Ch. 12 Commercial Inland Marine Insurance
Inchmaree Clause
- Covers direct damage caused by the bursting of boilers, breaking of propeller shafts, or loss due to faults or errors in navigation by the crew. When this clause is added to the policy, it broadens the types of losses that are covered for the hull.
Surety Bonds (Performance Bonds)
- guarantee that specific obligations will be fulfilled. If the principal defaults, the surety must perform the contract, duty, or obligation of the principal, or indemnify the obligee for actual loss. -Consequently, before accepting a risk, the surety considers the principal's ability to perform, financial capability, and previous contracts. Surety bonds are generally written for the duration of the contract, and they are written under the categories of Contract, Court, or License & Permit bonds:
Jewelers Block Coverage
- provide insurance for both business personal property and goods for sale during the normal course of the insured's business. Coverage is typically written on an Open Perils basis with the usual exclusions: war; wear and tear; delay and loss of market; flood; and earthquake. Specific block or dealers policies have exclusions designed to meet the needs of that particular business and its exposures. -A Jeweler's Block floater provides insurance for jewels, watches, gold, silver, platinum, pearls, and precious and semi-precious stones. Two optional coverages are available and, if not purchased, no coverage applies for: -Show Windows - Provides theft coverage for articles in a show window if the window is broken or smashed. Different limits apply when the business is open or closed and whether the window is protected by a security system Money - Provides coverage for theft of money from locked safes or vaults on the insured's premises
Accounts Receivable Coverage Form
- provides insurance when the insured's business records are destroyed in a loss caused by a covered peril, and the business is unable to collect money it's owed. The policy pays for the uncollected sums plus the expenses involved with reconstructing records, along with extra collection fees. -Accounts receivables coverage also pays for interest on loans and other reasonable expenses. Typical exclusions include those involving dishonest acts of the insured, its employees and authorized persons; bookkeeping or accounting errors; bad debts; alteration or falsification of records; war; governmental action; and nuclear hazard.
Directors and Officers Liability (D&O)
- typically written to protect the directors and officers of a corporation or other legal entity for wrongful acts committed while acting in their capacity as directors and officers for the organization.
Annual Transit Coverage Form
-Covered property is the insured's personal property or the property of others in the insured's care, custody, or control. Property must be in transit when shipped by any type of carrier or vehicle, or in any land vehicle owned or operated by the insured. Coverage applies while covered property is in the custody of the carrier for hire until it's either delivered to its destination or returned to the insured.
Hull Insurance
-Covers physical damage to the vessel. Coverage may be written on a named perils basis on one of two types of policies: A Voyage policy, which covers the vessel for a specific voyage, or A Time policy, which covers the vessel for a specific period of time (usually 12 months). Named perils include perils of the sea, jettison, piracy, fire and explosion, and lightning.
Fiduciary Responsibilities
-Directors and officers of corporations have many and varied fiduciary responsibilities. These include the duties of care and loyalty, in addition to exhibiting due diligence when handling the money and property of the corporation -Board members of non-profit institutions may have special fiduciary duties to advance the charitable goals of the institutions and protect their assets. Allegations of wrongful or tortuous conduct may require directors and officers to defend themselves personally from such claims, and to face substantial liability exposure. The most common forms of liability for insuring these fiduciary responsibilities are Directors & Officers (D&O) Liability and Fiduciary Liability.
Inland Marine Policies
-Generally, the property insured under these policies is property that is only covered on land. The coverage is designed to protect against losses to property that is mobile in nature, primarily while the property is away from the owner's premises. Inland marine policies are designed primarily to cover property in transit, moveable property, property particular to transportation and communication risks, and property in the possession of bailees. -generally written on an open perils basis and contains few exclusions. The policies are not used to cover furniture and fixtures at fixed locations. The only inland marine policies that insure property at fixed locations are those issued to insureds in the transportation and communications industries because such property cannot be insured on other property policies.
Liquor Liability Insurance
-Provides legal liability coverage for businesses in the business of selling, serving, distributing, manufacturing, and furnishing alcoholic beverages based on common law and statutory liability. Under Dram Shop Liability laws, a business selling or serving alcohol to an intoxicated person, or contributing to the intoxification of an individual, may be held liable for bodily injury caused to or by the actions of that individual.
Installation Floater
-The primary property insured under the installation floater is movable property, such as electrical, plumbing, or heating equipment to be installed in a building. -Property, such as carpeting, tile, glass, elevators, and machinery, can also be included in coverage. -Insurance is provided during installation, and sometimes after installation, until construction has been completed and the property has been accepted by the owner OR when the interest of the insured ends, whichever occurs earliest.
Nationwide Marine Definition
-guideline that was established in 1953 by the National Association of Insurance Commissioners (NAIC). It was revised in 1976 for the purpose of classifying inland marine, marine, and transportation exposures into categories of insurance -All property must contain an element of transportation to be eligible under inland marine coverage forms. Specifically, it must be in transit, be moveable, bear a relationship to transportation or communication, or be held in the possession of a bailee, who is someone other than the property owner. The Nationwide Marine Definition defines 6 broad classes of property that may be insured under marine contracts. The 6 classes are: 1. Imports, 2. Exports, 3. Domestic Shipments and Property in Transit 4. Instrumentalities of Transportation or Communication 5. Personal Property Floaters 6. Commercial Property Floater Risks
Builders Risk Coverage
-insures buildings and structures that are in the course of construction, along with machinery, equipment, supplies, and fixtures that will eventually become part of the insured buildings and structures. Scaffolding and temporary structures can also be included in coverage. -Eligible buildings can be commercial, residential, or farm -he coverage form is similar to the Building and Personal Property Coverage Form and provides insurance on an open perils basis. The perils of theft and vandalism often contain limits and/or specific conditions, such as for accidental loss, damage, or destruction of property in which the insured has an insurable interest.
Electronic Data Processing Coverage (Computer Systems Coverage Form)
-nsures computers, component parts, associated peripheral equipment including printers and faxes, and systems used exclusively in the insured's computer operations, such as air conditioning, fire suppression, and electrical equipment. The form also insures data stored on software, tapes, discs, drums, or cells. -The form does NOT provide coverage for the following types of property: Property leased to others and located off-premises Accounts, records, documents, etc. Laptops and notebooks Contraband Stock in trade Note: Extra Expense Coverage is available as an optional coverage.
Signs Floater
-provides coverage insurance for neon signs, automatic or mechanical signs, and street clocks, as well as billboards, ordinary fixed or plastic-faced signs. Coverage is provided for property of the insured and similar property of others in the care, custody, or control of the insured.
Bailees Customers Form
-provides open perils coverage for covered personal property of others while it's in the care, custody, or control of the insured. Covered property does NOT include certain types of property that are uninsurable or that must be insured on another policy or form of inland marine coverage, such as: Accounts, bills, records, documents, deeds Animals, birds, or fish Autos, trucks, trailers, aircraft, watercraft Furs, jewelry, watches, precious or semi-precious stones Property accepted by the insured for storage Property shipped by mail Contraband or property in the course of illegal transportation or trade Property owned by the insured
Contractors Equipment Floater
-provides open perils coverage on the insured's equipment, such as mobile tools, equipment, and machinery, including forklifts, compressors, generators, and small hand tools. Coverage is also provided for similar property of others in the insured's care, custody, or control. -No coverage is provided for: Autos, trucks, aircraft, boats Plans, blueprints, designs Property loaned, leased, or rented to others Contraband and personal property of employees
Seaworthiness
-the vessel must be seaworthy at the time insurance goes into effect and upon the insurer's subsequent inspections -the vessel must always be in the command of a qualified and experienced captain and crew -vessel must comply with safety and operational requirements
Medical Malpractice Insurance
-typically written for medical professionals - such as doctors, surgeons, nurses, and dentists - whose negligent acts or omissions may injure or harm patients. Other professions covered by malpractice insurance include social workers and beauticians. This is the only type of professional liability that may include coverage for bodily injury.
License and Permit Bond
A bond required by municipalities or other public bodies as a condition for granting a license or permit to engage in a specified activity. The bond guarantees that the party seeking the license or permit will comply with applicable laws or regulations. Examples include: Contractor's license bonds guarantee that a contractor complies with laws pertaining to his or her trade. Tax bonds guarantee a business complies with laws pertaining to payment of taxes. Broker's bonds, such as insurance, mortgage, or title agency bonds guarantee that the broker performs according to law. Motor vehicle dealer bonds guarantee that the dealer performs according to law.
Labor and Materials Bond
A guarantee that bills for labor and materials called for in a construction contract will be paid when due. This bond can be written separately or as part of a Performance Bond.
Bid Bond
A guarantee that the contractor making the bid will, upon acceptance of the bid by the contractor's customer (the Obligee), proceed with the contract and replace the Bid Bond with a Performance Bond. Failure to do so results in default and the Surety will pay the contractor's customer (the Obligee) the difference between the contractor's bid and the next highest bid.
Performance Bond
A guarantee that the contractor will perform, as agreed in the contract. If the contractor defaults, the Surety will pay the obligee the value of the bond, which is usually the value of the contract.
Particular Average
A partial loss sustained by a specific vessel or cargo. The loss is NOT shared by anyone other than the party with insurable or financial interest in the loss.
General Average
A partial loss sustained voluntarily, but done so to save a vessel or cargo from a total loss. An example of a general average loss is jettisoning part of the cargo (throwing it overboard) to prevent a vessel from sinking. When a general average loss occurs, the owners of the vessel and all cargo share proportionally in the loss.
Released Bill of Lading
A released bill of lading is issued when the carrier and shipper agree that the carrier's responsibility is limited to the value stated on the bill of lading
Straight Bill of Lading-
A straight bill of lading doesn't contain a value limitation for the cargo being shipped, meaning the carrier is legally responsible for the full value of transported goods while it is in the carrier's care
Farm Property Conditions - Loss Conditions:
Abandonment Appraisal Duties in the Event of Loss or Damage Insurance Under Two or More Coverages Legal Action Against the Insurer Loss Payment Pairs, Sets, or Parts Other Insurance Recovered Property Transfer of Rights of Recovery Against Others to the Insurer Unoccupancy and Vacancy
Limits of Insurance -
Applicable limits of insurance in the farm coverage forms are shown on the Declarations page for each class of property insured. If no designation appears on the Declarations, coverage is NOT provided.
Collapse -
Applies only when Broad or Special Covered Causes of Loss are specified in the Declarations.
Who is an Insured
As with commercial general liability policies, the insureds are those named in the declarations and can include: Executive officers and directors Stockholders and trustees Volunteer workers and employees
Self Insured Retention
As with personal umbrella policies, a commercial umbrella policy has a self-insured retention, which is a form of cost-sharing that applies when the policy drops down to act as primary coverage because the underlying primary policy doesn't cover a loss.
Implied Warranty
Breach of an implied warranty will void the contract. These warranties include: legality seaworthiness no deviation in voyage
The Farm Liability Insurance policy covers each of the following, except:
C Coverage K - Non-farming Liability
Exclusions The following exclusions appear in the Equipment Breakdown Protection Coverage Form:
Combustion Explosion Ordinance or Law, except as specifically provided Earth Movement Nuclear Hazard War and Military Action Water, flood, mudslide, water backup or sump overflow Failure to protect property Failure to use dispatch in resuming business Loss resulting from a test, such as an electrical insulation breakdown test; a hydrostatic, pneumatic, or gas pressure test. Indirect loss resulting from an accident to an object.
Commercial Umbrella Insurance
Commercial Umbrella Insurance provides coverage against catastrophic losses, extends liability limits, drops down to provide coverage not included in underlying primary insurance, and provides more comprehensive coverage than that contained in underlying primary insurance.
Coverages E and F only -
Cost of Restoring Farm Operations Records
Which of the following bonds is not a type of Fidelity Bond?
Court -A Court Bond is a Surety Bond required by the court to enforce certain behavior.
Equipment Breakdown Protection Coverage Form (EB 00 20)
Coverage - The following types of coverage are provided by the Equipment Breakdown Protection Coverage Form: Property Damage - The form pays for direct damage to covered property located at the premises described in the Declarations. Expediting Expenses - The form pays for the necessary extra costs the insured incurs to make temporary repairs, and to expedite the permanent repairs or replacement. Business Income and Extra Expense - The form pays the actual loss of business income during the period of restoration, and the necessary extra expense the insured incurs, to operate the business during the period of restoration. Spoilage Damage - The form will pay for spoilage damage to raw materials, property in process, or finished products (provided the spoilage damage is due to lack or excess of power, light, heat, steam or refrigeration, and certain other stipulated conditions are met). Newly Acquired Premises - This form provides automatic coverage to newly acquired premises. Ordinance or Law Coverage - Provides coverage for loss in value of undamaged property due to enforcement of ordinances or laws concerning repair or replacement of damaged equipment. Errors and Omissions - Coverage pays for loss or damage not otherwise payable due to an unintentional error or omission. Brands and Labels - Provides coverage to allow the named insured to either stamp a brand of "salvage" or remove the label from damaged goods and re-label at the insurer's expense.
Coverage H (Bodily Injury and Property Damage Liability)
Coverage H pays sums the insured becomes legally obligated to pay for losses arising from bodily injury or property damage. Fire damage liability is included. Coverage includes products liability from the sale of farm products.
Coverage I (Personal and Advertising Injury Liability)
Coverage I provides for payment of sums the insured becomes legally obligated to pay for losses arising from personal or advertising injury, to which the insurance applies. An offense must be related to the farming business. For example, the insured unknowingly libels a neighbor's farm products.
Coverage J (Medical Payments)
Coverage J provides third-party payments for reasonable medical expenses arising out of an accident, if the expenses are incurred and reported within 3 years of the accident date. The Medical Payments limit applies per person, and payment is made regardless of fault.
Cargo Insurance
Covers physical damage losses to merchandise while in transit. Cargo insurance can be written on an open perils basis. Certain shipping considerations affect coverage: OB (Free On Board) Point of Shipment - The seller is responsible for damages until the property is placed safely on a vessel (to be shipped) or when a bill of lading has been issued. The buyer is responsible for damages from that point on. FOB Point of Destination - The seller is responsible for damages until the property reaches its final destination (which includes the shipping) and is delivered based on the terms of the contract. The difference in these two methods of shipping is, essentially, who is legally responsible for the cargo at the time of the loss. If cargo is shipped FOB Point of Shipment, the shipper is responsible for insuring cargo during shipment. If cargo is shipped FOB Destination, the seller is responsible for insuring cargo during shipment.
Additional Coverages Coverages A, B, C, E, F, and G:
Debris Removal Reasonable Repairs Damage to Property Removed for Safekeeping Fire Department Service Charge
Definitions
Definitions Business Property - Property pertaining to any trade, profession, or occupation other than farming. Dwelling - A building used for family residential purposes; includes mobile homes, modular homes, and prefabricated homes. Farm Personal Property - Equipment, supplies, and products used in farming. Insured - The named insured and resident relatives, along with any other person under age 21 and in the care of the insured. Insured Location - Any location described in the Declarations. Livestock - Cattle, sheep, swine, goats, horses, mules, and donkeys. Money - Currency, coins, and bank notes in current use and having a face value. Pollutants - Any solid, liquid, gaseous, or thermal irritant or contaminant. Poultry - Fowl kept by the insured for use or sale. Securities - Negotiable and non-negotiable instruments or contracts presenting either money or other property.
Duty to Defend
Depending upon the type of coverage, the insurer may not have the duty to defend, as it has in most other insurance policies. Certain professional liability policies require the insurer to pay for defenses costs but do not require the insurer to actually handle defense. Because some professionals, such as doctors and attorneys, wish to have control over whether to settle a loss, it's very important to understand fully how the defense provision works in a professional liability policy.
Bonds are contracts that involve all of the following parties, except:
Director -The insurance company issuing the bond is the surety or guarantor, the party owing the duty is the principal or obligor, and the party who is paid by the surety if the principal fails to perform is the obligee.
Which of the following perils is not insured under a professional liability insurance policy?
Discrimination -Other covered perils include conflict of interest, malpractice, neglect, errors and omissions, and breach of contract.
Farm Property Coverage Form Coverage A
Dwellings provides insurance for the residential dwellings owned and occupied by the insured. It includes attached structures.
The Equipment Breakdown Protection Coverage Form does not provide which of the following types of coverage?
Earth movement damage -The types of coverage also include expediting expenses, business income and extra expense, newly acquired premises, ordinance or law, errors and omissions, and brands and labels.
Objects Covered
Equipment built to operate under internal pressure or vacuum; electrical or mechanical equipment that is used in the generation, transmission or utilization of energy; communication equipment, and computer equipment; and equipment for any of the preceding that is owned by a public or private utility and used solely to supply utility services to the insured's premises.
Under Ocean Marine Coverage, breach of each of the following implied warranties will void the contract, except:
Express -Express warranties are those that are written into the policy contract.
Coverages E, F, or G
Extra Expense
Breakdown
Failure of pressure or vacuum equipment; mechanical failure including rupture or bursting caused by centrifugal force; or electrical failure including arcing that causes damage to covered equipment and necessitates its repair or replacement. "Breakdown" does not include: Malfunction, including but not limited to, adjustment, alignment, calibration, cleaning, or modification. Defects, erasures, errors, limitations, or viruses in computer equipment and programs. Leakage at any valve, fitting, shaft seal, gland packing, joint, or connection. Damage to any vacuum tube, gas tube, or brush. Damage to any structure or foundation supporting the covered equipment or any of its parts. The functioning of any safety or protection device. The cracking of any part on an internal combustion gas turbine exposed to the products of combustion.
Cause of Loss: Basic
Fire or Lightning Windstorm or Hail Explosion Riot or Civil Commotion Aircraft Vehicles Smoke Vandalism Theft Sinkhole Collapse Volcanic Action Collision (Coverages E & F only) Earthquake Loss to Livestock Flood Loss to Livestock
Liquor Liability
For businesses that have this exposure
Commercial Auto Liability
For exposures pertaining to vehicles owned, used, leased, or hired by the business
Pollutant Clean Up and Removal -
From land or water at the insured location if caused by or resulting from a covered cause of loss.
Typical exclusions on an inland marine policy include:
Governmental action War and nuclear hazard Consequential loss Dishonest and criminal acts of an insured Weather conditions Acts and decisions -The exclusions of earthquake and water are usually found only in inland marine policies that insure buildings.
Contract Bonds
Guarantee that contractors perform according to a construction contract. If a contractor fails to perform according to the contract, the Surety is responsible to the Obligee for the bond limit, which usually equals the value of the completed contract. The following types of contract bonds may be required in connection with a contract:
Farm Property Coverage Form Coverage C
Household Personal Property provides insurance for household personal property owned by the insured and family members while on the premises.
One Breakdown
If an initial "breakdown" causes other "breakdowns" all will be considered "one breakdown." All "breakdowns" at any one premises that manifest at the same time and are the direct result of the same cause will be considered "one breakdown."
Cause of Loss: Broad
Includes the Basic Causes of Loss, plus the following: Electrocution of Covered Livestock Attacks on Covered Livestock by Dogs or Wild Animals Accidental Shooting of Covered Livestock Drowning of Covered Livestock From External Causes Loading/Unloading Accidents Breakage of Glass or Safety Glazing Material Falling Objects Weight of Ice, Snow, or Sleet Sudden and Accidental Damage to Heating or Air Conditioning Systems Accidental Discharge or Leakage of Water or Steam From a System or Appliance Containing Water Freezing of Plumbing, Heating, Air Conditioning, Fire Protective Systems, or Appliances Sudden and Accidental Damage From Artificially Generated Electricity
Excess Liability Insurance
Insurance purchased for the purpose of extending the limits of liability on another policy.
Protection and Indemnity (P&I) Insurance is similar to which of the following coverages?
Liability Protection and Indemnity, or P&I, is purchased by the ship owner to protect against cargo lost due to the insured's negligence, damage to other property when not caused by collision, damage to property on board caused by collision, and injuries to seamen resulting in unworthiness of the vessel.
Farm Property Coverage Form Coverage D
Loss of Use provides insurance for additional living expense and fair rental value.
Business Income
Net income (net profit or loss before income taxes) that would have been earned or incurred, and continuing normal operating expenses incurred, including payroll.
Farm Property Coverage Form Coverage G
Other Farm Structures provides insurance for described farm buildings and structures and their attached sheds and permanent fixtures. Also covered are silos if described on the Declarations, portable fences and structures, corrals, pens, chutes, etc.
Farm Property Coverage Form Coverage B
Other Private Structures provides insurance for detached private garages and other private structures. These structures must be used personally - and not for farm purposes.
The Running Down Clause
Part of a hull policy that provides coverage for legal liability of the shipper or carrier for claims arising out of collisions caused by the shipper or carrier. This clause covers the negligence of the shipper or carrier that results in damage to the property of others.
Which of the following is covered under the Electronic Data Processing Floater?
Printers -Also covered are computers and their components and systems used exclusively in the insured's computer operation, such as air conditioning or electrical equipment; the other choices are exclusions.
Policy Triggers
Professional liability policies are typically written on claims-made forms of coverage - either pure claims made or claims-made and reported. The pure claims-made form requires claims to be made during the policy period. Claims-made and reported forms require claims to be both made AND reported during the policy term.
Exposures
Professional liability policies insure against a wide range of perils, many of which are specifically excluded under other forms of liability coverage: Fraud or breach of contract Conflict of interest Malpractice or neglect Government investigation Errors and omissions Cyber risks, such as: Business-to-Business (B2B) exposures Business-to-Consumer (B2C) exposures Internet Service Providers (ISP), mobile, cellular exposures Internal technology infrastructure exposures Corporate "brochure" web site exposures
Covered Property
Property the insured owns, or property that is in the insured's care, custody, or control and for which the insured is legally liable.
Fiduciary Liability Insurance
Provides errors and omissions insurance for businesses with respect to their administration of employee benefit plans, such as pensions, profit-sharing, and medical insurance. The Employee Retirement Income Security Act of 1974 (ERISA) increased the legal liabilities of fiduciaries that, in turn, increased many business' exposures to fiduciary liability claims.
Employer's Liability
Provides liability insurance for the business in the event an employee sues the business for injuries that fall outside workers' compensation statute
Commercial General Liability
Provides liability insurance for the business' premises, operations, products, and completed operations—along with a few other exposures
Cause of Loss: Special
Provides open perils coverage for insured property other than livestock, poultry, other animals, bees, fish, worms, hay, and plants, trees or shrubs. The special form will not pay for dishonest or criminal acts committed by the insured or employee, and release or escape of pollutants or contaminants unless caused by a specified cause of loss.
Coverages A, B, C, and D only:
Removal of Fallen Trees - The policy will pay up to $500 for any 1 loss, regardless of the number of fallen trees. Credit Cards and Fund Transfer Cards; Forgery; Counterfeit Currency - The policy will pay up to $500 for any 1 loss.
Court bonds
Required by the court to enforce certain behavior. There are two types of court bonds: fiduciary and judicial bonds :
Farm Property Coverage Form Coverage E
Scheduled Farm Personal Property provides insurance for specific types of property if a designation appears on the Declarations for that type of property. For example, grain and hay, farm products, poultry (other than turkeys), and computers and related equipment used for farm management.
The Controlled Inland Marine Coverage forms provide insurance for which of the following?
Signs -Signs, accounts receivable, commercial articles floater, jewelers block coverage, valuable paper and records, and equipment dealers coverage are controlled, or filed, forms; the other choices are uncontrolled, or unfiled forms and also include contractors equipment, electronic data processing, and installation floaters.
Under the Equipment Breakdown Protection Coverage Form, the __________________ condition will apply if the covered equipment is subject to a dangerous exposure.
Suspension -The Suspension condition allows the insurance company to immediately suspend coverage against the loss.
Extra Expense
The additional cost the insured incurs to operate their business, during the period of restoration, over and above the cost the insured would have incurred during the same period, had no "breakdown" occurred.
Multi-Peril Crop Insurance (MPCI)
The coverage is written by private insurers and is reinsured by the Federal Crop Insurance Corporation (FCIC). Coverage may be provided for approximately 200 different types of crops, but 5 major crops account for 90% of the liability assumed (corn and maize, cereal grains, soybeans, tobacco, and cotton). Covered causes of loss include: adverse weather conditions, fire, insects, plant disease, wildlife, earthquake, and volcanic eruption.
Exclusions
The forms do not cover losses caused directly or indirectly by ordinance or law, earth movement (other than sinkhole collapse), government action, intentional loss, nuclear hazard, off-premises services, war and military action, or flood or surface water.
Surety (Guarantor) -
The party guaranteeing the duty, performance, or honesty of the Principal. The Surety issues the bond, is also called the Guarantor, and is usually an insurance company.
Principal (Obligor)
The party owing the duty, performance, or honesty and is usually the party purchasing the bond. The Principal is also called the Obligor and is usually the insurance agent's client or insured.
Obligee -
The party paid by the Surety if the Principal fails to perform (because this is the party harmed by the principal's dereliction of duty). If the Principal fails to perform as agreed, the (Surety) must perform in lieu of the Principal because of the requirements of Suretyship. Suretyship is the assumption of liability for the obligations of another; in other words, a guarantee. The Surety has a legal right of action against the Principal in the event of default until the amount of the loss is recovered. The defaulting Principal MUST repay the Surety.
Period of Restoration
The period of time that begins at the time of the "breakdown" or 24 hours before the insurer receives notice of the "breakdown," whichever is later, and ends 5 consecutive days after the date when the damaged property is repaired or replaced with reasonable speed and similar quality.
Deductible
The standard deductible is $250.
Crop/hail insurance Exclusions
These may vary by company but common exclusions include: Until normal visible (crop must be above ground) Failure to harvest a mature crop Non-owned property (share crop) Loss from injury to buds, blossoms or blooms, unless the crop is affected Injury to leaves, vines, etc unless crops are also damaged or affected Injury to trees, bushes, fruit or nut crops
Business Income - Report of Values (BM 15 31)
This endorsement is no longer widely used, but when it is used it is completed and signed by the named insured or its authorized representative and sent to the insurer in order to establish "actual" total net profits, fixed charges, and expenses for the immediate 12-month policy period that is expiring and to also "estimate" what the same values are expected to be for the upcoming 12-month policy period. The endorsement is used to determine the amount of the insurer's payment to the insured in the event of a loss of income.
Actual Cash Value (BM 99 59)
This endorsement, when added to the Equipment Breakdown Protection Coverage Form, changes the property damage method of valuation to state that the insurer will pay the lesser of: The cost to repair or replace the damaged property with property of the same kind, capacity, size, or quality on the same site or another site, whichever is less costly. The actual cash value of the damaged property. Note:The valuation of covered property will be as of the time of the "breakdown", and the insurer will not pay for damaged property that is obsolete or useless to the insured.
Trip Transit Coverage Form -
This form is used by those who do not make regular shipments, but wish to insure a single shipment. Covered property is the property described in the Declarations and that isn't otherwise excluded. Coverage applies while covered property is in the custody of the carrier for hire or in any vehicle owned or operated by the insured while in transit. Both forms may be written on an open or named perils basis.
Crop/Hail Insurance
This is private insurance, not reinsured by the federal government. This policy provides named perils coverage. Other perils that may be included in addition to hail are: Fire, lightning, wind. Freezing, drought, insects and disease. The rates for crop hail insurance are developed by the Crop Hail Insurance Actuarial Association (CHIAA). Crop-hail insurance is rated on an acreage basis and the insured can choose a wide variety of coverage options. Typically, coverage begins at 12:01 a.m. following the date the application is signed, provided the crop is clearly visible above the ground. However, this will vary by insurer and state. Changes will be addressed in the state law chapter if applicable. The policy is typically written with deductibles (normally a 5% yield reduction). Policies can be written to cover a percentage of expected yield, such as 50% or 100%. If a crop is expected to yield 10,000 bushels but yields only 5,000, the policy will cover the unrealized 5,000 bushels. The coverage ceases when the crop is harvested (1 growing season). The payment of an insured loss reduces the total amount of available insurance. The policy includes a replanting provision designed to reduce both the insured's and the insurer's losses. The insurer may reimburse the insured up to 20% of the amount of insurance. The reimbursement does not reduce the amount of insurance available for the crop.
The Nationwide Marine Definition includes all of the following classes of property, except:
Umbrella -The other three classes are exports, domestic shipments and property in transit, and commercial property floater.
Farm Property Coverage Form Coverage F
Unscheduled Farm Personal Property provides insurance for all items of farm personal property on the insured location except for those specifically excluded. A few types of property are covered off-premises, however, coverage is not provided for household or personal property usual to a dwelling (that type of property is insured under Coverage C).
Valuable Papers and Records Floater
Valuable papers and records coverage provides insurance for the destruction of valuable papers and records by a covered cause of loss. Examples of covered property include maps, blueprints, manuscripts, films, illustrations, abstracts, deeds, books, mortgages, etc. Money and securities are NOT covered.
All of the following underlying coverages must be purchased in order to qualify for the Umbrella and Excess Liability policy, except:
Workers' Compensation -Commercial Auto Liability is also a required underlying coverage to qualify for the Umbrella policy.
Legality
all voyages must be made legally and for legal purpose. any loss that occurs as result of an illegal will not be covered
Controlled lines of coverage, (filed)
are those that use policy forms, endorsements, and rates that are filed by insurers with the departments of insurance in each of the states where they write insurance. These forms are governed by the rules contained in the commercial lines manual, or any other approved manual. The most common forms of coverage in the controlled lines are: Accounts receivable Commercial articles floater Jewelers block coverage Sign coverage Valuable papers Records coverage, and equipment dealers coverage
Uncontrolled lines of coverage, (non filed)
are those that use policy forms, endorsements, and rates that are not filed with or through any rating bureau or state department of insurance. They are developed by individual insurers for individual risks and, consequently, the forms and coverage differ from insurer to insurer. A majority of commercial inland marine insurance is uncontrolled, such as: Builders risk coverage Contractors equipment floaters Electronic data processing (EDP) coverage Installation floaters Transportation floaters
Windstorm Insurance Coverage
covered under the peril of wind in standard property insurance policies. In some states, exclusionary endorsements may be added to property policies to exclude coverage for the peril of wind or windstorm. These states are Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, South Carolina, and Texas -Because these states are at high risk for wind loss caused by hurricane, they have established wind and/or wind and hail associations that provide a marketplace of last resort for those who are unable to purchase insurance for the peril of wind on their primary property policies. In these and other states, some insurers require mandatory wind deductibles of a certain dollar amount, such as $2,500 or higher, based on the geographic location of property (such as within a certain distance of the sea coast) or prior wind losses.
Fidelity Bonds (Honesty Bonds)
designed to cover an employer from direct loss due to fraudulent and dishonest acts (namely theft) by their employees. They are commonly referred to as "dishonesty insurance." Several types of Fidelity Bonds are designed for the needs of employers. An Individual Bond is used when an employer wishes to bond a single employee. A Name Schedule Bond is used when an employer wishes to bond several employees who are all named in the bond. A Position Schedule Bond is available to employers that desire to bond a specific position, regardless of who fills the position, or how often the person filling the position is replaced. A Blanket Bond is for an employer that desires to cover all existing employees of a firm without exception, as well as any new employees.
Judicial Bonds
guarantee that certain parties fulfill their statutory obligations in connection with court proceedings.
Fiduciary Bonds
guarantee the honest and faithful performance of executors, trustees, and other fiduciaries. This type of bond is often required by statute in order to protect the interests of those for whom the fiduciary acts.
Commercial Property Floater Risks
insure property pertaining to a business, profession, or occupation. Examples include: Physicians' and Surgeons' Equipment Floaters Pattern, Tool, and Die Floaters Theatrical Floaters Film Floaters Salesman's Sample Floaters Tools and Equipment Floaters Builders' Risk & Installation Floaters
Protection and Indemnity Insurance (P & I Insurance)
liability insurance purchased by ship owners for virtually all types of maritime liability pertaining to the use of a vessel. Coverage includes: Cargo lost or damaged through the insured's negligence. Damage to other property, including fixed objects, such as wharves, docks, and other vessels, when not caused by collision. Damage to property on board the insured vessel when caused by collision. Injuries to seamen resulting from the vessel's lack of seaworthiness, for other job-related injuries, and general damages subject to the Jones Act caused by negligence.
Commercial Articles Coverage Form
ovides insurance for fine arts, cameras, musical instruments, and their related equipment when used for business or commercial purposes.
Bonds Bonds are contracts that involve three parties:
principal (obligor), surety (guarantor), and obligee
Common Carrier Cargo Liability - Motor Truck Cargo Coverage
provided for loss or damage to property arising from the legal liability of the carrier. It covers the interest of the trucker - not the shipper, owner, or consignee - when loss or damage to the cargo occurs. Coverage is written on one of two forms: Bill of lading form, which is written on an open perils basis Named perils form, which varies by insurer
Motor Truck Cargo Owners Coverage Form
provides OPEN PERILS property coverage for the insured's cargo under the following terms: The property is owned by the insured. The property is covered property (meaning it's not a type of property that's excluded in the form). The property is located in or on a land vehicle OWNED or OPERATED by the insured AND is in transit at the time of loss.
Employment Practices Liability Insurance (EPLI)
provides businesses with liability coverage against claims made by employees, former employees, and potential employees alleging their legal rights were violated. Some insurance companies provide this coverage by endorsement to the BOP; other insurance companies provide coverage on standalone policies. EPLI provides coverage against various types of claims that are typically excluded on other liability policies, including: Sexual harassment Discrimination Wrongful termination Breach of employment contract Coverage includes defense and typically excludes punitive damages and civil/criminal fines assessed against the insured. Workers' compensation and Employer's Liability are also excluded.
Aircraft liability insurance
provides coverage for the insured's legal liability for bodily injury or property damage that arises out of the ownership or use of an aircraft. A combined single limit of coverage is purchased and applies per occurrence. In addition, policyholders may also purchase a sublimit of coverage that limits loss payments to a single person or passenger. For example, an aircraft liability policy may have a $1 million per occurrence limit with a sublimit of $100,000. This means that if a loss occurs, the most the policy will pay is $1 million for all claims arising from the loss, and the most it will pay per person or passenger is $100,000.
Freight Insurance
provides coverage when the prepayment of freight is lost due to a partial loss to cargo or a voyage that isn't completed. Freight Revenue may be insured in a number of ways and depends upon the agreement between the shipper and carrier. If the shipper is required by agreement to pay the carrier's freight bill without regard to delivery of the goods, the freight revenue is considered part of the cargo and is insured in the cargo's limit of insurance. If the freight revenue depends upon the safe delivery of the goods, it's insured as part of the hull value.
Livestock Coverage Form
provides insurance for livestock of a class shown on the Declarations against loss by death or destruction. Limits can be shown on the Declarations with a limit per animal within a class OR with a limit per class with a sublimit for individual animals. Livestock is defined as cattle, sheep, swine, goats, horses, mules, and donkeys; POULTRY is NOT livestock. NO coverage is provided for livestock that is: In the custody of a common or contract carrier. In public stockyards, sales barns or yards, etc. In packing plants or slaughterhouses.
Mobile Agricultural Machinery and Equipment Coverage Form
provides insurance for mobile devices used in the everyday operation of a farm, including accessories, tools and spare parts specifically designed and intended for such mobile devices. The insured chooses the specific causes of loss form to apply. The following types of property are specifically excluded under this coverage form: aircraft, watercraft, automobiles, motorcycles, mobile homes, snowmobiles, trucks, vehicles licensed for use primarily on public roads, irrigation equipment, contraband, etc.
Aircraft hull insurance
provides insurance for physical damage to the airplane. Coverage is offered at 3 different levels, or causes of loss. The premium for each type of coverage increases as the number of perils covered increases. Ground only provides coverage when the hull is on the ground and not in motion; covered losses would include fire, theft, vandalism, etc. Ground including taxi provides coverage when the hull is on the ground and not in motion PLUS losses that occur during taxi; for example, a collision with another plane when taxiing on a runway. All risk provides coverage when on the ground, during taxi, and in flight.
Equipment Dealers Floater
provides insurance for property consisting primarily of mobile agricultural and construction equipment, including property of others in the dealer's care, custody, or control, such as binders, reapers, harvesters, tractors, bulldozers, and road scrapers. The following types of property are excluded: Aircraft, watercraft, motor vehicles Accounts, bills, currency, deeds Property leased, rented, or sold; coverage includes property owned by others in the dealer's care, custody, or control
The Internet Liability and Network Protection Policy
provides liability coverage on a claims-made basis for risks that are specific to business use of the internet, such as network security, electronic publishing liability, and loss of data. The policy provides the following five insuring agreements: Insuring Agreement A (Website Publishing Liability) provides liability coverage for wrongful acts committed in the course of internet publishing. Insuring Agreement B (Network Security) pays for the insured's liability for a network-related security breach. Insuring Agreement C (Replacement Or Restoration Of Electronic Data) pays for loss or recovery of data resulting from a virus or other malware. Insuring Agreement D (Cyber Extortion) pays for losses resulting from threats such as virus or denial of service attacks. Insuring Agreement E (Business Income And Extra Expense) pays for indirect loss due to business interruption resulting from an attack or extortion attempt.
Motor Truck Cargo Carrier's Legal Liability Form -
provides property coverage for the insured's cargo under the following terms: The property is owned by others and is covered property (meaning it's not a type of property that's excluded in the form). The insured has accepted the property for transportation as a contract or common carrier. The insured has issued a bill of lading or a shipping receipt. The insured is legally liable for loss or damage to the cargo.
Primary insurance
responds to a loss before all other insurance that might be in place to coverage a particular loss. An example of primary insurance is a commercial auto policy
No Deviation in Voyage
the ship must sail the course that was filed with the insurer at the time the policy was underwritten -exceptions that dont void coverage in event of loss include a deviation in voyage to avoid bad weather, make necessary repairs, save a human life, or obtain medical care
Personal Property Floaters
typically insure personal property on an open perils basis and, when covered on a floater, this type of property is excluded from coverage on the Homeowners and/or Dwelling policies. It involves property that is usually NOT located at the insured's residence.
Errors and Omissions (E&O) Insurance
typically written for professionals who provide services, such as insurance agents, adjusters, real estate agents, architects, accountants, attorneys, surveyors, and appraisers, whose negligent acts or omissions may result in financial harm to a third party.
Instrumentalities of Transportation or Communication
which DO cover items that are often at a fixed location because they play an important role in the transportation and communication industries. These items are NOT easily insured on traditional commercial property policies. They include the following types of property: bridges, tunnels, transmission towers, including radio and television transmitting equipment, piers, wharves, slips, docks, dry-docks, marine railways, pipe lines, outdoor cranes, loading bridges, and similar equipment
Domestic Shipments and Property in Transit
which involves shipments on consignment, for sale or distribution, for approval or auction, while in transit, while in the custody of others, and while being returned and DOESN'T include coverage while on premises owned, leased, or operated by the consignor.
Exports,
which may be insured at any location and acquires its character when being prepared for export and must retain that character unless diverted for domestic trade.
Imports,
which may be insured at any location and must remain segregated from other property so it can be easily identified.
