14.3 Inland Marine and Nationwide Marine Definition
Key Takeaways
- Inland marine insures movable property, property in transit, and instrumentalities of transportation/communication; the name is historical, descending from ocean cargo coverage that followed goods inland.
- The Nationwide Marine Definition (NMD), last revised 1976, lists the six classes that may be written as marine: imports, exports, domestic shipments, instrumentalities, personal property floaters, and commercial property floaters.
- Inland marine is split into filed (standardized ISO forms) and non-filed (judgment-rated) classes and is usually open-peril, often with agreed-value or replacement-cost settlement.
- Common floaters include contractors equipment, installation, builders risk, accounts receivable, valuable papers, EDP, jewelers/furriers block, and bailee forms.
- Open-peril floaters exclude wear and mechanical breakdown but cover upset/overturn; agreed value avoids depreciation disputes on high-value mobile equipment.
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 ship, so underwriters extended coverage to follow goods inland - hence inland marine.
Inland marine is prized because it is typically open-peril, often written without coinsurance, and frequently covers property on an agreed-value basis - ideal for hard-to-value items like jewelry, fine art, and contractors equipment that move from place to place.
The Nationwide Marine Definition
The scope of inland marine is governed by the Nationwide Marine Definition (NMD), last revised in 1976 by the NAIC. The NMD tells insurers what classes of property may be written as marine (ocean or inland) rather than as property/fire business. The six broad classes are:
- Imports (until they reach final destination/warehouse)
- Exports
- Domestic shipments (goods in transit within the country)
- Instrumentalities of transportation and communication (bridges, tunnels, towers, pipelines)
- Personal property floaters (movable personal property)
- Commercial property floaters (movable business property)
If a risk does not fit one of these classes, it cannot be written as inland marine - this prevents insurers from writing stationary building risks under the more liberal marine rules.
Filed vs. Non-Filed Classes and Common Floaters
Inland marine splits into filed classes (rates/forms filed with the state, e.g., the Commercial Inland Marine program with standardized ISO forms) and non-filed classes (rated by judgment because exposures are too varied to file). Common floaters tested on the exam:
| Floater | Insures |
|---|---|
| Contractors Equipment Floater | Mobile tools/equipment off premises |
| Installation Floater | Materials until installed/accepted |
| Builders Risk (inland marine version) | Structure under construction |
| Accounts Receivable | Loss from destroyed records |
| Valuable Papers and Records | Documents, manuscripts |
| Electronic Data Processing (EDP) | Computer hardware/media |
| Jewelers / Furriers Block | Stock of dealers |
| Bailee forms | Customers property in insured's care |
Floaters generally cover property wherever it goes, distinguishing them from fixed-location property forms.
Coverage Triggers, Valuation, and a Worked Example
Most commercial inland marine floaters are open-peril, so the burden falls on the insurer to prove an exclusion. Valuation can be ACV, replacement cost, or agreed value, depending on the floater and endorsement.
Worked example - Contractors Equipment Floater. A landscaper's $40,000 chipper overturns while being towed between two private job sites. The unit is not road-licensed, so a business auto policy will not respond. The floater is open-peril and excludes only mechanical breakdown and wear, not upset/overturn.
On an ACV floater, if the chipper has depreciated to $28,000 and the deductible is $1,000, the insurer pays $28,000 - $1,000 = $27,000. On an agreed-value floater scheduled at $40,000, the insurer pays $40,000 minus the deductible with no depreciation argument - illustrating why contractors prefer agreed value for big-ticket equipment.
Trap: Property in the custody of a common or contract carrier is the carrier's transit exposure, not the shipper's floater, unless a transit/motor-truck-cargo form is purchased.
Transit Coverage, Carrier Liability, and Bailee Forms
Transit exposures are a frequent exam topic. A common carrier holds goods under a near-absolute liability standard but enjoys five classic defenses: acts of God, acts of a public enemy, acts of public authority, the shipper's own fault, and the inherent nature of the goods. Because those defenses can leave a shipper uncovered, shippers buy their own transit floaters rather than relying on the carrier.
The motor truck cargo forms come in two flavors: carriers form (protects the trucking company's legal liability for cargo it hauls for others) and owners/shippers form (protects the cargo owner directly). A trip transit policy covers a single shipment, while an annual transit policy covers ongoing shipments.
Bailee coverage is distinct: a bailee is in lawful possession of someone else's property for a purpose - a dry cleaner, repair shop, or warehouse. A Bailees Customers form pays for damage to customers' goods in the insured's care regardless of the insured's legal liability, preserving goodwill. Compare:
| Situation | Right Coverage |
|---|---|
| Trucker hauling others' freight | Motor truck cargo - carriers form |
| Cargo owner shipping goods | Transit floater / owners form |
| Repair shop holding customers' items | Bailees customers floater |
Which document defines the six classes of property eligible to be written as inland or ocean marine insurance, last revised in 1976?
A contractor's $50,000 backhoe, scheduled open-peril on a contractors equipment floater with agreed value and a $1,000 deductible, is damaged when it tips over at a job site. How is the loss settled?
The Nationwide Marine Definition and Common Floaters
Inland marine evolved from ocean marine to cover property that moves, is transported, or is held by a bailee, plus instrumentalities of transportation and communication. The Nationwide Marine Definition (adopted by the NAIC) is the regulatory list of what insurers may classify as marine — imports/exports, domestic shipments, instrumentalities of transportation/communication (bridges, tunnels, pipelines, radio/TV towers), and certain movable or specialized property (jewelry, fine art, contractors' equipment, mobile medical gear).
Inland marine splits into filed (rates/forms filed with the state — e.g., personal articles floater, jewelers block) and non-filed (manuscript forms with flexible terms — e.g., contractors equipment, bailee forms) classes:
| Floater | Insures |
|---|---|
| Personal Articles Floater (PAF) | Scheduled jewelry, furs, fine art, cameras, worldwide, open peril, agreed value |
| Contractors Equipment Floater | Mobile tools and equipment on jobsites and in transit |
| Bailee's Customer Floater | A bailee's liability for customers' goods (dry cleaners, repair shops) |
| Motor Truck Cargo | Freight in the insured's vehicles |
| Accounts Receivable / Valuable Papers | Records hard to reconstruct |
Exam point: inland marine floaters typically provide broad, open-peril, often worldwide, agreed-value coverage with no coinsurance, which is why high-value, mobile, or hard-to-value items are scheduled here rather than left to a homeowners special limit.