ISO MAIL COVERAGE FORM ANALYSIS

(August 2018)

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INTRODUCTION

The Insurance Services Office (ISO) Mail Coverage Form insures valuable contents of letters and packages being sent by eligible financial institutions via First Class Mail, Certified Mail, United States Postal Service Express Mail, or Registered Mail.

Property is covered while in the care, custody, or control of a government postal service and while in transit by common carrier or messenger to or from the government post office.

ELIGIBILITY

The types of businesses eligible to use this coverage form are limited to only the following:

Banks, bankers, trust companies, insurance companies and security brokers can purchase this coverage
Investment corporations when their business is primarily fiduciary
Corporations that act as security transfer agents or registrars for their own security issues

This form cannot be used for single specific or special trip shipments.

POLICY CONSTRUCTION

ISO Mail Coverage requires at least these six forms:

CM DS 02–Commercial Inland Marine Declarations
IL 00 17–Common Policy Conditions

CM 00 01–Commercial Inland Marine Conditions

CM DS 10–Advisory Mail Coverage Declarations
CM DS 11–Advisory Mail Coverage–Reporting Declarations
CM 00 60–Mail Coverage Form

Note: Mail coverage may be issued as a stand-alone, monoline inland marine policy or as part of a commercial package policy.

CM DS 10–ADVISORY MAIL COVERAGE DECLARATIONS

CM DS 10–Advisory Mail Coverage Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Limits of Insurance

A. First Class Mail and Certified Mail

Separate limits of insurance for Any One Shipping Package and to Any One Addressee on Any One Day must be entered in the spaces provided for the following:

Covered property that is sent between the named insured's offices, between the named insured's offices, and banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations, or corporations that act as transfer agents or registrars for their own securities issues
Covered property that is sent from the named insured's office to parties other than those indicated above. This item does not include negotiable securities as covered property. As a result, values for them should be excluded.

B. United States Postal Service Express Mail

Separate limits of insurance for Any One Shipping Package and to Any One Addressee on Any One Day must be entered in the spaces provided for the following:

Covered property that is sent between the named insured's offices, and between the named insured's offices and banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations, or corporations that act as transfer agents or registrars for their own securities issues
Covered property that is sent from the named insured's office to parties other than those indicated above.

In Any One Shipping Package sub-limits are required under each of the above for Non-negotiable Securities, Detached Coupons, and All Other Covered Property.

C. Registered Mail

Separate limits of insurance for Any One Shipping Package and To Any One Addressee on Any One Day must be entered in the spaces provided for the following:

All Covered Property except bullion, currency, and other property that is described in Paragraphs A. 1. d. and
A. 1. e. in the coverage form
Bullion, currency, and other property described in Paragraphs A. 1. d. and A. 1. e. in the coverage form

A Separate entry must be made in the spaces provided for the most paid for all Covered Property sent in Any One Shipping Package and To Any One Addressee on Any One Day.

Reports and Premium

This information is provided on CM DS 11–Mail Coverage–Reporting Declarations

Negotiable Securities Sent Under Air Bill

If CM 60 09–Negotiable Securities Sent Under Air Bill is attached, the name of the carrier must be entered in the space provided.

Special Provisions

Any special provisions are entered in the space provided.

CM DS 11–ADVISORY MAIL COVERAGE–REPORTING DECLARATIONS

Because of different types of property being covered and the different types of mailing, there are a number of different rates that must be shown. This separate declarations provides the needed detail.

CM DS 11–Advisory Mail Coverage–Reporting Declarations contains the following information:

Policy Number

The policy number is entered in the space provided.

Effective Date

The effective date of coverage is entered in the space provided.

Deposit Premium

The deposit premium subject to reporting and adjustment is entered in the space provided.

Annual Minimum Premium

The minimum retained premium is entered in the space provided. This premium applies regardless of the number or value of mail shipments made.

Reporting Period

The annual, monthly or other reporting period that applies is selected by checking the box that matches the reporting period selected.

Rates per $1,000

1. First Class Mail, Certified Mail, and United States Postal Service Express Mail

a. The rates entered for each of these mail categories apply to property sent within and between places in the United States of America. The rates do not apply to property being sent to or from Alaska or Hawaii. Each category has different rates for Non-Negotiable Securities, Detached Coupons, and All Other Covered Property. The following are the two types of covered property:

Property sent between the named insured's offices, between the named insured's offices, and banks, trust companies, insurance companies, securities brokers, investment firms or corporations, stock clearing corporations, or corporations that act as transfer agents or registrars for their own securities issues
Property sent from the named insured's office to others other than above

b. This area has a space to enter rates for described types of delivery.

2. Registered Mail

a. The rates entered for this mail category apply to property sent within and between places in the United States of America. The rates do not apply to property being sent to or from Alaska or Hawaii. A separate rate that applies to property that is sent within Alaska can be entered in the spaces provided. The following are the four types of covered property:

Non-Negotiable Securities
Bullion and Other Property Described in Paragraph d. under Covered Property
Currency and Other Property Described in Paragraph e. Under Covered Property
All Other Covered Property

b. This area has a space to enter rates for described types of delivery.

Special Provisions

Any special provisions are entered in the space provided.

Types of vehicles used to transport property this coverage form insures

CM 00 60–MAIL COVERAGE FORM ANALYSIS

Note: This analysis is of the 03 10 edition. Changes from the 09 04 edition are in bold print.

Introduction

CM 00 60 opens by stating that certain provisions restrict coverage and encourages the named insured to carefully read the policy to understand what is covered, what is not covered, and to determine its rights and duties. It highlights that the insurance company uses the terms you and your to refer to the named insured that is shown on the declarations and the terms we, us, and our to refer to the insurance company that provides coverage.

It also directs attention to Section E–Definitions because understanding the special terms in the policy is critical to understanding the coverage and exclusions that apply.

A. Coverage

The insurance company pays for direct physical loss or damage to covered property from a covered cause of loss.

1. Covered Property

The property in paragraphs a-e below is covered but only if both of the following apply:

The named insured recorded them for insurance under this coverage form before any loss or damage occurred
There is a limit of insurance on the declarations for the type of mail involved

The types of mail are First Class Mail, Certified Mail, United States Postal Service Express Mail, and Registered Mail.

a. Securities, bonds, stock certificates, and certificates of deposit

b. Coupons but only those that have been detached from bonds

c. Postage and revenue stamps, postal and express and other types of money orders, checks, drafts, notes, bills of lading, warehouse receipts and other commercial papers. Coverage also applies to other documents and valuable papers. However, food stamps, unsold travelers checks, and currency are not covered.

d. Bullion, platinum, and other precious metals are covered property only when sent by Registered Mail

e. Currency, unsold travelers checks, food stamps, jewelry, watches, precious and semi-precious stones, and similar valuable property are covered property only when sent by Registered Mail

Note: Property this coverage form insures is significantly different than property that almost all other commercial property coverage forms and policies insure. The property covered is narrowly defined and only a select few classes of business are eligible to use it.

2. When Coverage Applies

Insurance applies to covered property while it is in a government postal service's care, custody, or control and also while it is in transit by common carriers or messengers to or from government post offices. Property remains covered until one of the following occurs:

a. It is delivered to the addressee at the address on the package.

b. It is delivered at the proper address. This applies when a non-delivery occurs because of an error in the address or because the address had been removed.

c. it is returned to the sender because it cannot be delivered.

Coverage does not apply to property when it is on the premises of any mail-receiving agency.

3. Property Not Covered

There is no coverage for the following property:

Contraband. These are goods that are illegal to possess or that are legal but are in the course of illegal transportation.

Example: Friendly Investments is sending bullion and jewelry received from a local drug dealer in Indianapolis to her supplier in Austin. There is no coverage when a fire occurs, and the federal government determines that the contents were being used in the furtherance of criminal activities.

4. Covered Causes of Loss

The covered causes of loss under this policy is direct physical loss or damage to the named insured's covered property. The only exceptions are those causes of loss that are listed and described in Section B. Exclusions.

5. Coverage Extension

Errors and Oversight

The insurance company forgives errors and oversights in the following very specific circumstances:

a. When, through an error or an oversight, the value of a mailing was recorded incorrectly, that property’s actual value will be paid but no more than the limit of insurance on the declaration for that property and the type of mail used. The named insured is required to notify the insurance company promptly after it discovers the error or oversight and record the correct value.

Example: Homestead Bank sends some stock certificates by registered mail but records an older lower value, not their actual market value on the date they are sent. Homestead discovers the error and notifies the insurance company two days later. This prompt notification proves wise because the certificates are never delivered, and all efforts made to track them down fail. Even though the incorrect value was initially recorded, the loss was valued on the higher correct figure.

b. When the value of covered property in one shipping package is higher than the limit on the declarations for that type of mail, the most paid for loss or damage is no more than the proportion that the insurance limit bears to the actual value of the property on the date it was mailed.

Note: This is similar to a coinsurance penalty.

Example: Homestead Bank is having a bad week. It sends another batch of stock certificates in a single package to save mailing costs but does not calculate the aggregate value of the certificates and compare it to the limit per shipping package on the declarations. The shipment is partially destroyed, and the value of the items destroyed is $60,000. The limit on the declarations is $50,000 and the package’s value is $100,000. Homestead receives $50,000/$100,000 X $60,000 = $30,000 and thereby sustains a $30,000 penalty for not purchasing the correct limit.

B. Exclusions

The causes of loss do not apply to loss or damage caused directly, indirectly, or in any sequence in a chain of events that contribute to the loss. Exceptions to the chain of events condition are stated in the specific exclusion subpart. Coverage form wording emphasizes that coverage for any loss event described in these exclusions does not apply even if the event is widespread.

1. Governmental Action

Coverage does not apply if the government seizes or destroys property. This exclusion has an exception. Coverage applies to loss or damage due to such ordered acts of destruction at the time of a fire in order to prevent the fire's spread. The exception applies only if the insurance provided by this coverage form covers the fire.

Example: Friendly Investment’s bullion and jewelry that was salvaged following the fire loss was seized by the government. There is no coverage for Friendly Investment’s loss due to governmental action.

2. Weapons

Loss or damage that is caused by or is the result of mines, torpedoes, or any weapon that uses atomic fission or fusion is excluded.

3. War and Military Action

This exclusion lists three specific warlike activities that are excluded.

War. This can be a declared, an undeclared, or a civil war.
Military force of a warlike nature. These activities must utilize military personnel or agents of a government or other type of authority. The actions taken to thwart any of these activities are also considered war.

There is an exception to this item in the exclusion. Direct loss or damage that is caused by fire, explosion, stranding, heavy weather, or collision with aircraft, rockets, or missiles, or fixed or floating objects, other than mines or torpedoes is covered as long as if warlike action does not contribute to these causes of loss.

Insurrection, rebellion, revolution, and attempts to usurp power.

Any government action taken to respond to such actions is also considered war.

Note: As opposed to all other inland marine and commercial property coverage forms and policies, these are the only exclusions. This means that the coverage provided is probably the broadest of any insurance coverage form or policy on earth. As a result, nearly every legitimate loss is covered, subject to following proper mailing procedures, keeping records, and reporting losses.

C. Limits of Insurance

The limits on the declarations are the most paid for loss or damage in a single occurrence.

D. Additional Conditions

1. Valuation

This condition replaces General Condition F. Valuation in CM 00 01–Commercial Inland Marine Conditions.

This condition is specifically for mail coverage. Because covered property lost may not be replaceable, this valuation clause also details what happens if such a loss occurs.

a. Property is valued at its actual value on the date of mailing which is not permitted to be less than its market value.

b. The following apply if loss or damage occurs:

The insurance company provides the bond or indemnity needed to reissue or duplicate the covered property on the registered owner’s behalf after it receives the proof of loss from the named insured. If the owner subsequently finds or recovers the property, the recovered property must be returned for cancellation. In all other circumstances the insurance company obtains the named insured's rights of recovery against the property's owner.
The named insured may be required to deliver the covered property and cannot wait for it to be reissued. In that case, the insurance company pays the following:

The cost of similar property the named insured purchases in available markets
Postage and mailing costs
Any loss of interest that would have been earned between the date of mailing and the date similar property is purchased, if it was not already included in the value recorded for that mailing

There are cases where the covered property cannot be reissued or duplicated, and equivalent property is not available for purchase. The insurance company will then pay the following:

The covered property’s value as of the date of loss or damage
The postage and insurance charges for the mailing
Any loss of interest that would have been earned as of the date of mailing that was not already included in the value recorded for that mailing

The insurance company does not pay more for any loss or damage than 125% of the recorded value for bonds, stock certificates, certificates of deposit, and other securities or the value the named insured recorded for all other covered property. It pays the named insured or other parties the named insured directs it to pay. All rights, title, and interest in the covered property then transfer to the insurance company.

Note: The valuation conditions, steps, and procedures followed after a covered loss occurs are unique to this coverage form. The named insured and its insurance agent should review these together carefully to avoid any misunderstanding or misconceptions concerning this area when or if a loss occurs.

2. Cancellation

This condition is added to the Common Policy Cancellation Condition.

If coverage is cancelled, this insurance covers all mailings of covered property made up to the date and time of cancellation.

Example: Homestead Bank sent out a number of mailings on July 30. Its coverage was cancelled on July 31. All packages mailed are covered even though many will not reach their destinations until August.

3. Duties In The Event of Loss

This condition is added to Loss Condition C., Duties in the Event of Loss in CM 00 01–Commercial Inland Marine Conditions.

The proof of loss that the named insured submits to the insurance company must include the following:

Proof of its interest in the property
An affidavit of mailing
An affidavit by the addressee of non-receipt, as well as one by the owner if the company requests
The receipt of any government postal service for the mailing (if applicable)

Note: These duties and the proof of loss are unique to this class of business and the type of property insured.

4. Loss Payment

This condition replaces Paragraph 5. of Loss Condition E. Loss Payment in CM 00 01–Commercial Inland Marine Conditions.

The insurance company pays for covered loss or damage within seven days after it receives the sworn proof of loss subject to both of the following:

The named insured complied with all the coverage form’s terms
There was an agreement between the named insured and the insurance company or an appraisal award was rendered

Note: The insurance company has up to 30 days to pay covered losses after it receives a properly executed proof of loss in most other property and inland marine coverage forms. The unique nature of this coverage and the circumstances that surround losses makes the time requirement much shorter.

5. Other Insurance

This condition replaces Loss Condition F. in CM 00 01–Commercial Inland Marine Conditions.

Other insurance or indemnity may be available that covers the same loss or damage on the same basis. In that case, the insurance company pays only it’s pro rata share, subject to the following two exceptions:

The loss or damage may be due to theft by employees of senders or addressees. In that case, the insurance company will pay only in excess of the amount that the other insurance or indemnity covers. This applies whether or not the insured is able to collect that other insurance.
The loss or damage may be due to a cause other than theft by employees or sender or addresses. If blanket bond coverage is available for that loss, this insurance is considered primary and the insurance company has no recourse against that bond because this coverage form is primary.

6. Additional Conditions

These conditions are in addition to those in IL 00 17–Common Policy Conditions and CM 00 01–Commercial Inland Marine Conditions.

IL 00 17–Common Policy Conditions

CM 00 01–Commercial Inland Marine Conditions

a. Coverage Territory

The coverage territory for First Class Mail, Certified Mail, and United States Postal Service Express Mail is within and between places in the United States of America, Puerto Rico, Canada, the United States Virgin Islands, and other United States territories and possessions. For Registered Mail, the territory is between places anywhere in the world.

Note: This territory is slightly larger than other inland marine forms for most types of mail and significantly larger for registered mail.

b. Records

The named insured must keep accurate records of all covered property that is mailed, and the recording must take place before any loss or damage occurs. Records must include a description of the covered property, its final destination, and the type of mail used. They must also include the value of the property in each shipping package that this coverage form insures.

Note: Refer to 5. Coverage Extension, Errors and Oversight above for an exception to the requirement that the recording of covered property must take place before the loss or damage occurs.

c. Reports and Premium

Reports must be submitted to the insurance company within 30 days after the end of the reporting period on the declarations. The reports must include the total values of all covered property sent during the reporting period. They must also include the values for each different type of property and type of mail that has a rate on the declarations.
Rates and premium

The insurance company calculates the premium for each reporting period using the rates on the declarations.
Premium adjustment is based on the reporting period on the declarations. If the period is annual, the insurance company applies the total earned premium due against the deposit premium. If the earned premium exceeds the deposit, the named insured must pay the difference. If the earned premium is less than the deposit, the insurance company returns the difference to the named insured.

If any other reporting period is used, the company applies the earned premium to the deposit until it is used up. After that, the named insured pays additional premium earned for each reporting period. Such additional premium must be paid by the due date on the billing statement.

The named insured does not pay less than the minimum annual premium on the declarations.

The following applies if this coverage is cancelled:

The named insured is required to promptly report to the insurance company the total values of all covered property sent up to the date and time of cancellation. It then calculates the premium according to the coverage form's terms and conditions.
The named insured must pay a minimum premium equal to at least 1/12th of the minimum annual premium on the declarations for each month or part of a month that coverage was in force.

E. Definitions

There is one definition.

Non-Negotiable Securities

This means securities that cannot be negotiated or converted to cash by unauthorized persons unless forgery is involved.

ENDORSEMENTS

ISO has developed six endorsements to use with the Mail Coverage Form.

CM 60 02–Flat Premium Per Shipping Package–First Class Or Certified Mail

This endorsement is available to limit coverage to only first class or certified mail and to provide a flat premium per package.

CM 60 08–Transfer Agents Mail

This endorsement modifies the coverage that CM 00 60–Mail Coverage Form provides by limiting coverage to a named insured acting as a transfer agent, registrar, trustee under indentures. It reduces mail coverage to only that needed by a transfer agent.

CM 60 09–Negotiable Securities Sent Under Air Bill

This endorsement modifies coverage the Mail Coverage Form provides. The insurance company pays for loss or damage to negotiable securities sent under the air bill of any carrier listed on the declarations. Coverage applies to only property sent between places in the United States but does not cover property that is sent to or from Alaska or Hawaii. The property’s actual value on the sending date must be declared to the carrier. However, the value declared cannot be less than its market value.

CM 60 10–Securities Sent By the United States Treasury Department–Registered Mail

This endorsement modifies coverage that the mail coverage form provides. The insurance company pays for loss or damage to securities sent by the United States Treasury Department or any other agency or corporation of the United States government to either the named insured or its customers if the named insured directs it to do so. Coverage does not apply if the customer insured the mailing. Only property sent by Registered Mail is covered. In addition, the named insured must record all property that this endorsement covers before any loss or damage occurs. If property was sent without the named insured's knowledge, it must record the mailing as soon as possible after learning that it was sent.

CM DS 13–Advisory Transfer Agents Mail Declarations

This is used when CM 60 08–Transfer Agents Mail Endorsement is attached to CM 00 60–Mail Coverage Form.

CM DS 14–Advisory Flat Premium Per Shipping Package Declarations

This is used when CM 60 02–Flat Premium Per Shipping Package–First Class Or Certified Mail is attached to CM 00 60–Mail Coverage Form.

UNDERWRITING CONSIDERATIONS

Operational controls over mail shipments and the methods used are the main underwriting considerations. The named insured's record keeping must be disciplined and rigorous in order to facilitate accurate rating and loss reporting. Tracking lost packages depends on the accuracy of the record keeping program and procedures.