What Does Inland Marine Insurance Not Cover?

Inland marine insurance provides coverage for property that is mobile, in transit, or on the property of others, distinguishing it from traditional property insurance which typically covers assets at a fixed location. This type of insurance is particularly useful for businesses that frequently move valuable goods or equipment. Understanding the limitations and common misconceptions of typical inland marine policies is important for anyone relying on this specialized form of coverage.

Fundamental Exclusions

Inland marine insurance policies contain fundamental exclusions common across many types of insurance. These address risks considered catastrophic and beyond standard insurable events.

Losses arising from war or military action, including invasion, civil war, rebellion, or insurrection, are generally not covered. Nuclear hazards, such as nuclear reaction, radiation, or radioactive contamination, also fall under broad exclusions. Damage or loss resulting from governmental action, such as seizure or destruction of property by order of a civil authority, is another common exclusion. Acts of terrorism are typically excluded or have limited coverage in standard policies, often requiring specific endorsements.

Excluded Property Types

Standard inland marine policies generally do not cover certain categories of property, regardless of the cause of loss or location.

• Real property, including buildings, land, and anything permanently attached to them, is excluded because inland marine insurance is designed for movable property. This type of property is typically covered by commercial property insurance.
• Vehicles, such as cars, trucks, airplanes, and boats, are also generally not covered under inland marine policies. These assets typically require separate, specialized policies like commercial auto, aviation, or marine hull insurance.
• Property that is considered contraband or involved in illegal trade or activities is universally excluded from coverage.
• Certain types of data or electronic information are often not covered by property policies, including inland marine, and instead fall under cyber liability policies.
• Animals are typically excluded unless specifically endorsed as part of a unique business operation.
• Property in the care, custody, or control of others, such as goods shipped via a common carrier like FedEx or UPS, is often not covered unless specific provisions or endorsements, like bailee’s customer coverage, are added to the policy.
• Property damaged before shipment, such as during the loading process, is generally not covered by an inland marine policy.

Non-Covered Perils

Specific causes of loss, known as perils, are typically excluded from inland marine policies even if the property itself would otherwise be covered.

• Damage resulting from wear and tear, gradual deterioration, rust, corrosion, mold, mildew, or rot is commonly excluded. These are considered predictable occurrences or maintenance issues rather than sudden, accidental losses.
• Inherent vice, which refers to a defect or quality within the property itself that causes it to damage or destroy itself without external cause, is also excluded.
• Mechanical or electrical breakdown is generally not covered unless the breakdown itself results from a separate, covered peril like a fire.
• Pest infestation, including damage from insects, rodents, or vermin, is typically excluded from coverage.
• Damage due to extremes of temperature or humidity is also commonly excluded, unless caused by a covered event, such as a burst pipe from freezing.
• Consequential losses, which are indirect losses stemming from a direct physical loss, are often excluded. Examples include loss of market, delay, or loss of use of the damaged property.
• Earth movement, such as earthquakes, landslides, or mudslides, and flood damage are typically excluded from basic property forms, including inland marine. These perils often require specific endorsements or separate policies for coverage.
• Intentional damage or dishonest acts by the insured or their employees are also excluded, unless specific employee dishonesty coverage is added to the policy.

Conditions Affecting Coverage

Coverage under an inland marine policy can be negated or limited by specific policy conditions or the actions of the insured.

• Failing to protect property from further damage after a loss, such as neglecting to secure damaged items, can affect claim payouts.
• Policies may also stipulate conditions regarding the security of property, such as exclusions for property left unattended in an unlocked vehicle or unsecured premises.
• Misrepresentation or fraud by the insured when obtaining or claiming under the policy can lead to a voiding of coverage.
• Violations of policy conditions, such as not properly packing, securing, or transporting property according to specified guidelines, can also result in denied claims.
• Losses occurring outside the defined coverage territory or during periods when coverage is not active are not covered. Inland marine insurance typically covers property in transit over land, so property transported by sea or air often requires different insurance.
• Losses that fall below the deductible amount will not result in a financial payout from the insurer.
• Losses exceeding policy limits mean that coverage stops once the maximum payout for a specific item or occurrence is reached, and any remaining loss beyond that limit is the insured’s responsibility.