14.3 Inland Marine and Nationwide Marine Definition

What Inland Marine Actually Insures

Inland marine insurance covers property that moves, property in transit, and the instrumentalities of transportation and communication (bridges, tunnels, piers, pipelines, radio/TV towers). Despite the word "marine," most inland marine risks never touch water. The line grew out of ocean marine cargo coverage: early cargo policies ended when goods left the vessel, so a new "inland" extension was built to follow shipments overland to their final destination.

Quick Answer: If property is mobile, in transit, or hard to fix to one address, it is usually an inland marine risk - not a commercial property risk.

The defining test on the exam is mobility or transit, not the type of peril. A $400,000 crane on a job site is inland marine (a contractors equipment floater); the same value in a boiler bolted to a building is commercial property.

The Nationwide Marine Definition (NMD)

Filed with regulators and last substantially revised in 1976, the Nationwide Marine Definition lists the classes a company may write as inland (or ocean) marine. It is what keeps marine underwriters from straying into pure property risks.

Memorize the six classes - exam questions often ask which class a specific risk falls into.

How Inland Marine Forms Behave

Inland marine is prized for breadth: most forms are open-peril (all-risk), written on a valued or agreed-amount basis, carry little or no coinsurance, and provide broad territory (often coverage in transit anywhere in the U.S. and Canada).

Filed vs. Non-Filed (Manuscript) Forms

• Filed (controlled) forms - standardized ISO forms with filed rates (e.g., contractors equipment, builders risk). The Commercial Inland Marine Conditions Form (CM 00 01) plus a coverage form.
• Non-filed (uncontrolled / manuscript) forms - underwriters can tailor terms and set their own rates. This flexibility is a defining feature of marine insurance and a frequent exam contrast with rate-regulated property lines.

Common commercial floaters: contractors equipment, builders risk, EDP/computer, bailee (property of customers in the insured's care, like a dry cleaner), transportation/transit, accounts receivable, and valuable papers and records.

Builders Risk and a Worked Coinsurance Example

Builders risk can be written as inland marine (or as commercial property CP 00 20). When a builders risk form does carry a 100% coinsurance requirement based on completed value, undervaluation triggers a penalty.

Example: A building's completed value is $1,000,000 and the form requires 100% coinsurance. The insured buys only $800,000 of limit. A covered partial loss of $200,000 occurs.

• Required amount = 100% x $1,000,000 = $1,000,000
• Coinsurance ratio = carried / required = $800,000 / $1,000,000 = 0.80
• Recovery = 0.80 x $200,000 = $160,000 (insured absorbs $40,000)

Many pure floaters (jewelry, contractors equipment) are agreed-value and avoid this penalty entirely - a key reason marine is sold as broader than property.

Bailee Coverage and Trip Transit

A bailee holds another party's property for a business purpose (a dry cleaner, repair shop, or processor). The bailee's customers form pays for loss to customers' goods in the insured's care, custody, or control - filling the gap left by commercial property, which covers only the insured's own property and excludes most personal property of others.

• Annual transit policy - covers all the insured's regular shipments for a year.
• Trip transit policy - covers a single, specific shipment from origin to destination.
• Motor truck cargo - covers a for-hire carrier's legal liability for customers' goods it hauls.

Valuable Papers, Accounts Receivable, and EDP

Three commercial floaters frequently tested: Valuable Papers and Records covers the cost to research and reconstruct documents (deeds, manuscripts, maps); Accounts Receivable pays when records of money owed are destroyed and the insured cannot collect; and Electronic Data Processing (EDP) covers computer hardware, media, and sometimes data and extra expense. All three respond to perils that standard commercial property either sublimits sharply or excludes, illustrating why marine forms are sold as the broad, flexible alternative.

The Nationwide Marine Definition

Inland marine eligibility is governed by the Nationwide Marine Definition, which lists the classes insurers may write as marine. It groups eligible property into broad categories tested on the exam:

• Imports and exports and domestic shipments (goods in transit).
• Instrumentalities of transportation/communication — bridges, tunnels, pipelines, power transmission lines, radio/TV towers.
• Personal property floaters — movable property such as jewelry, fine art, cameras (the Personal Articles Floater).
• Commercial property floaters — contractors' equipment, accounts receivable, valuable papers, electronic data processing.

Common Inland Marine Forms

Why Inland Marine Is "Floating" Coverage

Inland marine grew out of ocean marine to cover goods once they left the ship and traveled overland, so its hallmark is mobile or transit property and broad, often open-peril, agreed-value terms. A floater follows the property wherever it goes, unlike a fixed-location property policy. The exam tests that property which moves, is held in trust, or is an instrumentality of transportation belongs on an inland marine form rather than a building-and-contents property policy — the dividing line between the two property worlds.