CHAPTER SIX - TRIP TRANSIT & MAIL INSURANCE

 

As the name would imply, trip transit insurance is used for a single trip, and can be used by a carrier, an owner who ships their own property, or a shipper who is having property shipped by a carrier.  It is a nonfiled form and printed conditions vary from company to company.

 

Generally, the property is valued at the amount of invoice, or if no invoice, then by the actual cash market value at time and place of loss.  They are usually subject to a 100% coinsurance clause.  Both Named Perils and All-Risks forms are available.  When Named Perils forms are used, the named perils covered are the usual fire, flood, etc., collapse provisions, collision, derailment or overturn of the conveyance, and generally for theft.  Exclusions usually eliminate coverage caused by or resulting from delay, loss of market, or loss of use; inherent vice or gradual deterioration; strikes or riots; employees dishonesty; war and nuclear occurrences. 

 

Rates are a matter of judgement and underwriting is about the same as for other forms.  Care has to be taken if the policy is requested to just cover a commodity that is susceptible to breakage, or for theft (if theft is covered).  Sometimes these policies are used when large and/or expensive machines are shipped, in which case the underwriter wants to make sure that a loss of income claim couldn’t end up costing excessive amounts if something should happen to the machine while in transit.  A small property damage loss could trigger a huge claim for loss of income.  Deductibles are an important consideration and for household items and other cargo where small breakage claims can be expected, smaller deductibles can be used. 

 

ARMORED CAR AND MESSENGER INSURANCE

 

Armored cars are used to transfer money and securities and on occasion, banks and other financial services may use a messenger service to transfer valuable documents or material.  Messengers may be armed, depending upon the value of the material being transferred.  Coverage can be written for either the shipper or to cover the liability of the carrier.  In some cases, if the shipper is a financial institution, then the coverage can be written as an endorsement to a mail policy, or a separate policy.  These forms are not filed.

 

Usually, the coverage is provided on an All-Risks basis with exclusions.  The exclusion for employee dishonesty may or may not be on the policy.  The property that is covered is spelled out, and the policy can cover stocks, bonds, coupons, gold, silver, platinum, coins, paper money and bullion, and other valuable items.

 

Limits of insurance depends on whether the property is being transported by armored car, or whether the messenger is armed or not.  It is important that the shipper keep the property value under the insurance limits, or they must notify the insurer if there is an excess and do so before the property is shipped. 

 

When the policy is written for the account of the shipper, it may be designated as excess over a particular brokers or bankers blanket bond, and if the policy is written with a deductible, the deductible is the amount of the blanket bond. 

 

The premium is usually on a flat basis, and is based upon the amount of the primary coverage, the amount shipped during the year, and hazards that are present for the operation.  Rates are based upon these hazards, and apply to each $100 of value of property shipped. 

 

This insurance is a specialty class and is written by a very few insurers.  The form is written for each particular situation so the uses of this type of coverage are many.

 

MAIL COVERAGE

 

Most people are not aware that commercial insurance covering shipments by the United States Postal Service (USPS) is available.  Many businesses prefer the commercial insurance as there is no need to stand in line at the Post Office, the cost of the insurance is often less than that of the USPS (even though the limits of the USPS insurance is limited), and in many cases, the commercial insurance can make faster claims settlements. 

 

The limits of insurance depends upon the type of mail service that is used and commercial insurance can be used to cover all types of mail service handled by the USPS, except for parcel post.  The ISO offers one form for these coverages, the AAIS has forms filed for registered, certified and express mail.  That does not mean that parcel post cannot get commercial insurance, but only that there is not a filed form for it, and parcel post and “transit cash letter insurance” may both be written on a nonfiled basis. 

 

The ISO form is most often used, and is described below.

 

The ISO mail coverage form applies to:

1. first class mail,
2. certified mail,
3. USPS express mail,
4. registered mail send by banks, bankers, trust companies, insurance companies, security brokers and investment corporations,
5. other persons/firms/corporation whose business is of fiduciary nature and those corporations who act as security transfer agents or registrars for their own security issues. 

 

For any other person or organization, mail insurance is only on a nonfiled basis.

 

The mail coverage only covers those valuable items which are likely to be mailed.  For first class mail, certified mail, USPS express mail or registered mail, covered property is (1) bonds, (2) stock certificates, (3) certificate of deposit (CD’s), (4) other securities; coupons if detached from the bonds, (5) postage and revenue stamps; (6) postal, express and other money orders; (7) checks, drafts, notes, bills of lading, warehouse receipts and other commercial papers; (8) other documents and papers of value except unsold travelers checks and currency.

 

Bullion, platinum and other precious metals; currency, unsold travelers checks, food stamps, jewelry, watches, precious and semi-precious stones, and other similar valuable property are included for coverage when sent by registered mail.

 

Property is covered while in the “care, custody, or control of government postal service,” and while in transit to or from the government post office by common carrier or messenger.  Note that “government” is used, as the form can also be used in Canada.  Therefore, property is covered until it has been delivered to the address shown on the shipping package, or delivered to the proper person/firm at a different address if the address shown is incorrect, or if it is returned to the sender in case of non-delivery.  Mailed property will not be covered while it is at the premises of any mail-receiving agency.

 

COVERED PERILS

 

The “covered causes of loss” means Risks of Direct Physical Loss to covered property except for the losses listed in the exclusions.  In other words, this is the All-Risks coverage.  The only exclusions are the governmental action exclusion and the war and military action exclusion, and an exclusion of any weapon employing atomic fission or fusion or any mine of torpedo.  Obviously, this is a very broad coverage.

 

LIMITS OF INSURANCE

 

Limits of insurance depend primarily upon the types of mail that the insured uses.  The three types are  (1)  first class and certified mail, (2)  USPS express mail, and (3)  registered mail.  Within in each type of mail, there are separate limits for

 

1. property in any one shipping package,
2. property to any one addressee on any one day,
3. property sent between the insured’s offices or to its transfer agents, and
4. property sent to others than those mentioned above.

 

In addition, separate limits may be used for USPS express mail to non-negotiable securities, detached coupons, and other covered property.  For registered mail, there are separate limits for currency, unsold travelers checks, jewelry, watches, precious and semiprecious stones, and similar valuable property, and all other covered property.

 

CONDITIONS

 

Losses are subject to the Commercial Inland Marine Conditions Form, plus others related to records, valuation, reports, premium, cancellation, etc., some of which are discussed below.

RECORDS

 

Every mailing has to be recorded prior to loss and must include a description of the property, the destination of the property, the type of mail use and the value of the property contained in each shipping package covered.  The mail form has an “errors and oversight extension” that covers property even though it may be incorrectly reported due to errors or oversight, with attendant rules regarding correcting any such error or oversight, etc.  If an error or oversight can result in the value of the covered property in one shipping package exceeding the limit of insurance, the insurer will pay only the proportion of  any loss that the applicable limit of insurance bears to the actual value of the property on the date of mailing. 

 

 

VALUATION

 

The covered property is valued at its actual value, but not less than its market value, on the date of the mailing, or to put it another way, property is valued at its actual value or its market value, whichever is greater.  For bonds, stock certificates, certificates of deposit and other securities, the insurer will pay no more than 125% of the value the insured has recorded.  For all over covered property, the insurer will pay no more than the value the insured has recorded.

 

 

REPORTS AND PREMIUM

 

The type of reporting (monthly, annual, etc.) will be on the Declarations page.  Within 30 days after the end of each reporting period, the insured is required to report to the insurer the total value of all covered property sent during the preceding reporting period.  The report will list the values for each type of property separately, and for each type of mail for which a rate is shown in the Declarations.  Generally, the insurer will require a deposit premium, adjusted at the end of the reporting period.  The form will require an annual minimum premium that must be paid, even if the premiums computed are less than the minimum premium.

CANCELLATION

In addition to any other provisions regarding cancellation, the form also stipulates that the coverages applies to all mailings of covered property made up to the date and time of cancellation.

TERRITORY

First class mail, certified mail, and USPS express mail are covered anywhere in the U.S., U.S. Virgin Islands, Canada, Puerto Rico, and territories and possessions of the U.S.  Registered mail is covered anywhere in the world.

DUTIES IN CASE OF LOSS

In addition to the duties outlines in the Commercial Inland Marine coverages, the insured must provide proof of interest in the property, affidavits that the property was mailed and was not received by the addressee &/or property owner, plus any receipts issued by the Post Office.

PAYMENT OF LOSS

The insurer will pay for any covered loss within 7 days after agreement with the insured, a court decision or an appraisal award.

OTHER INSURANCE

If there is other insurance, this policy will share on a pro-rata basis with the other insurer, except that if the loss is due to a theft by an employee of either the sender or the addressee, then the mail form is excess over other insurance, collectible or not.  If the loss is not due to theft by an employee, and it is covered by a blanket bond, then the insurer will be primarily liable and has no recourse against the blanket bond.

RATING

The Inland Marine division of the ISO provide the rates for the mail form and are filed for shipments within the continental U.S., with limits of insurance of $250,000 for each package and $1,100,00 for one addressee in any one day.  Rates for shipments for other areas are not filed.

 

ENDORSEMENTS

 

Transfer Agents Mail endorsement covers first class, certified or registered mail if the sender insured is acting as a transfer agent or similar position.  It covers non-negotiable securities and other certificates that may be negotiable, with maximum value not to exceed $150 per package mailed on any one day, and it is insured for only nondelivery.

 

Negotiable securities can be sent under air bill of any named air carrier within the continental U.S.  The value of the package must be declared as actual value but not less than the market value on the day the package was sent.

 

Coverage can be afforded to securities sent by the U.S. Treasury or other federal governmental agency and only pertains to shipments sent by registered mail.

 

Another endorsement can be added that allows for the premium for first class or certified mail to be a function of the number of packages sent by the insured.

 

 

 

PARCEL POST INSURANCE

 

Many firms use parcel post commercially, such as large mail-order houses and those who handle specialty items not usually sold in stores.  It is a nonfiled class of business.

COVERED PERILS AND PROPERTY

 

The Parcel Post Insurance policy covers a package and its contents against loss or damage from any external cause, including nondelivery, with exclusions of war and nuclear reaction.  There are other exclusions as shown below.

 

The types of property covered must be described specifically in the policy.  There is one important stipulation: The property must be usual to the insured’s business.  There are certain types of business that are excluded:

 

1. accounts, bills, currency, deeds, evidences of debt, money, notes or securities;
2. merchandise shipped on consignment unless shipped in fulfillment of an order or consigned to parties to whom the insured had previously sold merchandise;
3. perishable items, except against loss by fire, theft, pilferage or nonarrival;
4. packages incorrectly addressed, inadequately packaged, or on which the postage is not fully prepaid;
5. shipments sent to transients at hotels, except sales personnel of the insured, unless sent by registered mail or government insured parcel post;
6. packaged bearing descriptive labels, unless such labels are in compliance with the laws of regulatory authorities;
7. packages not bearing the notation “Return Postage Guaranteed.”

 

 

 

LIMITS OF INSURANCE

 

Policy limits usually range from $100 per package shipped by regular parcel post or unregistered mail, to $500 per package shipped by USPS - insured parcel post or registered mail.  If property is shipped C.O.D., there is usually no use for this coverage as USPS insures packages for the full value, up to a maximum of $500.

 

DUPLICATION OF COVERAGE

 

If a parcel post package is insured by both the USPS and a commercial parcel post policy, the loss will be apportioned between the two by a formula:

 

USPS Insurance (or actual value

                              whichever is less)            X             Actual Value or     =           USPS

(The amount above plus)                                              Cost of Repairs                 Liability

Total Commercial Insurance

(or actual value, whichever is less)

 

If the parcel post policy has a deductible, the USPS will pay the deductible before applying the formula.

 

 

PREMIUMS

 

The policy is usually written on reporting basis with a monthly, quarterly or annual adjustment.  The insured is, as usual, required to keep complete and comprehensive records.

UNDERWRITING

 

As one would expect, articles that are unusually fragile or susceptible to theft or loss, create the greatest underwriting problems.  Proper packaging is absolutely essential.  Rates are applied to each $100 value of shipment, and vary considerably according to the exposure and the loss experience of the insured.  Overseas rates are treated separately, and a rate schedule for each country will be a part of the policy.

TRANSIT CASH LETTER

 

This is a highly specialized form and covers letters containing checks, promissory notes, drafts, and other similar items sent by one bank to another bank.  The insurance covers these items while in transit.

 

This is a nonfiled form, and there are many variations in conditions.  Transit can include any means agreed upon by the insured and the insurer and may cover shipments sent to the wrong address or returned to the insured by the addressee.

 

This form is so specialized that there really are no hard and fast rules for this coverage, and more detail is outside the scope of this text.

 

 

STUDY QUESTIONS

 

1.  Which of the following statements regarding Trip Transit Insurance is NOT true?

      A.  It can be used for a single trip by a carrier.

      B.  It is used only for multiple trips.

      C.  It may be used by an owner who ships his/her own property.

      D.  It may be used by a shipper who is having property shipped by a carrier.

 

2.  Commercial insurance can be used to cover all types of mail service handles by the U.S. Postal Service (USPS), except

      A.  parcel post.

      B.  registered mail.

      C.  certified mail.

      D.  express mail.

 

3.  Jewelry, money, bullion, watches and precious stones may be covered by commercial insurance when in custody of the USPS and is sent by

      A.  parcel post.

      B.  registered mail.

      C.  certified mail.

      D.  express mail.

 

4.  Property being shipped by USPS and insured commercially, is valued

      A.  at its actual value, provided it is less than its market value.

      B.  at no more 100% of the value the insured has recorded for stocks, bonds, other securities.

      C.  at its actual value, but not less than its market value, on the date of the mailing.

      D.  only for the value the insured has recorded, for all goods shipped.

 

5.  In case of a loss under Mail coverage, it is not necessary for the insured to provide

      A.  proof of interest in the property.

      B.  affidavits that the property was mailed & not received by the addressee.

      C.  the name and employee number of the postal employee than accepted the mail.

      D.  any receipts issued by the Post Office.

 

6.  Which of the following statements regarding Endorsements to Mail coverage is not correct?

      A.  Transfer Agents Mail Endorsement covers registered mail only.

      B.  Negotiable securities can be sent under air bill of any named air carrier within the continental U.S.

      C.  Coverage can be afforded to securities sent by the U.S. Treasury by registered mail.

      D.  An Endorsement can be added that allows for the premium for first class or certified mail to be a function of the number of packages sent by the insured.

 

7.  If a parcel post package is insured by both the USPS and a commercial parcel post policy, if there is a loss, how is the loss apportioned between the two?

      A.  The USPS has full coverage responsibility.

      B.  By a formula whereby the commercial insurance is divided by the USPS insurance, times the actual value or cost of repairs, and that equals the liability of the commercial insurance company.

      C.  The commercial insurance carrier assumes all responsibility of the coverage.

      D.  By a formula whereby the commercial insurance is divided by the USPS insurance, times the actual value or cost of repairs, and that equals the liability of the USPS.

 

8.  The greatest underwriting problems of the commercial mail policies is (are)

      A.  employee theft loss.

      B.  breakage and theft.

      C.  fire.

      D.  misdelivery.

 

9.  If a person has a package containing checks, promissory notes, drafts and other similar items, sent from one bank to another bank, this can be covered by

      A.  USPS insurance only.

      B.  a nonfiled Transit Cash Letter form.

      C.  a Transit Cash Letter form which cannot by law cover shipments sent to the wrong address and returned to the insured by the addressee.

      D.  an ISO filed Transit Cash Letter form.

 

10.  Premier Corp. sends goods worth $500 to a customer C.O.D. by USPS.

      A.  Premier’s commercial mail insurance should cover this package.

      B.  Commercial mail insurance cannot be used for goods worth $500.

      C.  There is no use for commercial insurance, as USPS insures packages for the full value, up to $500.

      D.  USPS will not insure a parcel post package for more than $100, so the commercial insurance will have to cover the remainder or a portion thereof.

 

ANSWERS TO STUDY QUESTIONS

 

1B     2A     3B     4C     5C     6A     7D     8B     9D     10C