14.3 Inland Marine and Nationwide Marine Definition
Key Takeaways
- Inland marine covers movable property, property in transit, and instrumentalities of transportation/communication; it is largely open-peril with often no coinsurance.
- The Nationwide Marine Definition lists six classes: imports, exports, domestic shipments, instrumentalities, personal property floaters, and commercial property floaters.
- Instrumentalities (bridges, tunnels, pipelines, towers) are fixed property that enable transit/communication - they do not move yet qualify as marine.
- Common forms include contractors equipment, installation, bailee's customers, accounts receivable, valuable papers, motor truck cargo, and jewelers block.
- Many floaters use agreed value (suspending coinsurance) and provide worldwide territory, unlike location-bound commercial property.
Inland Marine Insurance
Inland marine grew out of ocean marine to cover goods in transit over land and property that is movable, in transit, or instrumental to transportation/communication. It is broadly an open-peril ('all-risk') line that frequently has no coinsurance and often pays on an agreed-value or replacement-cost basis. Because property moves, inland marine has no fixed-location limitation the way commercial property does.
The scope of inland marine is fixed by the Nationwide Marine Definition - a model adopted by states (originating with the NAIC) that lists the classes an insurer may write as marine business. Understanding this definition is essential for the national exam.
Inland marine forms come in two regulatory flavors. Filed (controlled) classes use standardized rates and forms that insurers must file with the state - for example, personal articles floaters and commercial accounts/valuable papers. Non-filed (uncontrolled) classes are open to manuscript drafting and free rating because the exposures are too varied to standardize - for example, contractors equipment and large national accounts. Knowing that some inland marine is filed and some is not explains why pricing flexibility is a hallmark of the line.
The six classes of the Nationwide Marine Definition
The Nationwide Marine Definition authorizes marine/inland marine coverage for:
- Imports - goods arriving from abroad.
- Exports - goods leaving for abroad.
- Domestic shipments - goods moving within the country (truck, rail, air, mail).
- Instrumentalities of transportation and communication - bridges, tunnels, piers, pipelines, power transmission lines, radio/TV towers (property that enables transit/communication, even if it does not itself move).
- Personal property floaters - movable personal property (jewelry, fine arts, cameras).
- Commercial property floaters - movable business property (contractors equipment, accounts receivable, valuable papers, signs).
Common inland marine forms
| Form / Floater | Covers |
|---|---|
| Contractors Equipment Floater | Mobile tools/equipment on jobsites or in transit |
| Installation Floater | Materials being installed until owner accepts |
| Bailee's Customers Form | Customers' goods in the insured's care (dry cleaner, repair shop) |
| Accounts Receivable | Loss of records preventing collection |
| Valuable Papers & Records | Cost to reconstruct documents |
| Motor Truck Cargo | Carrier's liability or owner's goods in transit |
| Jewelers Block / Furriers | Dealer stock and customers' property |
| Equipment Floater (EDP) | Computers/electronics, often worldwide |
Many floaters are written on an agreed value basis (limit = agreed amount, suspending coinsurance), and many provide worldwide territory - unusual versus location-bound commercial property.
Worked example - contractors equipment ACV settlement
A contractor's excavator (scheduled at its ACV) is stolen. Replacement cost new is $120,000; the machine is 6 years into a 12-year useful life, so depreciation is 50%. The floater settles on actual cash value with a $2,500 deductible.
ACV = Replacement cost - depreciation = $120,000 - (0.50 x $120,000) = $120,000 - $60,000 = $60,000. Payment = ACV - deductible = $60,000 - $2,500 = $57,500.
If the same item had been written on an agreed-value floater for $75,000, the insurer would pay the agreed $75,000 less the deductible ($72,500), with no depreciation - illustrating why scheduling high-value equipment on agreed value protects the insured.
Watch the valuation basis on every floater question. ACV deducts depreciation; replacement cost pays new-for-old but may require the item be repaired/replaced; agreed value fixes the payout in advance and suspends coinsurance. Inland marine also frequently covers property the insured does not own - a bailee form covers customers' goods in the insured's care, custody, or control, paying regardless of the insured's legal liability, which is why a dry cleaner or repair shop buys one.
Which item is classified under the Nationwide Marine Definition as an 'instrumentality of transportation or communication' rather than a moving good?
A scheduled contractor's machine has a $100,000 replacement cost new, is 50% depreciated, and is written on an ACV inland marine floater with a $1,000 deductible. After a total theft loss, the insurer pays:
What Inland Marine Insures
Inland marine insurance evolved from ocean marine to cover property in transit over land and property that is movable, portable, or instrumental to transportation and communication. It typically provides broad, often open-peril coverage with few of the geographic and coinsurance restrictions of standard property forms, making it the tool for valuable, mobile, or hard-to-value property. The exam treats inland marine as the answer when property moves, is carried by the insured, or does not fit neatly within a fixed-location property form.
The Six Classes of the Nationwide Marine Definition
The Nationwide Marine Definition delineates what insurers may write as marine (and thus on flexible inland marine forms). Its principal classes are: imports and exports; domestic shipments (goods in transit); instrumentalities of transportation and communication (bridges, tunnels, pipelines, radio and TV towers, which are fixed but instrumental to transport or communication); personal property floaters (movable personal property such as jewelry and fine arts); and commercial property floaters (movable business property such as contractors equipment and dealers stock).
Recognizing that bridges and towers qualify as instrumentalities is a classic exam point, because they are fixed yet eligible for marine coverage.
Common Inland Marine Forms
Frequently tested inland marine forms include the Contractors Equipment floater (mobile tools and machinery at job sites), the Commercial Articles floater and Camera/Musical Instrument floaters, the Accounts Receivable and Valuable Papers and Records forms (covering the cost to reconstruct records), the Electronic Data Processing floater, the Installation floater (property being installed), the Transportation/Motor Truck Cargo forms (a carrier's liability for cargo), and the Jewelers Block and Furriers forms. Bailee forms cover a business's liability for customers property in its care, such as a dry cleaner or repair shop.
Worked Example: Contractors Equipment ACV Settlement
Suppose a contractor's five-year-old excavator with a replacement cost of 200,000 dollars is destroyed, and the contractors equipment floater settles on an actual cash value basis with a 2,500-dollar deductible. If the equipment has depreciated 40 percent over its life, the ACV is 200,000 times 0.60 = 120,000 dollars; subtracting the deductible yields a 117,500-dollar payment. Had the floater been written on an agreed-value or replacement-cost basis (common options on scheduled equipment), the settlement would differ accordingly.
The exam tests recognizing inland marine as the proper form for mobile equipment and applying the stated valuation basis and deductible to compute the payment.