TRANSPORTATION INSURANCE

 

The questions of when Title to Goods passes from seller to buyer can be a very complicated, technical question. It is important to understand the basic aspects of this question. One must remember that the location of the title to the goods in transit will most often control the settlement of any losses. Example:  if title to the goods has passed to the consumer at the time of the loss, claims for such loss must be made under the Consignee's  Policy. However, if the seller has retained title to the goods in transit then the Seller's Policy will rule.

 

In general, title to property at any moment will depend on the mutual intent of buyer and seller. When the contract does not state anything different, the question of title will depend on the nature of the goods and the stated terms of sale.

 

Usually, the Contract of Sale contains some specific reference to when the title is intended to pass. Inland Transportation, the term most frequently mentioned is F.O.B.

 

F.O.B. ‑  the term F.O.B. means AFree on Board@ and definitely implies that the seller will deliver the property at its expense to a designated point. In reality, F.O.B. Point of Shipment simply means that the property will be delivered by the seller to the initial carrier and that the title to the property will pass to the buyer at this point. If the contract has F.O.B. as a stated location, transfer of the title to the buyer occurs when the property is delivered by the seller, at its expense, to the stated location.

 

A Contract of Sale may designate F.O.B. for certain freight cars at a given point. Possibly, a buyer may agree to a contract for purchase of certain property F.O.B. to the Buyer's city and title to the property will remain with the Seller until the goods reach the designated city.

 

A Contract of Sale could call for goods to be shipped via a Named Carrier. If the Seller ships using another carrier, title to the property will remain with the Seller until the goods are delivered to the designated carrier or the buyer.

 

It makes no difference when Date of Payment for the property is made. Where property is delivered to the initial carrier under a F.O.B. Contract, determines when title passes to the Buyer.

 

Transportation Policy ‑ Shipper's Form (Transit Policy) ‑ Once again there is no standard forms or rates for Transportation Insurance. Policies are tailored to meet the needs of the individual carriers, shippers or consignees. There are Basic Coverages in these Transportation Policies that are worth noting.

 

There are several areas of property that will not be covered:

 

»  export and import shipments are excluded. (We will discuss this coverage under Ocean Marine Policy.)

 

»  accounts, bills, currency, deeds, evidences of debt, money securities and notes are not covered

 

»  shipments that have been refused or returned by the receiver are not covered.

 

Transit Policies are written on a Named Perils Basis. The Basic Policy usually will cover the following 10 perils:

 

»  fire

 

»  lightning

 

»  collision

 

»  derailment or overturn of a vehicle                                                             

 

»  cyclone

 

»  tornado

 

»  flood

 

»  contamination of goods by other goods being carried

 

»  theft (but only of an entire shipping package)

 

»  while waterborne, against any loss caused by fire and perils of the sea.

 

The Transit Policy excludes the usual Floater perils and also includes most Exclusions in the Cargo Liability Policy. Also the following Exclusions are added to the policy:

 

»     loss or damage caused by capture, seizure, arrest, restraint, detainment, preemption, requisition or nationalization, or the consequences or any attempted threat.

 

»  loss by breakage, leakage, marring or scratching unless caused by fire, lightning, cyclone, tornado, flood, collision and/or derailment and/or overturning of the vehicles, of while waterborne, by the vessel being burned, sunk, stranded or in a collision.

 

An All‑Risk Transportation Endorsement may be issued to cover property in transit. These policies do not name perils insured against but cover All‑Risks of Loss or Damage subject to stated exclusions.

 

COVERAGE POINTS

 

Transit policies are written to cover the property of the insured from the time the goods leave the factory, store or warehouse at the initial point of shipment until they are delivered to the store or warehouse at the destination point, all while in the due course of transportation.

 

The Policy will also cover property at:

 

»     depots

»     stations

»     on platforms

»     docks

»     piers

»     bulkheads

»     wharves

 

Coverage can be extended for 90 days after reaching the consignee; or 120 days if the merchandise has been forwarded on consignment.

 

Coverage applies to property only within the U.S. and Canada. There are different forms which are attached to the Transportation Policy to provide coverage on the various types of carriers.

 

Form AA@ ‑ This form provides coverage for loss to property while in the custody of the following:

 

1.   any public truckers, land transfer or land transportation companies, provided these carriers are used in connection with railroad and steamer shipments

 

2.   any railroad or railroad express company

 

3.   any regular coast‑wide ship lines between Inland Atlantic Coast and Gulf ports. The policy excludes the Great Lakes, the Mississippi and Ohio rivers and their tributaries, any canal, and the Pacific Coast.

 

 

Form AB@ ‑ This form is identical to the Form AA@ except it does not cover any coast‑wide ship lines.

 

As many businesses ship large quantities of merchandise by Motor Truck Common Carriers directly to their customers, these types of Endorsements greatly expand their coverages.

 

Form AC@ ‑ Owner' Goods On Owner's Trucks ‑ When an owner ships his merchandise on his own trucks, a special form is attached to the policy known as AForm C@.

 

With this Endorsement, the insured is required to list each truck with an amount of insurance applicable to the truck.

 

Only 10% of the amount of insurance applicable to any truck will apply to the loss of wines, spirits and other alcoholic beverages. 10% is applicable to cigars, cigarettes, tobacco, furs and silk.

 

Loss or damage to paintings, statuary or other works of art is covered only if the absolute total loss, and only if the loss, was caused by fire or lightning. In no event will the Loss Settlement exceed $250 for any one casualty.

 

Transit Policies stipulate that goods shipped for the insured's account will be valued at the actual invoice cost plus such costs and charges they have accrued.

 

Goods which have been sold by the insured will be valued at the amount of the insured's selling invoice plus any prepaid freight.

 

If goods are not shipped under invoice, they are valued at the Actual Cash Market Value at the point of destination on the date of the loss. These policies will be liable for the actual amount of any loss at the time and place of the loss.

 

The Transit Policy does not contain any Limit of Liability for loss on any one vehicle. A Limit of Liability is established only for the total losses in any one casualty.

 

There is a Machinery Clause that states, when the property shipped is a machine that consists of several parts and one part of the machine is damaged, then the company is liable only for the value of the part damaged.

 

If the labels or wrappers of shipped goods are damaged, the policy will pay only for the cost of new labels or wrappers and the cost of reconditioning the goods.

 

Also, if there is other insurance covering the same property, the Transit Policy is liable only for any excess of the loss over the amount of the other insurance.

 

Premium Determination ‑ There are no standard rates for Transit Policies. Again, underwriters take into account the type of commodity shipped and the way in which it is packed and handled. Also, the underwriter evaluates the type of carriers used, the distance the goods are shipped and the kind of arrangements that are entered into between the insured and any of its carriers.  The premium is based on the aggregate amount of all shipments that are made under the Policy, and is calculated by multiplying the rate per $100 of shipments times the volume of the shipments.

 

Smaller risks, whose shipments remain at a consistent level throughout the year, are written for a flat annual premium. At times, the volume of shipments tend to fluctuate and at this point in time, the policy may be written on an annual reporting basis.

 

The insured would pay a premium at the beginning of the policy which would be based on the estimated volume of shipments for the year. At the end of the policy year, the insured would report to the company the value of all shipments that were actually transported under the policy. If the premium proved to be too low, then the insured would simply pay the loss or damage.

 

Additional Premiums ‑ If the premium proved to be too high, then the insurance company would reimburse the insured.

 

Larger risks are always written on a monthly reporting basis. The insured is required to forward monthly reports of the shipments made under the policy.

 

REQUIREMENTS IN CASE OF LOSS

 

Notice of Loss ‑ the insured is required to give immediate notice of any loss or damage.

 

Proof of Loss ‑ the insured must file proof of loss within 4 months from date of loss.

 

Suit Against the Company ‑ no action may be taken against the company until the insured has complied with all the requirements of the policy, but not later than 12 months after the loss or damage.

 

The insured must bring a suit against the company within 12 months but it cannot be restricted to less than 2 years to institute a suit against a Common Carrier in Interstate Commerce.

 

Loss Payment ‑ losses must be paid within 30 days after proof of loss has been submitted to the company.

 

Reinstatement of Losses ‑ the policy provides for automatic reinstatement of losses paid. The insured is required to pay an additional premium on a Pro‑Rata Basis for the reinstatement. The clause does not apply to policies written on a Reporting Basis.

 

Both the Sue and Labor Clause  and Benefit  of Insurance Clause  have been previously discussed.

 

TWO OTHER CLAUSES

 

Term of Policy ‑ the policy starts at noon, Standard Time, at the place where the policy has been issued. Policies may be written for one year or on an Open Basis with no expiration date.

 

Cancellation ‑ The insured or the company may be canceled. The company is required to give 15 days notice in writing. The policy may not be automatically canceled if the premium is not paid within 60 days after the start of the policy.

 

MISCELLANEOUS TRANSIT POLICIES

 

There are 3 other Transit Policies ‑

»  Trip Transit Policy

»  Department Store Floater

»  Railway Express Transit Policy

 

Trip Transit Policy ‑ covers a single shipment. The policy could be written to cover property in temporary storage and in often written for private individuals who send their furniture and household goods to a storage location before moving.

 

Department Store Floater ‑ this policy provides broader coverage as department stores will cover their goods while in transit. The policy covers property while in the hands of Common Carriers, truckers, on the insured's trucks, and in the custody of messengers.

 

Railway Express Transit Policy ‑ Businesses that ship all their goods by Railway Express will use this Special Transit Policy. This policy provides broader coverage than policies that are usually offered to shippers who are Common Carriers.