Furriers Block Policy

FURRIERS BLOCK POLICY

(December 2016)

 

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INTRODUCTION

Furriers Block Policies are independent non-filed forms. Insurance Services Office (ISO) has a suggested coverage form for this class but it is not a filed or standardized policy used throughout the industry.

Related Article: ISO Furriers Block Coverage Form

A furrier’s block policy covers dealers of furs, fur garments, fur-trimmed garments, and related accessories, including property sold but not yet delivered. It also covers property of other dealers of such property or otherwise in the fur business for which the insured may be liable. The insured’s interest in such property for labor performed and materials expended on such property are also covered. Property is covered at the dealer's location, off premises, and in transit for all risks of direct physical loss or damage to covered property, except as limited or excluded.

 

POLICY CONSTRUCTION

A  Furriers Block Policy is constructed by using at least the following forms:

Note: This might be incorporated into the policy.

COMMON POLICY DECLARATIONS

A Common Policy Declarations usually includes the following information but is not necessarily limited to it:

FURRIERS BLOCK POLICY DECLARATIONS

A Furriers Block Policy Declarations might include the following information but is not necessarily limited to it:

This section has spaces to enter the limits of insurance for the primary coverages at the location or locations where coverage applies and for the coverages indicated.

FURRIERS BLOCK POLICY ANALYSIS

1. Warranty

This section states that the insured's signed and dated proposal is the basis for the coverage this policy provides. It also states that the insured warrants that each statement made or detail provided is true to the best of its knowledge.

Note: Warranties in inland marine insurance are usually more enforceable than warranties in other lines of insurance. They are especially enforced in the Furriers Block Policy. It can be voided if any statement on the proposal is false, untrue, or incorrect.

2. Limits of Liability

The most the insurance company pays as a result of any one loss, disaster, or casualty is the limit of insurance on the declarations for the following:

a. Property at the insured's specified premises

b. Property in transit by common or contract carrier or by registered mail

c. Property in the custody of merchants' parcel delivery services

d. Property at the premises of processors, dealers, sales agents, or similar custodians

e. Owned property while stored at custodians' premises other than as stated in d. above

f. Property elsewhere and not included above or otherwise limited

Note: Only item e. states that the property must be owned. This means that the other limits apply to both owned and non-owned property as described in Property Covered.

3. Deductible

The amount entered in the space provided or on the declarations is deducted from the amount of each adjusted loss or claim for damage.

4. Property Covered

Coverage applies to furs, fur garments, and garments trimmed with fur that is considered stock in trade. Accessories that relate to the fur garments are also covered. Other stock in trade is also covered but it must be secondary to the furs. This property can be any of the following:

Note: This does not include property of customer’s that are on the insured’s premises.

Related Article: Furriers Customers Custody Policy

 

Example: Franklin's Finer Furs is primarily a large retail furrier but it also repairs and alters furs for other commercial furriers. A fire occurs on Franklin’s premises. Franklin's is paid for its furs, its legal liability for furs being repaired, and the value of its labor expended on the furs it did not own.

5. Property Excluded

Coverage does not apply to the following property:

a. Covered property of others that the insured accepts for storage

Note: This property is covered under Furrier's Customers Custody Coverage.

Related Article: Furriers Customers Custody Policy

b. Covered property that is no longer on the premises even though it has been sold under an installment plan or has been rented or leased to others.

 

Example: Franklin's occasionally arranges to finance and sells expensive furs to its uppity clientele under an installment sales arrangement. Franklin’s interest in the property is not covered under this form but it could contractually require the purchaser to cover the interest under their coverage form.

 

d. Import shipments are not covered until they arrive at the insured's premises or at another final destination location that is within the coverage territory

Note: Ocean Cargo policies usually cover these shipments under a "Warehouse To Warehouse" bill of lading until they are delivered to the final location. It covers goods through all stages of shipment. Coverage begins when the shipment leaves the shipper's warehouse and continues until it reaches the customer's warehouse. The term "location" or "premises" can be substituted for "warehouse."

e. Animal and any of their parts while at the premises of ranchers, breeders, growers, or trappers

Note: This is a defensive exclusion. The insured does not have any control over such property and cannot determine the value of such property until it reaches its premises.

f. If an exhibition is financially assisted or promoted by either a public authority or a trade association any property at that exhibition is not covered

 

Example: Franklin's participates in a few exhibitions each year to support local charities or not-for-profit organizations in their annual efforts to raise funds. Coverage applies for its property at these events because they are not sponsored by any excluded organizations.

 

g. When property is being worn, it is not covered. The exclusion is fairly absolute because the insured, its corporate officers, members of the business, or the insured's directors, employees, agents, servants or messengers cannot wear the property. In addition, dealers, others in the fur business, or any of their officers, directors, employees, agents or messengers, family members, relatives, and friends cannot wear the property when it is under their control.

This only exception is that property being modeled on the insured's or another dealer's premises or while at a covered exhibition is covered.

h. Property in transit:

Note: In transportation insurance, a tariff is a schedule of the carrier's prices or fees.

6. Territorial Limits

The territorial limits are very restricted. Coverage applies only in the contiguous United States and Canada. This means that there is no coverage in Alaska and Hawaii or any of the U.S. territories or possessions such as Puerto Rico.

Note: Keep the limitations on transit above in mind and the fact that coverage does not apply at all in Alaska and Hawaii. Coverage on property in transit is very restricted.

7. Perils Covered

This insurance is for all risks of direct physical loss or damage to covered property. However, exclusions and limitations apply.

8. Perils Excluded

This policy does not insure against the following perils:

a. Sabotage, Theft, Conversion, or Dishonest Acts by Trusted Individuals

Sabotage, theft, conversion or other dishonest acts by the insured, its employees or anyone to whom the property has been entrusted are excluded. There is an exception. If the insured, an officer of the corporation, a member of the business, or a traveling salesperson gives the property to any of the following for safekeeping, coverage does apply:

·        Porters or similar individuals as long as that person is not an employee of the insured

b. Consequential and Other Losses

There is no coverage for loss or damage caused by or that results from the following:

The only exception is when a fire or explosion occurs during any process or treatment in which only the damage from the ensuing fire or explosion is covered.

 

Example: Franklin is adding new lining to an older fur. The process required the use of a highly flammable adhesive. The heat of a nearby iron ignited the adhesive fumes causing the fur being repaired to burn. The loss is covered because it was a fire loss.

 

c. Flood

The insurance company does not pay if a flood at the insured’s premises causes the loss or damage. Flood includes surface waters, waves, tidal wave, tidal water, overflow of streams or other bodies of water, or spray from any of these, whether wind-driven or not. However, if fire or explosion is caused by the flood there is coverage for damage caused by the ensuing fire or explosion.

Note: The flood exclusion applies only to items at the insured premises.

d. Property on Unattended Vehicles

The insurance company does not pay for loss or damage while property is on or in any automobile, motorcycle, or any other vehicle unless the insured, one of its employees or a person responsible for attending the vehicle is also on or in it at the time of loss. This exclusion does not apply to property in the custody of carriers for hire or the Post Office.

Example: Franklin is spontaneous and sometimes acts without thinking it through. He carefully put a fur he had sold into his vehicle and started driving to deliver it to the customer. He spotted a mail carriers sack left unattended near a mailbox, stopped, and got out to retrieve it. He figured he would drop it off at the Post Office that was right on his way. A carjacker threw him out of the vehicle, jumped in, and drove off. Franklin called 911 and the police arrived in less than a minute. They tracked down and located the abandoned vehicle a few blocks away but the fur was gone. A homeless man nearby told the police what happened and Franklin's merchandise loss was covered because he was still in the vehicle when it was carjacked.

 

e. Property in Show Windows at the Insured's Premises

There is no coverage for loss or damage to covered property caused by or that results from theft or attempted theft of covered property from show windows at the insured's premises that arises out of the smashing or cutting of such windows.

Note: Coverage for this exposure can be added by endorsement.

 

Example: Franklin had two outside unprotected show windows. Each one had different fur articles displayed. While they were substantial and well constructed, he suddenly realized that he had a lot to lose if he were the victim of a "smash and grab" type of loss. His building was located on a corner and there was a real possibility of this happening. He read his proposal and policy carefully and realized that there was no coverage on the contents of the window for this type of loss. He contacted his agent, did all the paperwork needed, and had the coverage endorsed to his policy only three days before a would-be thief smashed one of the windows and made off with a fur valued at $8,000.

 

f. Property in Off Premises Show Windows

Coverage does not apply to loss or damage to covered property while off-premises and in showcases or show windows.

Note: This is an “all perils” exclusion while exclusion e. above applies only to theft.

g. Mysterious Disappearance, Unexplained Loss, Inventory Loss, or Shortage

Mysterious disappearance, unexplained loss, and/or loss or shortage as a result of taking an inventory are excluded.

 

Example: Franklin purchased and sent a batch of raw beaver pelts to a fur dealer that specialized in processing them. The package arrived at the dealer's location completely intact and in perfect shape but it was empty when it was opened. This policy excludes this loss but Franklin had wisely insured the shipment for 500% of the raw value of the pelts and recovered his acquisition cost of the pelts as well as their projected value after processing.

 

h. War

Coverage does not apply to loss or damage caused by or that results from hostile or warlike acts during times of war or peacetime. This includes acts to hinder, combat, or defend against an expected, impending, or actual attack by any of the following:

i. Nuclear

There is no coverage for direct or indirect, proximate, or remote loss or damage caused by, that results from, or that arises out of controlled or uncontrolled nuclear reaction, radiation, or radioactive contamination or caused, contributed to, or aggravated by the perils this policy insures in whole or in part. However, coverage applies to direct loss by fire that results from nuclear reaction, radiation, or radioactive contamination.

j. Earthquake

The insurance company does not pay for any loss or damage caused by or that results from earthquake.

Note: The term used is earthquake so other types of earth movement would be covered. In addition, this peril is not limited to only damage at an insured premises so there is no coverage even when an earthquake damages property in transit.

9. Change of Interest or Premises

Changes of interest or assignments under this policy are not binding on the insurance company until it agrees to the change and endorses the policy accordingly. There is no coverage for any location added during the policy period nor for any additions to existing premises.

Note: Most coverage forms and policies cover additions to existing buildings. These restrictions could be a surprise to the insured and should be explained so that the insurance company is notified before any stock is moved into a newly added space or a newly acquired location.

10. Records and Inventory

Accurate books, records, and accounts must be maintained as follows:

a. Detailed, itemized inventory records of all covered property. Actual physical inventories must be taken at least annually.

b. Detailed, itemized books that record all business purchases and sales transactions on cash or credit terms

c. Detailed records on property of others in the insured's custody or control, travelers' stocks, and all property sent to others for any reason or purpose.

d. These books, records, and accounts must be kept for at least a year after this policy expires or is renewed.

Note: These records will be used in establishing the property valuation at the time of loss so it is vital that they be accurate.

11. Protective Safeguards

The insured must maintain all protective safeguards that are described in the proposal form or in any subsequent endorsements. If the insured fails to maintain the safeguards, insurance is suspended with respect to the premises or situation affected until service is restored. The only exception to this warranty is if a situation beyond the insured’s control causes the safeguards to stop working.

 

Example: The lines from Franklin's burglar alarm system to the central station were cut during a failed break-in. He concentrated on cleaning up the mess from the botched attempt and completely forgot about the cut lines and that the premises no longer had an operating alarm system. Knowing this, the burglars struck again the next evening shortly after the business was closed for the day and removed additional furs. Franklin realized his error the next morning and sadly discovered that the second loss was excluded because the protective device was not operating properly at the time of loss.

12. Valuation

The insurance company's obligations are limited to the following:

a. Unsold property is valued based on the least of the following:

b. Sold property is valued up to its net selling price after deducting discounts and allowances.

c. Property of others is valued at the insured’s legal liability for the property but it cannot exceed I the property’s actual cash value at the time of loss or damage. The actual cash value includes the insured's labor and materials cost expenditures in the property.

 

13. Privilege to Adjust With Owner

The insurance company will adjust covered loss or damage to covered property of others with the owner and pay it directly. If anyone initiates legal action against the insured to enforce a claim, the insurance company may defend the insured. The defense costs are paid by the insurance company but the payment of those costs is part of the limits of insurance, not in addition to them. This means that defense costs could actually exhaust the amount of insurance available to pay any settlement.

14. Other Insurance

The insurance under this policy does not apply if there is any other insurance that would apply if this policy had not been issued. However, it will apply as excess after all other insurance is exhausted, up to its limit, but not for more than the amount of loss. This restriction does not apply to coverage for the legal liability the insured has for the property of others.

15. Automatic Reinstatement

Claims paid reduce the amount of insurance by the amount paid. However, amounts paid are automatically reinstated and an additional premium is charged from the date of loss once the amount of loss is determined.

16. Changes

Only company-issued endorsements can change the policy.

PROPOSAL FOR FURRIERS BLOCK POLICY

This is the application for Furriers Block coverage. The applicant must complete every part of each section and sign it. Along with the Jewelers Block Coverage Form and the Proposal for Jewelers Block Policy, the Furriers Block Policy and the Proposal for Furriers Block Policy are unique in the insurance industry because the proposal is attached to and becomes part of the coverage form. Without it, the policy is void and there is no coverage. A separate proposal is required for each covered location.

The proposal is extremely detailed and contains ten sections that address virtually every physical aspect of the business. Only the applicant has the knowledge and information to properly complete it.

UNDERWRITING CONSIDERATIONS

Ownership and management issues are the most important part of underwriting a fur-related risk. The financial condition of the risk dictates the degree of attention to protective devices and procedures incorporated into the business. Its experience in the business and its hiring practices are other important elements to consider and evaluate. Developing and implementing plans, procedures, protocols, and actions to take in an emergency before they are needed are other critical factors. A fur-related business operates on trust with clients, suppliers, and others in the industry. The per-item values are very high and therefore each item provides a significant temptation when problems arise. 

Underwriting must also evaluate the physical characteristics of the risk and the effectiveness of the proposer’s control and maintenance of its properties and exposures. Furriers usually occupy a fixed location that is subject to the same fixed location exposures to loss as most other businesses Location factors to consider include the exposure to losses by fire. This involves evaluating the building construction, the exact nature of the occupancy, exposing occupancies, and public and private fire protection.

Related Article: ISO Commercial Property Program Underwriting Considerations

Furs not on display should be kept in storage and procedures should be established to have high-valued merchandise removed in case of a fire. If the risk is equipped with automatic sprinklers, storage and display arrangements should be evaluated and stock especially susceptible to water damage should be located away from it and protected in some other way. Water damage can be reduced or eliminated by having furs stored on shelves in some cases instead of simply on hangers in the open. Earthquake issues may be present in certain geographical areas.

During the underwriting of furs and fur-trimmed garments one must focus in on theft, burglary, and hold-up issues. Alarm systems, storage arrangements, and the proposer's location must all be considered. Does the proposer remove property from the premises? If so, what precautions are taken? How does it handle property inside the location? How are show windows locked and who controls the keys? Showroom windows as well as smash and grab hazards are always key underwriting areas to consider.

Stocks of furs and garments trimmed with fur are easily moved and are highly attractive and susceptible to theft or burglary. These factors demand closely evaluating the variety of the inventory of each risk.

The premises should be protected by a good quality alarm system that covers all exterior openings that are connected to a certified central station alarm facility. Theft and mysterious disappearance are common issues for this class of business. Background checks should be done on all persons before they are hired. The premises should be equipped with video surveillance equipment. Arrangements should be made and procedures established that address display and storage issues. Furs and fur-trimmed garments displayed in show windows should have suitable protection and merchandise should be removed from them when the premises are closed to business.

Related Article: Commercial Crime Coverages Underwriting Considerations

Off premises issues to consider involve goods in various forms of transit and in the custody of salespersons for retail operations and sales agents for wholesale operations. Transit exposures should be addressed by using many different modes of transportation, varying the pattern and frequency of trips, and keeping values shipped as low as possible. Strict accounting and sign-off procedures should be incorporated and carriers evaluated to be certain they are experienced, qualified, and up to the task.

Salespersons and selling agents should also vary their routes and schedules to avoid developing a pattern that a would-be perpetrator might capitalize on. Security issues such as traveling by personal vehicle, taxis, or other public vehicles and by foot must be evaluated, appropriate arrangements made, and procedures followed.