(April,
2009)
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. Personal Inland
Marine refers to forms that insure
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 damage. The property that is eligible
for coverage includes the types of valuable property associated with family and
home life, specifically:
·
jewelry,
·
furs (including fur-trimmed items),
·
fine arts,
·
stamp collections,
·
coin collections,
·
silverware
·
bicycles,
·
musical instruments,
·
cameras,
·
wine, and
·
golfers equipment
The
above classes of property arethose 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 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 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
higher-valued 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 withthe following schedule:
|
Personal Article Floater Schedule |
||
|
Item |
Coverage
Amount |
Premium |
|
Diamond
Bracelet |
$3,355 |
$42 |
|
Emerald
Ring |
$3,200 |
$51 |
|
Diamond
Earrings |
$2,900 |
$30 |
|
Black
Pearl Necklace |
$4,780 |
$93 |
|
Total |
$14,235 |
$216 |
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.
Persons
who collect wine may also arrange for coverage. Protection may be on a blanket
basis, with specific descriptions (scheduling) required for bottles above a
certain dollar value. Insurance is usually provided without a deductible
applying. Critical coverages include insurance against damage caused by power
outages or breakdown of heating or cooling equipment as well as theft, fire,
breakage and other specific perils. Other important coverage features are
automatic protection for wine that is newly acquired and a world-wide coverage
territory. Generally, depending upon the applicable insurer, an appraisal will
be required for single items that exceed a certain dollar amount.
Except
for fine arts, stamp collections, wine 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.
Of
course these limits may differ among insurers or could be modified by
endorsement. 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 wine
and coin collections.