14.3 Inland Marine and Nationwide Marine Definition
Key Takeaways
- Inland marine grew out of ocean marine cargo coverage that followed goods overland; it insures mobile property, property in transit, and property of fluctuating ('floating') value.
- The Nationwide Marine Definition (NMD), drafted 1933 and last revised 1976, lists six eligible classes: imports, exports, domestic shipments, instrumentalities of transportation/communication, personal property floaters, and commercial property floaters.
- Inland marine forms are usually open-peril, written on valued or agreed-amount terms with little or no coinsurance, and split into filed (controlled) and non-filed (manuscript) classes.
- A bailee form covers customers' property in the insured's care, custody, and control, whereas a contractors equipment floater covers property the insured owns.
- Classify risks by mobility (inland marine vs. fixed-premises commercial property) and by the water boundary (inland marine overland vs. ocean marine over open water).
Origins and the Nationwide Marine Definition
Inland marine insurance evolved from ocean marine cargo coverage that needed to continue protecting goods after they left the ship and moved overland. To curb jurisdictional disputes between marine and fire underwriters, the industry adopted the Nationwide Marine Definition (NMD), originally drafted in 1933 and last substantively revised in 1976. The NMD lists the classes of property eligible for inland marine treatment, and the exam expects you to recognize that inland marine covers mobile property, property in transit, and property of a 'floating' or fluctuating value.
The NMD identifies six broad eligible classes:
- Imports — goods en route from a foreign country, not yet at final destination.
- Exports — goods being prepared for or in the course of foreign shipment.
- Domestic shipments — goods in transit within the country.
- Instrumentalities of transportation and communication — bridges, tunnels, pipelines, power lines, radio/TV towers (property that facilitates movement or communication).
- Personal property floaters — movable personal property of individuals.
- Commercial property floaters — movable business property.
Inland marine forms are typically open-peril (all-risk), written on valued or agreed-amount terms, carry little or no coinsurance, and provide broad territory — a sharp contrast to filed fire forms.
Filed vs. Non-Filed Forms and Common Inland Marine Coverages
Inland marine forms split into two regulatory categories:
- Filed (controlled) classes: forms and rates filed with the state — e.g., personal articles floaters, commercial accounts receivable, valuable papers, EDP/computer, physicians/dentists equipment, signs, camera/musical instrument floaters.
- Non-filed (uncontrolled) classes: the underwriter has rate/form freedom and may use manuscript forms — e.g., bailee coverage, transit, contractors equipment, builders risk, motor truck cargo, installation floaters, jewelers/furriers block policies.
| Inland marine form | Insures | Trigger / feature |
|---|---|---|
| Contractors Equipment Floater | Mobile tools, machinery, scaffolding | Movement to/among job sites |
| Builders Risk (inland marine basis) | Structures under construction | Course of construction; soft costs option |
| Bailee form / Bailees Customer | Customers' property in insured's care | Bailee's care, custody, control |
| Motor Truck Cargo | Goods hauled for hire / on own trucks | In-transit on the insured's vehicles |
| EDP / Electronic Data Processing | Computers, media, data | Open-peril including breakdown/power surge |
| Accounts Receivable | Inability to collect after records lost | Destruction of records |
Bailee distinction (trap): a bailee form covers the customer's property in the insured's possession (a dry cleaner's garments, a repair shop's electronics), whereas a contractors equipment floater covers property the insured owns.
Distinguishing Inland Marine from Property and Ocean Marine
The exam routinely asks you to classify a risk. Use these boundary rules:
- Inland marine vs. commercial property: if the property is mobile, in transit, or of floating value, it belongs to inland marine; if it is fixed at a described premises, it belongs to commercial property (CP 00 10).
- Inland marine vs. ocean marine: the dividing line is the water boundary. Once cargo is over the open water, it is ocean marine; while it travels overland or on inland waterways tied to land transit, it is inland marine.
Worked valuation example: A jeweler insures a $300,000 stock under a jewelers block policy written on an agreed-value basis. A burglary destroys $120,000 of inventory. Because agreed-value inland marine forms suspend coinsurance, the insurer pays the full $120,000 (less any deductible) — there is no penalty even if the stock value had grown to $360,000. Compare this to a fire policy on the building's contents subject to 80% coinsurance, where underinsurance would trigger a proportional penalty.
Trip transit vs. annual transit is another tested pair: trip transit covers a single shipment; an annual transit floater covers all shipments during the year on a reporting or non-reporting basis.
Which document defines the classes of property eligible to be written as inland marine insurance and was last substantively revised in 1976?
A dry cleaner wants to insure customers' garments that are in its care while being cleaned. Which inland marine form is appropriate?
Common Inland Marine Forms and the Floater Concept
Inland marine grew from ocean marine to cover goods in transit over land and property that moves or is held by others. A floater is the classic inland marine policy: coverage that floats with the property regardless of location, written on an open-peril basis with no coinsurance on most personal forms.
| Inland marine form | Insures |
|---|---|
| Personal Articles Floater (PAF) | Scheduled jewelry, furs, cameras, fine art - worldwide, open peril |
| Contractors Equipment Floater | Mobile tools and machinery at job sites |
| Motor Truck Cargo | Property of others a carrier is transporting |
| Bailee's Customer | Customers' goods in the insured's care (dry cleaner, repair shop) |
| Builders Risk | Structures under construction |
| Accounts Receivable / Valuable Papers | Hard-to-replace business records |
Three distinctions decide most questions: inland marine covers property that is portable, in transit, or held by a bailee; it usually settles at agreed or actual value with no coinsurance; and the Nationwide Marine Definition (NAIC, 1953/1976) lists the classes an insurer may write as marine, separating filed (rate-regulated) from non-filed (flexible) forms.
Filed vs. Non-Filed Forms and Bailee Coverage
The Nationwide Marine Definition separates inland marine into rate-regulated and flexible classes.
| Category | Characteristics |
|---|---|
| Filed (controlled) forms | Standardized, rates filed with the state (e.g., personal articles, common-carrier cargo) |
| Non-filed (uncontrolled) forms | Flexible, custom-rated for unusual risks (e.g., contractors equipment, exhibitions) |
Exam Trap: A bailee (dry cleaner, repair shop, warehouse) insures customers' goods in its care under a bailee's customer or warehouse legal liability form - not under its own property policy, which covers only the bailee's own property. The bailee form responds even when the bailee is not legally liable, as a goodwill protection for customers.