BASIC AND MISCELLANEOUS
INTRODUCTION
Just as the Personal Inland Marine Policy has many uses in the insurance marketplace, the need for Commercial Inland Marine Coverages is just as broad. In Chapter Eight we will discuss the Basic Coverages of the Commercial Inland Marine Policy and focus on the following:
1. What is covered?
2. Hazards that are covered?
3. How much coverage is provided?
4. Loss conditions that must be met before coverage takes effect, and
5. other miscellaneous conditions.
WHAT IS COVERED?
Basically, 12 classes of property are covered. They are:
1. Accounts Receivables
2. Camera Dealers
3. Commercial Articles
4. Equipment Dealers
5. Jewelers Block
6. Musical Instrument Dealers
7. Physicians and Surgeons
8. Theatrical Property
9. Valuable Papers
10.* Film
11.* Floor Plan
12.* Mail
*These are written on a Reporting Basis
HAZARDS THAT ARE COVERED
Commercial Inland Marine offers coverage against Direct Physical Loss. The policy does not specify individual perils. There are some exclusions, which include the following:
» Concealment
» Misrepresentation
» Fraud
The insurer will void the entire coverage part if it is discovered that the insured concealed or misrepresented a material fact.
COVERAGE PROVIDED
Coverage provided actually depends on 6 key aspects of the coverage. The following must be answered before the insurer renders a decision on the total amount of the coverage:
1. Is there insurance under two or more coverage parts?
In reality, if two or more of the policy’s coverages apply to the same loss, the insurer will not pay more than the amount of the loss.
2. Is there other insurance? If the insured happens to carry other insurance, which would cover the same loss, the insurer will pay only the excess over the amount that is received from the other insurance.
3. Is there a pair or set involved in the loss? If a pair or set is lost, the insurer has the right to repair or replace any part to restore the pair or set to its value before the loss. The insurer may pay the difference between the value of the pair or set before and after the loss.
4. Parts Loss ‑ If the insured is just missing a part or parts, the company will pay only for the value of the lost or damaged part.
5. Is there any Salvage Value? If the insurer recovers or salvages any part of an incurred loss, the insurer is entitled to this value up to the value that it paid out to the insured.
6. What is reinstatement after the loss? This appears to be the most confusing aspect of Total Coverage. It is best to use an example to illustrate this factor. Example: Mary, the insured, schedules 8 individual diamonds, each worth $3,000 under a Commercial Inland Marine Form. The premium charge for each diamond is $300 per year. The policy coverage began on January 1st. On July 1st, one of the diamonds is stolen and Mary is paid $3,000 for the loss. Mary is now entitled to a refund of $150 (half of the premium paid for coverage on the stolen item), since she only had 6 months coverage on that particular diamond before the theft.
7. Transfer of Rights of Recovery Against Others ‑ If the insured who has suffered a loss has any Rights to Recovery damages for the loss from any other party, these specific rights are automatically transferred to the insurer.
LOSS CONDITIONS
Although the insured may indeed have a loss, there are duties that must be followed before a check is sent. We have divided the conditions into 2 groups: Basic and Miscellaneous. There are 10 Basic Conditions and 5 Miscellaneous.
Basic Loss Conditions
1. Cooperation with the Company ‑ Obviously the insured must cooperate with the insurer during any investigation and settlement of any loss under the policy. The insured should not make any statements or assume any obligation. Also, the insured should not admit any liability for loss in which the insurer may be liable.
2. Notification of Police ‑ If a loss does occur, the insured must notify the police, especially if a law may have been broken.
3. Notice of Loss ‑ As in most other insurance policies, the insured must give prompt notice of any loss. This notice should include a description of the property involved in the loss and a description of the Loss Occurrence.
4. Protect the Property ‑ The insured must take measures to protect any property from further damage. Also, if possible, the insured must separate the undamaged property from the damaged property. The insured is also obligated to prepare the damaged property for examination by the insured and to keep a record of expenses for consideration in settlement of the loss.
5. Examination of Books and Records ‑ Insurer has every right to examine the books and records of the insured within 3 years.
6. Inspection of the Property ‑ The insured is obligated to permit the insurer to inspect the property and any other records, which impact on the loss.
7. Sworn Statement of Loss ‑ Within 60 days after the insurer requests a statement from insured and provides the insurer with the necessary forms, the insured is obligated to complete the forms and send the company a signed sworn statement with the information the insurer requests to settle the loss.
8. Legal Action Against Insurer ‑ This condition states that no action may be brought against the insurer before there has been compliance with the terms of the policy. Also, such action may not take place after 2 years from the date the insured had any knowledge of the loss.
9. Loss Payable ‑ The insurer must provide that the loss will be paid within 30 days after determination.
MISCELLANEOUS CONDITIONS
1. No Abandonment ‑ There should not be any abandonment of any property by the insurer. The insurer basically is saying it will not take over or possess any Abandoned Property.
2. Company's Right To Defend ‑ The insurer, at its own discretion, will provide legal defense for the insured if the need arises. The insurer will bear all the costs of such a defense and these costs will not lower the Limit of Liability that is available under the policy.
3. Cancellation ‑ The insurer is obligated to 2 specific deadlines. The first is for nonpayment of premiums and states that if the insured fails to pay a premium, the insurer must give 10 days notice before cancellation. If the insurer wishes to cancel the policy for any reason, other than nonpayment, then 30 days notice must be given.
4. Adjustment With Owner ‑ If a loss occurs to another's property (not the insured) the insurer has every right to settle the loss with the owner of the property.
5. No Benefit to Bailee ‑ Only the insured may benefit from the insurance. If another person or organization has custody of the property, they will not be entitled to any settlement.
CHAPTER 8 ‑ QUESTIONS
1. How many classes of property are covered in a Commercial Inland Policy?
a. 9
b. 12
c. 13
d. 5
2. Commercial Inland Marine Policies offer coverage against:
a. Direct Physical Loss
b. all losses
c. Named Perils
d. all of the above
3. An exclusion under the Commercial Inland Marine Policy would be:
a. Concealment
b. Misrepresentation
c. Fraud
d. all of the above
4. A Miscellaneous Condition in a Commercial Marine Policy would be?
a. Loss Payable
b. Legal Action against Insurer
c. No Abandonment
d. Inspection of the Property
5. An insurer may cancel coverage for the following reason(s):
a. non‑payment of premium
b. adjustment with owner
c. adverse selection problem
d. all of the above
answers
1. b
2. a
3. d
4. c
5. a