Inland Marine and Ocean Cargo (Chapter 8)

Inchamaree Clause (open cargo)

A clause that adds coverage to an ocean marine cargo policy for a loss resulting from bursting of boilers, breakage of shafts, latent defects in the vessel, or faults or errors in navigation or management of the vessel.

Agreed Value (inland marine)

A method of valuing property in which the the insurer and insured agree, at the time the policy is written, on the maximum amount that will be paid in a total loss.

For property shipped on the ships deck, what kind of agreement is often used?

A named perils agreement

Acts of public enemy

A nation or government at war with the carrier's nation

Floater

A policy designed to cover property that 'floats', or moves, from location to location. (property in transit policies)

Contractors Equipment Floater

A policy that covers mobile equipment or tools while located anywhere in the coverage territory.

Inherent Vice

A quality of or condition within a particular type of property that tends to make the property destroy itself. (perishables)

Invoice Value (inland marine)

A valuation basis that values covered property at its invoice value, including freight

What are the exceptions to where common carriers can be held liable when transporting goods by land?

Act of God Acts of Public Enemy Exercise of public authority Shippers fault or neglect Inherent Vice

Soft Costs (Builders Risk IM)

Addition architects' and engineers' fees, and addition legal and accounting fees

The valuation of property for shipments between buyers and sellers will often include certain elements including: (open cargo)

All Invoice Charges Prepaid/advance freight charges Declared value Market Value

What could only marine insurers provide? (past)

All-risk Policies

Loss Exposures Covered

Although most inland marine coverages are limited to covering physical loss, some are able to cover indirect loss or business income and some can cover legal liability

Sue and Labor Clause (open cargo)

Amounts incurred to protect property from damage at the time of loss.

Endorsement for Motor Common Carrier Polices for cargo liability

An endorsement that insurers must attach to motor truck cargo liability policies of interstate carriers stating that the insurer will pay cargo claims for which the carrier is liable, up to the limits required by the U.S. Department of Transportation, even if such claims are not covered under the policy.

Owners' good on owners' trucks policy

Applies when transporting your own property

Inland Marine

Broadly covers land-based risks involving transportation and/or communication.

FOB Destination (terms of sale)

Buyer owns the property when it arrives at the buyers premisis

Free Along Side Vessel (FAS) (terms of sale)

Buyer owns the property when it is put along side the vessel

Free on Board (FOB) Vessel (terms of sale)

Buyer owns the property when it is put on the vessel

FOB Point of Origin (terms of sale)

Buyers owns the property when the seller gives property to buyer or seller

Ex Point of Origin (terms of sale)

Buyers takes ownership of the property at the point of origin.

Cancellation clause under Open Cargo Insurance

Cancellation usually requires 30 days notice (by either party) and only applies to new shipments (not shipments underway)

Filed Classes

Classes that are not exempt from regulatory and have regulatory requirements across states (A/R, camera and musical instrument dealers, film, mail, signs, etc). Characterized by a large number of potential insureds and reasonably homogenous loss exposures.

Nonfiled Class

Classes that exempt from regulation. usually these classes cover exposures that can vary between insureds, making standard forms impractical. Characterized by a small number of potential applicants, diverse loss exposures or both.

What are the two types of carriers?

Common and Contract

Exercise of public authority

Confiscation of cargo

What are the two most important types of equipment floaters?

Contractors equipment and electronic data processing equipment. Can cover some unusual perils.

What are the general characteristics of an inland marine policy?

Coverage for property in transit Loss Exposures Covered Broad Coverage of Perils Valuation Provisions

Annual Transit Insurance

Covers all shipments made or received by an insured during the policy period (including return shipments) The transportation type can be owned or by third party carrier. Policy territory is usually U.S. and Canada.

Harter Act

Covers domestic shipments (inland or on the coastal sea lanes) and is slightly more stringent. There is no per package limitation.

Mail Coverage form

Covers financial institutions for loss of securities/instrument while in transit (bonds, stocks, money orders, checks, etc.)

Parcel Post Policy

Covers loss due to nondelivery (by USPS) and excludes improperly or insecurely wrapped packages

The US Carriage of Goods by Sea Act (COGSA)

Covers shipment made in foreign trade. Further limits carrier liability to exclude "act, neglect or default" of the crew in navigation or management of the vessel; perils of the seas; unseaworthiness of vessel (unless carrier is negligent) Limits liability to $500 per package

Equipment Floater

Covers various types of equipment, wherever they may be located in the policy period. Coverage is usually in force across the entire coverage territory and can be insured on a scheduled or blanket basis. Typically includes extra expense coverage.

Accumulation Clause (open cargo)

Double policy limit if shipments accumulate during transit

When is coverage available under an installation floater?

During Transit, installation and testing.

Under open cargo insurance who is the loss payable to

Either the insured (sometimes called the assured) or anyone designated by the insured (an order)

What are two examples of indirect losses? (inland Marine)

Electronic data processing policy Builders risk policy

What does an EDP floater cover?

Equipment, media or data (owned or in the care, custody, or control of the insured) Direct or indirect losses Can cover for Upgraded Value

Carrier Responsibility

Even though the buyer owns the property, the carrier can still be responsible, thus providing a source of recovery for the owner. The type of liability held depends on the type of carrier.

Free of capture and seizure warranty (open cargo)

Excludes coverage if vessel is taken by another party (government, pirates, etc)

General Average (open cargo)

Expenditures or loss of part of the vessel or cargo incurred to save the voyage

The broader range of perils covered under the builders risk policy include: (inland Marine)

Flood Earthquake Theft of building materials that have not been installed Boiler Explosion Collapse due to faulty material and methods (The commercial property builders risk form does not cover this) Also some may cover soft costs via endorsement

Common Warrantees for Open Cargo Insurance

Free of capture and seizure warranty Strikes, riots, and civil commotion warranty Delay Clause

Open Cargo policies cover property damage as well as liability for:

General average and sue and labor clauses

Domestic Carriers of goods by Air

Have more control over their liability and it often varies by carrier (can agree to virtually anything)

How can many carriers limit the amount of liability if transporting good on land?

If the limitation is listed on the bill of lading, which is a document that contains the terms of the contract and is given by the carrier.

The nationwide Marine Definition was created to include coverage for loss exposures related to only:

Imports Exports Domestic Shipments Instrumentalities of transportation and communication Various property owned by individuals (jewelry, furs, musical instruments, silverware, coin collections, and stamp collections) Various property pertaining to businesses(mobile equipments, builders risk, property in the custody of a bailee, etc)

What are the two types of marine insurance?

Inland Marine and Ocean Marine

Trip transit insurance

Inland Marine or ocean marine coverage on a per trip basis

Valuation of Inland Marine Polices

Inland marine policies use the same valuation methods as many property policies such as replacement cost, ACV and selling price, however, in addition many uses special valuation provisions to address unique situations.

Attachment Clause (open cargo)

Insurance is for shipments that begin on (or after) the date shown in the policy and ends only when canceled by the insured or insurer

Mail Insurance

Insurance offered by the United States Postal Service or private insurers

Ocean Marine

Insurance on vessels and cargoes

Motor Truck Cargo Liability Policy

Insures liability of motor truck carriers for lost/damaged property in transit. Applies only if the carrier is legally liable and coverage is limed when not in transit .

What are two examples of special valuation provisions?

Invoice Value and Agreed Value

Contract carriers of goods by land

It many times depends on the contract between the shipper and the carrier. It is also typically less restrictive than common carriers (usually only liable for negligence)

What are three modes of transportation?

Land, water, and Air

What are two examples of legal liability? (inland Marine)

Liability for damage to cargo Stored property (warehouse legal liability insurance)

Coverage For Property in Transit

Many inland marine policies are used expressly for transit coverage, and if it is not expressly used for transit than the coverage is often incidental (art dealers policy)

What are the two types of Motor truck Cargo Policies?

Motor Truck Cargo Liability Policy Owners' goods on owners' trucks policy

Was marine insurance often regulated?

No, and although regulatory restrictions of insurers with respect to types that can be written has lessened, this definitions is still used as a basis to describe marine insurance.

Act of God

Occurrence of nature

Open Cargo Insurance

Ocean Marine coverage covering all overseas shipments (air or sea).

Warehouse to Warehouse Coverage (open cargo)

Ocean cargo insurance is said to provide warehouse to warehouse coverage, which covers the insureds cargo during the ordinary course of transit from the time the cargo leaves the point of shipment until it is delivered to its final destination

What is often excluded from annual transit coverage?

Ocean marine transportation to prevent overlapping coverage.

How do limits apply to open cargo insurance?

On a per-conveyance basis

What type of loss form is used for annual transit insurance?

Open Perils of Loss form

What are two main types of bailor policies?

Pattern and die floater Processing Floater

The Open cargo Perils Clause Includes:

Perils of the seas Fire Jettison (throwing cargo overboard) Assailing thieves (theft by force) Barratry of the masters and mariners (wrongful act committed by the crew)

Installation Floater

Policy that covers a contractor's interest in building supplies or fixtures that the contractor has been hired to install. Coverage for property being installed such as plumbing, electrical, or elevators.

Warehouse operators legal liability policy

Policy that covers warehouse operators against liability for damage to the property of others being stored in operators' warehouses.

Cost, Insurance, Freight (CIF) (terms of sale)

Price includes al three. Buyer owns property when given to carrier. The seller quotes a price that includes the cost of insurance and all transportation charges incurred to the named destination.

Shippers Fault or neglect

Property damage as a result of negligent packing

Computer (EDP) Equipment

Provides additional coverage for computer-related perils (breakdown, surges, viruses)

Builders risk policies

Provides broader coverage and more general flexibility than a normal builders risk policy. It covers structures under construction, temporary structures, and material (on-site, in transit, or even in storage)

Contract Carrier

Provides transportation for certain customers

Common Carrier

Provides transportation to the general public.

Judgement Rating

Rating used by underwriters to rate one-of-a-kind risks.

Contract carriers of goods by Sea

Shipper charters vessel (or part of vessel) for transportation and the shipowner is liable to the shipper to the degree designated in the charter contract (contract of carriage). Often use COGSA

Nationwide Marine Definition

Statement of the types of property that may be insured on inland marine insurance forms. Was created because fire insurers believed that the marine insurers were encroaching on their territory.

What is international transportation by air governed by?

The Warsaw Convention

Upgraded Value (EDP Floater)

The cost to replace covered equipment with the latest comparable state-of-the-art equipment available; can be used as a valuation basis in an EDP floater.

Coverage for instrumentalities or transportation and communication

The definition includes coverage for: Bridges, tunnels, etc Piers, wharves and docks Pipelines, propulsion equipment , regulating equipment Power transmission and telephone/telegraph lines Radio and television communication equipment Outdoor cranes, loading docks, and loading bridges (anything related to transportation/communication)

What will determines ownership of the property being transported?

The purchase order or the contract of sale. It is answered in the terms of sale

Parties involved (Property in transit)

The seller is usually referred to as the shipper. The buyer is referred to as the consignee. Third Party shippers are referred to as carriers. The key question in this is if property is damaged or lost, who really suffers the loss?

What are premiums usually based on in an open cargo insurance policy?

The total value of shipped property (not simply the limit)

Perils for Inland Marine Policies

These policies continue to be all-risks policies (Open perils coverage) and greater underwriting flexibility allows for more discretion for perils to be included.`

How do common Carriers of goods shipped by water determine liability?

Through the use of two acts. The US Carriage of good by Sea Act and the Harter Act

What industry did marine insurance become popular with because of it expertise with respect to property in transit?

Trucking

The Warsaw Convention

Under these rules, the carrier is not liable for property damage if the carrier takes all the necessary steps to avoid the loss or for pilot error. Liability is limited to $9.07 per pound or the amount shown in the bill of lading.

Bailee/Bailor Policies

Used when a bailee holds property of others (bailor)

How is annual transit insurance valued?

Usually by the amount showed in the invoice. However, if it is between a company's own locations then it can valued at ACV.

Under Open Cargo policies what are standard exclusions typically referred to as?

Warrenties

Bailee's Customers Policy

covers bailee regardless of liability

bailee liability policy

covers bailees only if legally liable (an example is a warehouse operators legal liability policy)

Bailor Policies

covers insured's property while with bailee

Delay Clause

excludes coverage for property loss (direct or indirect) due to delays

Strikes, riot, and civil commotion warranty (open cargo)

excludes coverage if property damage is a related to labor disputes (including vandalism)