Start Here: 5 Things You MUST Know
Filed Forms vs Unfiled Forms
Filed forms = Standard insurance forms that were submitted to and approved by state regulators. They have set rules, like a $250 deductible. Unfiled forms = Custom insurance designed for unusual or unique risks that don't fit standard forms.
Example: A jewelry store uses a "filed" Jewelers Block form (standard). A construction company needs an "unfiled" Contractors Equipment form (custom for bulldozers, cranes, etc.).
Contractors Equipment = Most Expensive Commercial Inland Marine
Of all the business equipment insurance policies, Contractors Equipment (bulldozers, cranes, excavators at construction sites) costs the MOST in premiums. This is because heavy equipment at job sites is very expensive and faces many risks.
F.O.B. = "Free On Board" (Who's Responsible During Shipping?)
When goods are shipped, someone has to be responsible if they get damaged. F.O.B. tells you who:
- F.O.B. Shipper's Location = The BUYER (receiver) is responsible once the truck leaves the warehouse. If it crashes, the buyer loses out.
- F.O.B. Destination = The SELLER (shipper) is responsible until it arrives at the buyer's door.
Think of it like this: "F.O.B. Shipper" = the moment it leaves the shipper, it's YOUR problem (the buyer's).
Common Carriers vs Contract Carriers
Two types of trucking/shipping companies:
- Common Carriers = Like UPS or FedEx - they'll ship for ANYONE. They have strict liability, meaning they're responsible for damage even if they didn't do anything wrong (unless it's an "Act of God" like a tornado).
- Contract Carriers = Private trucking companies that only work for specific clients under contracts. They're only liable if they were negligent (careless). If the driver was careful but an accident happened anyway, they're not responsible.
Commercial IM = EXCESS Over Other Insurance
If a Commercial Inland Marine policy and another policy both cover the same loss, the other policy pays FIRST. The Commercial IM policy only pays what's left over (it's "excess" or secondary coverage).
Example: A dry cleaner has a Bailee's Customer policy covering customers' garments. A customer's $2,000 coat is damaged. The customer also has a homeowner's policy covering their coat. The customer's homeowner's policy pays first. The Bailee's policy only pays any remaining amount.
Note: This applies to COMMERCIAL IM policies covered in this section - NOT Personal floaters like PAF (covered in Part 3A).
1. Commercial Inland Marine Conditions
These conditions are in addition to Common Policy Conditions. They apply specifically to commercial Inland Marine forms.
Abandonment
You can't say "this is too damaged, just take it and pay me full value." The insurer decides if it's repairable.
Other Insurance
If another policy covers the same loss, that policy pays FIRST. Commercial IM is excess (secondary).
Pair, Set or Parts
Lose one earring from a pair? They pay the drop in value, NOT half the set's price.
Privilege to Adjust with Owner
For businesses holding customers' stuff (dry cleaners, repair shops): the insurer can pay the ACTUAL OWNER directly instead of going through the business.
Reinstatement of Limit
After a claim, your coverage limit stays the same. One claim doesn't reduce how much coverage you have left.
Subrogation
After paying your claim, the insurer can sue whoever caused the damage to get their money back.
Valuation Condition
Value is determined by the LESSER OF:
ACV
Actual Cash Value
Restore
Reasonable Cost to Restore
Replace
Cost to Replace with Like Kind
Real-World Scenario: Pair/Set Condition
Setup: A jewelry store has a set of 4 matching antique bracelets worth $20,000 as a set. One bracelet is stolen.
Result: The insurer does NOT pay $5,000 (1/4 of set). Instead, they pay the difference in value - if the remaining 3 are now worth $8,000 instead of $20,000, the claim is $12,000.
2. Filed vs Unfiled Forms
FILED Forms
- - Standardized forms filed with regulators
- - Usually $250 deductible
- - Usually open peril basis
- - Commercial Property Causes of Loss forms NOT applicable
- - More predictable coverage terms
UNFILED Forms
- - Custom forms for unique exposures
- - May not require regulatory approval
- - Greater flexibility in terms
- - Regulations vary by state
- - Often for specialized/high-value risks
| FILED FORMS | UNFILED FORMS |
|---|---|
| Accounts Receivable | Contractors Equipment (HIGHEST PREMIUM) |
| Jewelers Block | Motor Truck Cargo |
| Valuable Papers and Records | Bailee's Customer |
| Signs (100% coinsurance) | Electronic Data Processing (EDP) |
| Equipment Dealers (80% coinsurance) | Installations Floater |
| Commercial Articles Floater | Annual Transit |
| Film Coverage | Trip Transit |
| Fine Arts Floater | Air Cargo |
Common Exclusions in Filed Forms
3. Key Commercial Coverage Forms
Accounts Receivable (FILED)
Covers losses of amounts due from customers that become uncollectable because A/R records are damaged or destroyed.
Unique: Unlike most IM, covers property at FIXED location. Must store records in described receptacle when closed. Records required for 3 years.
Valuable Papers & Records (FILED)
Covers cost to reconstruct documents - manuscripts, deeds, drawings, maps, mortgages, abstracts.
No coinsurance. Does NOT cover money, securities, stamps, or converted data (EDP covers that).
Contractors Equipment (UNFILED)
HIGHEST PREMIUM of all commercial IM! Covers mobile equipment (bulldozers, cranes, excavators) at job sites and in transit.
Automatic coverage for new equipment: Buy a new bulldozer? It's automatically covered for 60 days before you have to notify your insurer. Limit: 25% of your total policy limit or $50,000 (whichever is less).
Example: You buy a $40,000 skid steer at auction on Monday. It catches fire on Tuesday before you call your agent. Still covered! You have 60 days to add it to your policy.
Jewelers Block (FILED)
Covers dealer's own inventory AND customer property in their care. Optional transit coverage available.
NOT covered: Jewelry worn by insured/employees, items at trade shows without notification.
Bailee's Customer (UNFILED)
What's a Bailee? A bailee is someone who temporarily holds someone else's property. Think: dry cleaners holding your clothes, repair shops holding your car, or warehouses storing your furniture.
This policy covers customer property while it's in the bailee's care - if a fire destroys all the clothes at a dry cleaner, this pays to replace customers' items.
Warehouseman's form: Usually written as EXCESS over owner's insurance. "Privilege to Adjust with Owner" lets insurer settle directly with customers.
Signs (FILED)
Covers business signs: neon, fluorescent, automatic (digital/LED), and mechanical (moving parts, spinning) signs.
Why Inland Marine? Standard Commercial Property only covers $2,500 for outdoor signs. A custom neon restaurant sign could cost $25,000+ to replace - that's why you need this separate form.
100% COINSURANCE required! Must insure to full value.
Example: Joe's Diner has a $20,000 neon sign. Commercial Property pays only $2,500. The Signs form pays the full $20,000.
Commercial Articles Floater (FILED)
For businesses that USE cameras, musical instruments, or similar portable equipment - NOT dealers who sell them.
Who buys this? Photography studios, video production companies, bands, DJs, music schools, podcast studios - anyone with expensive portable equipment they use for business.
Automatic coverage: New equipment of the same type is covered for 30 days, up to 25% of limit or $10,000 (whichever is less).
Example: A wedding photography studio has $30,000 in cameras and lenses. They're covered at jobs, in the car, at the studio - anywhere.
Installations Floater (UNFILED)
For contractors installing equipment that will become a permanent part of a building - like HVAC systems, electrical systems, plumbing fixtures.
When is it covered? During transport to the job site, while being installed, and until the building owner accepts the work.
Coverage ends: When the work is completed and the owner accepts it - then it becomes THEIR property covered under THEIR insurance.
Example: An HVAC contractor is installing a $50,000 AC unit on a roof. While hoisting it up, the crew drops it. Installations Floater pays for the damaged unit.
Real-World Scenario: Bailee Coverage in Action
The Setup: Elite Dry Cleaners has 200 customer garments in the store (average value $150 each = $30,000 total). They have a Bailee's Customer policy.
What Happens: An electrical fire destroys the entire store including all customer garments.
The Result: The Bailee policy pays $30,000 for customer property. The "Privilege to Adjust with Owner" condition lets the insurer settle directly with each customer rather than paying the dry cleaner and hoping they reimburse customers.
4. Transportation Coverage
Types of Carriers (Shipping Companies)
Common Carriers
Who: Companies like UPS, FedEx, or freight trucking companies that ship for ANYONE who pays.
Liability: STRICT LIABILITY - they're responsible for damage even if they weren't careless. Only exceptions are extreme situations (tornado, war, etc.).
Contract Carriers
Who: Private trucking companies that only work for specific clients under written contracts (like Walmart's dedicated trucking partner).
Liability: Only liable if NEGLIGENT (careless). You must prove they did something wrong.
Private Carriers
Who: Companies shipping their OWN goods in their OWN trucks (like a bakery delivering its own bread).
Liability: No liability to others - they're moving their own stuff. Need "Motor Truck Cargo - Owner's Form" to protect their goods.
F.O.B. (Free On Board) - Who's Responsible If Goods Are Damaged During Shipping?
Key Terms: Shipper = the company sending the goods (seller). Consignee = the company receiving the goods (buyer).
F.O.B. Shipper's Location
The BUYER (consignee/receiver) owns the goods and is responsible for any damage once the truck leaves the seller's warehouse.
Translation: "Once it leaves my dock, it's YOUR problem." Buyer needs transit insurance!
F.O.B. Destination
The SELLER (shipper) owns the goods and is responsible until they arrive safely at the buyer's door.
Translation: "It's my problem until it reaches you." Seller needs transit insurance!
Memory Trick: F.O.B. stands for "Free On Board" - meaning "free of responsibility" once it's on board the truck at that location. So "F.O.B. Shipper" = the shipper is FREE of responsibility once the truck leaves!
Bills of Lading (Shipping Receipts)
A Bill of Lading is the receipt/contract you get when you ship something. It proves what was shipped and how much the carrier is responsible for if something gets lost or damaged.
Regular (Straight) Bill of Lading
The carrier is responsible for the full invoice value of whatever you shipped. You don't have to declare a value - they cover it all.
Example: You ship $10,000 of electronics. If lost, carrier pays $10,000.
Released Bill of Lading
You declare a lower value to get cheaper shipping rates. The carrier only pays up to that declared amount - even if the goods are worth more.
Example: Electronics worth $10,000, but you declare $2,000 for cheaper shipping. If lost, carrier only pays $2,000.
Real-world note: Most carriers today (UPS, FedEx, Old Dominion, etc.) use Released Bill of Lading by default - they limit liability to a per-pound rate unless you pay extra to declare full value. The "Regular Bill = full value" concept applies more to traditional freight contracts. For the exam: Know the textbook definitions!
Motor Truck Cargo Forms
Carriers Form (for Common Carriers)
- - Legal liability coverage
- - Covers cargo in their care
- - Covered until delivery
- - Up to 72 hours at unspecified location (see below)
Owners Form (for Private Carriers)
- - Direct damage coverage
- - For shipping own goods
- - Liability not a factor
- - First-party coverage
What's the 72-Hour Rule?
A Motor Truck Cargo policy lists specific terminals/warehouses where cargo is covered while stored. But what if the truck has to stop somewhere unexpected?
The 72-hour rule means cargo is still covered at an unscheduled/unlisted location for up to 72 hours (3 days). After that, coverage may stop or become limited.
Example: Old Dominion is hauling freight from NJ to California. The truck breaks down in Kansas and they leave the cargo at a random repair shop parking lot overnight. That parking lot is NOT on their policy, but the cargo is still covered for up to 72 hours while they fix the truck. This gives flexibility for breakdowns, weather delays, driver rest stops, etc.
Real-World Scenario: F.O.B. Determines Who Pays
The Setup: Acme Furniture (NJ) ships $100,000 of sofas to West Coast Retail (CA). Terms: F.O.B. Acme Factory (shipper's location).
What Happens: Truck overturns in Nevada. $40,000 of sofas destroyed.
Who Bears Loss? West Coast Retail (consignee) - because F.O.B. Shipper means title passed when goods left Acme's factory. West Coast should have had their own transit insurance!
Cheat Sheet: Commercial IM
Print for quick referenceFiled Forms Deductible
$250
Signs Coinsurance
100%
Equipment Dealers Coinsurance
80%
Cargo at Unspecified Location
72 hours
New Equipment Auto Coverage
60 days
Max New Equipment Coverage
$50,000
(or 25% of limit)
A/R Record Keeping
3 years
Newly Acquired (Comm Articles)
30 days
CP Outdoor Sign Limit
$2,500
HIGHEST PREMIUM IM FORM:
Contractors Equipment Floater (UNFILED)
OTHER INSURANCE CONDITION:
Commercial IM is EXCESS over other insurance
Exam Trap Alerts
1. F.O.B. Shipper's = CONSIGNEE Risk
F.O.B. Shipper means RECEIVER bears transit risk. Counter-intuitive but critical!
2. Common vs Contract Carrier
Common = STRICT liability. Contract = only if NEGLIGENT. Big difference!
3. Motor Truck Cargo ≠ The Truck
Covers the CARGO being transported, not the vehicle itself (that's commercial auto).
4. Commercial IM = EXCESS
Commercial IM pays AFTER other insurance covering same loss. This is a Commercial IM condition - don't confuse with Personal floaters!
5. A/R = Fixed Location Exception
Accounts Receivable covers property at FIXED location - unlike most Inland Marine!
6. Signs = 100% Coinsurance
Signs form requires 100% coinsurance (most others use 80% or none).
7. Reinstatement of Limit
Claims don't reduce limit EXCEPT total loss on a scheduled item.
8. Contractors Equipment = Highest Premium
Of ALL commercial IM forms, Contractors Equipment has the HIGHEST premium.
Quick Reference Summary
Filed vs Unfiled
Filed = $250 ded, standardized. Unfiled = custom
Contractors Equipment
HIGHEST premium - mobile job site equipment (Unfiled)
Valuation
Lesser of: ACV, restore, or replace with like kind
F.O.B. Shipper
Consignee (receiver) bears transit risk
Common Carriers
Strict liability for cargo
Other Insurance
Commercial IM is EXCESS