Ocean and Inland Marine Insurance

Inland and Ocean Marine Insurance

Ocean Marine is a form of commercial property coverage for imports and exports that are being transported over waterways (oceans). These policies protect hulls and the cargo aboard the ship. Ocean marine insurance covers four basic risks:

Hulls are protected by hull insurance. This protects the owner against loss to the ship itself.
Cargo insurance is written separately from insurance on the ship and protects the owner of the cargo for loss to all shipments which may be damaged or destroyed.
Freight insurance indemnifies the owner for loss of income experienced when a ship is lost.
Protection and indemnity insurance provides liability coverage for the owner of a ship for injury or property damage to others due to the negligence of the owner and/or crew.

Ocean marine insurance generally provides open-peril protection. The common perils insured against include perils of the sea such as damage caused by waves, sinking, stranding on reefs or rocks, collision, lightning damage, fire damage, theft by pirates, jettison and barratry.

Various implied warranties apply to ocean marine insurance and must be observed. The following are considered to be the most important implied warranties:

Seaworthiness
Condition of Cargo
Legality
No Deviation in Voyage

The typical exclusions include losses caused by war, strikes, riots, civil commotion, decay, deterioration, and inherent vice.

Inland Marine Insurance was first developed as an extension of Ocean Marine coverage to provide coverage for cargo traveling over land instead of by sea.

To help identify which risks would be covered under Inland and Ocean Marine, the insurance industry in our country developed nationwide definitions of coverage. The definition lists six categories of eligible risks under Marine insurance:

Imports
Exports
Domestic shipments
Instrumentalities of Transportation or Communication
Commercial Property Floater Risks
Personal Property Floater Risks

Transportation policies are also referred to as transit insurance. They cover owners of property against damage to their property while in the course of transit by carrier.

A shipper’s form is available to cover property in transit that may be damaged in circumstances under which the carrier has no legal obligation to pay the shipper’s loss.

A trucker or carrier form insures a trucker against legal liability for damage to the property of others that the trucker is transporting for hire.

An owner form insures property owners against damage to their own property while being transported on their own trucks.

A combination trucker’s and owner’s form is also available which combines the protection provided by each of those forms.

Another form of transportation coverage involves a trip transit policy, which is available for single shipments of merchandise, clothing, furniture, or livestock while in transit by motor truck or other covered type of transportation.

Instrumentalities of Transportation & Communication coverage provides for damage to bridges, tunnels, dams, pipelines, piers, docks, radio and T.V. towers. While this property is not portable, it does have a direct connection with transportation and subject to many of the same perils.

Bailee Forms

A bailment is the delivery of property, by the owner, to someone else to be held by the bailee for some special purpose, and then returned to the owner. If the property is damaged while in the custody of the bailee, the bailee will be held liable for damages.

Equipment Floaters:

Contractor’s Equipment Coverage Form – A form designed to insure various types of construction equipment used by contractors. The type of equipment used by contractors varies with the nature of the project on which the contractor is working
Commercial Articles Coverage Form – may be used to insure the interests of the owner of commercial cameras, musical instruments, and related equipment
Physicians and Surgeons Equipment Form – covers equipment owned by those in the medical, surgical, or dental professions on an all-risk basis both on and off the premises

Valuable Papers and Records Form

Provides coverage for inscribed, written, or printed documents, manuscripts, or records, including abstracts, books, deeds, drawings, films, maps, or mortgages.

Installation Coverage Form

Covers property sold by the insured that must be transported to another location and installed before the purchaser accepts it. In some cases, this can take weeks or even months to complete. Machinery, equipment, building materials, and supplies are the types of property considered installation risks and may consist of elevators, air conditioning equipment, boilers, and similar building equipment.

Sign Coverage Form

A special form exists for insuring the value of signs, including neon, fluorescent, automatic, or mechanical signs.

Electronic Data Processing (EDP) Form

An increasingly important coverage today is insurance for electronic data processing equipment and media. This coverage can be very important since it covers both hardware and software, which are often sizable investments to a business.

Jewelers Block Form

Is used to insure high-end jewelry stores. It covers the insured’s merchandise held for sale, property in showcases and customers’ property.

An extension of coverage is provided for theft damage to buildings.

The jewelers block form also covers loss of covered property from show windows at the premises from theft or attempted theft involving the smashing or cutting of the show windows. It will also cover the loss of property by theft from locked safes or vaults at the premises, when the safes or vaults have been broken into.

Aviation Insurance

Property and liability insurance may be purchased for aviation exposures. Aircraft hull insurance is available to cover direct total loss to aircraft. Coverage is provided for loss occurring on the ground or in the air. Ground coverage includes:

Hangar fire
Damage by windstorm
Theft when the aircraft is not in motion

Aircraft liability provides similar protection as that covered by commercial automobile liability. An insured may choose coverage for the bodily injury of passengers or may exclude passengers.

Additional types of aviation insurance include medical payments, products and cargo liability, premises and operations liability of an airport, and others.

Hangar keeper’s liability is a form of bailee coverage that will protect an airport that is legally responsible for damage to an aircraft owned by another person while it is kept in the airport hangar.

Lesson Summary

Marine insurance consists of two main categories: Inland Marine Insurance and Ocean Marine Insurance. Ocean Marine Insurance covers property being transported over waterways like oceans, protecting hulls and cargo. It covers four basic risks:

Hull Insurance
Cargo Insurance
Freight Insurance
Protection and Indemnity Insurance

It provides coverage against a variety of risks like perils of the sea. Implied warranties include seaworthiness, condition of cargo, legality, and no deviation in voyage. Exclusions typically involve war, strikes, riots, decay, and inherent vice.

Inland Marine Insurance was developed to provide coverage for cargo traveling over land. The insurance industry defines six categories of eligible risks:

Imports
Exports
Domestic Shipments
Instrumentalities of Transportation or Communication
Commercial Property Floater Risks
Personal Property Floater Risks

Transportation policies, including trucker, owner, and trip transit forms, cover property damage during transit. Equipment Floaters cover various types of equipment, such as contractor’s equipment and valuable papers and records.

Aviation Insurance covers property and liability for aviation exposures. Types include aircraft hull insurance, aircraft liability, medical payments, products liability, and hangar keeper’s liability.

Aviation exposures are covered by property and liability insurance.
Aircraft hull insurance covers direct total loss on the ground or in the air, including hangar fire and theft.
Aircraft liability mirrors commercial auto liability, with options for passenger coverage.
Other types of aviation insurance include medical payments, products, and cargo liability, and premises and operations liability.

Chapter Vocabulary

Definitions

Aircraft Coverage: Coverage for aircraft (hull) and their contents; aircraft owners’ and aircraft manufacturers liability to passengers, airports, and other third parties.
Bailee: A person who received temporary custody of goods or property belonging to others.
Common Carrier: A company or concern engaged in the transportation of goods or persons for a fee.

Hull Insurance - Coverage for damage to a vessel or aircraft and affixed items.

Implied Warranty: Warranty made as part of an ocean marine contract without any expression on the part of the parties involved.
Inland Marine: Coverage for a property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road construction equipment), or scheduled property (e.g., Homeowners Personal Property Floater), including items such as live animals, property with antique or collector’s value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.
Jettison: A voluntary action to rid a ship of cargo to prevent further damage or loss to the hull. Jettison is a covered peril in ocean marine policies.
Jewelers Block Coverage Form: Commercial inland marine form for jewelers. Covers the insured’s stock in trade and the property of others while it is on or off the premises.
Marine Insurance: Coverage for goods in transit and for the commercial vehicles that transport them on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance.
Merchant Marine: Endorsement used with the Workers Compensation and Employers Liability policy that covers the additional benefits required by federal law for maritime workers injured while working on navigable waters or shore site areas.
Motor Carrier Act of 1980: Trucking operators must file proof of pollution liability insurance. Other financial responsibility requirements were imposed of ―for hire and private transporters of certain hazardous cargoes in interstate or intrastate commerce.
Ocean Marine: Coverage for ocean and inland water transportation exposures; goods or cargoes; ships or hulls; earnings; and liability.
Perils of the Sea: Causes of loss a ship is exposed to during ocean travel. Common perils insured against include perils of the sea such as damage caused by waves, sinking, stranding on reefs or rocks, collision, lightning damage, fire damage, theft by pirates, jettison, and barratry.
Protection and Indemnity (P&I) Insurance: A broad form of marine legal liability insurance coverage.
Transit: Transporting from one location to another. Transportation policies are also referred to as transit insurance.
Travel Accident Insurance: Provides benefits for accidental injury while traveling, usually on a common carrier. A type of limited policy.
Truckers Form: Limited special purposes policy that provides liability and physical damage insurance for owners and operators of trucks while engaged in business.