7.2 Commercial Inland Marine & Transportation Coverages
Key Takeaways
The Nationwide Marine Definition establishes 6 eligible Inland Marine categories: Imports, Exports, Domestic Shipments, Instrumentalities of Transportation and Communication (bridges, tunnels, piers, pipelines, towers), Personal Property Floater Risks, and Commercial Property Floater Risks.
Fewer than 10% of Commercial Inland Marine forms are 'filed' (standardized ISO forms such as Accounts Receivable, Commercial Articles, Equipment Dealers, Jewelers Block, Signs, and Valuable Papers and Records), while over 90% are 'nonfiled' (such as Contractors Equipment, Bailee's Customer, and Installation Floaters).
A Bailee's Customer Floater (used by dry cleaners, laundries, tailors, and repair shops) covers damage to customers' property in the bailee's custody WITHOUT regard to the bailee's legal liability or negligence.
A Common Carrier is held to strict liability for cargo damage EXCEPT for the 5 Common-Law Exceptions: (1) Act of God, (2) Act of a Public Enemy, (3) Act or Default of the Shipper, (4) Exercise of Public/Governmental Authority, and (5) Inherent Vice or Nature of the Goods.
Under F.O.B. Point of Origin (Shipping Point), title and risk of loss pass to the buyer as soon as the seller delivers the goods to the carrier; under F.O.B. Destination, title and risk of loss remain with the seller until the goods reach the buyer's destination.
Commercial Inland Marine & Transportation Coverages
Quick Answer: Commercial Inland Marine insurance evolved from ocean marine cargo insurance to protect property that is movable, in transit over land, in the temporary custody of a bailee, or functions as an instrumentality of transportation or communication (such as bridges and radio towers). Unlike fixed-location
CP 00 10property forms, inland marine floaters follow the property wherever it moves within the coverage territory.
On the Michigan Claims Adjuster examination, you must distinguish between filed and nonfiled commercial inland marine forms, master the 10 specific commercial inland marine forms listed on the PSI outline, and apply common carrier cargo liability and F.O.B. shipping terms.
1. The Nationwide Marine Definition & Filed vs. Nonfiled Forms
A. The 6 Categories of the Nationwide Marine Definition
Adopted by the National Association of Insurance Commissioners (NAIC), the Nationwide Marine Definition defines the six broad classes of property eligible for Marine and Inland Marine coverage:
- Imports: Property imported from foreign countries while on consignment or before it loses its character as an import and becomes mingled with domestic inventory.
- Exports: Property designated for export from the time it begins moving toward its foreign destination or is placed in transit.
- Domestic Shipments: Goods in transit by land (rail, truck), air, or inland waterways within the United States, including limited storage incidental to transportation.
- Instrumentalities of Transportation and Communication: Fixed structures that facilitate movement of goods/people or transmission of information—specifically bridges, tunnels, piers, wharves, docks, slips, dry docks, pipelines, power transmission and telephone/telegraph lines, radio/television/cellular communication towers, and outdoor cranes (many of which are explicitly excluded as
"Property Not Covered"underCP 00 10!). - Personal Property Floater Risks: Floaters covering movable personal property of individuals (jewelry, furs, fine arts, cameras, musical instruments).
- Commercial Property Floater Risks: Movable commercial equipment, tools, dealer stock, property being installed at a job site, and property of others held by a bailee.
B. Commercial Inland Marine Conditions (CM 00 01) & Filed vs. Nonfiled Forms
When ISO Commercial Inland Marine forms are included in a CPP or issued as a monoline policy, they attach the Commercial Inland Marine Conditions (CM 00 01). Key provisions in CM 00 01 include:
- No Benefit to Bailee: Nobody having custody of the insured's property (such as a carrier or warehouse) may benefit directly or indirectly from the insured's inland marine insurance.
- Coinsurance: Most ISO Commercial Inland Marine forms impose an 80% or 100% Coinsurance clause (often called a
"Full Reporting"or"Coinsurance"condition). - Pair, Set, or Parts: In the event of loss to one item of a pair or set, the insurer pays either to repair/replace the lost part to restore the pair/set to its value before the loss, or pays the difference between the Actual Cash Value of the pair/set before and after the loss (losing one earring does not constitute a total loss of the pair).
Filed vs. Nonfiled Commercial Inland Marine Forms:
- Filed Forms (< 10% of the market): Standardized ISO forms whose policy wording and loss costs/rates must be filed with and approved by state insurance regulators because the risk exposures are relatively uniform. Examples of ISO Filed Forms include: Accounts Receivable, Commercial Articles, Equipment Dealers, Film, Floor Plan, Jewelers Block, Mail, Musical Instruments, Negative Film, Physicians and Surgeons Equipment, Signs, Theatrical Property, and Valuable Papers and Records (plus Contractors Equipment and Electronic Data Processing in certain jurisdictions).
- Nonfiled Forms (> 90% of the market): Open-perils (
"all-risk") forms that do not require rate/form filing with state regulators because each commercial risk is unique and individually underwritten (examples include Contractors Equipment Floaters, Installation Floaters, Bailee's Customer Floaters, Motor Truck Cargo, and Transit Floaters).
2. The 10 PSI-Tested Commercial Inland Marine Coverage Forms
| Commercial Inland Marine Form | Filed / Nonfiled | What It Covers & Key Exam Rules |
|---|---|---|
1. Accounts Receivable (CM 00 66) | Filed | Covers consequential financial loss when physical damage to the insured's accounts receivable records prevents the insured from billing/collecting from customers. Pays: (1) amounts due from customers that the insured cannot collect, (2) interest charges on any loan required to offset impaired collections pending insurer payment, (3) collection expenses in excess of normal collection costs, and (4) other reasonable expenses incurred to re-establish records. Receptacle Condition: Records must be kept in a locked, fire-resistant receptacle when the premises are not open for business (except while records are actually in use). |
| 2. Bailee's Customer Floater | Nonfiled | Designed for businesses that take temporary possession of customers' goods for service, cleaning, repair, or storage (dry cleaners, laundries, tailors, furriers, appliance/watch repair shops, cold-storage lockers). Covers direct physical loss to customers' property in the bailee's care, custody, or control (on premises and in transit) WITHOUT regard to the bailee's legal liability (negligence)! Even if a lightning strike or non-negligent burglary destroys customers' clothes at a dry cleaner, the Bailee's Customer Floater pays. |
3. Commercial Articles (CM 00 20) | Filed | Covers two specific classes of commercial movable equipment on an open-perils basis: (1) cameras, projection machines, films, and related equipment (used by commercial photographers/studios), and (2) musical instruments and related equipment (used by professional musicians, bands, or orchestras). Includes a Newly Acquired Property extension for 30 days (up to 25% of the limit or $10,000, whichever is less). |
| 4. Contractors Equipment Floater | Nonfiled (usually) | Covers a contractor's mobile heavy machinery, equipment, and tools used off-premises at job sites (bulldozers, excavators, backhoes, cranes, road graders, pavers, portable generators, air compressors, and hand tools). Can be written on a scheduled or blanket basis; excludes motor vehicles designed for highway use, aircraft, and waterborne property (unless endorsed). |
| 5. Electronic Data Processing (EDP) Form | Nonfiled / Filed | Specialized open-perils floater for computer hardware (mainframes, servers, workstations), data, media, and software. Unlike standard property forms (CP 10 30), an EDP form covers mechanical breakdown, electrical disturbance/power surge, short circuit, and changes in temperature or humidity (if climate control equipment breaks down), as well as property in transit. |
6. Equipment Dealers (CM 00 22) | Filed | Covers a retail/wholesale dealer's stock in trade consisting of mobile agricultural equipment (farm tractors, combines, harvesters, binders, plows) and construction/earth-moving equipment held for sale, demonstration, lease, or customer repair (including customers' equipment in the dealer's custody for repair). Excludes automobiles, motor trucks, motorcycles, aircraft, and watercraft. |
| 7. Installation Floater | Nonfiled | Covers a contractor's (or plumber's, electrician's, HVAC installer's) materials, supplies, machinery, fixtures, and equipment intended to be installed in a building or project while (1) in transit to the job site, (2) awaiting installation at the job site, and (3) during actual installation, until the work is completed and accepted by the project owner (or the insured's interest ceases). |
8. Jewelers Block (CM 00 59) | Filed | Unique "block" (all-in-one) open-perils policy for retail, wholesale, and manufacturing jewelers and watchmakers. Covers three categories of property: (1) the jeweler's own stock (pearls, precious/semiprecious stones, watches, gold, silver, platinum), (2) customers' jewelry in the jeweler's custody for repair, cleaning, or appraisal, and (3) other dealers' jewelry in the jeweler's custody on memorandum or consignment. Covers property on premises, in bank vaults, in transit by registered mail/armored car, and in the custody of traveling salespersons. Key Exclusions: Unexplained shortage or mysterious disappearance discovered upon taking inventory, and dishonesty of the insured or any employee (except loss while property is entrusted to a common carrier for transit). |
9. Signs (CM 00 28) | Filed | Covers neon, fluorescent, automatic, or mechanical signs (attached or unattached to buildings) against open perils, scheduled with each sign's location and limit, subject to 100% Coinsurance. (Needed because CP 00 10 limits outdoor signs not attached to buildings, or provides only limited coverage.) |
10. Valuable Papers and Records (CM 00 67) | Filed | Covers inscribed, printed, or written documents, manuscripts, or records—including abstracts, books, deeds, drawings, architectural blueprints, films, maps, and mortgages—against open perils. Excludes "money", "securities", and electronic data. Pays the cost to research, replace, or restore the lost information (or an Agreed Value for irreplaceable historical/artistic items). Requires keeping records in a fire-resistant safe/vault when premises are closed. |
3. Transportation Coverages: Common Carriers, Motor Truck Cargo & F.O.B. Terms
A. Common Carrier vs. Contract Carrier Cargo Liability
When goods are damaged in transit, liability depends on whether the transporter is a Common Carrier or a Contract Carrier:
- Common Carrier: A transportation company (railroad, trucking line, airline) that holds itself out to the general public to transport goods for a fee under published tariffs and bills of lading. Under common law and the federal Carmack Amendment, a Common Carrier is held to strict (absolute) liability for safe delivery of the cargo—meaning the carrier is liable for cargo loss or damage even without negligence, EXCEPT when the loss is caused solely by one of the 5 Common-Law Exceptions:
- Act of God: A violent, unforeseeable natural catastrophe with no human intervention (lightning, flood, tornado, earthquake, hurricane).
- Act of a Public Enemy: Hostile military forces or pirates at war with the domestic government (note: domestic rioters, hijackers, and thieves are NOT
"public enemies"—the carrier is strictly liable for theft or hijacking!). - Act or Default of the Shipper: Improper packaging, crating, loading, or mislabeling by the shipper that is not apparent upon inspection by the carrier.
- Exercise of Public / Governmental Authority: Seizure, quarantine, or embargo of the cargo by government authorities or health officials.
- Inherent Vice or Nature of the Goods: Natural spoilage, decay, fermentation, evaporation, rust, or shrinkage inherent in the cargo itself (such as fresh fruit rotting or livestock dying of natural disease).
- Contract Carrier: A private carrier that hauls goods only for specific clients under individual private contracts (does not offer services to the general public). A Contract Carrier is not subject to common-law strict liability; it is liable only for negligence or to the extent explicitly assumed in its private contract.
B. Motor Truck Cargo & Transit Forms
- Motor Truck Cargo — Truckers Form: Designed for for-hire carriers (common or contract carriers). Covers the carrier's legal liability for direct physical loss or damage to customers' cargo while loaded on the carrier's trucks or temporarily in terminals.
- Motor Truck Cargo — Owners Goods on Own Trucks Form: Designed for a business that transports its own merchandise on its own fleet of trucks (such as a furniture store or bakery delivering its own products). Covers the insured's own property directly (not legal liability).
- Annual Transit vs. Trip Transit Coverage Forms:
- Annual Transit Floater: Covers all of a shipper's incoming and outgoing shipments throughout an entire 1-year policy period via common carriers (rail, public truck, air, coastwise steamer).
- Trip Transit Floater: Covers a single, specific shipment of goods (such as moving specialized factory machinery or household goods on a one-time trip) from a specified origin to a specified destination.
C. F.O.B. (Free On Board) Shipping Terms & Risk of Loss
Adjusters investigating transit claims must inspect the bill of lading and sales contract to determine whether the seller or the buyer bore the risk of loss at the moment of damage:
- F.O.B. Point of Origin (F.O.B. Shipping Point / F.O.B. Factory): The seller's obligation ends as soon as the seller delivers the goods into the custody of the carrier at the point of origin. Title and risk of loss pass to the BUYER at the shipping point—if the goods are damaged in transit, the buyer suffers the loss and must file the transit claim.
- F.O.B. Destination: The seller retains title and bears the expense and risk of transporting the goods all the way to the buyer's location. Title and risk of loss remain with the SELLER during transit and pass to the buyer only when the goods are tendered at the destination.
A common carrier truck transporting electronics is hijacked at a highway rest stop by armed thieves, resulting in the loss of the entire cargo. Under common-law rules governing common carrier liability, is the common carrier liable for the stolen cargo?
No, because armed thieves and domestic hijackers are classified as a public enemy under common-law exceptions
No, unless the shipper proves by preponderance of the evidence that the truck driver was negligent at the rest stop
Yes, but only for 50% of the cargo value because hijacking is an intentional third-party crime
Yes, because a common carrier is strictly liable and domestic thieves are not a public enemy
A lightning strike starts a fire at a dry cleaning plant, destroying $40,000 worth of customers' clothing held for cleaning. The dry cleaner was not negligent in any way. Which Commercial Inland Marine form will pay for the damage to the customers' clothing?
Bailee's Customer Floater, which covers customers' property without regard to legal liability
Legal Liability Coverage Form (CP 00 40), which pays for property in the insured's custody regardless of fault
Equipment Dealers Coverage Form, which covers all personal property of others held for cleaning or servicing
Accounts Receivable Coverage Form, which reimburses customer claims after a covered fire
An HVAC contractor purchases a commercial chiller unit, transports it on a flatbed truck to a hospital construction project, stores it on the job site for a week, and then hoists it onto the roof for installation. Which Commercial Inland Marine form is specifically designed to cover the chiller during transit, on-site storage awaiting installation, and actual installation until accepted by the project owner?
Contractors Equipment Floater
Installation Floater (Commercial Inland Marine)
Commercial Articles Coverage Form (CM 00 20)
Builders Risk Coverage Form with 80% Coinsurance Clause
Sections you finish are checked off in the contents.