(August 2018)
This is a mandatory form that must be included on all Insurance Services Office (ISO) commercial inland marine policies. It contains both General Conditions and Loss Conditions. This form may also be used with independent coverage forms developed by individual insurance carriers.
Every ISO commercial inland marine policy must contain the following forms:
Related Articles:
ISO Filed Inland Marine Coverage Forms Overview
ISO Non-filed Inland Marine Coverage Forms Overview
A. Abandonment
The named insured may decide that they want to just give title or the damaged property to the insurance company, take their money and run. The insurance company might have a different idea. It is the insurance company’s option to take the property or not and that is why the named insured cannot abandon the property by giving all rights to it to the insurance company.
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Example: A ten-ton bulldozer flips over, rolls down a steep grade, lands in a creek bed, and begins to leak oil. Under these circumstances, Bob’s Bulldozer Services might be tempted to admit that this is a total loss, take the insurance proceeds, and turn the problem over to Not Taking Any Bull Insurance Company to handle. However, Not Taking Any Bull may prefer that Bob continue to be responsible for both the pollution situation and removing the bulldozer from the creek bed. The decision on how to act in a case like this is at Not Taking Any Bull’s discretion. |
B. Appraisal
Insurance companies control most aspects of the loss handling process, but this condition inserts some rights for the insured. If the insured and the insurance company do not agree on the value of the property there is a method written into the policy to solve the differences. First, the party who disagrees – normally the insured – notifies the other party. At this point, each side finds its own appraiser who must be both competent and impartial. These two appraisers then choose an umpire. If they cannot agree on an umpire they can go to a judge who has jurisdiction and ask him to choose an umpire.
Each appraiser then develops an independent valuation. They submit items on which they disagree to the umpire. Any decision on which two of the three agree is binding.
This is not a free situation. The insured must pay for its own appraiser and its share of the costs of the arbitration procedure. The insurance company pays for its appraiser plus its share of the arbitration expenses.
Related Court Case: Insurer Must Accept Decision of Its Approved Umpire
Note: This process is only to determine the value of the property. The insurance company may accept the value and still deny the loss because it is not a covered loss, or it is not covered property.
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Example: Nit Picky Insurance Company values Ed's total loss at
$75,000 but Ed thinks the value is closer to $200,000. He tells Nit Picky that
he wants to exercise his rights under the appraisal condition. Nit Picky’s
appraiser and Ed’s appraiser do not have a problem selecting and agreeing on
an umpire and the process begins. The appraisers agree on the value of 90% of
the items but encounter one major obstacle. They submit the difference to the
umpire who considers the opinions of both appraisers. The umpire agrees with
the value that Nit Picky’s appraiser determined and the total amount of the
claim remains at $75,000. Ed must pay all of his
appraiser’s expenses as well as his share of the costs and expenses of the
process from his own funds. |
C. Duties In The
Event Of Loss
When a loss happens, the insured cannot decide to be an innocent bystander or victim and just let the insurance company take care of everything. There are duties to be met and if they are not met, the claim can be denied, either in whole or in part. The duties are not burdensome and are those that a reasonable person should be expected to handle.
The named insured must do all of the following:
1. Notify the police or other law enforcement authorities. This is required only if a law may have been broken.
Note: This may appear to be logical, but the named insured may resist doing so because the loss may implicate a trusted employee, or another favored individual. The named insured might want to simply collect the insurance proceeds and just forget the details. However, law enforcement must be notified if the named insured wants the insurance company to pay the claim.
2. Let the insurance know promptly about the loss and include a description of what is involved.
Note: Prompt notice is not a complete and thorough report but instead provides enough information for the insurance company to begin to process the claim and make decisions about how to respond. Courts have debated the term "prompt" in several cases and decisions and they generally take a reasonable approach to interpret the meaning of the term. Delays of a few days because of trauma or emotional stress are generally acceptable but longer delays are more questionable and may work to the named insured's disadvantage.
3. As soon as possible, describe how, when, and where a loss occurred.
Note: This requirement is slightly different than the prompt notification obligation. The insurance company cannot make decisions on whether or not coverage applies without these details. Any loss that is not reported promptly or that lacks details simply slows down the process and leads to unnecessary delays in reaching the final settlement.
4. Take reasonable actions after a loss to protect covered property from any further damage. In addition (and if possible), separate the damaged property from the undamaged property and set it aside for the insurance company to examine. Because the insurance company will pay for the cost to protect the property from further damage, records should be kept to be reimbursed. These expenses must be reasonable, and they are not in addition to the limit of insurance that is available to pay the loss.
If the insured does not take such reasonable action, further damage that
could have been prevented by such action is not covered.
5. Not make any payments, assume any obligations, or incur any expenses on behalf of the insurance company unless consent of the insurance company had been granted.
Note: If the named insured makes payments or assumes obligations or expenses without the insurance company’s permission, the company is not obligated to honor those commitments and reimburse the named insured. In those cases, the named insured alone is responsible for the commitments or payments it made.
6. Give the insurance company the opportunity to review and copy books and records concerning the lost or damaged property. The insurance company must also be allowed to examine the damaged property and take samples for examination and testing, as needed. All requests must be reasonable.
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Example: Mary, the Helpful Carrier adjuster, is a night owl. She
contacted Melissa at 2:00 AM and demanded that she be permitted to come to
her store at 4:00 AM so that she could inspect and copy her account
receivable records. Mary considered this reasonable because all employees
would be away at the time and she would not disrupt Melissa’s business
operations. Melissa considered this highly unreasonable because she would be
forced to open the business and arrange for someone to be on premises to
answer questions and provide basic clerical support. |
7. Allow the insurance company to question or examine any insured under oath. Only questions that relate directly to the insurance claim are permissible. The questioning can include the way in which the named insured maintains its books and records. In the event of an examination, the answers to the questions are recorded and the named insured must sign them.
Note: This is usually done when the insurance company suspects fraud. Insurance companies prefer to believe the named insured. However, the sheer number of fraudulent claims requires the company to do whatever it believes is necessary to best evaluate the situation and reveal any problems.
8. Send a signed
and sworn proof of loss to the insurance company using supplied forms within 60
days after the insurance company requests it.
9. Send the insurance company copies of any legal documents that relate to
the specific claim immediately.
Note: The need for immediate action is critical because many documents are time sensitive and require a reply. Serious consequences could occur if the named insured does not meet the response or action date. The sooner the insurance company receives the documents, the sooner it can act and respond.
10. Cooperate with the insurance company as it investigates, adjusts, and settles any claim.
Related Court Case:
Uncooperative Insured Can't Seek Arbitration (Classic)
131_C113, Insured's Failure to Cooperate Relieved Carrier of Its Obligation to Pay Claim
D. Insurance under
Two or More Coverages
Sometimes a particular item might be covered under more than one coverage on the policy. If that is the case, the most that will be paid is the actual amount of the loss.
Note: Insurance is not a lottery – it is a policy of indemnity and the insured is to be made whole – not new and improved.
E. Loss Payment
The insurance
company is in charge as to how it pays a loss but there are obligations as to
how it responds, and it must meet those obligations just as the insured had to
meet its. Just as all insureds are not created equal, some insurance companies
do not always operate in the best interest of their insureds. This section
outlines the obligations put in place to protect some of the insured’s rights.
1. The insurance company has 30 days after it receives the sworn proof of loss to tell the named insured what it plans to do with respect to the loss.
2. The insurance company pays no more than the named insured's financial interest in the covered property.
Note: If the named insured owns only 50% of certain covered property, it receives only 50% of the loss payment.
3. The insurance company has the option to settle directly with another party that has a financial interest in the covered property. The payment cannot be for more than that party’s financial interest in the covered property. If the insurance company pays the other party, that payment satisfies the named insured's claim against the insurance company for the owners' property.
4. The insurance company has the option to defend the named insured against suits that arise from loss or damage to covered property claims that the property’s owner brings. If the insurance company decides to defend, it does so at its own expense.
5. This differs from item 1 in this section in
that the insurance company actually must pay the loss
within 30 days after it receives the sworn proof of loss. Item 1 only required
that notification be provided as to intentions.
However, the payment promised in this item is subject to both of the
following:
· The named insured must have complied with all terms of the coverage form or policy
· The value of the loss must have been determined. The value could have been arrived upon through an agreement with the named insured or through the appraisal award process.
6. If another party paid for loss or damage to covered property, the insurance company is not obligated to pay for the same loss or damage.
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Example: Paul’s camera is in Jack’s store for repair. A fire occurs. Jack’s insurance company agrees that coverage is available for Paul’s camera while in Jack’s store, but Paul has a personal camera floater on the camera. Because Paul’s insurance company pays Paul, Jack’s insurance company does not pay Paul because that would result in Paul benefiting from the loss and not merely being indemnified. |
F. Other Insurance
1. Other insurance that
applies to a loss may be written on the same basis as this insurance. In that
case, the insurance company pays only its share of the covered loss or damage.
Its share is in the same proportion that its limit bears to the limits of all
other insurance that cover on the same basis.
2. Other insurance that applies to a loss may be written on a different basis than this insurance. In that case, the insurance company pays only the excess of the amount the named insured should receive from the other insurance, whether it can be collected or not. However, it does not pay more than the limit of insurance.
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Example: Harvey's Emporium purchases Valuable Papers and Records coverage from Marine Insurance Company. The limit of insurance is $100,000. Harvey's property coverage has an extension of coverage with a $1,000 limit on Valuable Papers and Records. A $10,000 loss occurs that both policies cover. Marine Insurance Company waits for the property coverage to pay the first $1,000 of the loss before it responds and pays the remaining $9,000. |
G. Pair, Sets, or
Parts
1. If
any part of a pair or set is lost or damaged the insurance company will pay to
either restore the damaged item to the value before the loss OR it will pay the
difference between the value of the pair or set and the value of individual
items that remain.
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Example: A covered cause of loss damages a dining room set during shipment. The table is scratched but can be repaired. However, three of the six chairs are totally destroyed. The set is made of wood from a single tree and is quite unique in this respect. The set is valued at $50,000 but its value diminishes to $20,000 after the loss. The insurance company pays the $30,000 difference in value due to the loss of the three chairs. |
2. If there is loss or damage to any part of covered property that consists of multiple parts, the insurance company will pay only for the value of the particular part that was lost or damaged.
H. Recovered Property
If the insurance company or the insured recovers any of the lost property, the other party must be notified. The insured has the right to keep the property but only if any settlement that has been paid is returned. The insurance company is responsible pay for all recovery expenses but only up to the limit of insurance.
I. Reinstatement of
Limits after Loss
The limit of insurance is automatically reinstated after a covered loss is paid. The only exception is when there is a total loss of a specific item of property at which point, the insurance limit is reduced to reflect the deletion of that item and any unearned premium is refunded to the insured.
J. Transfer of Rights
of Recovery
The insurance company obtains the named insured's rights of recovery against others that may be responsible for a loss but only after the insurance company it pays for loss or damage to that property. The right of recovery against others is limited to the amount of the claim payment made. The named insured must do everything it can to protect those rights and not do anything after a loss to affect or reduce those rights.
Circumstances can arise where the named insured may waive rights of recovery against others without negatively affecting the insurance coverage. The named insured can waive rights of recovery against any other party without impacting coverage if it is done so prior to a loss. Once a loss occurs, rights of recovery may be waived only under either of the following two circumstances.
Related Court Cases:
Property Owner's Waiver of Subrogation Barred Action
Subrogation Right of Insurer Held Not Enforceable Against Officer of Insured Corporation
Waiver of Subrogation In Alarm Monitoring Service Agreement Barred Carrier From Recovery
A. Concealment,
Misrepresentation, or Fraud
The insurance company trusts and relies on the named insured’s statements and issues the policy and adjusts claims based on those statements. Coverage is void if the named insured commits fraud or intentionally conceals or misrepresents any material fact at any time with respect to this coverage, the covered property, its interest in the covered property, or a claim that this insurance covers.
Related Court Cases:
Insured's Material Misrepresentation In Application Warranted Denial Of Coverage
Misrepresentations Voids Entire Policy
B. Control of
Property
The named insured is not responsible for acts or neglect by any party that is not under its control or direction and the insurance coverage is not affected by those acts. If the named insured disregards any policy condition at one location, coverage at other locations is not affected provided that it did not violate the same condition at those locations.
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Example: Both of Alex's locations are equipped with automatic sprinkler systems. He inadvertently lets the service contract with the installing company lapse at his main location. A fire occurs at his other location and the sprinkler system quickly controls it. Although the system at the main location was no longer in proper service, the loss at the second location was fully covered because that system was not affected or impaired by the lapse at the main location. |
C. Legal Action against
Us
The named insured may be dissatisfied with the insurance company's actions in handling a claim. However, it cannot bring legal action against the company until and unless it has complied with all the coverage form or policy’s terms and conditions. In addition, the legal action must be initiated within two years after the named insured first knew about the loss or damage.
Note: The time to bring legal action is different in certain states because of specific legislation. In those cases, the state's requirements supersede and replace these requirements.
D. No Benefit to
Bailee
This insurance coverage is written for only the named insured’s benefit. No other person, organization, or bailee that has custody of covered property benefits from this insurance.
E. Policy Period,
Coverage Territory
The insurance company pays for only insured losses or damages to covered property that take place during the policy period and that occur within the defined coverage territory.
F. Valuation
The insurance company pays the least of the following:
· The property's actual cash value
· The cost to restore the property but only to the condition is was in immediately prior to the loss
· The cost to replace the damaged or destroyed property with similar property
The value of covered property is not determined at the time insurance is purchased but instead is determined at the time of loss or damage.
Note: This valuation condition is often altered in the various
coverage forms and changes to it must be carefully reviewed.