CPCU 551

Overview of Inland Marine Insurance

Was developed as a way to cover emerging loss exposures linked to transportation

Inland Marine Insurance

Insurance that covers many different classes of property that typically involve an element of transportation on land

Marine Insurance

Insurance (in the US), includes both ocean and inland marine coverage and (in the rest of the world) is limited to insurance for vessels and cargo

Nationwide Marine Definition

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

Examples of Nationwide Marine

• Imports

• Exports

• Domestic Shipments

• Bridges, tunnels, additional forms of transport,

• Various types of property owned or used by individuals (jewelry, furs, etc.)

• Various types of property pertaining to a business (mobile equipment, builders risk, etc.)

Filed Classes of Business

Policy forms/rates must be filed with state insurance department

• Greater number of potential insured and homogenous loss exposure

• Ex: musical instruments and photographic equipment

Non-Filed Classes of Business

Neither policy forms nor rates must be filed with the state insurance department varies by state

• Small number of potential insureds and diverse loss exposures (or both)

• Unique and volatile

Role of Judgement Rating in Inland Marine

• Filed rate with commercial lines manual (CLM)

• No CLM for non-filed but has become standardized over time

• Unique non-filed items, UW go with the best judgment with outside expertise and influence of market conditions

Non-Filed Classes of Inland Marine Insurance

1. Contractors Equipment (Floater)

2. Builders Risk

3. Transit

4. Motor Truck Cargo Liability

5. Difference in Conditions

6. Electronic Data

7. Bailees

8. Instrumentalities of Transportation and Communication

Contractors Equipment

• Covers mobile equipment or tools while located anywhere in the coverage territory

• Largest class of inland marine insurance

• Can have a schedule of limits or blanket coverage

• Open or named perils

• Rental reimbursement coverage

  Specialized and not under commercial property

Rental Reimbursement Coverage

Pays cost of renting substitute

Examples of Contractors Equipment

• Cranes

• Earthmovers

• Tractors

• Stone Crushers

• Bulldozers

• Mobile Asphalt Plants

• Portable Offices

• Scaffolding

Builders Risk (Liability)

• Covers a building in the course of construction, including building materials and supplies while on or away from the building safe

• Preferred due to better coverage and flexibility

• Open Perils (flood, earthquake, theft of materials)

• Soft Cost Coverage

• Installation Floater

Soft Cost Coverage

Covers additional incidental expenses that might result from a physical loss

• Lease renegotiation

• Real estate taxes

• Additional Interests

Installation Floater

Contractor’s interest in building supplies/fixtures

Transit

Covers owners of property against damage to their property while in transit by land, air, or water carriers

Property can be damaged and carrier has no legal obligation to pay for shippers loss

• Trip Transit

Trip Transit

Covers a particular shipment of goods specified in the policy Occasional shippers and 1 year to and from

• No contraband, likely to be stolen items, and high risk commodities (electronics, tobacco, alcohol, food and drinks)

• Open perils NO flood and earthquake

• Applies to continental US, Alaska, and Canada NO Hawaii, PR, Overseas

• Valued at amount of invoice and shipping charges of ACV

Motor Truck Cargo Liability

Covers a trucker’s liability for damage to cargo of others being transported by the trucker

• Some policies limit liability to specified perils / some cover regardless

• Covered only while in or on a land vehicle or while located at terminal

• Terminal coverage limited

Difference in Conditions (DIC)

Covers on an “all-risks” basis to fill gaps in the insured’s commercial property coverage, especially gaps in flood and earthquake

• Excess limits for flood and earthquake

• Covers loss exposures not covered in basic policies (Prop. in transit, BI due to theft)

• Covers property at overseas location

Electronic Data Processing Equipment

Covers computer equipment, software, and electronic date owned by insured and additional property in care, custody, or control

• Can cover medical equipment, robotics, and computerized gaming (additional benefits)

• Covers perils (Open-Peril) that are not usually covered in commercial property, like mechanical/electrical breakdown (added with separate deductible)

• Includes extra expenses, BI can be added

• Equipment valued at ACV, RC, or upgraded value/ Media valued at ACV or agreed value

  Can be tailored to meet needs

Equipment

Mainframe computers, servers, server racks/ farm, monitors

Data

Computer programs (direct processing of data) and data files (store processed data)

Bailees

• Covers loss to a customer goods only if the insured bailee is legally liable for the loss

• Covers damage to a customers’ goods, regardless whether the insured bailee is legally liable for the loss

Instrumentalities of Transportation and Communication

Covers property essential to transportation or communication

• Bridges

• Tunnels

• Pipelines

• Radio/ TV Broadcasting Equipment

Filed Classes of Inland Marine Insurance

1. Commercial Articles

2. Camera and Musical Instrument Dealers

3. Equipment Dealers

4. Physicians and Surgeons Equipment

5. Theatrical Property

6. Film

7. Floor Plan

8. Jewlers Block

9. Mail

10. Accounts Recievable

11. Valuable Paper and Records

Covered on open-perils and valued at ACV

Commercial Articles

Covers photographic equipment and musical equipment used commercially by photographers, motion picture producers, professional musicians, etc.

No dealers and blanket or schedule basis

Camera and Musical Instrument Dealers

Covers inventory of camera dealers or musical instrument dealers and similar property in care, custody, or control

Endorsements can cover other types of equipment while on insured’s premises

Equipment Dealers

Covers inventory of dealers that sell agricultural or construction equipment in care, custody, or control of others

Physicians and Surgeons Equipment

Covers professional equipment, materials, supplies and books of physicians, surgeons, and dentists

• Office equipment / improvements and improvements to a leased building

Physicians and Surgeons Equipment Endorsements

• Office Equipment off Premises (less than 30 days)

• Extra Expenses

• Money and Stamps on Premises

• Valuable Records

• Personal Effects on Insureds and Others on Premises

Signs

Covers neon, fluorescent, automatic, or mechanical signs Scheduled with a limit

Theatrical Property

Covers stage scenery, costumes, and other personal property used in theatrical products Intent must be stated and 3c’s

Film

Covers exposed motion picture, film, and magnetic tapes or videotapes, including related soundtracks or sound records Covers cost of reshooting

Floor Plan

Covers merchandise that is being held for sale and financed through a floor plan Retail

Jewlers Block

Covers the merchandise of retail jewlers. Designed to meet needs of small jewlers Filed has many coverages

Mail

Covers the insured against loss of securities and other negotiable instruments while in transit by first-class mail, certified mail, express mail, or registered mail.

Accounts Recievable

Covers losses (including uncollectible accounts) resulting from destruction of the insured’s records of accounts receivable

• Pays the amount unable to collect

• Covers cost to reconstruct, interest from inability to pay loans, and increased collection loss

Valuable Papers and Records

Covers printed or otherwise recorded items such as blueprints and cost neccessary to reconstruct

Ocean Marine Loss Exposures

1. Cargo owners (shippers)

2. Vessel owners

3. Carriers

Cargo Insurance

Covers loss of or damage to property shipped primarily by water, or if in foreign trade, by air

• Manufacturer’s importers and exporters

Hull Insurance

Covers physical damage to vessels, including their machinery and fuel, but not their cargo

Hull Insurance Perils

• Action of wind and waves

• Striking of rocks / other vessels

• Shifting of cargo

• Fire

• War

• Breakage of Machinery

Loss of Freight

When freight is guaranteed, the shipper is primarily exposed to loss of freight

Protection and Indemnity Insurance (P&I)

Covers shipowners against various liability claims due to operating the insured vessel Liability

Role of Judgement Rating in Ocean Marine

Rates created with judgment of UW (Not subject to rate-filing laws)

Factors in Judgement Rating in Ocean Marine

• Past loss experience

• Product being shipped

• Type of packing

• Trade route

• Time of year

• Volume of shipments

• Port conditions

• Ocean and inland carriers

• Suppliers reputation and quality of management

Hull & PI Judgement Factors

• Past loss experience

• Size/type/age of vessel

• Area of navigation

• Trade type

• Nation vessel is registered

• Vessel owner reputation and quality of management

Cargo Insurance

2 Types

• Voyage Policy

• Open Cargo Policy

Warehouse to Warehouse Clause

Sea and labor clause

General average

Voyage Policy

Covers single trip during policy period

Open Cargo Policy

Open covers all goods shipped and received. No set expiration date

Insured periodically makes payments based on reports from insured of covered shipments

Warehouse to Warehouse Clause

Covers the insured cargo during the ordinary cause of transit from time of leaving to time of meeting its final destination

• Supplemented by a marine extension clause

Martime Extension Clause

Expands coverage to include unavoidable deviations from the ordinary course due to natural disasters, orders of civil authorities, or strikes of port workers

Sue & Labor Clause

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

General Average

Partial loss that must, according to martime law, be shared by all parties to a voyage (cargo & vessel owners)

Open Marine Insurance Policies

1. Cargo Insurance

2. Hull Insurance

3. PI Insurance

Barratry

Misconduct by vessel’s master / crew

Hull Insurance

• Barratry

• Valued at agreed value

• Defense costs covered

• Liability is a separate amount with limit equal to vessel

PI Insurance

• Damage to bridges, piers, wharves, and other structures along waterways

• Injury to passengers, crew, and other persons injured on vessel

• Injury to persons on other vessels

• Damage to cargo of others aboard the insured vessels

• Expenses incurred to remove reckage and unscheduled port for medical expenses

  NO POLLUTION

Elements of a Commercial Property Loss Exposures

1. Types of property

2. Causes of loss to property

3. Financial consequences of property loss

Property

Any item with value

2 Types of Property

• Real

• Personal

Real Property

Realty (Structure and built-ins)

Commercial Property Dec. Page

Provides basic information about the policy holder and the insurance provided

Commercial Property Declarations (x7)

• Description of property

• Kinds and amounts of coverage

• Mortgages

• Deductibles

• Forms and endsorements

• Co-insurance

• Optional Coverages

Commercial Package Policy (CPP)

Policy that covers 2 or more lines of business by combining ISO’s commercial lines coverage parts

Monoline Policy

Policy that covers only one line of business

Commercial Property Coverage Forms (x3)

• BPP

• Builder’s Risk

• Business Income

• Crime

Cause of Loss Forms

Property coverage part that specifies perils covered

Types of Cause of Loss Forms

1. Basic

2. Broad

3. Special

Basic Form

Covers named perils

1. Fire

2. Lightning

3. Explosion

4. Windstorm / Hail (Hurricane / Tornado)

5. Smoke

6. Aircraft

7. Vehicle

8. Riot / Civil Commotion

9. Vandalism

10. Sprinkler Leakage

11. Sinkhole

12. Volcano

Broad Form

1. Falling objects

2. Weight of ice, snow, or sleet

3. Water damage

Special Form

Covers direct physical loss unless the loss is excluded or limited in this policy

Commercial Property Conditions (x9)

• Concealment, Misrepresentation, or Fraud

• Control of Property

• Insurance under +2 Coverages

• Legal action against us

• Liberalization

• Transfer of Rights

• No Benefit to Bailee

• Other Insurance

• Policy Period, Coverage Territory

Concealment, Misrepresentation, or Fraud

Only material misrepresentation / concealment can void coverage

Material if knowledge of such fact would cause higher premium or denial of coverage

Control of Property

1. Coverage will not be affected by acts of people other than the insured if they are not acting under direction or control of insured

2. Violation of conditions at one property will not impact coverage ay any other location

Insurance Under +2 Coverages

Prevents double payment

Legal Action Against Us

2 conditions must be met by insured before legal action against insurer

1. Followed all conditions in policy

2. Must be brought within 2 years after the date of loss

Liberalization

Any revision with broader coverage automatically extends to all policies in effect

Automatic Benefit

Transfer of Rights of Recovery Against Others to Us

Subrogation

Subrogation

Process by which an insurer can, after it has paid a loss, recover the amount paid from any party who caused the loss or is liable

No Benefit to Bailee

Reinforce the insurer’s right of subrogation against the bailee

Other Insurance

Limits the total recovery from all applicable insurance to an amount not in excess of the actual loss

Same plan, terms, conditions = pay in relation

Policy Period, Coverage Territory

Coverage begins on the effective date and ends on expiration date on dec. page at 12:01 am

Applies to US, Canada, PR

Purpose of Endorsements (x4)

1. Providing coverage enhancements

2. Eliminating coverage for certain exposures

3. Changing provisions to match specific characteristics

4. Amending the policy with state insurance regulations

Endorsements (x6)

1. Ordinance of Law Coverage

2. Spoilage Coverage

3. Flood Coverage

4. Earthquake and Volcanic Eruption Coverage

5. Peak Season Limit of Insurance Endorsement

6. Value Reporting Form

Ordinance of Law Coverage (x3)

A. Covers value of the undamaged portion of a building that must be demolished

B. Covers cost to demolish the undamaged portion of a building and remove its debris when demolition is required by building code

C. Covers increased cost to repair or rebuild property resulting from the enforcement of a building, zoning, or land use law

Spoilage Coverage

Covers damage to parishable stock from power outages; on-premises breakdown; or contamination or refrigerating, cooling, or humidity control

Must be caused by conditions out of insured’s control

Flood Coverages (x2)

1. NFIP

2. Privtate Insurer

NFIP

Must be in eligible zone ($500,000 limit)

Privtate Insurer

No high hazard (< once in 100 year possibility) and high deductible (> $25,000). Excess to NFIP

Earthquake and Volcanic Eruption Coverage

2 Forms

1. Earthquake and volcanic eruption endorsement

2. Earthquake and volcanic eruption endorsement (sub-limit)

Limited in areas with high probability

Peak Season Limit of Insurance Endorsement

Covers the fluctuating values of business personal property by providing different amounts of insurance for certain time frames during the policy period

Value Reporting Form

Covers fluctuating values of business personal property by insuring insured’s maximum expected values and requiring the insured to periodically report property values

Categories of Property

1. Building

2. Your Business Personal Property

3. Personal Property of Others

Building

• Covers additions, alterations, and repairs

• Fixtures, permanently installed machinery and equipment

• Personal property owned by the insured and used to maintain/service the building or its premises (outdoor furniture, fire extinguisher)

Your Business Personal Property

• Covers personal property owned by the insured and used in their business Inlcuding improvements and betterments

• Only applies when in/at premises or 100ft within the premises

• Includes furniture, fixtures, machines, stock, etc.

Stock

Merchandies held in storage for sale, raw materials, and in process or finished goods, including suppplies for packaging and shipping

Personal Property of Others

• Protect the insured against loss of or damage to the personal property of others while in the care, custody, control of others.

Property Not Covered

• Smuggled goods

• Property may be less susceptible to loss by perils insured against

• Can be covered more appropriately by something else

Additional Coverages (x6)

1.     Debris Removal

2.     Preservation of Property

3.     Fire Department Service Charge ($1,000 limit)

4.     Pollutant Cleanup and Removal

5.     Increased Cost of Construction

6.     Electronic Data (Inadequate)