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| Commercial Inland Marine Risk Control |
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Coverage Overview 
Commercial inland marine insurance can provide coverage for contractor's equipment, computers, goods in transit, fine arts, and just about any kind of property that is portable. This coverage is also used to ensure some unique properties that are fixed in place such as piers, wharves, docks, TV or radio towers, bridges, and tunnels. Though not portable, these properties are involved with the movement of either goods (i.e. transportation) or the movement of information (i.e. communication).
Inland marine insurance has its origins in ocean marine insurance, which is believed to be the first form of insurance. Merchants needed insurance for goods shipped by sea and ocean marine insurance provided coverage from port to port. As commerce expanded inland, from seaports and coastal areas, the need developed to extend this coverage beyond the ports to inland warehouse locations. Originally this need was met by including inland marine coverage clauses in the ocean marine policies. Eventually an entire new line of coverage evolved to include the wide array of inland marine coverages we have available today.
Inland marine policies typically insure against direct physical loss and provide coverage for all causes of loss except those that are specifically excluded. However, inland marine policies may be written on a named peril basis whereby coverage is provided only for the causes of loss listed. You should review your policy with your agent to be sure you understand the coverages and exclusions in your inland marine policies.
Some of the more common inland marine coverages you may need include:
• Electronic data processing
• Contractor's equipment
• Installation floater
• Transportation form for goods in transit
• Accounts receivable
• Valuable papers and records
• Mobile articles, machinery, and equipment floaters
• Pattern and die floater
Limited coverage for some of these items may also be provided in your property policy. In the FCCI Risk Control Manual, we will provide useful risk control information for the first four inland marine coverages listed above. In this era of Internet e-commerce transactions, most businesses use computers and probably have a need for electronic data processing or computer coverage, so we will begin there.
Electronic Data Processing (EDP)
Much of today's business is conducted on, with, and/or through computers. They are used for record keeping, billing, Internet (e-mail) communication, faxing, word processing, product design, research, etc. Many companies have minimum values at risk for loss of computer hardware or software. They may determine that they do not need a separate EDP policy because they do have some coverage under their property policy. The computer (i.e. the hardware) and computer disks (just the disk itself, not software programs) can be insured as office contents (i.e. business personal property under your property policy). However, if insured this way, it's important to keep in mind that the coverage most likely will not be as comprehensive as is provided under an EDP policy. For example, property policies most likely would provide no coverage for mechanical breakdown or for replacing the sometimes expensive software. You also may not have coverage for that laptop you take on a business trip. The bottom-line is that you need to review your coverage needs with your agent to see what works best for you.
Whatever you decide, it's always best to take reasonable precautions to avoid a loss in the first place. At the very least, a computer loss will be a big inconvenience. At worst, it might even threaten the survival of your business. The Electronic Data Processing Checklist (Appendix F1) provides some useful guidelines for minimizing and controlling your EDP risk and reducing your exposure to loss.
For business resumption planning, you may wish to refer to the Institute For Business & Home Safety publication Open for Business: A Disaster Planning Toolkit for the Small Business Owner which can be downloaded at no charge on their website at www.IBHS.org.
Contractor's Equipment
Contractor's equipment can range in value from $5 for a hammer or $500 for a portable generator to $500,000 for a backhoe. Equipment is usually kept on the jobsite, and it is while at the jobsite or in transit, that most losses occur. The most common causes of loss include theft, fire, overturn, vandalism, and boom collapse.
Theft
Despite its large size, contractor's equipment is a target item for theft. Most thefts are on a "stolen to order" basis often carried out by well organized groups. It's not unusual for people posing as contractors or their employees to arrive at a jobsite claiming that they are moving the equipment to another job. Or, they take equipment from job sites that have no security. While this problem affects every state, according to FBI figures the five states with the most equipment thefts are Texas, California, Oklahoma, Arizona, and Florida. Anecdotal evidence suggests that equipment that is painted a very distinctive color or which has the company name prominently painted on it in large block letters, is far less likely to be stolen than equipment that does not stand out. Our Contractor's Equipment Crime Prevention Checklist provides many other useful ideas for safeguarding your equipment against theft.
Fire
To help prevent fire loss to your equipment, you can and should exercise preventative maintenance techniques on your equipment. Regular maintenance by a qualified mechanic can reduce the exposure to fire resulting from loose fittings in the fuel system or in the hydraulic system. Always try to adhere to maintenance schedules. Even have your mechanic perform maintenance and repairs on the jobsite. An important part of maintenance is the record keeping. Perform the maintenance per the manufacturer's specifications. List what was done, by whom, what parts were replaced, and note the odometer or hour meter reading.
One of the more hazardous and frequent activities that can lead to fire is the refueling of equipment. In areas where fuel is stored or dispensed you should prohibit smoking, clean up spills immediately, and dispose of oily rags in a metal receptacle with a self-closing lid.
Since some equipment is almost always on a jobsite, be cognizant of where you park. Especially during the dry months do not park in or next to wooded areas where wild fires could strike. If possible, park your equipment in an area clear of tall grass and the ground should be level.
Overturn and Collision
Failure to park on level and solid ground can sometimes lead to overturn because the center of gravity is high on some mobile equipment. Rain may erode the soil on a slope just enough to cause overturn. Each operator of equipment should be trained and regularly reminded of the maximum slope at which the equipment can safely be operated.
Collision exposure is also a concern. Each operator needs to be aware of the limits of the equipment they operate. The turning radius of some equipment is wide making it more difficult to maneuver and more susceptible to collision with objects (other equipment, material, etc.). The visibility is often more limited as opposed to a vehicle designed for highway use.
Because conditions change so quickly on jobsites, operators need to dismount and walk around their equipment after they have been stopped for any length of time. Collision damage is expensive to repair and while the equipment is in the shop you may need to rent other equipment to replace the one involved in a collision.
Vandalism
When the equipment is left on the jobsite establish your own lighted, fenced/secured area. Post warning and "No Trespassing" signs. If necessary, hire a security company to provide night and weekend patrols. The best security from vandalism is to return your equipment to your permanent yard.
Boom-collapse
Estimates are that 85 percent of boom collapse losses are a result of human error. Poor judgment results in losses from:
- Positioning the crane improperly
- Exceeding lifting capacity
- Bracing the crane on soil that is too soft to support outriggers
- Moving a load too quickly
- Pulling a load obliquely
- Erecting the crane improperly
Operator training is probably the most important risk control technique to avoid boom collapse. Crane operators must be highly skilled, dedicated, and experienced staff. Mistakes can be very costly, and it's not unusual for boom collapse incidents to make the six o'clock news. Hire and screen crane operators very thoroughly, including testing and reference checks. Check out their motor vehicle driving record (MVR) as well, even if they will not operate a registered vehicle for you. You would not want to trust someone with a poor driving record to operate such a valuable and potentially dangerous piece of equipment. If additional training is needed, the manufacturer of equipment often provides training classes for your operators. Maintenance by qualified mechanics is critical to avoid boom collapse. To help safeguard your investment in contractors equipment machinery refer to Contractor's Equipment Checklist (Appendix F2).
Installation Risks
The purpose of installation floater coverage is to provide all-risk coverage against loss or damage to machinery, equipment, building materials, or supplies that owners, sellers or contractors use in the course of installation, testing, building, renovating, or repairing. These policies may be written to cover such property at points or places where the work is being performed, or while in transit and during temporary storage after, having been designated for such use. Installation floater coverage applies to such property that will become a permanent part of the installation project. You would need separate coverage for machinery, tools, equipment, and similar property, which will not become a permanent part of the installation project. For example:
- Air conditioning units and ductwork that will be installed in a building would be considered covered property since it would become a permanent part of the building.
- Furniture that is moved into a building would not be covered under an installation floater because furniture is not a permanent fixture. It would be covered under a Transportation Risk policy.
Review your exposure and installation floater coverage needs with your agent to be sure you are adequately insured. Some large projects take several months or even a year or more to complete installation and final testing, and it's important that you protect and safeguard your investment. Also, to protect against loss in the first place, there are some risk control measures you will want implement.
The main exposures to installation risks are theft, fire, vandalism, and water damage. Our Installation Floater Checklist (Appendix F3) provides some useful ideas for protecting against these causes of loss.
Transportation Risks
The purpose of transportation insurance is to provide coverage (usually for all risk) for property you own while in transit. Coverage can be purchased for property you ship in your own vehicles, or by common or contract carrier (i.e. truckers), or when shipped by airlines or railroads. You can insure property you own that is being shipped by you to others, or being shipped by others to you. When ownership is changing hands, it's important to understand when change of ownership takes place. Depending on the terms of the sales contract, property in transit may be owned either by the company sending the goods (the shipper) or the company receiving the goods (consignee).
If the goods are shipped Free On Board (F.O.B.) Shipper's Location, the company sending the goods owns them until they are taken to the carrier (i.e. the company transporting them). At that point, the company who will receive the goods after they've been transported will become the owner. This company, known as the consignee, needs transportation insurance to protect its financial interest while the goods are in transit. This is the most common shipping arrangement.
If the goods are shipped Free On Board (F.O.B.) Consignee's Location, the company shipping the goods owns them until they are delivered to the consignee, the company receiving the goods. In this situation, the company shipping the goods needs Transportation insurance to protect its financial interest while goods are in transit.
While truckers have some liability for the goods they carry, the owners of goods still need Transportation insurance for their property in transit because:
• Contract carriers may be liable only for their own negligence, which the owner would need
to establish and there are at least five categories of loss for which a common carrier is
not liable.
• Under the terms of a shipping document, known as a released bill of lading, a common
carrier is not required to reimburse the shipper of goods for the full invoice cost.
• Payment of claims by the trucker's insurance company could be delayed.
There are a variety of transportation insurance coverages, also known as transit insurance, that are available to meet your needs. Your agent can help you decide what is best for you. However, your best protection against the financial consequence of a loss to your goods in transit, is to not have a loss in the first place.
While protecting business, property, and people in transit, you should first assure that the risk control measures described in the Commercial Auto Risk Control section of the manual are in place. Your first concern is to protect against loss arising from collision and overturn. When you ship goods on your own trucks, you can manage this directly. When you ship by large national or regional carriers, they will typically have such controls in place. For smaller, local carriers, you should inquire about their fleet safety measures.
Depending on the target nature of the goods shipped, theft is very likely your next concern, along with damage during transit arising from rough handling or improper packaging. If your goods spend any time at terminals while en route, your biggest concerns there are likely fire and theft. Specific steps you can take to protect cargo are listed in Transportation Checklist (Appendix F4).
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