ISO Trip Transit Coverage Form

ISO TRIP TRANSIT COVERAGE FORM ANALYSIS

(April 2018)

 

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INTRODUCTION

The Insurance Services Office (ISO) Trip Transit Coverage Form is coverage for a single shipment of owned property that is being shipped from one point to another. Coverage begins when the carrier for hire takes possession of the property or the named insured's vehicle leaves the premises where the trip begins. It ends when the shipment arrives at the destination or it is returned to the starting point because it could not be delivered, or delivery was rejected.

POLICY CONSTRUCTION

Trip Transit Coverage requires at least the following six forms:

Related Article: IL 00 17–Common Policy Conditions Analysis

Related Article: CM 00 01–Commercial Inland Marine Conditions

IH DS 78–TRIP TRANSIT DECLARATIONS

The advisory Trip Transit Declarations does not have spaces for the named insured, its mailing address, other named insured information, the policy period, or the description of the insured business. That information is on the Common Policy Declarations. IH DS 78 contains the following information:

Insurance Company and Producer Name

The name of the insurance company that provides the coverage and the name of the agent or broker that produces the business are entered in the spaces provided.

Limit of Insurance

This section has a space to enter only the single limit of insurance that applies to the covered shipment.

Covered Property

This section has a space to describe the covered property being shipped.

Point of Departure to Destination

This section has spaces to enter the following:

Note: This date is not used when determining whether coverage applies. The policy inception and expiration dates are used instead.

Mode of Transportation Applicable

This section has boxes to check to indicate the mode of transportation used for the trip. The following are the selections available:

Deductible

This section has a space to enter the deductible amount that applies to each occurrence.

Premium

This section has a space to enter the premium charge for the shipment.

Special Provisions

Any special provisions are entered in the space provided.

IH 00 78–TRIP TRANSIT COVERAGE FORM ANALYSIS

This analysis is of the 12 13 edition. Changes from the previous edition are in bold print.

Introduction

This section encourages the careful reading of the entire coverage form to determine what is covered, what is not covered, rights, and duties. It defines we, us, and our as the insurance company that provides this insurance coverage. It also defines you and your as the named insured on the declarations. The reader is also pointed to the Definitions section because certain words or terms used in the form have a more broadened or restricted meaning.

 A. Coverage

The insurance company pays for direct physical loss or damage to covered property but only when that loss is from a covered cause of loss.

1. Covered Property

Covered property is the property that is described on the declarations.

Note: An unusual aspect of this coverage form is that there is no mention as to who must own the property or the relationship of the named insured to the property.

2. When Coverage Applies

The insurance company insures the covered property under the following circumstances:

a. Once the property is in the custody of the carrier or messenger for hire it is covered until it is delivered to its destination. If for some reason the property cannot be delivered, it is covered until it is returned to the named insured. When the property must be placed in temporary storage prior to its delivery or because it is going to be returned to the named insured coverage continues.

 

Example: Bubba’s Building Materials sells lumber and related materials directly to customers on a “cash and carry” basis most of the time. A customer occasionally makes a large purchase and requires that Bubba deliver it. Bubba does not have any vehicles suitable for such purposes and arranges for Curt’s Custom Contract Carriers to handle such shipments. Bubba uses the Trip Transit Coverage Form to insure the property from the time it leaves his premises until it is delivered to the destination. In this case, the shipment involves prefabricated wall panels for a frame office building under construction.

 

b. The property is also covered when the shipment is being made on the named insured’s vehicles. The start of coverage is when the vehicle leaves the location where the shipment begins and ends once it has arrived at the final destination.

3. Property Not Covered

The following property is excluded:

a. Accounts, bills, currency, deeds, securities, money, notes, or evidence of debt

Note: This property is a mix of property that should be covered under commercial crime, accounts receivable, and valuable papers coverage forms.

Related Article:

ISO Accounts Receivable Coverage Form Analysis

ISO Valuable Papers Coverage Form Analysis

ISO Commercial Crime Coverage Forms and Policies Analysis

b. Jewelry, costume jewelry, precious stones, semi-precious stones, gold, silver, platinum, or other precious metals or alloys, unless specifically scheduled

Note: Most of this property is more correctly written on Jewelers Block Coverage Forms and policies.

Related Articles:

ISO Jewelers Block Coverage Form

Jewelers Block Policy

AAIS Jewelry Dealers Coverage

ISO Jewelers Block Coverage Form

c. Live animals, unless specifically scheduled

Note: This property is usually excluded but coverage can be arranged under certain circumstances.

d. Paintings and other works of art, unless specifically scheduled

Note: This property is more correctly written on Fine Arts Coverage Forms and Policies.

Related Articles:

AAIS Fine Arts Coverage Forms

ISO Commercial Fine Arts Coverage Form

e. Contraband. Any property that is illegal for the named insured to own or that is in illegal trade or transportation is not covered.

Example: Martin hires Nation’s Best to transport his marijuana plants from Colorado to California. Careful instructions were provided to stay in states where marijuana was legal but a serious problem arose so the driver took a detour through Utah. The truck overturned and the plants were destroyed. At the time of the accident, possession of the plants was illegal from both federal and state law so coverage for the plants was denied because they were contraband.

 

4. Covered Causes of Loss

Covered causes of loss are direct physical loss or damage to covered property with the exception of causes of loss that are listed in the exclusions section.

B. Exclusions

1. Primary Exclusions

The first group of exclusions applies whether or not the loss event results in widespread damage or affects a significant geographical area and is essentially absolute. Subject to specific exceptions, each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or that results from any of these events.

a. Governmental Action

This exclusion applies to the legal and authorized seizure or destruction of property by a government entity’s order. There is one exception. Loss or damage that is caused when the governmental entity orders property to be destroyed is covered if used as a method to prevent a fire from spreading is covered. However, this exception applies only if the fire being contained would have been a covered fire under this coverage form.

b. Nuclear Hazard

Nuclear reaction, radiation, or radioactive contamination is not covered. There is an exception. If a fire results from the nuclear reaction, radiation or radioactive contamination there is coverage for the direct loss or damage caused by that fire.

c. War and Military Action

This exclusion lists three specific warlike activities.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or that result from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or that result from any of these events.

a. Denting, chipping, marring, or scratching

This is loss or damage to covered property caused by or that results from denting, chipping, marring, or scratching.

Note: This exclusion does not have an exception where these causes of loss are covered if certain specified causes of loss occur first as is the case with some other exclusions. As a result, this exclusion is functionally absolute, regardless of other causes of loss that may cause or contribute to any events that involve denting, chipping, marring, or scratching.

b. Delay, loss of use, and loss of market

These are consequential or indirect losses that develop as a result of a direct loss or damage.

c. Dishonest or criminal acts (12 13 changes)

These are any dishonest or criminal acts that the named insured, its partners, employees, temporary employees, leased workers, officers, directors, trustees, authorized representatives, or members and managers of a limited liability company commit.

Such acts committed by anyone with an interest in the property, their employees, temporary employees, leased workers, or authorized representatives who act alone or who act in collusion with other parties or with each other are also excluded. It also applies whether or not the acts take place during regular working hours.

d. Theft (12 13 changes)

Theft is excluded. There are two exceptions:

·       Covered property that has been entrusted to a carrier for hire is covered.

·       Theft of an entire shipping package is covered.

The 12 13 edition adds a limitation to the theft of an entire shipping package that it is still subject to B. Exclusions 2. Secondary Exclusions c. Dishonest or criminal acts and that the limitation applies regardless of when the theft occurs, whether during the named insured’s normal hours of operation or not.

 

Example: Bubba of Bubba’s Building Materials sent a small shipment of building materials to a customer.

Scenario 1: Curt’s Custom Contract Carriers consolidated with several other loads. The part of the load destined for a hospital was unloaded first. While Bubba’s driver reconciled the paperwork for that delivery, thieves used a forklift to remove all of Bubba’s building materials. The loss was covered because this exclusion did not apply to Bubba’s property that was in Curt’s custody.

Scenario 2: Bubba’s employee Jake does small deliveries for anyone on his own time using his own truck. Bubba asks Jake to do so for him and Jake takes the items and never returns. There is no coverage even though Jake was not working for Bubba at the time of the theft.

 

e. Neglect

Neglect on an insured’s part to do take reasonable measures to preserve and protect covered property from subsequent damage during and after the time of loss.

3. Other Exclusions

This group of exclusions applies to loss or damage caused by or that result from any of the following loss events. In every case, if loss or damage by a covered cause of loss occurs as a result of one of these excluded events, coverage applies to the loss or damage the resulting covered cause of loss causes. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Wear and tear, depreciation

This is loss or damage due to wear, tear, and depreciation.

Notes:

Wear and tear is damage, diminishment in value, or erosion due to long or hard use or exposure.

Depreciation is a loss of value due to wear.

b. Any quality in the property

These are any qualities in the property that cause it to destroy or damage itself.

Note: An example is a loss or damage caused by hidden or latent defects in the property.

c. Mechanical breakdown

This is loss or damage caused by or that results from machines, tools, or mechanisms failing to operate or function properly.

Note: There are many reasons this could happen and none are covered unless they are a direct result of a covered cause of loss.

d. Insects, vermin, or rodents

This is loss or damage to covered property caused by or that results from insects, vermin, or rodents.

Note: Some examples are damage from mice, rats, cockroaches, squirrels, beavers, spiders, ants, centipedes, and ticks. Each is characterized by destructive habits that cause damage, such as gnawing and nibbling.

e. Corrosion, rust, dampness, or extremes of temperature

This is corrosion or rust, dampness, or extremes of temperature that cause loss or damage to covered property.

Notes:

Rust and corrosion are low-temperature oxidation processes that result in deterioration over time due to inactivity or neglect.

Dampness and temperature extremes can affect the oxidation process that affects different forms of property and can have other effects on the same and other forms of property.

C. Limits of Insurance

The most the insurance company pays for loss or damage in a single occurrence is the limit of insurance on the declarations for the applicable coverage.

D. Deductible

The insurance company does not pay for loss or damage until the amount of adjusted loss or damage (before capping with the appropriate limit of insurance) exceeds the deductible on the declarations. It then pays the amount of the adjusted loss or damage that exceeds the deductible up to the applicable limit of insurance.

E. Additional Conditions

This condition is in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions.

Coverage Territory

The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. This includes property that is shipped by air within and between these points.

ENDORSEMENTS

ISO has not developed any specific endorsements for exclusive use with the Trip Transit Coverage Form. ISO has developed one other endorsement that can be used to respond to specific situations.

IH 99 19–Additional Covered Property

This endorsement is used to include coverage for types of property the coverage form excludes.

UNDERWRITING CONSIDERATIONS

Underwriting trip transit exposures involves analyzing the property shipped, the mode of transportation used, the originating location, the destination, and the trip’s duration. Coverage can be written on property transported by carriers for hire or by the named insured's owned vehicles. The trip may involve more than one carrier or mode of transportation. Shipments by the named insured’s owned vehicles are usually considered the most hazardous.

The loss potential for trip transit exposures is reduced if the named insured takes certain steps before the trip even begins. Professional packers or experienced employees should pack, load, and unload any property that is delicate, sensitive, or susceptible to damage from rough handling. Only reputable and financially solvent carriers for hire with the experience and capability to handle the shipment should be used. The named insured’s legal representative should review shipping documents to ensure that they are proper and in order. If the named insured controls the destination location, it should have its employees unload the shipment.

When carriers for hire are used, the potential to subrogate against them should be investigated. Common carriers have a different degree of liability for merchandise of others in their possession than do contract carriers. Contract carriers are liable only if they are negligent in connection with the loss or damage to the merchandise. Common carriers have a greater degree of responsibility and are liable for loss or damage except for acts of God, acts of the public enemy, exercise of public authority, fault, or neglect on the part of the shipper, and inherent vice or the nature of the property. Subrogation is not an option if the named insured transports property on its own vehicles.

The declarations requires only an approximate start date and an approximate end date. However, the policy must have a definite inception and expiration dates. These dates should be as generous as reasonably possible so that unexpected date changes do not result in having to cancel and rewrite the policy.

 

Example: Perry is shipping $50,000 in goods from a plant in North Carolina to one in Massachusetts.

Scenario 1: The shipment is due to leave on 09/01/18 and arrive on 09/05/18 but a hurricane is expected to make landfall around 08/30/18. Perry might have his policy incept on 08/28/18 and expire on 09/28/18 in order to accommodate any early departure or potential late arrival because of the storm.

Scenario 2: The shipment is due to leave on 12/12/18 and arrive on 12/15/18. A snowstorm is gathering and might hit Washington, DC around 12/11/18. Perry might have his policy incept on 12/08/18 and expire on 12/28/18 in order to accommodate any early departure and potential late arrival because of both the storm and potential holiday traffic difficulties.

 

If the property shipped is sold, the sales contract must be reviewed to determine when title passes and the purchaser becomes the owner. The two most common uniform sales contracts are Free On Board (F.O.B.) Point Of Shipment and Free On Board (F.O.B.) Point Of Destination. In the first, title passes when the merchandise is in the carrier for hire’s care, custody, or control and a clean bill of lading has been issued. In the other, title passes when the carrier for hire delivers the merchandise at the final destination.

Bills of Lading are contracts the carrier for hire issues as a receipt for the merchandise being shipped and as the contract for carriage of the property between the carrier for hire and the owner or shipper. There are four common types of Bills of Lading.

It is important to completely understand the nature and characteristics of the property shipped. The type, quality, and condition of the property must be assessed, its susceptibility and damageability determined, and the level of protection required evaluated. If the property is attractive to thieves, the degree of protection against theft and hijack must be determined. In some cases, using packing containers is a deterrent to reduce handling and pilferage losses. This includes the adequacy of the packing materials used with respect to loading and unloading in addition to their adequacy during the shipment itself.

The distance the shipment travels and the route it takes are also important. The longer it takes to complete a shipment, the greater the chance of a loss occurring. Shipments made on direct routes also fare better than shipments that take indirect or circuitous routes.

Other exposures and coverage opportunities may develop as a result of a one-time shipment. A shipment to an exhibition may be followed by a request for coverage at the exhibition site. Coverage may be needed for consequential loss or loss of use if a shipment is lost. Other insurance may also apply to the property shipped and it must be determined if this coverage is primary or excess.