(February, 2006)

Coverage under the Personal Articles Floater is a form of inland marine coverage and is one of the insurance industry’s oldest forms of insurance. Inland Marine was derived from Ocean Marine insurance. Ocean Marine commonly covers nearly all aspects of perils faced by property travelling over bodies of water. At its broadest, inland marine handles coverage for perils faced by property that is transported by land or is closely related to overland travel. Therefore, inland marine policies may be used to cover structures that facilitate land travel such as tunnels and bridges.

Personal Inland Marine refers to forms that insure special classes of personal property having the following characteristics:

• is subject to minimal (or no) coverage under an unendorsed homeowners policy
• has a very high value, particularly in proportion to its size
• tends to have a higher vulnerability to loss or destruction
• is particularly likely to suffer loss by theft
• has a higher likelihood to be the subject of fraudulent claims

The Personal Articles Floater, whether in the form of an endorsement or a separate policy, covers property against direct, physical causes of loss. The property that is eligible for coverage includes the types of valuable property associated with family and home life, specifically:

• jewelry,
• furs,
• fine arts,
• stamp collections,
• coin collections,
• silverware,
• musical instruments,
• cameras, and
• golfers equipment

The above classes of property represent those most frequently insured on a schedule. Scheduling allows for property to be covered for its full value, based upon relevant documentation such as a current appraisal or sales receipt. Separate protection is important as a supplement to Homeowners insurance because the high values and exposures associated with the above property classes result in severe coverage limitations included in Homeowners policies for such property. For an illustration of how the basic policy limitations may affect coverage, please refer to PF&M section 469_C186, Sublimit Applies To Rare Coins in Court Cases. For more information on how coverage is restricted under a homeowners policy, please refer to PF&M section 460.4-2, ISO Special Homeowners Coverage Form Analysis.

Scheduled coverage may be written as a separate policy, as an endorsement to a Homeowners policy (Scheduled Personal Property Endorsement HO-61 under the ISO Homeowners Programs and other standard provision homeowner policies) or, by some companies, as an endorsement to other types of personal policies. Please refer to PF&M Section 460.6-15, ISO Scheduled Personal Property Endorsement, for more information on this coverage option. For more information on the importance of personal inland marine, please refer to PF&M Section 401.1, Hobbies – Hazards and Opportunities.

Personal Articles Floater coverage, identified in many Homeowners policies by an attached Scheduled Personal Property endorsement, insures against all risks of direct physical loss to one or more classes of personal property. The scheduled (described) property is subject to a limited number of coverage limitations. Please refer to PF&M Section 460.6-15, ISO Scheduled Personal Property Endorsement.

An important coverage benefit of scheduling is the automatic coverage for newly acquired items of jewelry, furs, cameras, musical instruments and fine arts. However, the coverage for new purchases only applies when scheduled coverage already exists for similar property. The automatic limit is 25% of the amount of insurance for the class of property involved or $10,000, whichever is less. This feature is particularly helpful since persons who schedule coverage are likely to be persons who collect additional, higher value property. This coverage feature allows such persons reasonable time to remember to report their new property and, most importantly, have their coverage adjusted. Of course, prudent action often needs encouragement, so, typically, it is a condition that coverage ceases on a newly acquired item if it is not reported within 30 days.

Example: Shimmerly Jimstonz has a Personal Article Floater which includes the following:

Scenario 1 - On June 1, Shimmerly’s latest gentleman friend celebrates their six months of dating by giving her a ruby pendant valued at $2,100. Shimmerly wears the pendant frequently on a favorite jacket. During a July 8 dinner date, with yet another gentleman admirer, Shimmerly returns to her table from the dance floor and notices that the pendant has been removed from her jacket. When she files a claim, her adjuster from Snooterly Property & Casualty denies coverage. Shimmerly is informed via certified mail that the pendant should have been added to her floater by July 1.

Scenario 2 - On August 5, Shimmerly is visiting a friend who takes her to a private estate auction. Shimmerly falls in love with an authentic bronze statue of a Roman Gladiator that is valued at $3,500. On August 9, Shimmerly loads the statue and luggage in the back seat of her car for the long drive home. When she returns to her car that she had parked while eating at a highway restaurant, she discovers her back window smashed and her statue gone. She reports the loss as soon as she gets home on August 10 and she is furious to hear that the loss does not qualify for scheduled coverage. Shimmerly points out that she only owned the statue for several days. The Snooterly P&C adjuster explains that the Newly Acquired provision would apply to a new piece of jewelry (which is on her current schedule), but not an entirely different class of property such as her statue.

When fine arts are scheduled, coverage applies to other objects of art that an insured acquires (purchases, finds, inherits) during the policy period. However, coverage is:

• usually settled according to the new property’s actual cash value,
• restricted to no more than 25% of the amount of insurance applicable to fine arts already scheduled,
• limited to property of the same class for which coverage already exists (see example above) and,
• lost if the new property is not reported within a specified reporting period, typically as long as 90 days.

The additional premium an insured owes on the new fine art acquisition is computed pro rata from the date of purchase. For more information on covering this class of property, please refer to PF&M Section 430.3, Fine Arts Insurance.

Coverage applies anywhere in the world except with respect to fine arts, which are covered within the United States (including territories and possessions) and Canada.

Personal Articles Floater coverage does not insure against loss or damage caused by:

• wear and tear, or gradual deterioration
• insects, vermin or inherent vice
• nuclear activity (reaction, radiation or contamination) whether loss is direct or indirect. However, direct loss by fire that results from nuclear activity is covered
• hostile or warlike action in time of peace or war
• any weapon of war employing atomic fission or radioactive force
• seizure or destruction under quarantine or customs regulations
• confiscation by order of any government or public authority, or
• risks of contraband or illegal transportation or trade.

Items of jewelry, furs and garments trimmed with fur or consisting principally of fur must be identified in the supplemental contract or policy schedule subject to an amount of insurance. A bill of sale or jeweler's or furrier's appraisal is the basis for proper scheduling. For more information on this topic, please refer to PF&M Section 430.7, Personal Jewelry and Furs Insurance.

Cameras, projection machines, films and articles of related equipment must be scheduled with an amount of insurance indicated. However, it is permissible to include one or more specifically described blanket items aggregating not more than 10% of the total amount insured on scheduled items. For more details on this topic, please refer to PF&M Section 430.2, Camera Insurance. For a quick reference on the various terms related to this class of property, please refer to PF&M Section 430.2-1, Photography Glossary.

The insured is typically required to give full information about whether she receives any income for public performances using the insured instruments during the policy term. The exposure between an amateur and professional musician is a big difference and premiums must reflect that difference. Further, a policy covering musical instruments would have to be endorsed to remove the wording that prohibits paid performances. An important coverage limitation exists for large organs that are immobile fixtures. Loss or damage caused by mechanical or electrical breakdown and failure, or repairing, adjusting, servicing or maintenance operations are not covered. However, if a fire or explosion ensues from any of the prohibited sources of loss, the policy would cover the ensuing fire and/or explosion damage. For additional information on this topic, please refer to PF&M Section 430.8, Musical Instruments Insurance.

This class of property includes silverware, silver plate, gold plate, and pewter. It does not include pens, pencils, flasks, smoking accessories or jewelry. Other precious metals used in dinnerware, such as platinum, are also eligible. Objects may be insured on either a scheduled or a blanket basis. In many instances, it would be more convenient and practical to write the coverage under a blanket, reserving use of a schedule for handling individual, high-value items. For more information on insuring this class of property, please refer to PF&M Section 430.9, Silverware Insurance. To become more familiar with items that may be included on a silverware schedule, please refer to PF&M Section 430.9-1, Silverware Glossary.

Insurance on golfer's equipment covers golf clubs, golf clothing and golf equipment belonging to the named insured. It also covers other clothing belonging to the insured while it is kept in any locker situated in a clubhouse or other building used in connection with golfing. Not that the following is a substantial point, but golf balls are insured only against loss by fire or burglary, if burglary appears to be the likely cause. In order to qualify for coverage, there must be evidence that balls were taken from within a building. Further, there must be evidence that a person broke into a covered location.

Example: Jada's sleeve of custom, monogrammed golf balls disappeared from a clubhouse dining room table - not covered.

Coverage is provided for either philatelic (stamps) or numismatic (coins, paper money) and related property. Collections of both kinds are highly popular and there is similarity in the coverage provisions. Personal Articles Floater coverage may be written on a variety of collectible property that, generally, are worth significantly higher than their face values. For more information on covering either stamps or coins, please refer to PF&M Section 430.6, Stamp and Coin Insurance

A variety of property qualifies for classification as fine art. A typical fine art policy includes a number of significant coverage restrictions, the first being territorial. While peer coverage tends to be global, most fine arts coverage applies only to losses that occur within the United States, its territories, possessions and Canada. Because many articles of fine art are particularly fragile, there are policy restrictions that minimize an insurer’s exposure to loss due to routine handling as well as from added exposure by placing articles on public display at large events. For more details on coverage and restrictions, please refer to PF&M Section 430.3, Fine Arts Insurance.

Except for fine arts, stamp collections and coin collections, covered property losses under a Personal Articles Floater policy or Scheduled Personal Property endorsement are settled on the basis of the least expensive of the following options:

• the actual cash value of the property at the time of loss or damage
• the reasonable cost to repair or restore the property to its pre-loss condition
• the reasonable cost to replace the lost or damaged article with a substantially identical piece
• the applicable insurance limit

In light of the above settlement option, property values are determined at time of loss or damage rather than upon any agreed value.

Fine arts - losses are settled according to the insurance limit shown for each scheduled article; in other words, an agreed value. In case of loss to a pair or set, the insurer agrees to pay the full amount of the set as shown in the schedule. When full value has been paid on a damaged set, the insured must surrender the remaining article or articles of the set to the insurer.

Stamp and coin collection - losses, with respect to scheduled items, are paid according to the "least expensive option" formula described above. However, when coverage is on a blanket basis, the insurer will pay the cash market value at time of loss, but not more than:

• $1,000 on any unscheduled coin collection
• $250 for any one stamp, coin or individual article or any one pair, strip, block, series sheet, cover, frame or card.

Another restriction is that the company will not pay a greater proportion of any loss on blanket property than the amount insured on blanket property bears to the cash market value at the time of loss. This limitation protects insurers in instances that an insured "blankets" property valuable enough to have been separately scheduled as well as in instances when the aggregate property substantially appreciates in value. For examples of how this restriction applies, please refer to PF&M Section 430.6, Stamp and Coin Insurance.

Except with respect to fine arts, special provisions apply to loss to a pair, set or parts. When loss occurs to a pair or set, the insurer has the option of repairing or replacing any part to restore the pair or set to its value before the loss. The insurer may, as an alternative, pay the difference between the actual cash value of the property before and after the loss. If loss occurs to any part of covered property consisting of several parts, the insurer will pay the value of the damaged or lost parts. This option lends reasonableness to the settlement process. Sometimes a loss will involve property which, for all practical purpose, cannot be replaced. Though a cash settlement is not a perfect option, it at least provides some level of compensation when property just cannot be restored or replaced.

When Personal Articles Floater insurance is written on the basis of an application signed by the insured, it is important that the applicant fully understands the importance of providing accurate and complete information.

The insurer must rely upon a signature as protection against moral hazard and fraud. Further; accurate information results in proper insurance and improved claim settlement should a loss occur. When insurance is written on forms involving scheduling, limits of insurance should be determined using current values. Receipts are valid for newly-acquired property (copies should be given to the insurer). When valuable property, such as paintings, other art objects, expensive jewelry and furs have not been re-valued recently, it is strongly recommended that the agent, broker or insurer insist upon the insured securing a new appraisal. This will establish a proper amount for insurance purposes and reduce the chance of minimizing problems in the event of loss. In order that lost or stolen property may be identified, a detailed description of scheduled articles is essential. Photographs of articles of substantial value are recommended.

Agents and brokers can assist underwriting efforts substantially by providing complete applications and other relevant information. Incomplete information typically results in delaying coverage and adding to unnecessary correspondence.

It is important, when discussing Homeowners coverage with insureds, to ask about the existence of property that is subject to limited coverage under a basic (unendorsed) policy. This is the ideal time to suggest that such property be scheduled. The "Special Limits of Liability on Certain Property" under Coverage C (Unscheduled Personal Property coverage) of Homeowners policies establish a need to do this. Homeowners coverage generally provides an aggregate limit of either $500 or $1,000 on stamps, insufficient for most stamp collections. The basic coverage limit for loss by theft of jewelry and furs is $500 or $1,000. The usual "built-in" limit of $100 or $200 on money loss is not adequate for coin collections. Some insureds are not adequately protected by basic Homeowners policy theft limits of $1,000 or $2,500 applicable to silverware, silverplated ware, goldware, gold-plated ware and pewterware. While the above sub-limits can vary by type of policy offered by different insurers, the maximum amounts are still very modest, resulting in poor protection for persons owning a significant amount of coins, silverware, furs, jewels and similar property. For an illustration of how the lack of scheduled coverage can harm an insured, please refer to PF&M Section 469_C186, Sublimit Applies To Rare Coins, in Court Cases.

Scheduling valuable personal items under a Homeowners Policy Scheduled Personal Property Endorsement or under a Personal Articles Floater Policy is important because the action:

• Provides proper limits of insurance for property subject to reduced limits of insurance under a Homeowners policy
• Provides significantly broader coverage for valuable items that face special exposure to loss
• Typically provides global coverage
• Removes high value items from the Personal Property section of a homeowners policy, increasing the coverage for general personal property
• Encourages the insured to maintain current appraisals and other valuation data for valuable items, minimizing settlement problems

The forms and endorsements used by most companies, including Homeowners Scheduled Personal Property Endorsement HO-61, contain complete provisions for covering jewelry, furs, cameras, musical instruments, silverware, golfer's equipment, fine arts, stamps, and coins. Provisions also exist for other property that falls outside these classes, depending on the underwriting practices of the individual insurance company. General exclusions are very few; namely, the familiar war risks and nuclear hazards plus wear and tear, gradual deterioration, insects, vermin or inherent vice. Reasonable special exclusions apply to fine arts, stamp collections and coin collections.