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Open Perils Coverage on Property Carried by Travelers
Summary: The personal effects floater, a standard inland marine form promulgated by Insurance Services Office (ISO), provides open perils coverage on personal effects usually carried by tourists and travelers. The coverage applies only to such property belonging to and used or worn by an insured (the named insured, spouse, and unmarried resident children) and only while the insured property is off the premises of the insured's domicile.
The ISO form is PM 00 20 12 02; the American Association of Insurance Services (AAIS) writes personal effects insurance subject to substantially the same provisions, using Form IM-177.)
Like the personal articles floater, the PM 00 20 must be attached to the PM 00 01 12 02, since this form contains the loss settlement conditions, exclusions, and general conditions.
Need for Personal Effects Coverage
The widespread acceptance of homeowners insurance as the preferred method of covering most property that comes under the heading of “personal effects” has limited the usefulness of the personal effects floater. Nevertheless, the floater's coverage represents a convenient form of insurance for certain persons or situations. For example, the coverage may be desired by retirees, with no residence, who tour the country in motor homes. Additionally, the form may be used for persons who frequently attend conventions, or who go on tour, as an actor or singer. Rules in the ISO personal inland marine manual permit a single floater to be issued for several persons attending a convention or on a tour. Each person covered must be named individually and a separate amount of insurance must be assigned to each person.
Traveling exposes personal property to a unique set of risks, many of which are not covered under a named perils policy. The open perils feature of the personal effects floater fills this coverage gap. An insured with any considerable values at risk, such as cameras, jewelry, furs, and golfing equipment, may already have such property insured under a personal articles floater or the equivalent homeowners endorsement. Such an insured should still consider obtaining the same degree of protection on other property to be taken along on a trip.
A. Property Covered
1. We cover Personal Effects usually carried by tourists and travelers, that an “insured” owns and uses or wears anywhere in the world.
2. Special Limits Of Liability
The limit for the following property is 10% of the amount of insurance that applies to personal effects:
a. Jewelry, watches and articles consisting in whole or in part of silver, gold or platinum; and
b Fur or articles trimmed with or consisting principally of furs.
We will not pay more than $100 of this limit for any one item.
B. Property Not Covered
We do not cover:
1. Personal effects while:
a. At “your domicile”. “Your domicile” means your permanent residence to which, whenever absent, you intend to return;
b. In storage. However, we do cover such property at points and places en route during travel; or
c. In the custody of students while:
(1) In dormitories or fraternity or sorority houses; or
(2) On the premises of educational institutions.
However, we do cover such property for loss by the peril of fire.
2. Accounts, bills, currency, deeds, documents, evidences of debt, letters of credit, money, notes securities, passports and transportation or other tickets;
3. Animals, artificial teeth or limbs and contact lenses;
4. Bicycles, hovercraft, motors, motor vehicles, watercraft and other conveyances including their accessories, equipment and parts;
5. Household furniture;
6. Merchandise for sale or exhibition;
7. Physicians and surgeons instruments;
8. Salesperson's samples;
9. Theatrical property;
10. Contraband or property in the course of illegal transportation or trade; or
11. Any property specifically or otherwise insured.
Analysis
Some points involving practical application of the floater's definition of covered property should be carefully explained to prospective insureds. The term personal effects is typically defined in dictionaries as a reference to articles normally worn or carried on the person. It therefore does not represent as broad a category as the term unscheduled personal property, with which a homeowners insured may already be familiar.
Coverage is limited, moreover, to personal effects usually carried by tourists and travelers and is further subject to a list of excluded property that might otherwise be eligible for coverage, like currency, passports, securities, and tickets. Note, as well, the very limited coverage for jewelry, watches and furs. If an insured needs more coverage, the personal articles or a class-specific form should be used. The floater's list of excluded items also contains property that does not seem to come within the definition of personal effects in the first place—automobiles and automobile equipment, motorcycles, bicycles, and boats.
To be eligible for coverage, property must not only be used or worn by an insured but must belong to an insured as well. There is no coverage, therefore, for articles an insured rents or borrows from anyone other than an insured.
While the floater's coverage is designed for travelers and applies only to property of a kind usually carried by travelers, it is not necessarily limited to property actually taken along on a trip or in the possession of someone traveling. Coverage applies to insured items while away from the insured's domicile anywhere in the world for virtually any reason. The explanation below of the storage exclusion is an example of this application of coverage.
To emphasize the off premises nature of this form, property on the premises of the insured's domicile is not covered. “Domicile” was not a defined word in the previous form, but the current form (PM 00 20) contains a definition.
Loss occurring to property in storage is excluded. Property is not in storage, however, when left at points and places en route during travel. For instance, an insured planning a midwinter Caribbean cruise might first visit friends in New York , leaving several items of heavy clothing there with the intention of picking up these articles on return. This exclusion does not apply to this property.
Insured property in the custody of students and located in fraternity or sorority houses or dormitories or on the premises of educational institutions is covered only against the peril of fire. ISO rules allow this exclusion to be deleted. See the discussion later under Coverage Options.
C. Perils Insured Against
We insure against risk of direct physical loss to covered property.
We do not insure the following:
1. Loss caused by wear and tear, deterioration, inherent vice or any quality in property that causes it to damage or destroy itself;
2. Loss caused by insects or vermin;
3. Loss caused by or resulting from work done to or handling the property; or
4. Breakage of fragile articles unless caused by:
(a) An accident to a conveyance;
(b) A fire; or
(c) A thief.
Analysis
Coverage is on an open perils basis with some exclusions characteristic of open perils inland marine policies, such as wear and tear and inherent vice, and breakage of fragile items unless caused by thieves, fire or vehicle accident. Note as well the exclusion for loss caused by having work done to the property, or from its being handled.
The prior form eliminated theft from an unattended auto unless the auto had a fully enclosed body or compartment, and the loss was a direct result of forced entry to such body or compartment, with visible marks of the forced entry. Even in those instances, recovery was limited to 10 percent of the policy limit or $250, whichever was less. This provision no longer appears in the current PM 00 20.
The following loss settlement conditions of form PM 00 01 are deleted: D.1.a.(2) newly acquired property; D.1.b. agreed value loss settlement scheduled property only; D.1.c. unscheduled property – blanket insurance; and D.2. loss clause. This reinforces the personal effects floater's function—to provide protection for property a traveler might carry, not to provide coverage for high value items that are properly insured by other methods. For information on these loss conditions, see Personal Articles Form.
Coverage is automatically provided with no deductible, but the insured may select a $100, $250, or $500 deductible. In the earlier program optional coverages were available by means of endorsement. In this program, all options appear on the form; the insured selects the coverage and the appropriate options box on the declarations. Four of these options increase the scope of coverage as indicated below:
1. Property At Your Domicile Coverage. For a premium increase of 25 percent, personal effects coverage may be extended to eligible property while on the premises of the insured's domicile. Any loss to the property at the insured's domicile is settled on this basis: “the proportion of any loss to such property that the amount of insurance bears to the actual cash value of all covered property at the time of loss.” When calculating the amount of loss, the value of jewelry, watches and furs subject to the special limit of liability (10 percent of the amount of insurance applying to the personal effects) is not taken into account. The limit of no more than $100 for any one item on this property still applies.
2. Students' Property Coverage. Although the floater already covers such property for fire only, open perils coverage may be purchased by choosing this option. Property Not Covered Paragraph B.1.c. is deleted. Rules call for increase in policy premium subject to a minimum additional charge.
3. Additional Person Insured Coverage. “Insured” includes only the named insured, his or her spouse, and unmarried children living at home. Others, if residing permanently with the named insured, may be named as additional insureds. The endorsement requires an additional premium for each insured added.
4. Property in Trailer Home Coverage. This option adds coverage for furniture and furnishings of an auto trailer or trailer home owned or leased by the insured. Coverage applies only to such property contained in or used in connection with the trailer and does not extend to built-in equipment and accessories or parts “built into and forming a permanent part of the auto trailer home; and usually attached to an automobile of the private passenger type.”
Loss caused by marring and scratching, dampness of atmosphere, extremes of temperature, mechanical breakdown, and damage to electrical apparatus caused by electricity whether artificial or natural is excluded. Ensuing fire damage in connection with either of the latter two perils is covered.
A separate amount of insurance is to be specified in the endorsement and an additional premium is charged.
One option is used to limit the basic coverage:
1. Theft Exclusion. The perils of theft or attempted theft, larceny, burglary, robbery, mysterious disappearance, and vandalism or malicious mischief may be excluded for a premium credit. The percentage credit, specified in the manual's state rate pages, is applied to the basic premium and to any additional premiums charged in connection with endorsements pertaining to domicile risks, students' property, and auto trailers.