7.5 Commercial Inland Marine, Equipment Breakdown & Farm Property Coverages

Why These Coverages Exist

The commercial property coverage part (CP 00 10 with a causes of loss form) is built for fixed-location property. It limits or excludes property away from premises, property in transit, mechanical and electrical breakdown, and farm operations. Three specialty lines fill those gaps, and PSI's Series 204 outline lists each under Commercial Property Policies:

• Commercial inland marine: definitions, conditions and exclusions, and coverages such as transportation, contractor's floater and equipment
• Equipment breakdown coverages
• Farm property: definitions, conditions and exclusions, and coverages

Commercial Inland Marine

The Nationwide Marine Definition

Marine insurance began as ocean cargo and hull coverage. Inland marine grew from insuring goods moving over land and then expanded to property that is mobile or connected with transportation. The NAIC's Nationwide Marine Definition describes what insurers may write as marine or inland marine:

Filed and Nonfiled Forms

• Filed forms have standardized rates and forms filed with regulators (ISO commercial inland marine program). Common examples: accounts receivable, camera and musical instrument dealers, equipment dealers, film, floor plan, jewelers block, mail, physicians and surgeons equipment, signs, theatrical property, and valuable papers and records.
• Nonfiled (manuscript or independently filed) forms are tailored by each insurer. Common examples: contractors equipment floaters, installation (builders) floaters, motor truck cargo, transit (trip or annual) coverage, bailee's customers coverage, and electronic data processing equipment.

Typical Inland Marine Conditions and Adjusting Issues

Equipment Breakdown Coverage

The Gap It Fills

Commercial property causes of loss forms exclude or limit:

• mechanical breakdown, including rupture or bursting from centrifugal force;
• artificially generated electrical current, such as arcing or electrical surges; and
• explosion of steam boilers, steam pipes, steam engines or steam turbines the insured owns, leases or operates.

Equipment breakdown insurance, historically called boiler and machinery, covers direct damage caused by a sudden breakdown of covered equipment.

What It Typically Covers

Distinctive Conditions

• Inspections: equipment breakdown insurers perform jurisdictional and loss-prevention inspections of boilers and pressure vessels. Many policyholders value that engineering service as much as the coverage itself.
• Suspension: if covered equipment is found in a dangerous condition, the insurer may immediately suspend coverage on that equipment by delivering or mailing written notice. Coverage resumes only by endorsement.
• Common exclusions: wear and tear or gradual deterioration, though a resulting breakdown is often covered; testing; defects the insured knew of; and damage from perils the commercial property policy covers, such as fire.

Farm Property and Farm Liability

Farms are ineligible for homeowners, dwelling and most commercial package programs, so ISO provides a farm program. It can be written monoline or combined into a farmowners-ranchowners package.

Farm adjusting issues:

• Livestock: coverage for animals is written on named perils and often includes death or destruction from causes such as attack by dogs or wild animals, accidental shooting, drowning, electrocution and collapse. Valuation usually follows market value, with proof of ownership and headcount.
• Farm machinery: mobile machinery may be scheduled (Coverage E) or blanket (Coverage F), and theft, collision and overturn provisions vary.
• Business pursuits and custom farming: farm liability forms limit or exclude custom farming done for others for pay, and injuries to farm employees who fall under workers' compensation or employers liability.
• Crops: growing crops are generally excluded from farm property forms. They are insured through federal multiple peril crop insurance or crop-hail policies, which Louisiana adjusters handle under the separate crop line of authority (R.S. 22:1671(A)(3); PSI Series 205).