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• Steam boilers, steam pipes, hot water boilers or other water heating equipment caused by any condition inside the equipment; however, loss to the equipment from an explosion of gases or fuel in the device is covered;
  

• Hot water boilers or other water heating equipment for events inside the equipment other than explosion;

• Property that is missing with no physical evidence to show what happened to the property or if only detected by an inventory shortage (mysterious disappearance);

• Property transferred to a person or place outside the premise in the Declarations based on unauthorized instructions;

• Loss to the interior of any building or structure caused by rain, snow, sleet, ice, sand or dust unless the outside of the building or structure is damaged first. Coverage also applies if the loss results from the melting of snow, ice or sleet on the building or structure;

• Restrictions on coverage for animals, glassware, marble, porcelain unless caused by a list of named perils known as specified causes of loss. These perils are listed in the definitions section of the property portion of the policy and include fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; sprinkler leakage; sinkhole collapse; volcanic action; falling objects; weight of snow, ice, sleet; water damage; or

• Special limits of liability exist for theft losses. The sublimit of $2,500 applies to furs, jewelry, watches, precious stones, gold, silver, platinum, patterns, dies and molds. Jewelry and watches worth $100 or less per item are not subject to the limitation.

• Ordinance or law;
• Earth movement;
• Governmental action;
• Nuclear hazard;
• Utility service (power failure);
• War and military action;
• Water (flood, waves, mudflow, and waterborne material);
• Certain computer-related losses (failure, malfunction, or inadequacy of hardware, software, networks, etc.);
• Fungi, wet rot, and dry rot except as covered in the additional coverage for fungi, and wet or dry rot;
• Virus or bacteria;
• Electrical apparatus (artificially generated electrical current);
• Consequential losses (delay, loss of use or loss of market);
• Smoke, vapor, gas (smoke from agricultural smudging or industrial operations);
• Explosion of steam apparatus;
• Frozen plumbing;
• Dishonesty;
• False pretense (voluntarily parting with property if induced by trick, scheme, or device);
• Exposed property damaged by rain, snow, ice, or sleet;
• Collapse (except as provided in the additional coverage);
• Pollution;
• Neglect;
• Expected losses (wear and tear, gradual deterioration, mechanical breakdown, etc.);
• Errors or omissions;
• Installation, testing, repair;
• Electrical disturbance;
• Continuous or repeated seepage or leakage of water;
• Weather conditions (but only if weather conditions contribute to an otherwise excluded cause of loss);
• Acts or decisions, including failure to act or decide;
• Negligent work;
• Loss or damage to products resulting from an error or omission;
• Business income and extra expense that results from delays or cancellation of a lease; and
• Accounts receivable: loss or damage caused by or resulting from alteration, falsification, concealment, or destruction of records of accounts receivable done to conceal the wrongful giving, taking, or withholding of money, securities, or other property, and loss or damage caused by or resulting from bookkeeping, accounting, or billing errors or omission.

• All amounts due from the insured's customers that the insured is unable to collect;
• Interest charges on any loan required to offset amounts uncollectible pending the insurer's payment of these amounts;
• Collections expenses in excess of normal collection expenses that are made necessary by loss or damage; and
• Other reasonable expenses that the insured incurs to re-establish records of account receivables that result from direct physical loss or damage by a covered cause of loss to the insured's records of accounts receivable.

• Outdoor signs attached to the building are covered for $1,000 per sign, in any one occurrence;
• Coverage extensions and the following additional coverages are paid in addition to the limits of insurance:

• Fire department service charge;
• Pollutant cleanup and removal;
• Increased cost of construction;
• Business income from dependent properties;
• Electronic data; and
• Interruption of computer operations.

1. Building Limit — Automatic Increase — The limit of insurance for the building will automatically be increased annually by 8% or the percentage amount shown in the Declarations; and
2. Business Personal Property Limit — Seasonal Increase — The limit for business personal property will be automatically increased by 25% for seasonal fluctuations unless otherwise specified in the Declarations. This increase is only applicable if the insured carries insurance equal to 100% of the average monthly values for the past 12 months.

• Fire department service charge;
• Fire extinguisher systems recharge expense;
• Business income;
• Extra expense;
• Civil authority coverages; or
• Optional coverage selections.

• Abandonment;
• Appraisal;
• Duties in the event of loss or damage — The following are the insured duties in the event of loss or damage:
  • Notify the police if a law has been broken;

• • Give the insurer prompt notice of loss, and a description of how, when, and where it occurred, including a description of damaged property;
  • Take all reasonable steps to protect covered property from further damage, and keep a record of all expenses;
  • At the insurer's request, provide an inventory of the damaged and undamaged property;
  • Permit the insurer to inspect the property and to examine the insured's books and records;
  • Send the insurer a signed, sworn proof of loss within 60 days of the request;
  • Cooperate with the insurer in the investigation and settlement.
  • Resume all or part of the business operations as soon as possible; and
  • The insurer has a right to examine any insured under oath;
• Legal action against the insurer — The insured is required to be in full compliance with regard to policy provisions before bringing any legal action against the company, and the action must be brought within 2 years of the date of loss;
• Loss payment — In the event of loss or damage, the insurer has the option to do the following:
  • Pay the value of the lost or damaged property;
  • Pay the cost to repair or replace the lost or damaged property;
  • Take all or any part of the lost or damaged property at an agreed upon or appraised price;
  • Repair, rebuild, or replace the lost or damaged property with like kind and quality;
  • Insurer will give notice of intentions within 30 days of receiving the sworn proof of loss;
  • If the property is insured, at the time of the loss, for 80% or more of the full replacement value the policy will pay on a replacement cost basis
  • If the property is not insured to 80% of the full replacement value, the policy will pay the greater of ACV or the coinsurance formula;
  • Replacement cost payment will not be made until all repairs are made in a timely fashion. The insured can elect to settle the loss on an ACV basis. If the cost to repair or replace is less than $2,500, then the insurer will not require repair or replacement of the property;
• Recovered property — If property is recovered after loss settlement, the insured may either retain the property and return any loss settlement payment or surrender property to the insurer;
• Resumption of operations — The insurer will reduce the amount of business income and extra expense losses to the extent the insured can resume operations in whole or in part by using damaged and undamaged property.
• Vacancy — Losses caused by vandalism, sprinkler leakage (unless the insured takes protective measures), building glass breakage, water damage, theft or attempted theft will not be covered if the building has been vacant for more than 60 consecutive days. Losses in a building vacant for more than 60 days caused by any other covered perils will be covered for an amount 15% less than normal coverage under the policy. Note that buildings under construction or renovation are notconsidered vacant. When a policy is issued to a tenant, vacancy occurs when the building does not contain enough business personal property to conduct customary operations. When the policy is issued to the owner or general lesee of a building, vacancy occurs when at least 65% of the square footage is unused or is not rented.

Section II - Liability

1. Coverages

Business liability: The liability coverage of the businessowners policy is very similar to the CGL policy. One major difference is that this section is included in all policies, and cannot be written on a monoline basis. The BOP liability section has the following features:

• Usually written with an occurrence coverage trigger;
• Includes coverage for bodily injury, property damage, and personal and advertising injury for an occurrence within the coverage period and coverage territory;
• Supplemental payment features are paid in addition to the limit of insurance noted on the declarations;
• The limit of liability is the most the insurer will pay subject to an aggregate amount for the policy term; and
• The insurer's duty to defend ends when the limits of insurance are exhausted.

Medical expenses: Medical payments coverage of a BOP will pay medical, dental, hospital, and funeral services incurred within 1 year from the date of an accident to a person who suffers bodily injury by accident on or next to the insured's premises, or because of the insured's operations.

2. Exclusions

The following exclusions apply to the business liability and medical payments coverages:

• Expected or intended injury — This exclusion does not apply to bodily injury that results from the use of reasonable force to protect a person or property.
• Contractual liability — This exclusion does not apply to the insured contracts.
• Liquor liability — There is no coverage for liability arising out of causing or contributing to the intoxication of a person, furnishing alcoholic beverages to a minor or a person who is already intoxicated, or to any regulation or ordinance relating to the sale, gift, or distribution of alcoholic beverages. This exclusion applies only to insureds in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages (host liquor).
• Workers compensation and similar laws — There is no coverage for any obligation the insured has under a workers compensation or similar law.
• Employer's liability — There is no coverage for bodily injury to an employee in the course of employment, including the spouse, children, or siblings of the employee. This exclusion does not apply to any liability assumed under an insured contract.
• Pollution — Bodily injury or property damage arising out of actual or alleged pollution is excluded. The exclusion does not apply to heat, smoke, or fumes from a hostile fire.
• Aircraft, auto or watercraft — There is no coverage for bodily injury or property damage caused by the ownership, maintenance, use, or entrustment to others of any aircraft, auto, or watercraft. However, this exclusion does not apply to the following property and perils, which will be covered:
  • Watercraft while on shore at a premises owned by the insured;
  • Nonowned watercraft less than 51 feet long and not being used to carry persons or property for a fee;
  • Parking an auto on or on the ways next to a premise owned or rented by the insured. The auto cannot be owned, rented or loaned to the insured;
  • Liability assumed under any insured contract;
  • Bodily injury or property damage arising out of the operation of machinery or equipment attached to or part of a vehicle that meets the definition of mobile equipment if not subject to a compulsory or financial responsibility law; and
  • Bodily injury or property damage caused by the operation of a cherry picker or similar equipment mounted on trucks, and air compressors, pumps and generators.
• Mobile equipment — There is no coverage for the transportation of mobile equipment by an auto, or the use of mobile equipment in any speed, demolition, or racing contest.
• War — There is no coverage for war, including undeclared civil war, warlike actions, insurrections, rebellions, revolutions, or actions taken by government authority.
• Professional services — There is no coverage for bodily injury, property damage, personal, or advertising injury due to the rendering or failure to render professional services listed in the exclusion.
• Property damage to property the insured owns or in the insured's care, custody, or control
• Damage to the insured's product or work
• Damage to impaired property or property not physically injured
• Recall of products, work or impaired property
• Personal and advertising injury exclusions — These are the same as discussed in the commercial general liability coverage form. (Review the exclusions found in the CGL coverage section.)
• Electronic data — There is no coverage for damages arising out of damage to or loss of use of electronic data.
• Criminal acts of the insured;
• Recording and distribution of information in violation of law — There is no coverage for bodily injury, property damage, or personal and advertising injury resulting from a violation of laws such as the Telephone Consumer Protection Act, the CAN-SPAM Act, the Fair Credit Reporting Act, and any federal, state, or local statute, ordinance, or regulation
• Medical expense exclusions — These are similar to the exclusions already discussed for medical payments in the commercial general liability coverage form. (Review the exclusions found in the CGL coverage section.)
• Nuclear energy liability exclusion — This is applicable to all liability coverages.

3. Who is an Insured

If the named insured is designated in the Declarations as an individual (or sole proprietor), that individual and his or her spouse are the insureds, but only with respect to the conduct of a business of which they are the sole owners.

If the named insured is designated as a partnership or joint venture, the named insured and his or her spouse, members, and partners also are insureds, but only with respect to the conduct of the business.

If the named insured is designated as a limited liability company (LLC), the named insured and members are also insureds, but only with respect to the conduct of the business. Managers are insureds, but only with respect to their duties as managers.

If the insured is a trust, the named insured and trustees are covered.

If the named insured is designated as an organization other than a partnership (corporations), joint venture, or limited liability company, the named insured is covered. Executive officers and directors are insureds, but only with respect to their duties as officers and directors. Stockholders are also insureds, but only with respect to their liability as stockholders.

Each of the following is also considered to be an insured:

• Volunteer, while performing duties related to the insured business or its employees;
• Employee in the course of employment;
• Any person (other than an employee or volunteer) of any organization acting as the insured's real estate manager;
• Any person or organization having proper temporary custody of the property if the named insured dies; and
• The legal representative if the named insured dies, but only with respect to his or her duties as such.

No person or organization is considered to be an insured with respect to the conduct of any current or past partnership, joint venture, or limited liability company that is not shown as a named insured in the Declarations.

4. Limits of Insurance

The amount listed in the Declarations is the most the policy will pay regardless of the number of insureds, claims filed or suits brought, or persons or organizations bringing suit.

Medical expenses are paid on a per person basis and are also subject to the limit on the Declarations.

Aggregate limits exist in the BOP as they did in the CGL policy. The policy includes an aggregate for products and completed operations exposures that is two times the occurrence limit. Another aggregate similar to the general aggregate in the CGL, applies to all bodily injury, property damage, personal and advertising injury and medical expense claims that are not associated with products or completed operations. This aggregate is also twice the occurrence limit listed in the declarations.

In addition, the policy contains a separate limit of insurance for fire damage legal liability which can be included in either aggregate based on the nature of the claim.

The limits of insurance under the liability section apply separately to each consecutive annual period, and to any remaining period of less than 12 months, starting with the beginning of the policy period shown on the Declarations.

5. General Conditions

The following conditions for business liability coverage apply to the liability coverage in addition to the common policy conditions:

• Bankruptcy — Bankruptcy or insolvency of the insured does not relieve the insurer of any obligation.
• Duties in event of occurrence, claim or suit — In the event of a loss, the insured's duties include the following:
  • Promptly notifying the insurer of the occurrence (how, when, where, names and address of any injured persons);
  • Prompt written notice of a claim;
  • Promptly notifying the insurer of any legal papers received related to the loss; and
  • Cooperating and assisting in the investigation of a claim.
• Legal action against the insurer — No party has the right to join or bring the insurer into an action against the insured. In addition, no party can sue the insurer unless all the terms of the policy have been complied with. A party may sue the insurer to recover an agreed upon settlement; however, the settlement cannot exceed the policy limits, nor can it include items that are not covered by the policy.
• Separation of insured — The limit of insurance is paid only once per occurrence regardless of the number of claimants or the number of insured covered by the policy.

6. Definitions

The Definitions section of the business liability coverage form contains definitions of advertising injury, bodily injury, coverage territory, insured contract, mobile equipment, personal injury, products/completed operations hazard, insured product, and other terms related to liability and medical expenses forms.

Section III - Common Policy Conditions

The BOP includes the common policy conditions applicable to Section I — Property and Section II — Liability that are in addition to the conditions found in those separate coverage sections. These conditions are similar to the common policy conditions, commercial property conditions and commercial liability conditions already discussed. The businessowners common policy conditions are listed below:

Cancellation — The insured may cancel the policy at any time by mailing a written notice of cancellation to the insurance company. In a policy in which 2 or more insureds are listed on the declaration page, only the insured listed first (first named insured) can request the cancellation. The insurer can cancel the policy by mailing a written notice of cancellation to the first named insured.

Advance notice of policy cancellation is required by the insurer so that the insured may obtain other insurance. Additional requirements for notice by mail are the following:

• Mailed or delivered to the insured 5 days prior to the date of cancellation if any of the following conditions exist at the insured building:
  • Building is vacant or unoccupied for 60 or more consecutive days (buildings with 65% or more of the rental units or floor area vacant or unoccupied are considered unoccupied);
  • Permanent repairs for damage by a covered loss have not been contracted for within 30 days of initial payment of loss;
  • Building has outstanding order to vacate, demolition order, or has been declared unsafe by a government authority;
  • Fixed and salvageable items have been removed from the building and are not being replaced;
  • Insured fails to furnish necessary utilities (heat, water, sewer) for 30 or more consecutive days (except during a period of seasonal unoccupancy); or
  • Insured fails to pay property taxes owed or outstanding for more than 1 year;
• Must be mailed or delivered to the insured 10 days prior to the date of cancellation if nonpayment of premium is the cause of cancellation;
• Must be mailed or delivered to the insured 30 days prior to the date of cancellation for any other reason (may vary by state);
• Insurer has to prove only that the notice was mailed to the first named insured to the mailing address on file with the company, not that the notice was actually delivered; and
• If cancellation results in a return of premium, the refund is sent to the first named insured.

Changes — This condition states that the policy constitutes the entire contract between the insured and the insurer. The policy can be changed only by a written request by the first named insured and approval by the insurer.

Concealment, misrepresentation, or fraud — The policy will be void if any insured commits fraud relating to the policy, or intentionally conceals or misrepresents a material fact concerning the policy, covered property, the insured's interest in the covered property, or a claim under the policy.

Examination of books and records — The insurer has the right to examine and audit the insured's books and records that relate to the policy at any time during the policy period and for up to 3 years after the policy is no longer in force.

Inspections and surveys — The insurer has the right to inspect the insured's premises and operations at any reasonable time during the policy period. The purpose of these inspections is to determine the insurability of the property and operations, to set proper insurance rates, and to make loss control recommendations. Such inspections do not guarantee that the property or operations are safe, healthful, or in compliance with state laws.

Insurance under two or more coverages — If two or more coverages in this policy apply to the same loss, the insurer will not pay more than the actual amount of the loss.

Liberalization — If the insurer adopts any revision that broadens coverage without additional premium within 45 days prior to or during the policy period, that coverage will apply to the policy immediately.

Other insurance — If a loss is covered by other insurance, the insurer will pay only the amount of the loss in excess of the other coverage, whether or not the insured can collect from the other insurance.

Premiums — The first named insured is responsible for paying the premium under the policy. In addition, if ever the insurer gives any refund, it will be sent to the first named insured.

Premium audit — The policy is subject to audit if a premium designated as an advanced premium is shown in the declarations. The final premium due will be computed when actual exposures are determined. The first named insured must keep records of information needed for premium computation and send copies to the insurer at the insurer's request.

Transfer of rights of recovery against others to the insurer (subrogation) — The insurer has the right to recover its claim payment from a negligent third party.

Transfer of rights and duties under the policy — The insured cannot transfer any rights or duties under the policy to any other person or entity without the written consent of the insurer. Also, upon death, the insured's rights and duties under the policy are automatically transferred to the insured's legal representative.

In New York, cancellation requirements for businessowners policies are as follows:

• If the policy has been in effect for 60 days or less, the insured must be given 30 days' notice prior to the cancellation unless the cancellation is due to nonpayment of premium, in which case, a 15-day notice is required.
• If a policy has been in effect for more than 60 days, a 15-day notice must be given by the insurer to the first named insured.

Nonrenewal: notice of nonrenewal must be given to the insured within 60 days of the expiration but not more than 120 days. Conditions are also set for conditional renewals which are renewals with amendments to coverage and premium increases that exceed certain thresholds.

Selected Endorsements

In addition to the optional coverages built into the property coverage form, insurers usually offer other endorsements that can further expand the coverage provided in the policy for an additional premium.

1. Protective Safeguards

Protective safeguards endorsement adds a policy condition requiring the insured to maintain protective safeguards (automatic sprinkler system, fire alarm, etc.) as a condition for coverage. If the automatic sprinkler system is shut down due to breakage, leakage, freezing, or opening of the sprinkler heads, the insured has 48 hours to restore the system before the insured must notify the insurer.

2. Utility Services – Direct Damage

Utility services — direct damage endorsement provides coverage for direct damage caused by utility service disruption stemming from a covered peril. The insured's location and utility service must be indicated in the endorsement. Utility services include water services, communication services, and power supply services.

3. Utility Services – Time Element

The utility services — time element endorsement covers the insured's loss of business income or extra expense in the event of a direct physical loss to a utility service. The insured's location and utility service must be indicated in the endorsement.

Other Coverages and Options

Aviation Insurance

In aviation, hull refers to the fuselage, wings, tail, rudders, and other major structural features of an aircraft. The insurance policy that indemnifies the insured for damage to or loss of the hull is called aviation hull insurance. An aviation hull insurance policy provides physical damage coverage on the aircraft itself, and is the equivalent of the comprehensive and collision coverage of an automobile insurance policy.

There are 2 basic forms of hull coverage:

1. All-risk on ground and in flight — This is the broadest form of hull coverage and provides all-risk coverage on the aircraft both while it is on the ground and while it is in flight. Deductibles may be purchased applying either the same or different amounts while on the ground or while in flight or taxiing.
2. All-risk on the ground and limited in flight — This form provides all-risk coverage on the aircraft while on the ground, but coverage while the aircraft is in flight is limited to the perils of fire, lightning, and explosion, but not fire or explosion following a crash or collision.

The major perils not covered in flight are crash or collision. The coverage is usually written with a deductible that applies to all losses except fire, lightning, explosion, vandalism and malicious mischief, transportation, or theft. The deductible applies while the aircraft is not in motion, or when the aircraft is taxiing.

Aircraft Liability

Aircraft liability insurance covers bodily injury or death, and property damage caused by ownership, maintenance, or operation of the aircraft. Aircraft liability usually does not cover the crew. This coverage can be written to include or exclude bodily injury to passengers. Typical exclusions include contractual liability and injury to employees who are covered by workers compensation laws. In addition, there are usually exclusions if the plane is

• Used for a purpose not described in the declarations;
• Operated by a different pilot than that named in the policy;
• No longer considered airworthy; or
• Used for flying lessons.

A medical coverage option, which would pay regardless of fault, with no deductible, may be available. The medical coverage option pays for aircraft occupants' medical and funeral expenses up to the applicable limit. This may include crew members.

Property damage liability: This coverage covers damage to property of others. As with other property damage coverages, there is no coverage for property owned by the insured or property in the insured's care, custody, or control.

Ocean Marine Insurance

Ocean marine is the oldest type of insurance in the world. Edward Lloyd opened a coffeehouse in London in 1689, and it became a meeting place for people buying and selling insurance. Today's Lloyd's of London grew from these beginnings. Lloyd's list provides the name, position, destination, and other important data of every merchant ship in the free world.

Most ocean marine policy forms were adopted by Lloyd's around 1780 with little change since. The forms are full of archaic terms but have proved reliable in courts, and Lloyd's is reluctant to make changes. The forms are brought up to date by adding printed institute clauses to it.

OCEAN MARINE TERMS:

• Adventure means a trip or voyage.
• Assured is the insured.
• Average means loss.
• Constructive total loss means expense to repair or recover exceeding the value or policy limit.
• Demurrage is delay of vessel beyond the normal time to on-load or off-load or a charge for the delay.
• Laid up means in port or at anchor.
• Loss of specie means the subject matter ceases to be a thing of the kind insured.
• Misfortune is an accident or occurrence.
• Particular means partial.
• Touching means applying to.

• 1. Hull Insurance

  A hull policy is type of ocean marine insurance that provides physical damage coverage for the ship while it is in transit.

  If the ownership of an insured vessel changes, the hull policy terminates

  • At the time of ownership change;
  • If at sea, upon arrival at the final port; or
  • If the termination is involuntary, 15 days after the ownership transfer.

General average is defined as an ocean marine loss that occurs through the voluntary sacrifice of any part of the vessel or cargo to safeguard the vessel or cargo from a common peril, and all interests at risk contributing to it based on their respective saved values. Simply put, general average is a clause found in ocean marine policies requiring that when there is a sacrifice of property to save the ship, crew, and other cargo, everyone who benefited from this sacrifice must share in the payment for the sacrificed property.

According to the conditions of a hull policy after a loss, wages and maintenance will be paid for the master, officers, and crew when removing the vessel from one port to another for repairs, or on a trial trip to test repairs.

The insurer will not pay maintenance and wages for the master and crew while the ship is laid up for repairs. The insurer can pick the port of repair and can veto any proposed repair facility.

The hull policy pays for sighting the bottom after stranding whether or not damage is found. The hull policy never pays for scraping and painting the bottom of the ship.

American Institute Hull Clauses (AIHC)

American Institute Hull Clauses were created to establish wording to be used in marine policies in order to suppress confusion. Although hull policies could be written for a specific period of time, for a voyage, or for a voyage plus a stated amount of time in port after the voyage, most AIHC policies are issued for a term of 1 year. Explained below are clauses contained within the American institute form.

The assured is listed in the policy. If payment is made to anyone other than the owner of the vessel, it will be made on to the extent that the owner would have collected. It also contains a waiver of subrogation to related entities of the assured.

The loss payee is the party to be paid by the insurer in the event of loss. The loss payee could be a mortgagee or lien holder.

The vessel is the ship itself and is covered for physical damage or loss by the hull policy. Equipment owned by others and installed on the ship will also be covered. No coverage exists for cargo containers, barges or lighters (flat bottom ship used to unload cargo ships).

The duration of the risk on hull policies could be for a specified period of time for a voyage (one place to another and usually for an additional 24 hours after moored at anchor safely at port of destination) or mixed (voyage plus a specified period of time in port after arrival). Most AIHC policies are written with a coverage term of 1 year.

Most hull policies are written on an agreed value basis. The insured and insurer agree upon the value of the ship at the time the contract is made. In the event of a total loss, this amount is paid.

The limit of insurance is called the amount insured hereunder.

Any deductibles applying will be expressed as a dollar amount in the policy. A deductible does not apply for total losses.

Premium is stated in the policy and is fully earned in the event of a total loss.

Return of premium will be applied on a pro rata basis upon a change of ownership of the vessel. Premium also will be returned on a pro rata basis for each 30 consecutive day period laid up in port not under repair and not being used for storage or lighting. If the insurer cancels the policy, a pro rata refund is due. If cancelled by the assured, a short rate refund is due.

Nonpayment of premium after 30 days of an in-force policy can be cancelled by the underwriter with 10 days' notice to the assured or broker who negotiated the contract. If a total loss occurs prior to the cancellation, the full annual premium will be earned.

The adventure clause describes when the vessel is covered and not covered. In general, it will be covered during the period of the policy while at sea, in docks, and while towing other vessels in distress, trial trips and sailed with or without pilots. The vessel may not be towed by other vessels in other than a customary fashion.

In the event of any accident or occurrence that could lead to a claim, prompt notice must be given to the underwriters. The underwriters have the right to appoint their own surveyor to determine the extent of the damage. The underwriters have the right to decide where the vessel will proceed for repairs and have the right to veto any repair firm proposed.

If the underwriters direct the vessel to proceed to a particular port for repair, the insurer will pay the expenses of doing so, including wages and maintenance for the master, officers, and crew. Maintenance and wages also will be paid for the master, officers, and crew during any trip to test the repairs. Maintenance and wages will only be paid while the vessel is underway.

The expenses of sighting the bottom after stranding will be paid new for old without deduction even if no damage is found. In no case does the policy pay for scraping or painting the bottom.

The insurer also will pay for loss or damage to equipment not owned by the assured but installed for use on board the vessel and for which the assured has assumed responsibility.

In the event of a loss or misfortune, the master and crew is required to sue and labor to prevent further loss and keep the loss as small as possible. The insurer will pay reasonable expenses in doing so. If the master and crew do not sue and labor to prevent further loss, the insurer could refuse to pay the claim.

The collision clause of the hull policy is actually a type of liability coverage because it pays for damage to another's ship with which the assured's ship has collided. The assured must have been at fault for payment to apply.

The sistership clause stipulates that in the event the assured collides with a ship also owned by the same assured, each vessel has the same rights as if the collision was with a ship owned by someone other than the assured. If there is a question of liability, an arbitrator will determine the outcome.

When both vessels are at fault for a collision, the indemnity is calculated on the principle of cross liabilities. Each vessel owner would pay the other vessel owner the proportionate amount of damage based on the percentage of fault, subject to its own limit of collision liability. The exception to this is if one of the vessel's ability to collect damages is limited by law.

Although most ocean marine insurance is written on an all-risk basis, its intent is to cover the perils of the sea. Losses due to war, strikers, riot, civil commotion, decay, deterioration, and inherent vice are not covered.

In certain areas of the world there exist narrow waters (ports, straits, etc.). In these areas, so as to complete the voyage in a timely and safe manner, pilotage and towingservices must be used. The insurance coverage remains in effect while the vessel is under tow or the control of the specially qualified pilot in areas where pilotage and towage are the common practice. If the pilotage or towing firm is responsible for the damage, the firm would be liable for paying for it.

In the event of a change of ownership (voluntary or otherwise, such as new management - change from one entity to another, not internal changes of the assured; bareboat charter; or classification change), the coverage automatically terminates unless the following conditions apply:

• At that time, or if the ship is at sea with cargo, the coverage terminates upon arrival at the final port.
• In the event of an involuntary temporary transfer by requisition or otherwise, without the prior written consent of the assured, the automatic termination will be 15 days after such transfer.

The insurance will not benefit the new owner.

Additional insurance: other insurance is not allowed, except to cover perils excluded by the policy or to cover the difference between the amount insured hereunder and the agreed value.

Other Hull Coverages

In addition to the AIHC, there are other commonly used hull clauses, such as the Taylor Hull form, that are very similar to the AIHC. These other forms use the same terms, and the coverage works the same.

Not only do ocean marine hull policies cover ships on the high seas, but they also cover coastwise vessels and vessels on inland waterways. Again, all the same terms, conditions, and provisions apply.

Increased value and excess liability (IVEL) clauses work like umbrella policies. They provide excess coverage for the same losses covered by an underlining policy they are written to go with. The underlining policy must pay up to its limit before the IVEL pays anything.

The IVEL clause can provide excess coverage for protection and indemnity, collision, towers liability, general average and salvage, sue and labor, ship repairers liability, charterers liability, wharfingers/or safe berth liability, and others as specified.

2. Cargo Insurance

Cargo policies are written to cover loss or damage to the cargo. The owner of the cargo certifies that the cargo is suitable for shipment. The amount of premium will be partly determined by the packing method used and partly by the type of ship providing the transportation.

Bulk carriers are used to carry coal, grain, phosphates, and other loose cargo. The ship itself is the container for the cargo. Tankers are used to carry liquid cargo such as oil.

General cargo ships carry break-bulk cargo. Things such as steel, rolls of wire, and boxed goods are hauled in general cargo ships. Loading and offloading is slow because each piece of cargo must be individually handled. The cargo is not as well protected using this method, resulting in higher premiums.

Container ships carry cargo packed in 20- and 40-foot containers that also can be moved by trucks or railcars. This method is the more efficient in cargo handling than break-bulk, resulting in shorter port times. Containers provide better protection for the cargo, resulting in lower premiums than break-bulk.

Roll on/roll off ships (ro/ro ships) are used to carry motor vehicles, which roll on and roll off the ship via a stern ramp.