CHAPTER ELEVEN - DEALERS POLICIES

 

 

The 1953 Nation-Wide Marine Definition first established that certain specified dealers can be insured under an Inland Marine policy.  This may seem odd as the insurance would cover the goods sold by the dealer and the largest exposure would be at the dealer’s place of business.  However, that leaves “gaps” in coverage, such as goods in transit or insurance on some types of goods, such as portable equipment.  The only practical way would be to use the flexibility of the Inland Marine insurance policies. 

 

The 1976 Definition added fine arts dealers and stamp & coin dealers to those covered in the 1953 Definitions.  It should be noted that only those dealers who are specifically mentioned in the Definitions are covered under Inland Marine provisions.  Other dealers who operate very similarly to those mentioned in the definition, such as Automobile Dealers, Marine suppliers, etc., can be covered under commercial property insurance, or as in the case of the Auto dealers, with Commercial Auto policies.

 

For reference, Section F, subsection 19, is as follows:

 

 

 

 

JEWELERS BLOCK

 

Please note the use of the word “Block”, which is believed to come from the French “en bloc”, defined as “all together.”  Dealers policies cover not only the goods that the insured has for sale during the normal course of business, but also covers any personal property of the insured – “all together.” 

 

The Jewelers Block policy is one of the earliest types of Inland Marine insurance, and was used as an example when constructing other Inland Marine policies.  It has been a filed class of business, however if the dealers (retailers in this case) have an average inventory of over $250,000, then it is not subject to the filed provisions.  However, the form itself will closely adhere to the filed form.  The coverage provided under this policy pertains to the exposures inherent in very expensive articles of small volume, which can be easily transported, therefore extremely attractive to thieves. 

 

Simply put, Jewelers Block Insurance is a type of Inland Marine insurance that provides coverage for jewels, watches, gold, silver, platinum, pearls, previous and semiprecious stones.  Property can be owned by the insured jeweler, or can be customer’s property in the care, custody and control of the jeweler.  Coverage is on an All-Risks basis except specifically excluded perils, such as wear and tear; war; delay; loss of markets; flood; earthquake; loss or damage while jewelry is being worn by the insured or his or her representatives; loss resulting from the infidelity of any person under the care, custody, and control of the insured; damage or destruction of jewelry after it leaves the insured under an installment contract; mysterious disappearance; and shipments of jewelry not sent registered first class mail.

 

The form and rules as shown here are those of the ISO.  AAIS forms and rules are comparable.

 

PROPERTY COVERED

 

Covered property is as stated above, but if the insured is a department store, with a separate department for jewelry, silverware  &/or watches, then the policy will only apply to those departments. 

 

There are several notable risks that are covered under the filed form, such as wholesalers, manufacturers and distributors of jewelry, and other commodities shown under the filed form, plus those dealers who are exclusively diamond stone dealers – both industrial and for jewelry; dealers of bullion and precious metals; auction dealers; fine arts/antiques dealers; and pawnbrokers, etc. 

 

Covered property when on exhibition is not covered under the filed rates (but can, of course, be covered under a nonfiled form).  Underwriters need to consider this exposure separately, as there are many things to be considered in such an exposure.

 

The stock of the jewelers is covered regardless of whether it is located on the premises, in transit from the premises to another location, in the custody of employees, or located anywhere else. 

 

Legal liability does not extend to the coverage of property that belongs to others that are not in the jewelry business.

 

PROPERTY EXCLUDED

 

If the jeweler’s property is sold under a deferred payment sales agreement, then it is not covered once it leaves the jewelers premises.  The reasoning behind this is that the item is no longer in the control of the insured jeweler so the jeweler should not be held liable.  For the same (loss of control) reason, jewelry that is in a showcase away from the insured’s premises will not be covered.  Insurance can be obtained for jewelry shown in an area outside of the insured’s premises, but under another policy.

 

There are other situations where the property is not insured.  The subject of property being on exhibition has been previously covered, and in the same vein, any jewelry work by the insured or an employee or a person who is a member of an organization involved in the jewelry trade, will not be covered. 

 

GOOD IN TRANSIT

 

Interestingly, mailing of  jewelry or goods of the insured jeweler is only covered if it is mailed by USPS registered mail – and not by express, certified or parcel post.  If the goods are transported by armored car or by parcel transportation of a bus lines, it will be covered, but not if it is shipped by railroad, waterborne or air carriers unless under the parcel shipment or baggage services of the carrier.  Goods shipped by a motor carrier will not be covered, unless the carrier is exclusively the insured’s parcel delivery service.

 

It pretty much goes without saying that contraband or goods illegally transported, will not be covered.

 

EXCLUDED CAUSES OF LOSS, THEFT, ETC.

 

If insurance limits are not shown for jewelry and articles in a show window, the theft of goods in a show window resulting from the window being broken or smashed are not covered.  If there is a show windows coverage shown in the declarations page, there will be different limits for when the business is open and when it is closed, and for whether the windows are protected in some fashion or unprotected. 

 

Any theft of goods from an unattended vehicle will not be covered unless the owner or an employee (whose job is to be with the vehicle) is actually upon or in the vehicle when the theft occurred. 

 

As stated earlier, there is the standard exclusion for dishonest acts by the insured, employees, etc.  There are exceptions, such as while the property is in the custody of a porter or helper that is not on the employer’s payroll, when the insured &/or employees deposit the property for safekeeping while travelling, or when the property is in the custody of carriers.

 

As discussed earlier in this text, theft losses by trick or device or unauthorized instructions, are excluded. 

 

Theft losses are also excluded if the loss is by unexplained disappearance, due to a shortage that was discovered during inventory, or if the shortage loss pertains to property in transit when the cargo was under seal and the seals were unbroken.

 

OPTIONS AND EXTENSIONS

 

There are several options and extensions of coverage for the jeweler block coverage.  The extension (there is only one extension) covers damage caused by theft or attempted theft to other buildings the insured owns or for which he is legally liable. 

Options that may be elected include the ability to insure additional property, including furniture, fixtures, office supplies, machinery, tools, patterns, dies molds, improvement and betterments, etc.  Another option would coverage loss of money by theft when the safes or vaults are “broken open” – without the evidence of the safe or vault being “broken open”, there would be no coverage. 

 

DEDUCTIBLES

 

The Jewelers Block Insurance has a mandatory deductible of $500, with higher deductibles available.

 

SPECIAL PROVISIONS

 

1.  There is a special valuation clause which adds “the lowest figure put on the property in your inventories, stock books, stock papers or lists existing as of the time of loss.”  This is in addition to the usual 3 types (cash value, restoring value, and replacing value).

 

2.  Itemized and accurate records of the business must be kept for three years after the coverage ends and the insured is required to take a physical inventory of all stock at least annually.

 

3.  The “protective safeguards” in effect when the policy is issued, must be maintained in good working condition and operating when the business is closed.  This is a rather severe provision and not complying with this provision will render the insurance suspended until the safeguards are back in operation.

 

4.  If the insured’s premises are changed or risk of loss has been “materially increased,” the coverage will cease unless the company, in writing, agrees to the changes in premises.

 

 

 

CAMERA AND MUSICAL INSTRUMENT DEALERS

 

Camera and Musical Instrument Dealers insurance provides coverage on an All-Risks basis for the insured’s own property as well as property of others under the insured firm’s care, custody and control.  Exclusions are wear and tear, mysterious disappearance, earthquake, flood, theft from an unlocked and unattended vehicle, loss of market, and delay.

 

Coverage for both cameras and musical instruments are written on the same form as both articles are precision-made and can be damaged easily. 

 

PROPERTY COVERED

 

 

While the property covered is cameras and musical instruments, it also states in the form that coverage is provided to “stock in trade consisting principally of cameras or musical instruments and related equipment and accessories, and to property of others that is in the control or custody of the insured.”  The use of the word “principally” would allow other articles carried in stock that are not specifically cameras or musical instruments.  The other items in stock must be sold incidental to the musical instruments or cameras.  Radios, television sets, record players and tape recorders are not considered as musical instruments. 

 

Cameras and/or musical instruments that are sold in departments of department stores, are covered but all other goods sold in the store would not be covered.

 

Other items can be covered, such as furniture, fixtures, office supplies, machinery, tools, fittings, patterns, dies, molds models and tenants’ improvements and betterments.  Theft damage to the insured’s premises are covered. 

 

Certain types of property are excluded, such as accounts, bills, currency, deeds, money, notes, securities and property sent by mail (unless by registered mail or government-insured mail), and property sold under a deferred payment sales agreement.

 

Exclusions in this policy are as stated above. 

 

LIMITS OF INSURANCE

 

Separate limits of insurance apply to property that is (1)  at described premises; (2)  away from premises in the care, custody or control of the insured or the insured’s employees; (3)  in transit; (4)  not at the insured’s premises and is not included above; and (5)  all covered property at all locations.

 

The valuation of property for camera and musical instrument dealers insurance depend upon whether it is unsold property, sold property, property of others and negatives, positives or prints.  For unsold property, the usual cash value, restoring value or replacement value applies.  Sold property is net selling price. 

 

The same provisions regarding the keeping of records and inventory, and protective safeguards that are discussed with Jewelers Block insurance apply to the Camera and Musical Instrument Block insurance.

 

There is an 80% coinsurance clause.

 

 

 

EQUIPMENT DEALERS

 

Equipment Dealers Insurance provides coverage on All-Risks basis for such items as binders, reapers, harvesters, plows, tractors, pneumatic tools and compressors, bulldozers, and road scrapers.  Excluded from coverage is wear and tear, loss due to delay, loss of market, consequential loss such as loss of income because of damage to the equipment and mechanical breakdown.  Property excluded includes aircraft, watercraft, motor vehicles, and property sold on an installment contract basis after it has left the care, custody and control of the insured dealer.

 

Simply put, this policy covers property consisting principally of mobile agricultural and construction equipment and other such related accessories.  Since some if it is stored outside, the policy provides coverage for property inside and outside the premises.

 

PROPERTY COVERED

 

For an additional premium, the insured may cover such things as furniture, fixtures, office supplies, improvements, betterments, machinery, tools and fittings, patterns, dies, molds  and models. 

 

Property not covered includes accounts, bills, currency, deeds, money, notes, securities, etc.  Automobile, motor trucks, motorcycles, aircraft, and watercraft are excluded, obviously because of the potential problems in defining mobile equipment with these excluded items. 

 

The insured may have property of others deleted from the policy.  Property leased, rented or sold is excluded, including property sold under a deferred payment plan “after it has left the custody of carriers for hire when you are responsible for delivery.”  Contraband or property in the course of illegal transportation or trade are excluded. 

 

The exclusions in this form are identical to exclusions in the camera and musical instrument dealers form, except earthquake is not excluded, and this form does not have exclusions for theft from unattended automobile, and marring, scratching, exposure to light, and so on. 

 

LIMITS OF INSURANCE

 

Separate limits of insurance apply to property that is (1)  at described premises; (2)  at other premises the insured acquires (with limits) (3)  in transit; (4)  not at the insured’s premises and is not included above; and (5)  all covered property at all locations. 

 

There is an 80% coinsurance provision.

 

Valuation conditions, and the records & inventory and protective safeguard conditions, are the same as in the Camera and Musical Instrument policy.

 

 

 

 

FINE ARTS DEALERS

 

Fine Arts Dealers insurance provides coverage for works of art, antiques, and similar articles of value on an All-Risks basis, subject to the exclusions of wear and tear, war, breakage, repairing, infidelity of the insured’s employee, and mysterious disappearance.  Fine Arts Insurance policies are written on a scheduled basis with damaged or destroyed items being indemnified on a valued basis.  The same type of coverage for fine arts is available through a “Fine Arts Endorsement” for a “Special Multiperil Insurance” policy. 

 

Breakage of fragile property may be excluded unless the loss is caused by specific perils (wind, fire, theft, etc.). 

 

Limits of insurance pertain to property at the insured’s premises, property in transit and property at locations other than the insured’s.  The latter allows coverage while property is on exhibition, sent to a customer on approval or property that is being repaired or restored.

 

Valuation for unsold property is the amount that is carried on the insured’s inventory, but actual cash value or fair market value can be used, although the latter can be difficult to ascertain with some fine arts.

 

Premiums can be a flat premium or they can be on a reporting basis if the inventory fluctuates considerably.  There is a 100% coinsurance clause for fixed premium policies.

 

Fine Arts Dealers insurance is rated by starting with the fire contents rate and then graduated loadings for various exposures can be added.  The primary exposures are fire, theft, breakage and transportation.  Deductibles are generally used for breakage claims.

 

 

 

STAMP AND COIN DEALERS

 

Stamp and Coin Dealers insurance provides coverage on an All-Risks basis with exclusions for wear and tear, war, loss resulting from delay, loss of market, infidelity of the insured’s employees, loss due to rain, sleet, snow or flood (except while the stamps or coins are in transit).  This is a special Inland Marine insurance coverage designed specifically for dealers. 

 

This policy can be written either on a blanket basis, or with a schedule of the more valuable items, or by blocks of stamps or coins.  Named Perils form may be used on a rare occasion. 

 

Other exclusions commonly used are for loss due to fading, creasing, tearing, thinning, transfer of colors, moths, vermin, inherent vice, extremes of temperature, gradual deterioration and damage sustained during handling, as well as unexplained disappearance and shortage discovered during inventory.  Shipment by mail may be excluded also, or restricted just to registered USPS mail.

 

Those dealers who sell directly to the public have an unusual exposure because of the values of some of their goods.  Therefore, the policy may warrant what property can be kept outside of safe when the store is closed. 

 

 

 

 

FURRIER’S BLOCK

 

(Do not confuse Furrier’s Block insurance with Furrier’s Customer Policy, discussed earlier, although some coverages are available with either policy.)

 

Furrier’s Block Insurance provides coverage for furs owned by a furrier or by others in the fur trade for which the insured is liable.  Coverage is on an All-Risks basis except those specifically excluded, (such as) wear and tear, war, delay, loss of market, flood, earthquake, loss or damage while furs are being work by the insured or his or her representatives, loss resulting from infidelity of any person under the car/custody/control of the insured, damage of destruction of the furs after they leave the care/custody/control of the insured that has been sold under an installment contract, and mysterious disappearance.

 

The Insurance Service Office no longer files a Furrier’s Block policy, and may be written on whatever form the insurer find appropriate, although many companies continue to use the provisions of the form formerly filed by the ISO.

 

The Furrier’s Block (and the Jeweler’s Block) policies require that a proposal be made before a policy can be issued, and the insured must warrant that the information contained therein is complete and accurate. 

 

The policy covers the furrier’s “stock in trade” and has the same restrictions for department stores that appear in similar policies. 

 

 

Note that this exclusion delineates the principal difference between Furrier’s Block insurance, and Furrier’s Customers insurance.

 

Property that is sold on the installment plan after it has been delivered to the customer, is excluded also.  A unique exclusion is animals, furs, pelts, skins, or parts thereof, on the premises of ranchers, breeders, growers or trappers.  Another exclusion applies to property that is worn by the insured or anyone else that is engaged in the fur trade, including but not limited to employees, members of the insured’s family, relatives, etc. 

 

Other exclusions include the unattended vehicle exclusion and loss or damage caused by theft by cutting or breaking show windows, as discussed in the description of Jewelers Block insurance.

 

There can be 6 different limits of insurance in the policy covering property

1. at premises described in the policy;
2. in transit by contract or common carrier, or registered mail;
3. in the custody of a merchants’ parcel delivery service;
4. at the premises of sales agents, dealers, processors, or similar custodians;
5. owned by the insured while in storage at the premises of custodians other than those shown immediately above;
6. located elsewhere and not included in the above property locations, or limited by policy provisions otherwise.

 

 

 

FLOOR PLAN

 

Floor Plan insurance provides coverage for a lender who has accepted property on the floor of a merchant as security for a loan.  If the merchandise is damaged or destroyed, the lender is indemnified.

 

This type of coverage is not a “dealer” situation in the strictest sense, but the concept is quite similar.  Under the Definition, the dealer must have borrowed money from a lending institution to pay for the merchandise, and the merchandise must be specifically identifiable.  The dealer cannot sell or dispose of the merchandise in any way, without first receiving a release by the bank or lending institution. 

 

It may be written to insure the interests of the dealer only, the lending institution only, or both.  If the dealers or lending institution are insured solely, only the outstanding balance is shown.  If both are insured, then the full value of the property is reported.

 

The exclusions are those used by the ISO (three-level as discussed earlier in the text) with some exceptions.

 

1. The insurance company will not pay for loss or damage caused by or resulting from bankruptcy foreclosures (or similar proceedings).
2. Excluded are loss to property caused by or resulting from “Rain, hail, sleet, snow or freezing with respect to property in the open.  Property insured in the policy could possibly be stored in the open, subjecting it to additional risks.
3. A breakage exclusion is applicable, covering glass and fragile property unless the breakage is caused directly by fire, lightning, explosion, etc.
4. Loss by a short circuit or other electrical disturbance is excluded if the disturbance is the result of an artificially generated current.
5. Dishonesty and Trick or Device exclusions also will apply.
6. Loss by delay or loss of market, “wear and tear, any quality in the property that causes it to damage or destroy itself, hidden of latent defect, gradual deterioration or mechanical breakdown” are also excluded.

 

VALUATION

 

The Commercial Inland Marine form to which this form is attached, has an actual cash value provision, but it does not work well with the coverages of the Floor Plan insurance as there are different conditions for property that is not sold, and property that has been sold.  For instance, the value of property that has not been sold is the least of (a) the cost of restoring the property to its original condition prior to loss, (b) the replacement cost, or (c) the price the dealer paid for the property.

 

The policy contains a provision called “Loss Limit – Single Interest” which states that the insurer will pay only the portion of the loss in proportion to the amount of interest the insured has in the property bears to the value of the property.

 

 

There is also a records and inventory provision which demands that accurate and complete records be kept of all inventory, and property of others in the custody of the insured, outstanding balances, and payments made & values at risk.

 

 

STUDY QUESTIONS

 

1.  Only those dealers who _________________________ are covered under Inland Marine provisions.

        1.  sell, wholesale, or manufacture certain valuable goods

        2.  sell to the general public

        3.  handle money or securities as part of their business

        4.  are specifically mentioned in the Nation-Wide Marine Definitions

 

2.  Which of the following statements is true?  Jewelers Block insurance

        A.  covers not only the goods that the insured has for sale during the normal course of business, but also covers any personal property of the insured.

        B.  covers property owned by the insured only.

        C.  only covers property of others in the care and custody of the insured.

        D.  is available only to retail jewelers.

 

3.  Under a Jewelers Block, which of the following is NOT excluded (is covered)?

        A.  Jewelry work done by an employee.

        B.  A necklace that the jeweler has for sale and is displayed inside the store.

        C.  A necklace that the jeweler has for sale in a showcase at an exhibition hall.

        D.  A diamond broach that has been sold under a deferred payment plan.

 

 

4.  Under a Camera and Musical Instrument Dealers policy, which of the following is not covered?

        A.  a Stradivarius violin

        B.  a rare Philco radio

        C.  sheet music

        D.  reeds for clarinets and saxophones

 

5.  Bert & Mary have an “Antique” store, selling antique furniture, paintings, weavings, statuary, and books.  They have discovered that some of their antiques are quite valuable.  What kind of insurance should they consider in addition to their Commercial Property policy to protect their valuable stock?

        A.  Fine Arts Dealers (Inland Marine) insurance.

        B.  Fire and Extended coverage.

        C.  Fine Arts Dealers Liability insurance.

        D.  Commercial Crime coverage.

 

6.  Which of the following persons would be eligible for Stamp & Coin Dealers insurance?

        A.  Bill has collected Indian Head pennies and has one of the finest collections in the country, which he will not sell.

        B.  Rod collects rare stamps from Asian countries which he exhibits at fairs.

        C.  Sam collects various types of stamps, particularly those that have misprinted, and which he sells from a small store he has on Main Street.

        D.  Ruby collects new coins, presently gathering all of the newly minted quarters, which she then gives to her grandchildren when the collection is complete.

 

7.  Franks Furriers sells, repairs, and cleans fur and fur-trimmed garments.  What kind of inland Marine policy that will cover the furs that he owns and also those of others that he repairs or cleans, should he be considering?

        A.  Furrier’s Customer Policy.

        B.  Furriers Block Insurance.

        C.  Commercial Furriers Theft and Liability coverage.

        D.  Commercial Crime policy.

 

8.  Which of the following is NOT an exclusion (is covered) to the Furriers Block Insurance?

        A.  Furs belonging to others in the fur trade that are in the custody or control of the Furrier.

        B.  Animal hides on a mink ranch.

        C.  Property that is worn by an employee or the insured.

        D.  Theft by breaking or cutting a show window.

 

9.  To qualify for Floor Plan insurance, the dealer

        A.  must first apply to an organization representing his occupation, for their group coverage first.

        B.  must have borrowed money from a lending institution to pay for the merchandise.

        C.  must sell the merchandise at a retail price as stated in the policy conditions.

        D.   is the only person/organization/firm that can apply for coverage.

 

10.  The Floor Plan insurance, which is attached to a Commercial Inland Marine Form, contains a provision, called “Loss Limit – Single Interest.  What does this provision do?

        A.  It states that the policy will only pay the limit of only one loss, regardless of the amount.

        B.  It provides for a multiple of Loss Limits, but each Loss Limit must be expressed as a percentage of the Maximum Aggregate Loss Limit.

        C.  It means that the amount of any loss must be either the cash value, or the price the dealer paid for the property.

        D.  It states that insured will pay only the portion of the loss in proportion to the amount of interest the insured has in the property, bears to the value of the property.

 

ANSWERS TO STUDY QUESTIONS

 

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