Section 1 ‑ On Premises of Contractors ‑  in this section, the policy clearly states that property which is temporarily held at the premises of contractors or subcontractors for work to be performed on it would be covered. Coverage is not provided if the property was at the contractor=s premises for any other reason.

Example:  if the manufacturer had stored some goods at a contractor=s premises, there would be no coverage. The policy would cover the stated property insured while on the premises of any contractor.

The policy will exclude the following types of processors of textiles:

1.   tanners or testing houses that are not defined to be contractors for purposes of this insurance.

2.   throwsters or other yarn processors

3.   weavers

4.   finishers or other cloth finishing works

5.   printers

6.   dyers

7.   spongers

8.   shrinkers

Section 2 ‑ Transit Coverage ‑ property while in transit between the insured=s premises and his/her contractors, subcontractors, mills and suppliers would be covered. The policy does specify the various types of transportation which are covered:

!  messengers

!  on trucks owned or operated for the insured or his contractor

!  air transportation carriers

!  railroad or railway expresses company

!  public or private truckers, land transfer or other land transportation carriers

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Keep in mind that a separate Limit of Liability may be set up for each of the different methods of transportation. Also, there is no coverage or any property that is shipped through the mail.

Section III ‑ Optional Coverage ‑ Insured=s Premises Extension ‑ The coverage may be extended to cover the property on the insured=s premises under the Basic Policy. Also, the policy may be extended to cover the following types of property:

!  dyes and patterns

!  machinery and tools

!  furniture, fixtures and office supplies

!  tenants improvements and betterments

The above availability of coverage will depend on the insured=s particular state.

The hazards covered will vary according to the section of coverage.

While in transit, the property is covered against AAll‑Risks@, while on the premises of contractors, the coverage would be on a Named Perils Basis.

The policy coverage could be extended to cover All‑Risks on the premises as well as in transit if garment contractors All‑Risks Floater is purchased. We will discuss this coverage in our next section.

While property is in transit between the insured=s premises and those of his/her contractors, subcontractors, or suppliers, it is covered against All‑Risks of loss or damage from any external cause, except those losses that are specifically excluded.

Hazards that are covered while on the premises of contractors, subcontractors or supplies are 7 in number. Optional coverages may be provided for 4 additional types of perils.

The 7 covered hazards are:

1.   Boiler Explosion , which originates within steam boilers, pipes, fly wheels, engines and machinery connected. Note:  no other explosion would be covered.

2.   Burglary ‑ this means illegal entry into the premises by force and violence when the premises are not open for business, and when visible marks of force and violence are left.

3.   Fire and Lightning

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4.   Water Damage ‑ the policy coverage is quite broad as it covers any physical contact with water.

5.   Windstorm, Hail, Smoke, Vehicles and Aircraft ‑ there is no coverage for explosion, riot and civil commotion.

6.   Holdup ‑ this means the forcible taking of property by violence, or other felonious acts that are committed in the presence of a custodian of the property.

7.   Sprinkler Leakage

OPTIONAL ADDITIONAL COVERAGE

The policy conveniently provides a space for this insertion of the word Acovered@ if the optional coverages are chosen.

!                 Theft

!                 Consequential Damage to Garments ‑ this coverage would include broken lots, size or color ranges. The insured would also be protected if as a result of insured loss or damage, he/she would be unable to make up a full lot, range of sizes or colors. Provided the insured customarily sells garments in lots or ranges of sizes of colors.

!                 Consequential Damage to Garments ‑ under both consequential damage coverages, consequential losses are insured when caused by any of the perils of the Garment Contractor=s Floater, including any optional additional coverages which may have been added to the policy.

!                 Strikes, Riots, Malicious Mischief and Explosion ‑ the coverage on explosion excludes the explosion of steam vessels.

The Garment Contractor=s Floater has the usual Floater Exclusions:  gradual deterioration, wear and tear, insects, vermin, hostile or warlike action in time of peace or war, and nuclear reaction or radiation. It also has 3 additional exclusions:

1.  Dishonesty Acts of Employees

2.  chaffing, rubbing

  3. delay or loss of market. The insured is covered for a direct damage to goods in transit but would not be covered for a delay in making a delivery.

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The policy will cover Loss or Damage up to the Actual Cash Value of the property at the time of the loss, but for not more than the cost to replace the property.

There is a Coinsurance Clause. The Garment Contractor=s Floater is written with a 100% Co‑insurance Clause. This means that the insured is required to carry insurance equal to the total value of goods on the premises of all contractors. If the insured fails to maintain this insurance, he/ she will be coinsured and will be forced to bear a portion of any loss.

There is a Limit of Liability for each contractor or subcontractor. A maximum Limit of Liability is inserted alongside each of the contractors named in the policy. The policy also provides coverage for the premises of contractors that are not named in the policy. A Limit of Liability is inserted to apply to any unnamed location, but the Limit of Liability will not exceed 25% of the total amount of insurance carried or $25,000, whichever is less.

This simply means that the insured does not need to specify any contractor to whom he/she has given goods to if the value of the goods does not exceed 25% of the amount of insurance and is not over $25,000. If the value of any of the contractor=s premises goes above 25%, the insured must then specify the particular contractor and set the Limit of Liability high enough to cover the property.

Note that the Coinsurance Clause requires that the insured carry 100% of the value at risk of all contractors, whether they are named or not.

The Garment Contractor=s Floater has 10 other provisions:

1.   Benefit of Insurance ‑ this provision states that when a receipt is issued, the Bailor stipulate that any insurance carried by the owner of the property will be for the benefit of the Bailor

2.   Notice of Loss and Proof of Loss ‑ the insured must give notice of any loss as soon as is practical and reasonable. The insured must file a Proof of Loss within 90 days of the loss.

3.   Examination Under Oath ‑ At times, the insurer may require the insured to submit to examination under oath and to produce records that are important to the loss, as well as the remains of the insured property.

4.   Right to Institute Legal Proceedings ‑ this provision states that no action may be brought against the company before there has been full compliance with the terms of the policy but not after 2 years from the date the insured had any knowledge of the loss.

5.   Loss Payable ‑ this loss should be paid within 30 days after the determination of the loss.

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6.   Term of the Policy ‑ this policy states 12 noon, standard time, at the place where the insurance takes place. This type of policy may be written for more than 1 year.

7.   Other Insurance ‑ as before, the policy states that if there is other insurance at the time of loss, the Garment Contractor=s Floaters is liable only as excess insurance and simply only pays the excess of any loss over the amount of any other insurance.

8.   Requirements in Case of Loss ‑ the insured is obligated to use all reasonable means to save and preserve the property at the time of any loss. The policy will not cover any loss caused by the insured=s neglect.

9.   Released Bills of Lading or Shipping Receipts ‑ This Floater insures goods while in transit. This policy does not cover any loss if the insured accepts a receipt from a shipper, which limits the carrier=s liability to less than the full value of the goods shipped. This policy grants permission specifically to the insured to accept such limited receipts, provided that certain minimum valuations are stated.

10.    When Suit Must Be Brought ‑ A legal suit against the insurer cannot be started until the completion of the 12th month from the date of the incurred loss.

The Garment Contractor=s Floater may be written for a flat annual premium, or on a reporting form that would be based on gross sales. The rate for the reporting form is calculated by multiplying the flat annual premium by the insured=s gross sales for the 12 months immediately before the application.

The premium payment may be paid monthly, quarterly or semi‑annually. The insured would be required to report the total amount of gross sales for the chosen period established in the policy by the 30th day of the succeeding period.

It is important to note that the Coinsurance Clause does not apply to policies written on a Gross Sales Reporting Basis. The Reporting Form Policy is subject to a deposit premium against which the premium earned for each reporting period is applied. When the Deposit Premium has been fully earned, the insured pays an additional premium at the rate named, for each successive period. The reporting form has a $500 minimum premium.

Premium is determined when the garment manufacturer submits an application in which he/she sets forth the approximate values estimated at risk during the next 12 months at various contractor or subcontractor locations. The rate is then developed with the above data and this rate is in effect for 1 year. When the policy comes up for renewal, the insured will once again submit a breakdown of the different locations he/ she is planning to use. Obviously, if a change has been made then the rate will be changed.

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GARMENT CONTRACTORS ALL‑RISK FLOATER POLICY

Because the Basic Garment Contractor=s Floater Policy only provides coverage on property while on the premises and only against named risks, the Garment Contractor=s All‑Risk Floater was developed. With this policy it is possible to extend coverage to include protection against all risks. When this is endorsed to the policy, the sections of the policy which indicate the protection provided and the exclusions which are part of the policy are simply deleted. In their place, the policy will insure against any Direct Physical Loss or of damage to the property covered. Of course, all coverage is subject to some exclusions but this floater has 7.

1.   Nuclear Reaction of Radiation and Contamination. If caused by a fire, the direct loss that results from the nuclear reaction would be covered.

2.   Delay, Loss of Market and Gradual Deterioration are excluded. Also, any type of rubbing,  chafing, insects, vermin and inherent vice are not covered.

3.   Seizure or destruction under quarantine or customers regulation would not be covered. Confiscation by order of any government or public authority and contraband or illegal trade would not be covered.

4.   Mysterious disappearance or an unexplained loss or shortage that is disclosed when taking an inventory would not be covered.

5.   Hostile or warlike action in time of peace and any weapon of war that is employed to create an atomic fusion or radioactive force would not be covered. Also excluded would be any insurrection, rebellion, revolution or civil war.

6.   Loss resulting from the property being worked upon  would be excluded (except, of course, if fire or explosion develops then the company is only liable for loss created by the fire or explosion).

7.  Sabotage and theft by the insured or employees or by any person to whom the insured property is delivered would not be covered. If the property is deposited for sale, custody, or while in the custody of a carrier for hire or a porter that is not on the insured=s payroll and a loss occurs, then there is coverage.

JEWELERS BLOCK COVERAGE FORM

As discussed before, the jewelry business differs drastically from most other types of businesses. There are 3 differences in the jewelry business that make it unique:

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1.  most of the property is quite small

2.  although small in mass, most of the property is quite valuable

3.  the average jeweler is usually engaged in quite a few different types of activities. Example:  the typical jeweler is usually selling at retail and probably has a few salespeople on the road. Also, the jeweler probably accepts jewelry and watches from the public for repair or renovations. Often, the jeweler will have in his/her possession property that belongs to other dealers for which he/she is liable as a Bailee.

Due to these various types of duties, a policy was developed that would cover all the various types of property at risk against many types of loss or damage. For this reason, the Jeweler=s Block Policy is one of the broadest forms of insurance in our study of Inland Marine Insurance. There are several features which make this policy unique. This policy requires the submission of a completed, detailed proposal, which becomes a part of the policy. Also, separate Limits of Liability will be applied to the different classes. Limits are shown for the stock covered at each of the insured=s stores, which includes:

!   property off the premises for any circumstance

• property in vaults

!   property entrusted by the insured to others

!   stock which is kept at the various insured=s locations

The Jewelers Block Policy covers:

!  Money ‑ although not covered under a Basic Policy, money can be listed as property and covered. This is usually purchased as an option. Coverage would then be extended to cover any loss of money from locked safes or vaults inside the premises by theft. The safes or vaults must be broken into.

!  Show Windows ‑ this coverage may be extended to cover loss of property in the insured=s Show Windows at the premises. The coverage protects against theft or attempted theft.

!  Collapse ‑ the policy will cover Direct Loss resulting from collapse of all or part from any of the following perils:

!  use of defective materials or methods in construction, remodeling or renovation if the collapse occurs during the course of the work.

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!  fire, lightning and smoke

!  windstorm and hail

!  explosion

!  vehicles, aircrafts and falling objects

!  hidden decay and hidden insect or vermin damage

!  riot, civil commotion, vandalism and breakage of glass

!  weight of snow, ice or sleet. The weight of rain that collects on a roof. Also, weight of people or personal property.

!  Property in Transit ‑ except for the excluded methods of transportation, other covered methods of transit are armored car delivery, parcel delivery service, etc.

Keep in mind that each mode of transportation  covered will have its own Limit of Liability.

!  Damage to Buildings ‑ assuming the insured owns the building or is legally liable for damage to it, the policy will extend and pay for damage by theft or threat to the building and the equipment used in servicing the building. There is no coverage for loss caused by fire, or to glass or lettering on the glass.

!  Property of Others in Jewelry Trade ‑ similar property of others in the jewelry trade which the insured has control over would also be covered.

!  Property of Others Not in Jewelry Trade ‑ similar property of others not in the jewelry trade, which is in the insured=s care would be covered.

!  Stock‑in‑Trade ‑ Stock‑In‑Trade that consists of jewelry, precious and semi‑precious stones, precious metals and alloys would be covered. Also covered would be other stock used in the business. Similar property, which has been sold but not yet delivered by the insured, would also be covered.

The hazards covered would be all‑inclusive except those perils excluded in the policy. The Jewelers Block Policy will usually have separate Limits of Liability for the various types of property.

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There are 3 Basic Optional Property Coverages which may be added:

1.   types of property covered under the Furniture, Fixtures, Tools and Machinery Option plus the Tenant=s Improvement.

2.   Furniture, Fixtures, Tools and Machinery but not Improvements by the Tenant.

3.   Patters, Molds and Dies.

There are 9 types of property that are not covered:

1.     Property  Under a Deferred Payment Plan ‑ the policy will not cover property sold under a deferred sales agreement after it has left the insured=s premises. If property that is sold under a layaway plan under which the items are retained by the insured until paid for would be covered.

2.     Exhibitions ‑ there is no coverage at an exhibition promoted or assisted by any public authority or trade association.

3.     Show Cases ‑ property in Show Cases or Show Windows away from the premises is not covered.

4.     Property in Transit ‑ the policy will not cover property in transit by the following modes, except where noted:

Mail ‑ property must be sent by First Class U.S. Postal Registered Mail or it will not be covered.

• Express Carriers ‑ this mode of transit will not be covered.

• Shipments that are under receipt  of their Passenger Parcel Transportation or baggage service would be covered.

5.   Railroad, Waterborne or Air Carriers    ‑ no coverage is provided for these modes except for 2 situations

• Air Carrier=s Passenger Baggage Service that is subject to Air Freight Tariffs with delivery

to the passenger at the destination, which is considered as accompanied baggage would be covered. One noted provision is that this form of shipment is subject to the limit of insurance that is shown on the policy Declarations Page as applicable to property away from the premises and not included above.

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7.  Motor Carriers ‑ shipments by motor carriers would not be covered. The one noted exception would be for carriers operating exclusively as a Merchant=s Parcel Delivery Service, by Armored Car Service or by Parcel Transportation or Baggage Services of Passenger Bus Lines.

• Property Being Worn by the Insured ‑ this will not cover any property being worn by any director, agent, employee, member, messenger or officer of the insured. Also, there is no coverage for property being worn by any member of the family, relatives, or friends of the named insured. An exception is made for watches while being worn for the purpose of adjustment.

9.   Illegal Transportation, Contraband ‑ Obviously there is no coverage for loss due to illegal activity.

Hazards that are not covered by the Jeweler=s Block are quite numerous. They are:

!        earthquake

!        flood

!        water damage

!        unexplained disappearance

!        inventory shortage

!        damage due to processing

!        delay due to processing

!        delay or loss of market

•         fraudulent scheme
•         unauthorized instructions
•         weather conditions
•         government action

!        nuclear hazard

!        war and military action

            !        theft from any vehicle

            !        infidelity

!        shortage of property

!        theft from show window

!        defective packing

!        changes to premises

!        breakage of fragile articles

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Valuation of property protected under the Jeweler=s Block is based on the lowest figure put on the property in the insured=s inventories, stock books, stock papers or lists existing at time of loss.

There is no Coinsurance Clause but the insured is required to maintain a minimum amount of insurance based on the figures furnished in a special application which must be submitted when applying for a Jeweler=s Block Coverage Form.

The Policy has 4 different Limits of Liability:

1.   Clause A ‑ Limit on property at the location described in the policy.

2.   Clause B ‑ Applies to 5 separate situations, each of which may be covered for a different      amount:

!  property shipped by registered mail

!  property in the custody of an Armored Car Service

!  property in the safe or vault of a bank or safe deposit company

!   Property in the custody of another party in the jewelry business not employed by the insured

!    property in the custody of a commissioned salesman or agent

3.   Clause C ‑ places a limit on property in transit by Customer Parcel Delivery Service or service of a railroad, water or air carrier or passenger bus line.

4.   Clause D ‑ a separate limit may be used under this clause for other property than those covered by Clauses A, B and C.

Registered Mail Deductible ‑ a special deductible is always available for registered mail shipments.

Deductible ‑ the policy is usually written subject to a $500 deductible. Higher deductibles are also available.

Antiquarian or Historical Values ‑ the policy, in settling a loss, excludes both these values in insured property.

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Pledged Articles ‑ policy limits the value of Pledged Articles to the amount actually lent and unpaid interest at the legal rate.

Property in Custody of Salesman ‑ even when the limit for property in the custody of salesman in the policy exceeds $5,000, Off‑Premises Coverage on this property is limited to $5,000 when in the custody of salespeople, firm members or officers of the corporation, unless such a person is named in the Endorsement as being covered for a higher limit.

The insured must take protective safeguards to protect the property. The insured must keep accurate records and inventory. Such records must be kept for 3 years after the policy expires.

These records will consist of an itemized inventory of all stock trade, records of all purchases and sales whether for cash or credit, records of the property of others while in the care and custody of the insured. Also, a detailed listing of traveler=s stock and record of all other property away from the premises must be kept. The insured is required to take a physical inventory of all Stock in Trade a minimum of annually.

The Application ‑ The Jeweler=s Block Policy Application is quite different from other property insurance policies in that it requests extensive information. Also, a separate application is required for each location and usually consists of 6 pages. A copy of the Application is stapled to the back of the policy.

The application is divided into 7 parts.

!  Part One ‑ asks for information on the members of the firm or offices of the corporation