12.2 Commercial Inland Marine Insurance

Although it is classified as a type of Marine insurance, Inland Marine insurance generally covers property located on land, particularly when the property is being transported or is temporarily away from the insured’s premises. To qualify for Inland Marine coverage, the property must usually involve an element of transportation under the Nationwide Marine Definition or be in the care, custody, or control of a bailee. Inland Marine coverage may also apply to property kept at a fixed location, but only when the property is directly connected to the transportation or communication industries, such as bridges, tunnels, pipelines, docks, or communication towers.

Inland Marine coverage may be written as a stand-alone policy or included as a separate coverage part within a Commercial Package Policy (CPP).

Common Coverage and Exclusions

Inland Marine coverage is generally written on an open perils basis, meaning it covers direct physical loss unless the cause of loss is specifically excluded. These policies typically contain relatively few exclusions. Many Inland Marine forms also include a Collapse Additional Coverage, which functions similarly to the collapse coverage provided under commercial property Causes of Loss forms.

Common exclusions found in Inland Marine forms include the following:

Governmental action	War and nuclear hazard	Weather conditions
Dishonest and criminal acts of an insured	Theft by someone entrusted with the property	Neglect of the insured to use reasonable means to save property from further damage
Voluntary parting with the property	Unauthorized instructions to transfer property	Delay, loss of use, loss of market, or other indirect loss

Each Inland Marine form identifies the types of property that qualify as covered property and the types that are specifically excluded. For example, contraband and property being transported or traded illegally are never considered covered property.

Commercial Inland Marine Conditions

All Commercial Inland Marine policies include a Commercial Inland Marine Conditions Form. These conditions apply in addition to any conditions contained in the individual Inland Marine coverage form. When Inland Marine coverage is included in a Commercial Package Policy (CPP), the Commercial Inland Marine conditions also apply alongside the policy’s Common Policy Conditions.

Loss Conditions

Abandonment

Under the No Benefit to Bailee condition, the insured may not abandon damaged property to the insurer. The insured remains responsible for the property unless the insurer agrees to take possession of it.

Appraisal

Under the Appraisal condition, either the insured or the insurer may submit a written request for an appraisal when they disagree about the value of the covered property or the amount of the loss.

Duties in the Event of Loss

Under the Duties in the Event of Loss condition, the insured must provide the insurer with prompt notice of any loss or damage and describe the property involved. If the loss may involve a violation of law, the insured must also notify the police. The insured must take reasonable steps to protect the covered property from further damage and maintain records of any expenses incurred while doing so. When requested by the insurer, the insured must submit a signed, sworn proof of loss within 60 days.

As often as reasonably required, the insurer may inspect the covered property and examine the insured’s books and records. The insurer may also require any insured to submit to an examination under oath. The insured must promptly provide copies of any legal documents related to the claim and cooperate with the insurer during the investigation or settlement of the loss.

Loss Payment

Under the Loss Payment condition, the insurer must notify the insured of its decision to pay or deny the claim within 30 days after receiving the sworn proof of loss. The insurer must also pay a covered claim within this same 30-day period, provided the insured has complied with all policy terms and either the insured and insurer have agreed on the amount of the loss or an appraisal award has determined the amount.

Other Insurance

Under the Other Insurance condition, when another policy covering the same loss contains the same plan, terms, conditions, and provisions, the insurer will pay only its pro rata share of the loss. When the other insurance does not provide coverage on the same basis, the Inland Marine coverage applies as excess insurance.

Pair, Sets, or Parts

Under the Pair or Set condition, when part of a pair or set is lost or damaged, the insurer may repair or replace the affected part to restore the pair or set to its value before the loss. Alternatively, the insurer may pay the difference between the value of the complete pair or set before the loss and its value after the loss.

Under the Parts condition, when covered property consists of several individual parts, the insurer will pay only for the value of the part that is lost or damaged.

Recovered Property

Under the Recovered Property condition, if either the insured or the insurer recovers property after the loss has been settled, that party must notify the other. The insured may choose to have the recovered property returned, but must repay the amount of the loss settlement to the insurer. The insurer will pay the reasonable expenses necessary to repair the recovered property, subject to the applicable limit of insurance.

Reinstatement of Limit After Loss

Under the Reinstatement of Limit After Loss condition, payment of a claim does not reduce the applicable limit of insurance. However, when a scheduled item experiences a total loss, coverage for that item ends, and the insurer will refund any unearned premium associated with it.

Transfer of Rights of Recovery Against Others to Us

Under the Transfer of Rights of Recovery Against Others to Us condition, any person or organization that receives payment for a covered loss must transfer its rights of recovery to the insurer. However, the named insured may waive these subrogation rights in writing before the loss occurs.

General Conditions

Concealment, Misrepresentation, or Fraud

Under the Concealment, Misrepresentation, or Fraud condition, the insurer may void the policy if any insured intentionally conceals or misrepresents a material fact or engages in fraudulent conduct related to the coverage, covered property, or a claim.

Control of Property

Under the Control of Property condition, coverage will not be affected by the actions or negligence of a person who is beyond the named insured’s direction or control. In addition, a violation of a policy condition at one location will not affect coverage at another location where the same violation does not exist at the time of loss.

Legal Action Against Us

Under the Legal Action Against Us condition, the insured may bring legal action against the insurer only after complying with all policy terms. Any legal action must be filed within 2 years after the insured first becomes aware of the direct loss or damage.

No Benefit To Bailee

Under the No Benefit to Bailee condition, the policy does not provide coverage for the benefit of any person or organization, other than the insured, that has custody of the covered property.

Policy Period, Coverage Territory

Under the Coverage Period and Territory condition, coverage applies only to losses that occur during the policy period and within the coverage territory stated in the policy.

Valuation

Under the Valuation condition, the value of covered property is determined by the least of its actual cash value at the time of loss, the reasonable cost to restore it to its condition immediately before the loss, or the cost to replace it with substantially identical property.

Commercial Inland Marine Lines

Commercial Inland Marine coverage forms are divided into two categories: controlled forms, which are filed with state insurance regulators, and uncontrolled forms, which are generally not subject to filing requirements.

Controlled Lines

Controlled lines of coverage, also known as filed lines, use policy forms, endorsements, and rates that insurers file with the insurance department in each state where coverage is offered. Because these coverages address common exposures and are frequently purchased by insureds with similar needs, insurers can develop standardized forms and rates for broad groups of policyholders. The forms and rates are governed by the rules contained in the Commercial Lines Manual or another approved manual. Examples of controlled forms include the Accounts Receivable Coverage Form and the Commercial Articles Floater.

Uncontrolled Lines

Uncontrolled lines of coverage, also known as nonfiled lines, use policy forms, endorsements, and rates that are not filed with a rating bureau or state insurance department. Instead, individual insurers develop these coverages to meet the needs of specific risks. As a result, policy terms, conditions, and coverage may vary from one insurer to another. Most Commercial Inland Marine insurance is written on an uncontrolled basis. Examples include the Bailees Customers Coverage Form and the Installation Floater.