The very origin of Inland Marine insurance involved insuring property while being transported on land. This has changed so that now it covers the transportation of property on land, in the air, by railroad or even inland waterway. It remains a large and very important part of Inland Marine insurance.
Because it is so important to understanding Inland Marine insurance, the transportation loss exposures will also be discussed in this chapter to include methods to control loss other than insurance. The specifics of the insurance used to handle these risks and loss exposures will be treated in the next chapter.
Property is usually divided into real property and personal property, with the major difference being that of portability. Real estate cannot be moved, personal property can. To continue in generalities, only land, large buildings and other large structures cannot be moved. To make a list of property that can be moved, and can therefore be insured under an Inland Marine policy, would take several pages, but importantly would include
The same things (perils) that can happen to fixed property can also happen to property while it is being moved, plus other perils relating only to the moving process.
Fire can occur to property while fixed, or while moving and in transit, and while it is being stored in a warehouse. The conveyances can be subject to such perils as being overturned, demolished or otherwise damaged by a variety of causes. Windstorm can cause damage to goods in transit, and actually to the conveyance itself. While being transported, property can suffer damage by aircraft damage, vehicle damage, riot, civil commotion, explosion, smoke, vandalism, etc., etc.
While property is being moved from one area to another, it is highly subject to crime loss. While it is common knowledge that particular cargo is susceptible more than others – such as televisions, computers, cigarettes, etc. – even such things as a truckload of steel has been hijacked. Normally, thieves are more interested in items that are easily marketed and are in small units. The exposure for theft or hijacking is much easier when the property is on the move, as security is very difficult.
While there is a chance of flood, it usually is more remote as railroads and highways are usually warned sufficiently in advance of rising waters, so that the flooded areas can be avoided. But in nearly all flood pictures in the newspapers or on television, there seems to be at least one large semi-truck sitting in water almost over the cab.
Earthquakes are also remote causes of loss, but when trucks are parked in an earthquake area, there will be considerable losses. Again, pictures of earthquake damage seem to show a lot of trucks wrecked when overhead highways collapse.
The collision and upset perils are particularly prominent when cargo is in transit. Trucks run into each other, trains derail, trains run into trucks, airplanes can crash, etc.
The perils of “misdelivery” and “nondelivery” are exposures to property in transit. If property is not delivered to the right party, or simply is not delivered to anyone, then the shipper, the carrier, or the consignee has a loss staring them in the face.
Then there are a multitude of other perils, such as wear and tear, loss of refrigeration, excessive heat or cold, etc., that can be caused by poor judgement, an act of God, or simply poor wrapping.
As discussed earlier, loss of property or damage to it can reduce the property value, increase the expenses, and reduce the income of the owner or other party. The most usual consequence of losses to property in transit is reduction in value. Recently, the picture of a very large semi-truck that had overturned with a load of pickles, made most of the news programs. There was a huge reduction in value of pickles that were distributed all over the highway and immediate areas.
In many situations, the losses of property in transit does not result from increase in expenses or loss of income. Most property that is essential to the owner’s business can either be replaced or repaired. However, if the loss is of property that is “one-of-a-kind” or custom-made, then there could be substantial losses in income. If the owner had to rent equipment in order to stay in business, then expenses could be quite high.
Usually in case of a transportation loss, there are two parties involved, (1) the shipper (also known as consignor) or receiver (consignee), and (2) the carrier. The contract terms or terms of the sale will dictate when the custody and responsibility of the cargo transfers from one party to another, usually from the shipper to the receiver. Regardless, the carrier will have some legal responsibility for any loss or damage to the shipment while in the carrier’s custody.
If the carrier does not actually own the property, there are assumptions that the carrier is fully responsible for the cargo while it is in their custody, or to put is another way, all loss exposures have been transferred to the carrier. However, if the carrier is insolvent, establishing responsibility will do little good. Besides, it often is very difficult to determine exactly when responsibility is transferred to the carrier.
During this discussion of exposures, it is important to remember that there can be different exposures for the shipper, the carrier, the consignee (and the owner, if the owner is not the shipper, carrier or consignee).
In this context, a Carrier is a person or organization that has custody of property that they are transporting from one location to another. The most important methods of moving property are by railroad, trucks, waterways, pipelines and aircraft (few people who are not conversant with Inland Marine insurance realize that pipelines is a method of moving property), and each of the methods have their own particular and peculiar exposures. Aircraft transportation is the most expensive, third in dependability, (we’re talking cargo, not passengers), and is the least fuel efficient. The same study shows that pipelines are ranked the highest on losses, and railroads are the lowest. Pipelines are the most dependable, and waterways are the least dependable.
To properly classify carriers, they can be common carriers, contract carriers, exempt carriers and private carriers. Carriers operate under the Interstate Commerce Act (ICA), the program that regulates interstate commerce, and applies to those carriers that cross state lines. Those that do not cross state lines are called “Intrastate” carriers.
There is a major problem in determining as to who falls under the ICA as many shippers, carriers, and even insurance companies become involved in short trips in and around areas that border state lines. Therefore, the law provides for “exempt zones.” Certain commodities are also exempt from ICA control – originally designed to protect farmers taking produce to market. Therefore, certain products of fishing and agriculture are exempt.
In English Common Law, there were certain activities that were considered to be operating in the public’s interest and were called “common calling.” These included common carriers, innkeepers, surgeons, schoolmasters, etc. Today, all of the “common” callings have lost their special status, except for common carriers. A common carrier is a transportation firm that must carry customer’s goods if the customer is willing to pay. A common carrier may choose to restrict its activities within certain spheres or areas of operation, for instance only certain types of goods (milk carriers, refrigeration trucks, etc.), or to certain type of shipments. There cannot be any discrimination within the category served by the carrier, however. Of course, when a cargo is illegal or contain explosives or corrosive material, or items are not safely packaged, or can contaminate other cargo, then the carrier can refuse to haul it. The carrier can refuse to carry material if the carrier does not have equipment available or there is no room on the vehicle.
Generally, railroads have few restrictions as to what they will carry, trucking lines can be more restrictive, and pipelines are very restrictive as to what they carry.
The common carriers in nearly all cases, operate under authority granted by the Interstate Commerce Commission (ICC) and under state bodies, known as Public Utility Commission or similar name. They specify what cargoes can be carried and under what conditions. A carrier only has to show its ability to provide the advertised services.
Contract carriers do not have to have authorized routes and are relatively free to carry cargo for anybody between any points, and under individually negotiated contracts. In other words, the Common Carrier is able to offer its service to the general public, whereas the contract carrier operates under special and individual contracts. While Common Carriers are issued a “certificate of public convenience or necessity,” Contract Carriers are issued a “permit.”
Railroads used to be almost entirely common carriers, however they frequently now operate as a contract carrier. A large portion of motor truck operations are performed by contract. Scheduled airlines are common carriers, but can also operate as contract carriers by carrying passengers on charter trips (such as sports teams), or special loads under contract.
A Private Carrier is one that carries its own goods for which it is the lessee or bailee. When cargo is carried by its owner on a truck owned by the owner, there is no chance of recovery for damage from a carrier. Private carriers are allowed to operate as contract carriers on back haul (bringing back a contract load when the truck has made its delivery).
There are other carriers categorized as “specialty” carriers, such as Household Carriers, which operate under the Household Goods Transportation Act of 1980, and are limited to the carrying of household goods. Household goods are defined very broadly, including the contents of stores, museums, hospitals, etc.
Everyone has seen a huge truck on the freeway carrying a bridge support or piece of steel and/or concrete, the purpose of which is difficult to determine. They operate under the rules of the Heavy Specialized Carriers Conference.
“Indirect Carriers” are defined as carriers to the public by purchasing transportation services from direct carriers. They make their living on the difference between the rates in small and large shipments. There are three types of indirect carriers:
Different types of carriers can consolidate their services, such as the rail-truck combinations, known as “piggybacking.” This service is offered only by railroads. Trucks-Air is another example of a mixing of carriers, where air cargo is collected by truck, or delivered from airport by a truck owned by the airlines, etc.
The liability of a carrier comes from common law which establishes the principle that a firm making a business of carrying persons or property for consideration, is responsible for their safe delivery. This is not, however, carte blanche liability, as the responsibility can be affected by such things as the bill of lading, and that fact that any exposure to liability of a common carrier exists only while the property is in the control or custody of the carrier. A common carrier cannot control some situations, and therefore there are well established limitations.
A common carrier cannot be responsible for “acts of God”, such as floods, hurricanes, tornadoes and severe storms. Of course, if the carrier was aware of such possibilities and/or had advance warning, then they would be responsible for losses thereof.
CONSUMER APPLICATION
Farmer’s Transport is a trucking company that collects grain from farmers, and stores it on a temporary basis in a truck yard in Iowa near the Mississippi river, until such time that there is enough to load into railroad cars for shipment to processing plants. During an early thaw, Farmer’s Transport elected to park their truck trailers full of grain in the truck yard, as they were expecting some vacant railroad cars to be made available within a day or two. Water had been rising in the Mississippi and flooding in many areas, but the yard manager had not paid any attention to the flood forecasts as he thought it would not flood the yard for at least a week.
Overnight, the Mississippi overran the banks, flooding the yard and destroying the grain in the trucks. The farmers demanded payment for the grain but Farmer’s insisted it was an Act of God. However, the court later ruled, following several precedents, that since the trucking company had adequate warning which they ignored, and since they took no action to protect the cargoes, they were responsible for the damage.
While often referred to as “Acts of the Public Enemy”, in reality this refers to an exception where the “public enemy” is another country at war with the United States (assuming the carrier is domiciled in the U.S.) A common carrier does not fall under this exception when a loss occurs as the result of a criminal act. Acts of a terrorist group is still not firmly decided.
Another limitation is the “Exercise of Public Authority,” which is the result of a governmental action or act of a government representative, such as a quarantine. If the quarantined cargo was confiscated, the common carrier would not be at fault.
If a shipper is negligent in packing or shipping some property that obviously would be damaged during transit, then the common carrier cannot be held responsible.
When “Inherent Vice” is present in a property, the common carrier cannot be held responsible. This is the type of property that tends to make the property destroy itself, such as the weathering of tires.
CONSUMER APPLICATION
Cattle rancher, Prunty, was taking a herd of about 150 cattle to market. In order to get to the stockyards in the next town, it was necessary to herd them along a railroad track for about a mile. While the cattle were moving along the railroad track, a train belonging to the Texas and Prairie Railway approached the area where the cattle were, and the engineer sounded the train whistle about 3 times, so as to frighten any cattle off the railroad if they decided to cross in front of the train, and also to warn the cowboys herding the cattle that the train was approaching.
Unfortunately, the train whistle had the reverse effect and the whistle caused the cattle to stampede, resulting in several cattle being severely injured and had to be butchered on the spot as they could not move as a result of their injuries. Prunty took the railroad to court, claiming that it the injuries to the cattle were caused by the railroad. However, the court ruled that this constituted “inherent vice” as it was the nature of cattle to stampede under these situations.
(Paraphrasing Texas & P. Railway v. Prunty, 233 S.W. 625 (Tex. Civ. App. 1921).
Even with these exceptions, it is rare that a common carrier can escape liability from loss or damage, even from one of these above-mentioned exemptions.
Even when the common carrier has liability for a loss or damage, there are certain limitations that can apply. This particularly applies when a specified value is stated in the contract. This is also quite true when the common carrier has a different schedule of charges according to the declared values of the items transported. Usually this can be a dollar limitation, such as the usual case of household goods. There is another limitation when the position of the common carrier is reduced to that of bailee, which has more limited liabilities. This would apply in cases such as where the carrier delivers goods to a terminal in the receiver’s locality and the receiver has been so notified. If the receiver does not pick up the property within a reasonable period of time, the liability of the common carrier will be reduced to that of the bailee. (The liability of the bailee will be discussed later in this text).
CONSUMER APPLICATION
Benton Tools shipped a truckload of its mechanical equipment to various retail locations in and around Oklahoma City, by White Carriers, a common carrier. White delivered the property to a warehouse in Oklahoma City, which operated as a distribution center for Benton Tools. Benton was to contract with Al’s, a local drayage service, to pick up the equipment and deliver them to the various retail outlets in and around Oklahoma City. Delivery to the warehouse was made on Tuesday the 20th. Al’s was very busy with local clients, so the equipment languished in the warehouse for 3 weeks, at which time a rupture in a local gas line caused a fire, which in turn caused damage to the stored equipment.
Benton immediately makes a claim against White Carriers, as they were responsible, almost to the point of “insuring” the goods. However, White Carriers maintained that since the goods stayed in the warehouse for so long after Al’s had been notified, and White was not negligent in storing the equipment or in causing the losses, therefore White was required to use only the care an ordinarily prudent person would exercise under those circumstances. Al’s, the warehouse owner, and Benton will have to untangle the responsibility.
If, for instance, White had stored the material in the warehouse on a Friday, notified Al’s immediately, but Al’s didn’t pick up the goods until Monday, if this was determined to be a “reasonable” length of time (which it would in all likelihood be), then White could be responsible.
Often a shipper will load and seal a railroad car, and the carrier has no chance to check the load, so the carrier will have no liability for the weight, load or count. The Bill of Lading will usually be stamped “shippers weight, load and count.”
The Bill of Lading when issued by a common carrier, is actually a receipt from the carrier for the goods being transported. Bills of Lading are extremely important is determining liability for transported goods as it also serves as the contract between the shipper and the carrier that sets forth the obligations and responsibilities of both parties.
There are several types of Bills of Lading. On a Released Bill of Lading, the carrier is released from liability above a certain specified amount, whereas a Straight Bill of Lading does not include any limitation on the value that is to be paid by the carrier in case of a loss. An Order Bill of Lading is a Straight Bill of Lading with some limitations and is also used as a method of shipping on a Cash On Delivery (COD) basis. In a COD situation, where the common carriers do not want to take the responsibility for handling the money, the money is usually handled through banking channels.
A Through Bill of Lading covers shipments by more than one transportation company, with a fixed charge for the entire transporting. Actually, it is either a Straight or an Order Bill of Lading, that is marked “Through.” Under this type of Bill of Lading, a carrier who pays a claim has the right to sue the responsible carrier in the event it does not reimburse the paying carrier, and it can also collect attorney’s fees. The shipper can file a claim against either carrier. This does not apply to intrastate or unregulated shipments.
A common carrier’s exposure to a loss begins when the goods have been delivered to the carrier, and accepted by the carrier and ends when the property has been delivered to the consignee.
The delivery of goods to the carrier is usually clearly established, particularly in the case of packaged shipments. However, in the case of carload shipments from a railroad siding, usually a bill of lading by the carrier upon notice that the car is ready, ordinarily constitutes acknowledgement of delivery to the carrier.
Delivery by the carrier is usually in the form of a receipt signed by the consignee at delivery. When the consignee has to pick up the property at the carrier’s freight depot, the carrier’s liability as a carrier continues for 48 hours, and after that time, the liability of the carrier is that of a bailee.
When cars are delivered to a private or semiprivate sidetrack, delivery by the carrier is accomplished when the railroad car is placed on the sidetrack at a reasonable hour. There is no 48 hour requirement.
The claims section of a typical bill of lading is rather explicit and detailed. Common carriers generally enforce the claims section of the bill of lading very strictly. The consignee must note any shortages or damages upon receipt of the goods. Also, it must be recognized that the position of the carrier and the claimant are adverse and the common carrier will attempt by all legal means to reduce or eliminate its liability.
When a common carrier does become liable for loss or damage, it is required to pay the full amount of the loss for which it is obligated. The amount of the loss is usually determined as the market value of the lost or damaged property, assuming that it arrived in good condition at its destination. Expenses connected with filing a claim cannot be claimed. It is unusual for a consignee to collect damages from a common carrier for the loss of use of the property if the property is lost or damaged in transit even thought the common carrier is liable for the loss of the property itself. If the property is partially damaged and is repairable, the consignee may accept the property, have it repaired, and then make claim with the carrier for the actual loss. The consignee could dispose of the property and make a claim with the carrier for the full value of the actual loss.
When property is totally damaged, the consignee can refuse to accept delivery but then make a claim for the full value of the property. The carrier could then dispose of it as the carrier sees fit. However, if the carrier does not exercise that right, the consignee can dispose of the property in the best way that would benefit the carrier, such as selling it for salvage and any money received would be subtracted from the claim.
There are different liability requirements of the various types of carriers. At this point, it should be observed that the mode of transportation and the liability of the carriers are very important in underwriting considerations. The exposure can be measured by the mode of transportation, and the liability of the carrier is very important because of the possibility of subrogation.
Both rail carriers and motor carriers have basically the same liability under their bills of lading. They can limit their liability without prior approval of the ICC. The “piggybacking” of cargo can involve more than one bill of lading. The carrier making the delivery to the railroad can issue the bill of lading, or the railroad can issue the bill of lading, or the carrier that is picking up the load at destination can issue the bill of lading. Rail and truck service provided by railroads in piggyback situations is exempt from ICC regulation, but only if the motor carrier is a subsidiary of the railroad.
The liability of domestic water carriers is quite limited as in addition to the usual limitations, they are exempt from losses due to perils of the water, errors in navigation, rescue efforts, and fire.
Domestic Air carriers are confusing at this time. Originally they limited their liability according to common law and were relieved of liability unless they could be proven to be negligent. There was a modest limitation per pound (maximum $50 per shipment). But in 1977, the Civil Aeronautics Board changed the liability of the domestic air carriers to one similar to the surface carriers, the limitation per pound was raised and a shipper could declare a higher valuation (but which they had to pay for). But then, the CAB decided to allow the airlines to use either the original rules, or the new ones, with the result that there is little uniformity at the present time.
International Air Carriers operate under different rules and an air carrier is not liable for loss if it took all necessary steps to avoid the loss, or if the loss was caused by pilot error. The burden of proof is on the carrier.
Household carriers operate under the “Uniform Household Goods Bill of Lading and Freight Bill” which states that the carrier is liable for physical loss or damage from any external cause, and except for loss caused by or resulting from
There has been more recent legislation and now some carriers are able to offer replacement cost on articles lost or damaged while in their custody.
Freight forwarders file their own tariffs, but are subject to ICC rules, which cover shipments from point of origin to destination. Consolidators do not assume liability for loss to goods in transit, even if they have arranged for the transportation.
Contract carriers have a basic liability for negligence in the handling of the cargo. While generally it is against public policy for anyone to contract away the person’s entire liability for negligence, the liability can be affected by provisions of the contract.
CONSUMER APPLICATION
Twinkle Industries, manufacturers and distributors of crystal products, opened a new warehouse in Atlanta and contracted with Orange Transport to move their crystal products from their manufacturing plant to the warehouse. Orange Transport was very concerned about liability for breakage of the crystal products, as some of them were very fragile.
Twinkle proposed and Orange agreed, that Twinkle would be solely responsible for packaging the products so that they could absorb an impact equal to moving at 35 miles an hour and coming to an instantaneous stop. Orange would not be responsible for breakage even if the crystal was dropped while loading or unloading.
Even if an employee of Orange tipped over a dolly loaded with the crystal, there would be no liability. However, if the driver for Orange was driving under the influence of alcohol (as an example), then Orange would be liable for any damage to the cargo.
Since shipments are very frequently times made to transport property from a seller to a buyer, it becomes very important to determine when title to the property passes. For Inland Marine underwriting purposes, the general rule is that whoever holds the title to the property, bears the risk of loss while the property is in transit.
Sales of property are governed primarily by the Uniform Commercial Code, which permits the buyer and seller to stipulate by agreement when the title will pass. If there is no such “stipulation”, then the title will pass when delivery has been made by the seller to the buyer, and where and when the actual physical delivery is made depends upon the wording of the contract.
In most commercial sales of property, the buyer and seller agree when title passes according to customary shipping terms.
F.O.B. Point of Shipment (F.O.B. means “Free on Board”) is a shipment method whereby the seller assumes the responsibility for any loss or damage until the property is in the possession of the carrier and a bill of lading with no exceptions, has been issued. After that, the buyer assumes the responsibility
F.O.B. Destination obligates the seller to transport the property to the stated destination and offer proper delivery upon arrival. The seller assumes the responsibility for loss or damages until proper delivery has been made. There are many variations of F.O.B. terms.
F.A.S. Vessel (Named Port) means “Free Along Side”, and the seller must transport the property to the (Named Port) and place it alongside the vessel, and is responsible for the property until it has been so placed.
C.I.F., or “Cost, Insurance and Freight”, is used for overseas shipments. The seller is responsible to (1) arrange for transportation, (2) pay the shipping charges, (3) arrange and pay for the insurance, and (4) mail the shipping documents to the buyer. The risk of loss passes to the buyer when the goods have been fully loaded into the vessel or delivered to the custody of the ocean carrier. There is also C&F, which the same except that seller does not have to arrange and pay for the insurance.
Theoretically, the party that holds title to the property involved in a sale, has the risk of loss or damage to the property. However, under certain situations the seller can be exposed to loss after title has passed to a buyer, and a buyer could be exposed to loss before title has passed from the seller to the buyer. As an example, a manufacturing firm could order special machined parts from a machine shop. If the parts are destroyed in transit before title has passed to the buyer, the buyer could suffer loss of business income while the parts are being remanufactured.
There are other rules under the Uniform Commercial Code which stipulate when the seller has an insurable interest in goods and when the buyer has an insurable interest. Basically, the seller has the insurable interest in damage to the goods as long as the seller has title to the goods in accordance with an agreement between the buyer and the seller.
The seller maintains an insurable interest in the goods while the seller has a security interest in them, even after title to the goods has been transferred to the buyer.
The buyer has an insurable interest in the goods as soon as the goods have been identified – meaning when the contract has been fulfilled and the goods in question are accepted as meeting the provisions of the contract. The “identification” requirement can mean that the buyer has identified the goods under contract before the actual title to the goods is transferred. Therefore, it is possible (and quite common) for both the buyer and the seller to have insurable interests at the same time in the same property.
Since the buyer has no insurable interest in the property until the property has been identified, the buyer’s insurance interest is the full value of the goods – whether the buyer holds title to the property or not. As far as the seller is concerned, the seller’s insurable interest depends upon the point in the transaction at which the goods are damaged.
Interestingly, since the seller and the buyer may have insurable interests at the same time, the sum of both interests may exceed their full value.
The severity of a loss of property while in transit varies considerably, as it will always depend upon the kind of property that is being transported. There is quite a difference between a truck load of pickles, for instance, than that of a diamond merchant who may transport hundreds of thousands of dollars in a small package. In order to measure the loss exposure; many factors should be considered, including
There are many other factors that may apply, as there are so many types of property that is shipped and to numerous locations. But the severity and the frequency (how often) of transporting the property must be studied if the risk is to be measured correctly.
In addition to the determination of what exposures there are, there must then be control measures to keep the loss amount and frequency under control. There are many ways to help reduce these losses, but the four most prominent are:
There are certain things that cannot be changed and must be accepted as part of the risk, such as the fact that jewelry will always be attractive to thieves, cast iron is more susceptible to breakage than steel but could probably not substitute, etc. After determining that certain items or features create loss exposure, in some cases this loss exposure can be reduced without affecting the cargo. For instance, packing some articles in stronger material, or shipping certain goods in a near-finished condition where the goods can be finished after shipped.
Usually brittle objects can be shipped without chance of breakage if the packaging is adequate. Also, it may be better to ship articles such as jewelry, in packages that do not identify the contents to help avoid theft. Large, valuable items can sometimes be disassembled and sent in different packages (or on different trucks, for instance) which help to reduce the possibility of theft. The transportation industry has had great success in using containers for large shipments, to reduce theft or damage, both on land and on water.
The routing of the property can be used to help prevent losses. An air shipment can eliminate the problem of hijacking to a large extent. Some goods are better shipped by rail than by truck. Also, the routing and the timing can affect loss rates as some areas have higher theft statistics than others. Then there is always the history and experience of the carriers - some are just safer than others because of better equipment, better security, more experienced drivers, etc.
It should not come as a shock to know that a large portion of losses while in transit come from miscounts, either deliberate or accidental, shipments going to the wrong place and sometimes the rejection of shipments by the consignees for not-legitimate or unreasonable reasons. Many of these problems are a result of human errors and tendencies. About the only thing that can be done in most cases, is to exercise very strict and detailed control during the entire process – check and double-check.
Not all carriers purchase Transportation insurance, as in those situations where the operations are so large that they can handle their own claims. This would be the case with a large railroad, large truck lines and major airlines. Of course some smaller firms, such as owner-operator truck lines, may not carry insurance, as they cannot afford it. Therefore the shipper should always check on the financial ability of the trucking company to pay losses, or check on the status of insurance before shipping the property.
STUDY QUESTIONS
1. For Inland Marine purposes (and most other purposes), property is divided into Real property and personal property. The principal difference between the two is
A. cost.
B. availability.
C. age
D. portability.
2. The most usual consequence of loss to property in transit (while being moved) is
A. reduction in value.
B. valuation is higher.
C. difficulty to replace.
D. total loss nearly every time there is a loss.
3. A Carrier that does not have authorized routes and can usually haul cargo for anybody between any points, is usually
A. a Private Carrier.
B. a Contract Carrier.
C. a Specialty Carrier.
D. a Common Carrier.
4. Carriers who assemble and consolidate shipments, and make their money in the difference between shipping costs of small cargoes and large cargoes, is
A. a Common Carrier.
B. a Specialty Carrier.
C. an Indirect Carrier.
D. a Contract Carrier.
5. “Acts of God”, “Acts of Public Enemy”, and “Exercise of Public Authority” are examples of
A. the Covered Perils provision of an Inland Marine Policy.
B. situations that limit the liability of Carriers.
C. descriptions of definitions of fire losses.
D. liability limitations of an Inland Marine policy that will not stand up in court.
6. A Bill of Lading issued by a common carrier, is actually
A. a receipt from the carrier for the goods being transported.
B. instructions on how the load must be packaged and packed in the vehicle.
C. a bill for the services of a Common Carrier.
D. the inventory of the cargo from the shipper to the receiver of the cargo.
7. In case of a loss while property is being transported by a common carrier, the consignee
A. may collect actual damages and also for loss of use of property in most cases.
B. may not accept the shipment until the carrier has an opportunity to repair or replace the damaged property.
C. may accept the property, have it repaired and then make claim with the carrier for the actual loss; of dispose of the property and make claim against the carrier for the full value of the actual loss.
D. must go into arbitration in order to determine the amount of the loss.
8. The shipping terms “F.O.B. Point of Shipment”, “F.O.B. Destination”, “F.A.S. Vessel”, and “C.I.F.” are used to determine
A. the method of payment of the cost of shipping.
B. who assumes the responsibility of the good being shipped, and when it is assumed.
C. the method of shipment of goods and property.
D. the type of carrier used in the shipment.
9. In determining the insurable interest in goods, basically the seller has insurable interest
A. when the goods have been identified, the contract fulfilled and the goods accepted.
B. only if the buyer does not have an insurable interest.
C. when the seller has title to the goods or while having a security interest in the goods, even after the goods have been transferred to the buyer.
D. only during the time that the goods have been insured in the seller’s name.
10. A large portion of losses while in transit come from
A. miscounts, shipments going to the wrong place or rejection by consignees for “not-legitimate” reasons.
B. explosions.
C. overturning of transporting vehicles.
D. fraud.
ANSWERS TO STUDY QUESTIONS
1D 2A 3B 4C 5B 6A 7C 8B 9C 10A