March, 1991

Open Perils Coverage on Furriers' Stock

Furriers block coverage, usually written on a mono-line basis, provides open perils protection on the stock of insureds in the fur trade, at a rate individually determined after submission of a detailed proposal.

Prior to the Insurance Services Office's (ISO) introduction of the 1986 inland marine insurance program, furriers block insurance was available under standard forms administered by ISO. That organization withdrew this coverage with the revamping of its standard inland marine program effective in January, 1986. Today, the coverage is available in the specialty coverages market.

Although furriers block is no longer available under ISO standard policies, most companies writing furriers block coverage do so using forms developed from the one-time standard policy. The following is a discussion of furriers block coverage as ISO last issued the policy. It may be used as a standard for comparing the furriers block forms available today.

There was no overlapping between furriers block and furriers customers insurance in the ISO program. The furriers customers policy covered only property of customers left with the insured—not the insured's own property—while the furriers block form specifically excluded property of others accepted for storage.

Today, in the non-standard market, coverage is written on a mono-line basis, so all the terms and conditions that pertain to the coverage are found within the policy.

Eligible Insureds—Property Covered

Furriers Block coverage is written for dealers in property consisting principally of furs, fur garments and garments trimmed with fur. Businesses dealing exclusively in raw or dressed skins and those who manufacture exclusively for the fur trade are generally ineligible. In effect, therefore, the furriers block policy is intended primarily for wholesale and retail furriers. Department stores with fur departments may sometimes be eligible, depending on the security and loss controls in effect.

Generally, property covered by furriers block insurance is the inventory of the business; “stock in trade consisting principally of furs, fur garments, garments trimmed with fur, and accessories pertaining thereto.” (quoting from the ISO form) This expression is broad enough to include miscellaneous items of stock not made of fur that a furrier might carry for the accommodation of its customers. The value of any such stock must, of course, be included in determining the amount of insurance required. Some insurers' rules permit these miscellaneous items to be excluded by substituting the word “only” for “principally.” This same applies when coverage is written for the fur department in a department store, thus eliminating from coverage any other merchandise of the store. Some underwriters will cover only fur garments under the furriers block policy, leaving non-fur items to be covered under the package policy.

In the ISO program, coverage applied to property of the insured and also to property sold but not delivered. Property of others engaged in the trade was covered to the extent to which the insured might be liable, including the insured's interest in that property for labor and materials.

Common exclusions found in furriers block policies are: (a) property of others accepted by the insured for storage; (b) property rented or leased or sold on the installment plan, after delivery; (c) property in transit via the Panama Canal and import shipments until they had arrived at the insured's premises or other place of final destination used by the insured; (d) animals (anywhere) and furs, pelts, skins or parts on premises of ranchers, breeders, growers or trappers; (e) property while at any exhibition promoted or financially assisted by any public authority or any trade association; and (f) property worn or in their custody to be worn by the insured, officers, employees, etc., in the fur trade, or by members of their families, relatives or friends. This exclusion does not apply to property being modeled on the insured's premises or in exhibition not otherwise excluded.

Note that the types of property not covered by the furriers block form were, and still are, readily insurable under other contracts.

Property in transit, in care of public or common carriers or of postal authorities was covered only under certain conditions in the ISO policy. Unless registered (note that this did not include certified mail), property sent by mail was not covered. Also, property sent by express, railroad, waterborne, air, motor carrier or freight forwarders was not covered unless:

1.     full value was declared on shipments if less than $200;

2.     a declaration of 25% of the value of the shipment or $200, whichever was greater, was made if the shipment was valued at more than $200. If express shipment was by Railway Express Agency, the merchandise must have been designated “furs” on the carrier's receipt;

3.     the carrier operated exclusively as a merchants parcel delivery service; or

4.     property was in custody of air carriers' passenger baggage service for transportation under air freight tariff with delivery to passenger at destination. In this case, property is considered “accompanied baggage” and is subject to the limit of liability stated in the policy for property in locations other than those scheduled.

Coverage and Exclusions

The ISO form stated its protection as against risks of direct physical loss or damage, except as excluded. In addition, similar to many other burglary and inland marine contracts that primarily cover personal property only, the furriers block form covered damage (except by fire) to the portion of the building occupied by the insured and to equipment within it resulting from theft or attempted theft, provided the insured owned the premises or was legally liable for the damage. This extension did not apply to glass (except structural glass) and to lettering or ornamentation on glass, nor to department store premises at all.

The ISO furriers block form excluded loss from theft or attempted theft of property from show windows on the insured's premises by window smashing or cutting. Damage to property from any cause while in show windows or show cases away from the insured's premises was excluded. These exposures could be covered for an additional premium, as discussed later in these pages.

Generally, furriers block forms will contain the usual exclusion of theft from unattended vehicles. In the ISO form, the exclusion referred to theft from any “automobile, motorcycle or any other vehicle” (thus not restricted to motor vehicles) unless the insured, a permanent employee, or a person whose sole duty it was to attend the vehicle was actually in or upon it at the time the loss occurred. (Note that this exclusion would have applied, even if the attendant had been very close to the vehicle, but not actually “in or upon” it). This exclusion did not apply to property in the custody of a public or common carrier or the post office department.

Mysterious disappearance, unexplained loss and loss or shortage disclosed on taking inventory are also commonly and were excluded in the ISO form. So also was sabotage, theft, conversion, or “other act or omission of a dishonest character” on the part of the insured, its employees, or on the part of any person to whom the insured had delivered or entrusted the property for any purpose. The last exclusion did not apply to property deposited for safekeeping by the insured, an officer, member of the firm, or salesperson while traveling (such as in a hotel safe) or while the goods were in custody of the post office, a public or common carrier (subject to the restrictions previously mentioned) or in the custody of a person not on the payroll of the insured but serving as a porter or helper. Similar to jewelry trade usage, the term “porter” refers to a person engaged by a salesman to carry samples or to attend them in the salesman's absence.

Other Exclusions

The ISO furriers block form had the usual exclusions of loss or damage by delay, loss of market, gradual deterioration, moth, vermin, inherent vice, damage sustained due to any process or treatment or while the property was being actually worked upon and directly caused by this work (except fire or explosion damage). Also, the usual inland marine exclusions of war risks, atomic fission, insurrection, seizure, confiscation, etc. applied.

The form excluded flood damage to property at premises of the insured and defined flood as including surface water, waves, tide or tidal water, and overflow of streams or other bodies of water or spray from any of these, whether driven by wind or not. Some companies permitted the deletion of this exclusion at an additional charge.

Limits

Various limits may be applied to furriers block coverage. for example, the ISO furriers block form contained six limits, each being the maximum liability for any one loss. They applied to: (a) property at the insured's premises which must have been designated in the form; (b) property in transit, whether by contract or common carrier or registered mail; (c) property in custody of a merchants parcel delivery service; (d) property at the premises of sales agents, dealers, processors and similar custodians; (e) property of the insured while in storage at premises not specified in (d) above which must have been designated in the form and (f) property located elsewhere and not otherwise included under any of the previous limits and not excluded by the form.

The limit applying to property at the insured's premises applied in the aggregate to the property itself and to damage to the premises due to theft. In other words, the extension of the form to cover theft damage to the premises did not add an additional amount of insurance, but simply spread the premises limit to cover this additional exposure.

Valuation

Loss to unsold property was adjusted on the basis of the actual cash value at the time of loss, with proper deduction for depreciation, subject to the limitation of the cost to repair or replace the property with that of like kind and quality. On sold property, the maximum liability was the net selling price, after all allowances and discounts; and on property of others the limit was the amount for which the insured was liable, not to exceed the actual cash value, including labor performed and material expended. The insurance company retained the right to adjust losses directly with the owners of property held by the insured.

Except as to legal liability of the insured, the ISO furriers block contract did not cover if there was any other valid and collectible insurance.

Furriers block forms commonly include a detailed requirement of keeping records, including inventories, purchases and sales, property in the insured's custody, travelers' stocks and property sent to others for any purpose. The insurance company usually will require the right to examine these records at any reasonable time during the policy term and 12 months after termination.

Deductible

Generally the ISO furriers block coverage contemplated use of a deductible clause. The deductible amount might have been $500, $1,000, $2,500 or $5,000, and applied to each adjusted claim or the applicable limit of liability, whichever was less. Losses at the insured's premises due to fire and lightning were not subject to this clause.

Additionally, it was commonly required that the insured assume the amount of the deductible with a special restriction against coverage under any other form of insurance. Further, any salvage or other recovery on a loss went to the insurer until it had regained the amount paid under the claim.

Show Window Cover

ISO offered an endorsement for covering property in show windows under the contingencies excluded by the standard form. There were two divisions of this coverage, each covering property in show windows at the premises of the insured but excluded under the basic form: (1) when premises were open to business and (2) when premises were closed to business. Coverage was against theft losses involving window smashing or cutting.

Insurance under this extension required in both divisions an aggregate limit on property in all windows and a separate limit on property in any one window. Aggregate and separate limits were also required for protected and unprotected windows. Protected windows were defined as those in which the property displayed was behind shatterproof glass, behind swing plate glass or its equivalent secondary to the window pane, or behind metal bars or grills entirely across the window. An extension of coverage for property in show windows away from the premises was available.

Other Property

Often the ISO furriers block policy was extended to cover tenants improvements and betterments, furniture and fixtures, machinery and tools and neon, automatic, or mechanical electric signs.

A separate endorsement was usually required for this extension of coverage when it applied to furniture, fixtures, or improvements. If coverage of improvements and betterments were not to be included, provisions applicable to them were voided.