Basics of Commercial Inland Marine Insurance
Domain 5 - Basics of Commercial Inland Marine Insurance
This domain tests what inland marine covers, the Nationwide Marine Definition categories, the major commercial forms, and the features that separate inland marine from commercial property.
Nature of the line
Commercial inland marine covers property that moves or is in the hands of others - "floaters." The NAIC Nationwide Marine Definition recognizes four groups: imports/exports, domestic shipments, instrumentalities of transportation and communication (bridges, tunnels, pipelines, transmission towers), and personal property floater risks, including commercial property floaters. Inland marine is not ocean marine; most of it is land-based.
Underwriting features
- No coinsurance on most forms; limits are scheduled per item or per occurrence.
- Broad territory - typically anywhere in the US, its territories, and Canada; some forms are worldwide.
- "All risks" coverage is common, with exclusions for wear and tear, dishonesty, and inherent vice.
- Pair-and-set clause: loss to one item of a set pays only that item's value, not the whole set, unless the pair or set is scheduled.
- Agreed value and replacement cost are common for fine arts and equipment.
Common forms
Contractors equipment covers mobile equipment and tools at job sites and in transit; it excludes licensed road vehicles, aircraft, and watercraft. Installation floater covers property to be installed, during transit and at the job site until accepted. Builder's risk covers structures under construction, materials on site and in transit, with completed-value or reporting forms and optional soft-cost coverage. Motor truck cargo covers the carrier's legal liability for cargo, with limits per vehicle or load. Accounts receivable pays reconstruction costs, collection expenses, interest on loans, and amounts that become uncollectible because records are destroyed. Valuable papers pays reconstruction cost, not the value of the information. Bailee forms cover legal liability for customer goods.
Worked example
A contractor's excavator is destroyed when the transport truck overturns. The contractors equipment floater covers transit. Replacement cost is $120,000; depreciation is $30,000; deductible is $1,000. Under ACV settlement: $120,000 − $30,000 = $90,000; less $1,000 = $89,000. If replacement cost is endorsed, the insurer pays the cost to replace, up to the limit, after the deductible.
Traps
- Assuming inland marine has coinsurance - most forms do not, but underinsurance still affects ACV settlements.
- Confusing motor truck cargo (carrier's liability) with a shipper's goods policy.
- Forgetting that builder's risk reporting forms can reduce claims for underreporting.
- Treating valuable papers coverage as payment for the information lost.