Protecting your property Featured

7:00pm EDT January 26, 2010

You don’t need to own a boat, transport goods across the ocean or be lost at sea to make good use of inland marine insurance. Do not be confused by the name of this coverage. Inland marine insurance actually protects property during transit (whether by common carrier or by company-owned vehicles), held by a bailee, stored at a temporary location, such as a trucking depot, or movable goods, such as tools or contractors’ equipment.

“The most important thing to know is once materials, supplies, equipment or products leave your premises, you need to secure the proper inland marine insurance to protect you from the perils of theft, fire and other damage while the items are in transport or storage,” says Calvin Sistrunk, a principal with GMGS Insurance Services.

Once you take goods off an insured property, those goods are generally no longer afforded protection — unless a form of inland marine insurance kicks in.

Because inland marine coverage is somewhat flexible, it can also be broadened to cover a variety of exposures and property that is not covered by traditional property insurance, Sistrunk adds. And whether or not you transport goods, you’ll want to know about this insurance, especially if you ever ship property — and that involves almost every business.

Smart Business spoke with Sistrunk about the purpose of inland marine insurance and how it can protect businesses.

Why inland marine insurance?

The origins of this insurance actually started with Lloyd’s of London, a provider of insurance dating back to the 17th century. Lloyd’s insured cargo ships, and eventually that coverage was expanded to include cargo after it had been offloaded. Today, inland marine insurance has grown to cover cargo in transit or while in storage, providing more complete coverage to policyholders. Most of the businesses that benefit from this coverage are nowhere near water and have little, if any intention of shipping goods by sea. The coverage is important for businesses in all industries to consider because it can extend a company’s protection beyond its place of business to highways, railways, or even across town. Think how often you utilize a shipping service or delivery truck, warehouse goods or hire a third-party cargo carrier to transport property. Any business that has moveable property should consider this coverage.

What misconceptions do business owners have about inland marine insurance?

First, the name is confusing and leads people to believe the insurance involves the ocean or boat transport. Also, many business owners don’t realize that their present property and general liability insurance does not protect their goods in transport. As a result, once your property leaves your fixed location, the exposure to loss is great. If a serious accident or disaster like fire or theft were to occur, it could potentially cause irreparable harm to your business. Also, business owners do not realize that inland marine insurance does more than protect goods in transport. Its many coverages represent everything from accounts receivable, contractors equipment and leased property to valuable papers, motor truck cargo, guns, jewelry, fine art, communication towers and equipment — the list goes on. To understand the full picture of inland marine insurance, a business owner really should consult with an experienced risk manager or insurance broker.

What type of businesses can benefit from this coverage?

In order to determine if a company has need for inland marine coverage, certain questions need to be answered: Do you use delivery trucks to transport goods? Do you rent equipment for construction job sites? Do you contract with third-party cargo carriers to transport goods of any kind? Does your company transport goods? Do you transfer materials or supplies in any way?

Why will businesses that do not ship or transport their own goods appreciate the coverage?

It’s important to understand what type of coverage a third-party cargo carrier has and whether it is enough to cover your goods they are transporting. Even if you ship via UPS or Federal Express, you might find that their coverage is limited if your goods are damaged or stolen during transit. You may even need to carry some of your own inland marine coverage to properly protect your assets. Discuss this with your risk manager or broker, and always ask a third-party carrier for copies of its policy.

Will a commercial automobile policy cover transit claims?

No, though some business owners assume that the goods they transport are covered because they secure commercial auto insurance. It’s not like a homeowner’s policy that will generally cover property that is stolen from an owner’s automobile. Even goods transported in a company’s vehicles are not covered under commercial auto insurance. However, inland marine insurance does extend coverage to protect those goods during transit. Remember, as soon as goods leave your premises — the second you pull out of your driveway — those goods may not be protected without proper inland marine insurance.

What steps should a business take to obtain inland marine insurance?

You need to discuss with your risk manager the various transport activities your business engages in to protect your goods in transit. Inland marine insurance is a specialty area, so be sure your broker has experience with this coverage. Finally, it’s a good idea to ask your broker to explain all areas of inland marine coverage — the exposures and coverages are vast and, as you can see, extend to areas that surprise many business owners.

Calvin Sistrunk, CIC, is a principal with Garrett/Mosier/Griffith/Sistrunk Insurance Services. Contact him at (949) 559-3373 or calvins@garrett-mosier.com.