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CPCU 551 Chapter 8
Inland Marine & Ocean Cargo
| Question | Answer |
|---|---|
| Nationwide Marine Definition | Statement of types of property that may be insured on inland marine and ocean marine insurance forms |
| Non-filed Classes (uncontrolled classes) | not necessary to file forms & rates w/ state depts- allows flexibility to determine appropriate policy provisions and rates for individual risks |
| Filed Classes (controlled clases) | forms/rates must be filed with state depts- large # of insds with similar expos- |
| Largest classes of inland marine | contractors equipment- builders risk- motor truck cargo- electronic data processing- property in domestic transit- DIC (all risks policy) |
| What are the general characteristics of inland marine insurance | Coverage for property in transit, loss exposures covered, broad coverage of perils, valuation provisions |
| Floater | policy designed to cover property that floats or moves from location to location |
| Are Flood and Earthquake excluded in Inland Marine Coverage | No |
| What are 2 Valuation provisions unique to Inland Marine? | Invoice value- covers property at invoice value Agreed value method- insurer & insured agree at time policy is written on max amount to be paid in event of loss |
| What issues should be considered when analyzing transportation loss exposures: | Parties involved in transportation, ownership of goods, carrier responsibility for loss |
| What are the standard parties involved in transportation | Shipper- person or org shipping goods (often seller) Consignee- person or org receiving property being transported by carrier(buyer) Carrier - an individual or org in the business of transporting prop of others |
| what are the modes of transportation that can be used to transport property? | trucks, aircraft, railcars, river barges, oceangoing cargo vessels, oil & natural gas pipelines |
| Who owns the goods can be determined by | Terms of sale |
| What are common terms of Sale | Ex Point of Origin, FOB (Free on Board) Vessel, FAS (Free Along Side) Vessel, CIF (Cost, Insurance, Freight) |
| Ex Point of Origin | buyer takes delivery of goods at the point of origin specified in terms, buyer responsible for any loss that occurs after taking delivery |
| FOB (Free on Board) Vessel | buyer assumes responsibility for loss as soon as the goods are placed aboard the vessel at the port named in the terms |
| FAS (Free Along Side) Vessel | buy assumes responsibility for loss as soon as goods are placed alongside the vessel at port named in terms |
| CIF (Cost, Insurance, Freight) | seller quotes a price that includes cost of ins and all transportation charges (freight) incurred to the named destination. Buyer assumes responsibility as sppm as gppds are placed in custody of the ocean carrier or delivered aboard vessel |
| Does carrier responsibility for loss eliminate the owners loss exposure? | no, it merely provides a possible source of recovery |
| Common carrier | offers transportation services to the general public |
| Contract Carrier | carries goods of certain customers- often those with special needs not offered by common carriers |
| Common Carriers are typically liable regardless of whether they have acted negligently- what are the exceptions | Acts of God- tornado, weather nature; acts of public enemy- war; acts of authority- confiscation by authority; shippers fault/neglect-poor packaging etc; Inherent Vice- destructive condition - perishable eggs shipped w/out refrigeration |
| Bill of Lading | document acknowledging receipt of goods from shipper, given by carrier, includes terms of contract for carriage of goods- can limit amount of liability |
| COGSA | Carriage of Goods by Sea Act- far less restrictive - longer lists of exceptions for liability- carrier not help liable for cargo loss arising from unseaworthiness of vessel- $500 package limitation/package or unit |
| Harter Act | More Strict than COGSA- does not include a package limitation |
| Charter | a travel contract in which transportation is temporarily hired fro a specific trip |
| The liability of air carriers engaged in international service is governed by the rules of? | The Warsaw Convention- air carrier is not liable for loss to property if theycan prove they took all the necessary steps to avoid the loss or that the loss was caused by pilot error |
| If not value is declared, what is the limit of shippers recovery for international flights as stipulated by bills of lading? | 9.07/pound- if the shipper declares a higher amount, the carrier will charge a higher air freight rate and will be liable up to the declared amount. |
| Annual Transit Policy | covers all shipments made or received by the insured throughout a one-year policy period. |
| Open Cargo Policy | covers all goods shipped or received by the insured during the policy's term - no set policy expiration date |
| What are the common types of inland and ocean marine policies used for covering transportation loss exposures? | Annual transit insurance, Open Cargo Insurance, Trip Transit Insurance, Mail Insurance, Motor Truck Cargo Insurancec |
| Annual Transit Insurance | designed for orgs that frequently ship or recieve property in transit- covers all shipments in a policy period- Not all types of transportation covered- |
| What types of property are insurable, but attractive to thieves and therefore expensive to insure? | metals, furs, jewelry, money and securities |
| Annual Transit Policies may exclude overseas shipments made by the insured WHEN? | 1-after being placed on overseas vessel 2- after ocean marine insurance attached to the shipment (whichever comes first) |
| How is property covered under the Annual Transit Policy valued? | at the amount of invoice (including shipping charge) When no Invoice valued at ACV |
| Open Cargo Insurance | ocean marine insurance contract that covers overseas shipments by vessel or aircraft - designed for frequent shippers b/c it automatically covers all shipments for which the insured is at risk. |
| In Ocean Marine policies, what is the other name for the party named as insured? | Assured |
| Open cargo policies loss payable clause | states losses will be paid to the assured "or order"- Or Order means the assured can direct payment to the consignee, a bank, or some other party that has an insurable interest in the shipment |
| Goods Insured Clause | policy will cover "all shipments of lawful goods and merchandise of every kind and description consisting principally of..." (description of product(s) being shipped added in provided space) |
| General Average | an expenditure or sacrifice of part of vessel or cargo, made in a time of danger to save the voyage |
| Sue and Labor Clause | obligates assured to preserve the covered property at a time of loss- insurer agrees to pay the policy limit and cost of measures the insured takes |
| Attachment Clause | the insurance will "attach & cover all shipments made on and after" the date and time shown on the policy |
| How long is an open cargo policy term? | no specific expiration, policy remains in force continuously until cancelled by either insurer or assured- 30 days notice- prop in transit remains covered until delivery |
| Warehouse to Warehouse Coverage | shipments covered from point of origin to point of destination, regardless of any in between land conveyances - no land only shipments |
| What do you call the principal exclusions in marine policies? | warrarties |
| Free of Capture and Seisure (FC&S) Warranty | eliminates coverage for losses caused by any taking of the vessel by another party or cause (includes govt taking, piracy, or military actions) |
| Strikes, Riots and Civil Commotions ( SR&CC) Warrant | eliminates coverage for any type of loss that results from labor disputes or riots - including related property damage from vandalism, sabotage, and similar causes |
| Delay Clause | eliminates coverage for financial or property loss that occurs when a shipment is delayed - ex./ poilage of produce & disruptions to business processes that are dependent on the shipment |
| Inchmaree Clause | covers loss resulting from bursting of boilers, breakage of shafts, latent defects in components of the vessel, and faults or errors in navigation or vessel management |
| FPA/AC (Free of particular average/American Conditions) warranties | restricts the scope of covered perils with regard to "particular average" |
| Particular Average | used to describe the partial loss other than a general average |
| Accumulation Clause | provides some relief to the assured- doubles the policy limit when, for reasons beyond control of assured, shipments accumulate at some point in transit |
| Trip Transit Policy | Covers cargo on a specified trip- commonly used to cover property such as a valuable piece of machinery being moved from its place of manufacture to its place of use |
| Mail Insurance | covers property in the custody of USPS- also available through commercial insurers |
| Mail Coverage Form | CM 00 60- used by corporations acting as security transfer agents or registrars for their own security issues- bonds, stocks, cd's, money orders, checks, bills of lading, & commercial papers |
| Parcel Post Policy | provides coverage against loss due to non deliver (failure of package to arrive at its destination). |
| Motor Truck Cargo Policy | covers truckers liability for damage to cargo of others being transported by the trucker |
| Owners of Goods on Owner's Trucks Policy | purchased by firms that transport their own property with their own vehicles |
| What endorsement states the insurer will pay cargo limit claims for which the insured is liable up to limits required by USDOT? | BMC32 - Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability |
| Instrumentalities of Transportation and Communication | Bridges, tunnels & other similar- piers, wharves, docks, slips, dry docks, & marine railways- pipelines incldg online propulsion, regulating, & other eqpmt- power transmission & telephone/telegraph lines- radio/tv equipment- outdoor cranes loading bridges |
| What are the 2 most important types of equipment floaters? | contractors equipment & Electronic Data Processing Equipment |
| Contractors Equipment Floater | largest class of Inland Marine Insurance- used by contractors when constructing buildings, highways, dams, tunnels, bridges & other structures- ranges from small hand tools to large machines-equipment scheduled-open or named perils opts |
| Electronic Data Processing Equipment Policy(Computer Equipment) | EDP Equipment- covers equip/data/media owned by insd as well as similar prop of others in the insds care/custody/control- defined as: your electronic data processing equipt, word processing equipt, and telecommunications equipt including component parts |
| Upgraded Value | cost to replace covered equipt w/ latest comparable start of the art equipt available- can be used as a valuation basis for EDP floater |
| For purposes of data & media coverage, most EDP Policies exclude: | accounts, bills, evidences of debt, valuable papers, abstracts, records, deeds, manuscripts & other documents - unless converted into data format |
| What is an advantage of purchasing and EDP Policy? | Open Perils coverage- few exclusions than Causes of Loss- Special Form |
| Breakdown Coverage (EDP) | insures loss to equipment resulting from such perils as mechanical failure or faulty design of the covered property, or changes in temperature resulting from breakdown of ac equipment |
| When are computer viruses covered? | When they can be attributed to a covered cause of loss |
| Builders Risk Policy | covers an entire building or other structure during the course of construction, including the building supplies and material that will become part of the covered structure- entity insured is owner/builder/both |
| Installation Floaters | purchased by contractors & subs to cover the property they are installing at job sites- generally associated with plumbing, heating, cooling and electrical systems- can be used to insure prop being installed:carpet, tile, windows, elevators & machinery |
| At what point does coverage for an installation floater end? | 1- when insds financial interest ceases 2-when purchaser accepts prop as complete 3- when policy expires or is cancelled |
| Bailee | party that holds the property of another (bailor) for some purpose beneficial to both parties |
| Bailor | Party who's property is being help by another (bailee) for some purpose beneficial to both parties |
| When is a commercial bailee legally responsible for loss or damage to a customer's property? | When it results from the bailee's negligence |
| Warehouse operators legal liability policy | covers the liability of the insured as a warehouse operator for direct physical loss of or damage to property of others while contained in the specified premises |
| Bailees Customers policy | covers damage to customers goods while int he possession of the insured, regardless of whether the insured is legally liable for the damage |
| Pattern and Die Floater | covers the insureds tools while off premises |
| Processing Floater | covers property that the subcontractor is actually working on- can be obtained to cover such property from the time it leaves the insureds premises until it is returned there. |
| Dealers Policies | coverst eh inventory and other peoperty of any of hte types of deals that qualify for inland marine coverage (jewelers, equipment dealers, fine arts dealers, and furriers.) |
| Block Policies | dealers policy for jewelers & furriers |
| Property covered under a dealers form is covered while it is: | 1- on insds premises 2-away from insds premises or in the custody of insds employees 3- located elsewhere ~ Form can be extended to cover: furniture/fixtures/office supps- machiner/tools/fittings- patters/dies/molds/models- tenants I&B |
| What property is excluded under a dealers form? | accounts, bills, currency, deeds, evidences of debt, money, notes, and securities - flood and earthquake exclusions often ommitted |
| What are the 3 miscellaneous Inland Marine coverages? | 1- Sign Coverage 2-Accounts receivable Coverage 3-Valueable Papers & Records Coverage |
| Sign coverage | (CM 00 28) must be scheduled with limit for each iten scheduled- no coins for prop in transit- open perils |
| What are the 2 Sign Coverage Exclusiosn? | 1 breakage during transportation/installation/repair/dismantling of covered prop 2 loss cause by short circuit or other electrical disturbance w/in a covered sign caused by artificially generated current |
| Account receivable insurance | covers the sums the insured is unable to collect when records of accounts receivable are destroyed by a covered cause of loss |
| When is Accounts Receivable Insurance Triggered? | if a covered cause of loss damaged or detroys the insureds records of accounts receivable, interrupting insureds billing procedures |
| What expenses are covered by Accounts Receivable Insurance | interest charges on any load required to offset the uncollectible amounts- collection expenses in excess of normal collection expenses made necessary by dmg 2 records of accounts receivable- other reasonable expenses inrd incurs 2 reconstruct dmgd records |
| Valuable Papers & Records Insurance | obtained to cover loss of either replaceable or irreplaceable documents- for irreplaceable covg is agreed value on each item- items that can be reconstructed actual cash value- policy pays nothing for property unsched w/out limit that can't be replaced |
Created by:
hongaro
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