The degree of care will vary depending on the property involved. The storage of furniture does not necessitate quite the level of care as a fine piece of jewelry does. It is understood that the Bailee does have the responsibility of caring for the property. Because of the possible Loss Exposure, there are many Bailee's Insurance Policies that may be utilized.

Some Examples of such policies are:

»  Cold Storage Floaters

»  Dryers and Cleaners Forms

»  Laundry Form

»  Furrier's Customer Custody Form

»  Jewelers Block Form

»  Garment Contractors Floater Form

»  Processor's Floater Form

Before discussing each one of these forms, it is important to distinguish between two forms of coverage: Form A ‑ All‑Risk and Form B ‑ Named Peril.

Bailee's Customer Form A ‑ All‑Risk ‑ like all AAll‑Risk@ Policies, there is no need to mention the various perils protected against. All‑Risks of Physical Loss or Damage are always assumed and only limited by the stated exclusions in the policy.

Bailee's Customer Form B ‑ Named Perils ‑ The Counterpart Policy to Form A is the Form B ‑ Bailee's Customers Form as it will only cover Named Perils.

The Form B covers all lawful goods which are the property of others which are accepted by the insured for cleaning, laundering, pressing, dyeing, repairing or altering.

The policy will not cover goods which are held for storage. If goods are held by the insured with no instructions from the owner to hold in storage they are not considered as being held in storage.

The perils that are covered while in the insured's building are:

  1.    collision of the vehicle in which the property is being transported

  2.    theft, which would include burglary and hold‑up

  3.    floods

  4.    earthquake

 5.    sprinkler leakage

  6.    strikers, locked out workers taking part in any labor disturbances

  7.    explosion

  8.    smoke when due to the unusual faulty operation of a stationary heating furnace

  9.    aircraft and falling objects

10.    motor vehicles except those owned or operated by or for the insured or by or for any custodian of the property

11.    windstorm, hail, cyclone and tornadoes

12.    fire

While in transit, Bailee's Customer Policies stipulate that insured property will always be carried on trucks with a closed body and be equipped with locks. Also, the loss will be covered only while the property is within the closed body and is stolen by forcible entry into the vehicle. There would be coverage if the entire vehicle is stolen.

If goods are left overnight in any motor vehicles, the coverage would apply only if such vehicles were locked and garaged in a building which is occupied by the insured.

The Bailee's Customer Forms has the usual exclusions that are implemented in the All Floaters Policy with the addition of:

a.   The policy does not cover loss arising as a result of any dishonest act on the part of the insured, any employees or of any Bailee's.

b.   The policy does not cover loss while the property is in the custody of any other Bailee.

The Bailee's Customer Forms cover for the Actual Cash Value of the property at the time of loss. The policy will also pay for any labor or service charges.

The policy does contain a maximum Limit of Liability. A separate Limit of Liability is established for the premises of the insured, for each branch store, or for any other location not named, and while in transit on any one vehicle.

There are 6 requirements that the insured must fulfill at the time of loss:

1.   Notice of Loss ‑ the insured must give immediate notice of any loss to the company or its agent. The insured must also notify the Police Department in case of theft.

2.   Proof of Loss ‑ this form must be filed within 4 months of the date of loss.

3.   Adjustment of Loss With Insured or Customer ‑ the company is permitted to adjust the loss and pay the loss to the insured or to the customer or customers whose property sustained a loss.

4.   Right to Begin Legal Proceedings ‑ the insured must agree after collecting a loss from the company to begin a suit, at the expense of the company, against any other Bailee, carrier of goods, or other party who may be liable for the loss.

5.   Insured's Privilege Adjusting Losses ‑ the company allows the insured the right to adjust any loss in which the aggregate amount of all claims does not exceed $100.

6.   Sue and Labor Clause ‑ this means that the insured is obligated to take all possible means to preserve the property from further loss and to seek its recovery. The policy clearly states that the insured will be reimbursed for any expenses undertaken while trying to accomplish these duties.

MISCELLANEOUS PROVISIONS

Cancellation ‑ the insured or the company may cancel the policy at any time, either party is obligated to give 15 days notice to the other.

If the company performs the Cancellation, the rate is done on a Pro‑Rata Basis. If the insured cancels, then the Cancellation Rate is short‑rated.

PREMIUM DETERMINATION

The rate for a risk is left entirely to the judgment of the underwriter. Most of the rates are written for a flat premium and the Bailee's Customer Forms are written on a Reporting Form Basis.

Initial premium collected is a Deposit Premium. Each month, the insured would report to the company the monthly total of gross receipts and would pay the required premium based on the rate used in the policy.

COLD STORAGE LOCKER BAILEE FLOATER

Due to the popularity of frozen foods, the need for this Floater has been developed. For the Bailee who operates a Cold Storage Locker to store food belonging to others, this provides coverage to protect the Customer's Property.

This Floater is written either on an AAll‑Risk@ Basis or on a Named Perils Basis. The Named Perils will protect against:

»            lightning

»            windstorm

»            hail

»            explosion (other than boiler)

»            civil commotion

»            fire

»            aircraft and vehicles

»            earthquake

»            property transporter collision

»            theft

The policy also contains a Limit of Liability per locker and an Aggregate Limit for the entire loss.

PROCESSOR'S FLOATERS

Many industries, which produce a product, may depend on the following:

»  outside plants and

»  possible contractors for some service

When the manufacturer turns property over to another firm for processing or fabrication, it is entering into a Bailor‑Bailee relationship.

The liability of the Bailee is the same as any other Bailee and is limited to the loss caused by the particular Bailee's negligence.

In many cases, good business practice encourages the Bailee to insure the property being given them to protect against loss even when not due to negligence. This is the role of the Processor's Floater.

This Floater is usually written on a Named Perils Basis and will insure against the following:

»  windstorm

»  cyclone

»  tornado

»  riots

»   strikes

»  burglary and holdup

»  sprinkler leakage

»  lightning

»  fire

Just like the Bailee's Customer Form, the policy will cover the unpaid charges for any labor performed on the property, which is considered uncollectible by the destruction of the goods.

FURRIER'S CUSTOMER POLICY

The Furrier is just like any other Bailee who accepts goods for storage and/or repair. However, there are 2 differences between the Furrier Bailee and other Bailee's. The most notable difference is that the Furrier is usually handling articles of high value which are susceptible to loss. For this reason, owners of such property want broad coverage to protect their valued property. A second difference that makes Furriers quite unique is that a great percentage of the Furrier's business is simply storage.

A form of insurance has been developed called the Furrier's Customer Policy and like other Bailee‑Bailor relationships, this policy will cover not only the furrier's liability to its customers, but also covers any damage or loss on the customer's property.

The policy will cover 2 broad areas of property:

1.  garments other than furs and

2.  furs and articles trimmed with fur

As to garments other than furs  the policy will not cover clothing other than furs which have been accepted by the insured for any type of processing since these items should be covered under a separate policy. The coverage does exist only for storage. The policy will only cover a customer's property for which the insured has issued a written receipt.

The Furrier's Customer Policy will also cover goods received by the insured from customers and also any property which is on a ALayaway@ Plan when the purchaser agrees to leave the garment with the furrier until certain payments have been made.

Usually, the policy is sold to furriers and fur storage businesses but it is also available to laundries, cleaners, banks and other organizations that accept furs for storage.

The Furrier's Customer Policy is an AAll‑Risk@ Policy. It will cover:

» mysterious disappearance

» water damage

» dampness

» chemical damage

Because of these coverages, the policy offers broader coverage than most other policies.

Exclusions that are unique to the policy are 3 in number:

1.   Dishonesty of Employees ‑ this policy will pay for loss covered by dishonest individuals but it will only apply to any excess, which is over the primary insurance for this situation. An Example will highlight this situation. Assume a furrier carries a Blanket Position Bond (which is the primary coverage for a dishonest employee) which would cover any loss up to $10,000. The furrier's driver Aremoves@ a fur coat worth $20,000 from the delivery truck. In this situation, the Blanket Position Bond will pay the first  $10,000 and the policy the excess, or the  remaining $10,000. If the furrier had no insurance covering employee dishonesty, the policy would wind up paying the entire loss, subject to the Limit of Liability.

2.   Damage Due to Process ‑ just like the other Floaters, this policy will not cover loss or damage caused by work performed on the insured property. The policy will, however, pay for this type of damage if caused by explosion or fire. Example:  the insured was cleaning a coat and the cleaning material used damaged the coat. The policy would not cover this damage.

3.   Liability for Guarantee of Work to be done ‑ the policy clearly excludes any liability, which the insured assumes when it guarantees the result of work. If the insured accepts a coat for dyeing and guarantees that the shade of the coat will change according to the customer's specifications, it may be held liable if it fails to achieve what is guaranteed. The policy will not pay for the liability.

The policy will only pay up to the Actual Cash Value of the damaged property at the time of the loss, or possibly, the cost, to repair or replace the damaged property with like property.

The Furrier's Customer Policy does not cover any property unless a written receipt for the item has been issued. The policy will not pay a dime over the amount stipulated on the receipt issued by the insured. The policy also states that the insured must keep an accurate record of all the receipts that have been issued. Also, if the customer accepts the receipt issued by the insured as accurate, then the receipt will be the form used to determine value at the time of loss.

There are policy limits stated in the policy. In addition to the limit per article, the policy also contains a maximum limit for each of the premises used for storage as listed in the policy, for locations not used for storage and for other unnamed premises. Also, the policy contains an Aggregate Limit for any one loss regardless of the number of locations.

For a Furrier's Customers Policy, the premium is determined by the following:

1.   the Basic Fire Insurance rate for the vaults contents of the risk

2.   a loading charge from month‑to‑month. The loading charge is impacted by the construction of the vault and any protective devices that are installed

The insured is required to report to the company each month the values at risk. The insured would report the total amount of values stated in all receipts that were outstanding on the last day of the previous month.

These are the customary 5 requirements that the insured must comply with in the case of loss:

1.  Proof of Loss  must be filed within 90 days of the date of loss

2.  Notice of Loss ‑ insured must give immediate Notice of Loss to the company

3.  Loss Payable ‑ the loss payment should be payable in a reasonable time, usually 30 days after determination.

4.  Sue and Labor ‑ the insured is obligated to take all possible means to preserve the property from any further loss and also to seek its recovery. The policy will reimburse the insured for any expenses in attempting to fulfill these duties.

5.  Term of Policy ‑ the policy is continuous until cancelled. The policy will be subject to annual re‑rating by the Insurance Services Office. Since this policy has no expiration date, it is known as an Open Form.

CHAPTER 10 QUESTIONS

1.      Floaters that cover property, which moves from one location to another, are called?

a.   Transit Policies

b.   Bailee's Policies

c.   Cargo Policies

d.   all of the above

2.      An individual or business that has temporarily taken custody of the property of another party is called:

a.   Bailee

b.   Bailor

c.   Transferer

d.   all of the above

3.      A(n) example(s) of a Bailment would be:

a.   clothes to be laundered

b.   property to be repaired

c.   warehousing of goods

d.   all of the above

4.     An example of a Bailee's Insurance Policy would be:

a.   Jewelers Block Form

b.   Transit Form

c.   Ocean Marine Form

d.   All‑Risk Form

5.    What Bailee's Customer Form is a Named Perils Form?

a.   Form A

b.   Form B

c.   Form C

d.   Form D