Inland Marine and Ocean Cargo

							                             Chapter 8 - Inland Marine and Ocean Cargo
   What is the history of marine insurance?
   What major types of transportation insurance?
   What other exposures are covered under inland and ocean marine insurance?

Marine Insurance
 In general, marine insurance provides coverage for property:
           o In transit
           o Away from insured’s premises
 International use of “marine” insurance means ocean marine
           o Provides protection for vessels and their cargos transported over water, as well as
               liability protection
 Inland marine covers
           o Different classes of property that usually involve some element of transportation or
               communication
 Covered causes of loss are frequently quite broad

History of Marine Insurance
 Historical restrictions/separation on insurer’s business
    1. Life and health
    2. Fire (and allied)
    3. Casualty (liability and miscellaneous property)
    4. Marine – often written on open perils basis
 New coverage was demanded in early part of 20th century
 Fire insurers demanded a legal definition of “marine insurance” to establish barriers of competition
            o Legal separation not important today

Definition of Marine Insurance
 Imports
 Exports
 Domestic shipments
 Instruments of transportation and communication
             o E.g., bridges, tunnels, piers, power/telephone lines, radio/television towers, outdoor
                cranes, and loading equipment
 Various types of property owned/used by individuals
             o Jewelry, furs, musical instruments, coin/stamp collections
 Various types of property pertaining to a business, profession, or occupation
             o Mobile equipment, builders risk, bailees, at exhibitions, EDP, and filed classes

Forms of Ocean Marine
 Hull insurance covers physical damage to the ship or vessel
           o A collision liability clause (running down clause) covers owner’s legal liability if the ship
               collides with another vessel
 Protection and indemnity (P&I) insurance provides comprehensive liability coverage
           o Property damage to piers and docks
           o Bodily injury damages to others, including illness to passengers/crew
Common Types of Marine Coverage
 Transportation insurance
          o Annual transit insurance
          o Open cargo insurance
          o Trip transit insurance
          o Mail insurance
          o Motor truck cargo insurance
 Instruments of transportation and communication
 Equipment floaters
          o Contractors equipment
          o Computer equipment
 Builders and installation risks
 Others

Transportation Loss Exposures
 Three parties often involved in transportation exposures
           o “Shipper” is the seller of goods
           o “Consignee” is the buyer of goods
           o “Carrier” is the organization responsible for transportation
                     Common carrier is a transportation company available to public
                     Contract carriers do not serve public, but for shippers with contracts
                             Contract carriage by water is “chartering”
                     Private carriers haul their own goods
                     More than one carrier (e.g., land and water) complicates exposures
 The owner bears losses if property is damaged
 Transfer of ownership determined in terms of sale / contract
    1. FOB point of origin – ownership passes to buyer when goods are accepted by carrier
    2. FOB destination – ownership passes to buyer when delivered

Responsibility for Damages in Transporting Property
 Depends on nature of contract and type of carrier
            o For private carriers, it is a property issue
            o For common and contract carriers, it is a liability issue
 Common carriers are generally liable except for “Acts of God”, war risk, public authority, neglect of
   shipper, inherent vice
            o Liability can be limited in “bill of lading” (straight vs. released value)
 Contract carrier responsibility depends on contract terms
            o Usually requires negligence on behalf of carrier
 Air and water liability likely subject to federal and even international law
Transportation Insurance Policies: Annual Transit Insurance
 Most common “transportation insurance”
 Annual transit covers all shipments during policy period
           o Must list the types of transportation covered
           o May carve out international exposures (e.g., ocean marine or int’l air)
 May cover property with
           o Common/contract carriers or
           o On insured’s vehicles
 Typically open perils coverage (few restrictions on perils)
 Property exclusions include jewelry, furs, money/securities
 Valuation basis
           o Invoice price when selling merchandise
           o ACV for shipment between insured’s locations

Transportation Insurance Policies: Open Cargo Insurance
 The ocean marine equivalent to annual transit insurance
           o Covers frequent shipments overseas by boat or plane in which insured has insurable
                interest (ownership or contractual right to property)
           o Often has no expiration date
 Alternate terminology in marine insurance
           o Named insured is called the “assured”
           o “Average” is a partial loss
                     Particular average is borne by only one party (such as the cargo owner)
                     General average is share of loss among ship- and cargo owners
           o Exclusions are called “warranties”
 Often provides “warehouse to warehouse” protection
 Open peril policy provides broad protection
           o Free of capture and seizure warranty – war or piracy exclusions

Other Transportation Insurance Policies
 Trip transit insurance (sometimes “voyage policy” for ocean)
           o Covers cargo for a specific trip on a scheduled basis
 Mail insurance
           o Through USPS or private insurers
           o Parcel post policy is for loss due to non-delivery
 Motor truck cargo insurance
           o Carrier’s form covers carriers transporting shipper’s goods (a liability)
           o Owner’s form covers private carriers or other insured’s property transported by owner
Common Nonfiled Classes of Inland Marine Coverage
 Equipment “floaters”
          o Contractors equipment - e.g., cranes, tractors, bulldozers, etc.
                    Common insureds: construction contractors, mining operations, governmental
                       property
                    Scheduled property for smaller companies, blanket coverage for large insureds
          o Computer or electronic data processing equipment
                    May cover electrical/mechanical breakdown or property in transit
                    Can cover equipment, data, and media
 Builders risk covers buildings under construction can cover property owners and/or builders
          o Covers materials and supplies at or away from site
          o Unlike ISO Builders Risk Form, collapse is covered
          o Specialized policies for instrumentalities of transportation and communication
 Dealers policies – jewelers, musical instruments, art, etc
 Bailees/bailors policies
 Sign coverage
 Valuable papers and records

Chapter 8 – Quick Summary
 Know a bit of the history of marine insurance
 Summarize the major transportation coverages available and the parties insured