover such a wide variety of mobile property, there is no one standard policy. Instead, each type of property requires a unique policy form, with each company preparing its own contracts. The only exception is filed (controlled) classes of Inland Marine insurance that can be written under the Commercial Inland Marine Coverage part of the Commercial Package policy. They include these coverage forms:

* Mail Coverage Form

* Physicians And Surgeons Equipment Coverage Form

* Theatrical Property Coverage Form

* Film Coverage Form

* Commercial Articles Coverage Form

* Accounts Receivable Coverage Form

* Valuable Papers And Records Coverage Form

* Signs Coverage Form

* Jewelers Block Coverage Form

* Floor Plan Coverage Form

* Equipment Dealers Coverage Form

* Camera And Musical Instrument Dealers Coverage Form

Nonstandardized forms for other Inland Marine coverages not specifically listed are known as nonfiled classes or forms.

Nonfiled forms

Domestic Shipments

The Domestic shipments category of the Nationwide Definition includes a number of nonfiled Inland Marine Transportation forms that provide coverage for shipments traveling by truck, train, air, or mail.

Businesses that ship or receive merchandise need coverage against loss to their cargoes while they are in transit. Common carriers - those who hold themselves out to the public to ship goods - must accept a certain amount of liability for losses to cargo. (These obligations are set forth in the bill of lading that must be issued to each business for whom the carrier ships goods.) However, there are many losses for which the carrier is not responsible. Even loss may be uncertain. The various Inland Marine Transportation forms were developed to cover this exposure.

The Annual Transit policy protects the shipper or receiver of goods against loss to goods in transit. Coverage is available on a named peril basis, protecting against such losses as fire, windstorm, collision, and theft, or on an open peril basis. The policy covers all of the insured’s incoming or outgoing shipments during the year.

The Trip Transit policy is similar to the Annual Transit policy. However, it is used to insure single shipments of goods for companies that have only occasional shipments to insure. Coverage extends from the time and point of origination to the time and point of destination.

The nonfiled Motor Truck Cargo policy covers cargo while it is being transported in a truck. It protects the carrier, instead of the shipper, for liability for loss to domestic shipments in transit. The carrier has a responsibility to deliver goods entrusted to it unharmed. There are only a few things, such as acts of God (floods, tornadoes) or the shipper’s own neglect (poor packing), for which the carrier is not liable. This form is sometimes called the Motor Truck Cargo - Truckers form.

A variation of Motor Truck Cargo insurance provides coverage known as owner’s goods on owner’s trucks to companies that transport their own goods. It provides direct damage coverage instead of Liability coverage. This form may also be called the Motor Truck Cargo - Shipper’s form or the Motor Truck Cargo - Owner’s form. Some companies issue a Motor Truck Cargo - Combination form that provides both Liability coverage for the shipment of another’s goods and direct damage coverage for the shipment of the insured’s own goods on its own trucks.

Instrumentalities Of Transportation And Communication

The next category of the Nationwide Definition, Instrumentalities of transportation and communication, includes forms covering property such as bridges, tunnels, oil pipelines, loading docks, and radio and TV towers.

While this property itself is not portable, it is directly connected with transportation and is subject to many of the same perils as property in transit.

Commercial Property Floater Risks

Bailee’s Customer Policies

There are a number of nonfiled forms that fall under the Commercial property floater risk category of the Nationwide Definition. Bailee’s policies are a subcategory for which there are no filed forms but for which there are several important nonfiled forms.

Bailment is the delivery of property by the owner to someone else to be held for some special purpose, and then returned to the owner. An example of bailment is leaving your shoes at the repair shop to have them reheeled. The bailee is the one who receives the property; the one who owns the property is called the bailor.

Just as carriers have a responsibility for the safety of property in their custody, bailees also have a responsibility for property in their custody. If the property is damaged through the bailee’s own fault, he or she will be liable to the customer for damage. But even when the property is damaged in a fire or some other disaster that is not the bailee’s fault, the customer will expect to get the property back undamaged or be compensated for the loss. To retain the goodwill of the customer, the bailee will probably reimburse the customer. The Bailee’s Customer policy reimburses the insured for damage to a customer’s property that is in his or her care, regardless of whether the insured is liable for the damage, as long as the damage resulted from a covered peril.

There are several different Bailee’s Customer policies available that are tailored to specific businesses, such as the Cleaners, Dyers And Laundries policy. One unique peril covered by this form is confusion of goods, which covers the loss that can occur when the resulting damage from another loss has made it impossible to identify which garments belong to a particular customer.

Equipment Floaters

There are a number of nonfiled Equipment floaters, one of the most important of which is the Contractors Equipment floater.

The Contractors Equipment floater covers the heavy machinery, equipment and tools a customer needs to conduct business. It covers the contractor on an open peril or named peril basis for loss to all types of tools, machinery and equipment owned, rented or borrowed by the insured. The property is protected from loss by fire, landslide, theft, and other perils while it is on the job site, on the way to and from a job site and in temporary storage. Neither the Commercial Property nor the Commercial Auto policies provide the extensive coverage that can be obtained under the Contractors Equipment floater.

Business Floaters

There are also two nonfiled forms in this subcategory of Commercial property floater risks.

A firm selling refrigeration systems, elevators or other pieces of large equipment may have a great deal of property on location awaiting or in the process of installation. Such installation and final testing can take months, even years. The Installation policy is an Inland Marine coverage that insures against loss to machinery, equipment, building materials, and supplies in transit to or being used with or during the course of installation, testing, building, renovating, or repair. It can be issued to cover the interest of the owner, the seller or the contractor.

The Electronic Data Processing Equipment floater provides open peril coverage for computer hardware, software and data that is owned by the insured or in the insured’s care, custody or control. Property in transit is covered. Optional breakdown coverage insures against damage to the equipment caused by mechanical breakdown, electrical disturbances and temperature changes. Extra expense and business interruption coverage is also included.

Dealers Policies

In addition to the filed Dealers policies we’ve covered, nonfiled policies can be written for a number of dealers, including art, stamp, coin, and antique dealers. These policies are generally written on an open peril basis and cover property on the premises, off the premises and while in transit, provided certain conditions are met.

Please note that the precise coverage afforded is subject to the terms, conditions, and exclusions of the policy as issued. This explanation is intended only as a guideline. This information is not intended to be considered investment, tax or legal advice. It is provided, for your education only. This is not an insurance contract. All terms and coverages are defined solely by your policy.

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