Under the current commercial inland marine program of Insurance Services Office, one form—mail coverage form, CM 00 60—covers valuable mail shipments made by financial and fiduciary organizations. It provides coverage against risks of direct physical loss (accidental loss or damage) to covered property. The property may be sent by: first class mail, certified mail, United States postal service express mail, and registered mail. The coverage is written on a reporting basis with reports and premiums being sent to the insurer on a regular basis as shown on the declarations page. Several endorsements are available for use with this coverage. They are: transfer agents mail, CM 60 08 09 00; securities sent under air bill, CM 60 09 09 00; securities sent by the treasury department, CM 60 10 09 00; and flat premium per shipping package, CM 60 02 09 00.
Financial and fiduciary organizations eligible to use the mail coverage form are: banks and bankers, trust companies, insurance companies, security brokers, investment corporations whose business is primarily fiduciary in nature, and corporations that act as their own security transfer agents or registrars.
Like the other inland marine coverage parts of the program, the mail coverage form may be used independently to insure property on a monoline basis or in conjunction with coverage parts of the other simplified language programs on a multi-line basis.
When a monoline mail policy is desired, it is formed by combining a mail coverage declarations (showing limits for covered property by type of mail shipment used and any special provisions), a reporting declarations (showing deposit and annual minimum premiums, reporting period, and applicable rates by type of covered property), a mail coverage form (CM 00 60 09 00), a common policy conditions form (IL 00 17 11 98), a commercial inland marine conditions form (CM 00 01 09 00), and any applicable endorsements.
Coverage
A. COVERAGE.
We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.
1. COVERED PROPERTY, as used in this Coverage Form, means the following when sent by First Class Mail, Certified Mail, United States Postal Service Express Mail or Registered Mail:
a. Bonds, stock certificates, certificates of deposit and other securities;
b. Coupons if detached from bonds; and
c. Postage and revenue stamps; postal, express and other money orders; checks, drafts, notes, bills of lading, warehouse receipts and other commercial papers; other documents and papers of value except food stamps, unsold travelers checks and currency.
Covered Property also means the following, but only when sent by Registered Mail:
d. Bullion, platinum and other precious metals; and
e. Currency, unsold travelers checks, food stamps, jewelry, watches, precious and semi-precious stones and similar valuable property.
But we only cover property:
(1) You have recorded for insurance under this Coverage Form prior to loss or damage; and
(2) Sent by the type of mail for which a Limit of Insurance is shown in the Declarations.
2. WHEN COVERAGE APPLIES
We cover property in the care, custody or control of a government postal service. We also cover property while in transit by common carrier or messenger to or from the government post office.
We cover property until it has been:
a. Delivered to the addressee at the address stated on the shipping package;
b. Delivered at the proper address in the event of non-delivery by reason of error in address or removal of addressee; or
c. Returned to the premises of the sender in the event of non-delivery.
But we do not cover property at the premises of any mail receiving agency.
3. PROPERTY NOT COVERED
Covered Property does not include contraband, or property in the course of illegal transportation or trade.
4. COVERED CAUSES OF LOSS
Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE to the Covered Property except those causes of loss listed in the Exclusions.
5. COVERAGE EXTENSION
Errors and Oversight
If due to error or oversight:
a. The value of any mailing was not recorded properly, we will pay the actual value of that property in the event of its loss or damage. You will notify us promptly after you discover any error or oversight. You will also record the correct value.
But we will not pay more than the Limit of Insurance shown in the Declarations applicable to the property and type of mail you used.
b. The value of Covered Property in any one shipping package exceeds the Limit of Insurance shown in the Declarations for that type of mail, we will pay only the proportion of any loss or damage that the applicable Limit of Insurance bears to the actual value of the property on the date of mailing.
Analysis
The mail coverage form gives open perils coverage to those items of property described as “covered property” on the form and that have been recorded by the insured according to the policy provisions (see the Conditions section later in this discussion). The property must be sent by a type of mail for which a limit of insurance is shown on the declarations.
“Covered property” means the following items when sent by first class mail, certified mail, United States postal service express mail, or registered mail:
1. bonds, stock certificates, certificates of deposit and other securities;
2. coupons if detached from bonds; and
3. postage and revenue stamps; postal, express, and other money orders; checks, drafts, notes, bills of lading, warehouse receipts and other commercial papers; other documents and papers of value except food stamps, unsold travelers checks, and currency.
Covered property may also include the following, but only when sent by registered mail:
1. bullion, platinum and other precious metals; and
2. currency, unsold travelers checks, food stamps, jewelry, watches, precious and semi-precious stones, and similar valuable property.
Covered property does not include contraband or property in the course of illegal transportation or trade.
The coverage applies while the property is “in the care, custody, or control of a government postal service” or “in transit by common carrier or messenger to or from the government post office.” Coverage extends until the property is:
1. delivered to the addressee at the address shown on the package;
2. delivered at the proper address if the address on the package is incorrect or the addressee has moved; or
3. returned to the sender if it cannot be delivered.
However, the policy specifies that it does not cover property at the premises of any mail receiving agency. The term “mail receiving agency” is not defined on the coverage form, which could lead to some confusion as to just where and when the property of the insured is covered.
For example: if the insured puts some covered property in the mail box at the local post office, that property is, in effect, in the care, custody, or control of the postal service and should be insured. However, some enterprising claims adjustor could plausibly assert that the property is at the premises of a mail receiving agency and deny coverage if a loss is claimed. Should such a dispute end up in court, the insured would, in all probability, win the argument, but defining the term “mail receiving agency” would preclude such problems for all concerned parties.
The mail coverage form contains two special provisions regarding error or oversight on the part of the insured. The first concerns the insured's improper recording of mail shipment values resulting from error or oversight. Here, the insurer agrees to pay the actual value of lost or damaged property rather than recorded value. The insured must notify the company as soon as the error is discovered and correct the error promptly. Payment under this provision is still subject to the applicable limit of insurance for the covered property as shown on the declarations page.
The second provision concerns the value of one shipping package. If the insured's error or oversight results in the value of one shipping package exceeding the limit of insurance shown on the declarations, the insurer's payment is calculated on a pro rata basis.
Exclusions
B. EXCLUSIONS
We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
1. Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread if the fire would be covered under this Coverage Form.
2. Weapons
a. Any weapon employing atomic fission or fusion; or
b. Any mine or torpedo.
3. War and Military Action
a. War, including undeclared or civil war.
b. Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents.
But we will pay for direct loss or damage caused by fire; explosion; stranding; heavy weather; or collision or contact with aircraft, rockets or missiles or any fixed or floating object (except any mine or torpedo); if warlike action does not contribute directly to these causes of loss.
c. Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
Exclusions B.1 through B.3 apply whether or not the loss event results in widespread damage or affects a substantial area.
Analysis
The open perils coverage of the mail coverage form is modified by only three exclusions, all prefaced with concurrent causation exclusionary language.
The governmental action exclusion says that the seizure or destruction of covered property as an act of governmental authority is not covered, except for destruction of property ordered to prevent the more general spread of fire when the fire itself is a covered cause of loss.
The weapons exclusion eliminates coverage of loss by any weapon employing atomic fission or fusion or by any mine or torpedo. Unlike other marine forms, the mail coverage form does not exclude loss from nuclear reaction, radiation, or radioactive contamination from any other cause (such as a nuclear meltdown).
The war and military action exclusion applies to three related causes of loss: war, including undeclared or civil war; warlike action by a military force; and acts of insurrection, rebellion, revolution, or action taken by governmental authority in hindering or defending against any of the preceding acts.
An exception appears under the “warlike action” portion of the exclusion providing coverage for “direct loss or damage caused by fire; explosion; stranding; heavy weather; or collision or contact with aircraft, rockets or missiles or any fixed or floating object (except any mine or torpedo),” but only if warlike action does not contribute directly to the loss. This would provide coverage if, for instance, a ship or train carrying covered property was hit by a misfired missile, an indirect result of a warlike action.
Limits of Insurance
C. LIMITS OF INSURANCE
The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.
Analysis
Liability under the mail coverage form is limited to a specified amount for each shipping package and a specified amount sent to any one addressee on any one day. The commercial lines manual, inland marine section, provides rates for up to $250,000 per package and $1,100,000 per addressee per day as the maximum limits of insurance.
Additional Conditions
D. ADDITIONAL CONDITIONS
1. VALUATION
General Condition F. Valuation in the Commercial Inland Marine Conditions is replaced by the following:
a. The value of Covered Property will be its actual value, but not less than its market value, on the date of mailing.
b. In the event of loss or damage:
(1) We will furnish the bond or indemnity necessary to reissue or duplicate the Covered Property after receipt of your proof of loss.
If we do this on behalf of the registered owner and that owner finds or recovers the property after its reissue or duplication and fails to return it for cancellation, your rights of recovery against that owner are transferred to us.
(2) If you are required to deliver and cannot borrow equivalent property prior to the time the Covered Property can be reissued or duplicated, we will pay:
(a) The cost of equivalent property purchased by you in an available market;
(b) The postage and insurance charges for that mailing; and
(c) Any loss of interest actually earned on the Covered Property between the date of mailing and the date the equivalent property is purchased.
(3) If the Covered Property cannot be reissued or duplicated and if equivalent property cannot be purchased, we will pay:
(a) The value of the Covered Property on the date of loss or damage;
(b) The postage and insurance charges for the mailing; and
(c) Any loss of interest actually earned on the Covered Property as of the date of mailing. But we will pay this interest only if it has not been included already in the value you recorded for that mailing.
(4) If we pay any loss or damage:
(a) We will pay no more than:
(i) 125% of the value you have recorded for insurance for bonds, stock certificates, certificates of deposit and other securities; or
(ii) The value you have recorded for insurance for all other Covered Property;
(b) We will pay you or anybody else you direct us to pay; and
(c) All right, title and interest in the Covered Property will be conveyed to us.
2. CANCELLATION
The following is added to the Cancellation Common Policy Condition:
In the event of cancellation, this Coverage Form applies to all mailings of Covered Property made up to the date and time of cancellation.
3. DUTIES IN THE EVENT OF LOSS
The following is added to Loss Condition C. Duties in the Event of Loss in the Commercial Inland Marine Conditions:
Your proof loss will also include:
a. Proof of interest in the property;
b. Affidavit of mailing;
c. Affidavit of non-receipt by the addressee and, if we request, also by the owner of the property; and
d. If applicable, the receipt of any government postal service for the mailing.
4. LOSS PAYMENT
Paragraph 5. of Loss Condition E. Loss Payment in the Commercial Inland Marine Conditions is replaced by the following:
5. We will pay for covered loss or damage within 7 days after we receive the sworn proof of loss, if you have complied with all the terms of this Coverage Part and:
a. We have reached an agreement with you on the amount of the loss; or
b. An appraisal award has been made.
5. OTHER INSURANCE
Loss Condition F. Other Insurance in the Commercial Inland Marine Conditions is replaced by the following:
If there is any other insurance or indemnity covering the same loss or damage as the insurance under this Coverage Form, we will pay only our pro rata proportion of the loss or damage, except as follows:
a. With respect to loss or damage by theft on the part of employees of senders or addressees, we will pay only for the excess of the amount covered by any other insurance or indemnity. We will pay the excess whether the other insurance or indemnity is collectible or not;
b. With respect to loss or damage, other than by theft on the part of employees of senders or addressees, that is covered by any blanket bond, we will be directly and primarily liable for that loss or damage. We will have no recourse against any blanket bond.
6. The following conditions apply in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions:
a. COVERAGE TERRITORY
We cover property sent by:
(1) First Class Mail, Certified Mail and United States Postal Service Express Mail within and between places in the United States of America, Puerto Rico, Canada, the United States Virgin Islands and other territories or possessions of the United States; or
(2) Registered Mail between places anywhere in the world.
b. RECORDS
You will keep accurate records of all mailings of Covered Property. You must record each mailing prior to loss or damage:
These records will consist of:
(1) A description of the Covered Property, its destination and the type of mail you used; and
(2) The value of the property contained in each shipping package covered by this Coverage Form.
c. REPORTS AND PREMIUM
(1) Reports. Within 30 days after the end of each reporting period shown in the Declarations, you will report to us the total values of all property covered by this Coverage Form sent during the preceding reporting period. This report will list the values separately for each kind of property and type of mail for which a rate is shown in the Declarations.
(2) Rates and Premium
(a) Premium Computation. We will compute the premium for each reporting period using the rates shown in the Declarations.
(b) Premium Adjustment
(i) If an annual reporting period is shown in the Declarations, we will apply the total computed premium to the Deposit Premium. If it is more than the Deposit Premium, you will pay us the difference. If it is less than the Deposit Premium, we will pay you the difference.
(ii) If any other reporting period is shown in the Declarations, we will apply the computed premium to the Deposit Premium until it is used up. You will pay us all premiums that exceed the Deposit Premium. We will make these premium adjustments for each reporting period.
(iii) Minimum Premium
You must pay at least the minimum annual premium shown in the Declarations.
(3) If this Coverage Form is canceled:
(a) You will report promptly to us the total values of all property covered by this Coverage Form sent up to the date and time of cancellation. We will compute the premium as provided above.
(b) You must pay a Minimum Premium of at least 1/12th of the minimum annual premium shown in the Declarations for each month or part of a month that this coverage applies during the Policy Period.
Analysis
Besides the common policy conditions on IL 00 17 and the commercial inland marine conditions on CM 00 01, the following additional conditions appear on the mail coverage form:
Valuation: The valuation condition of the mail coverage form replaces the general valuation condition that is found on form CM 00 01 and prescribes that the value of covered property is its actual value on the date of mailing. It further prescribes that this “actual value” will not be less than the market value of the covered property.
Upon receipt of a statement of loss from the insured, the company agrees to supply a bond or other form of indemnity necessary while the property is being reissued or duplicated. If the original property is recovered after the property is replaced but it is not returned to the insured for cancellation, all rights of recovery against the registered owner revert to the insurer.
If the insured is required to deliver covered property and cannot borrow equivalent property before reissuance or duplication can be accomplished, the measure of recovery is the cost of equivalent property purchased by the insured in an available market plus loss of actual interest earnings, shipping, and insurance charges. Should the insured be unable to reissue, duplicate, or purchase equivalent property, the company will pay the value of the covered property on the date of loss instead, also including interest earnings, etc.
Under the valuation condition, the total amount payable for bonds, stock certificates, certificates of deposit, and other securities will not exceed 125 percent of their recorded value. That the insured may recover more than the amount of insurance recognizes that the market price of such property is subject to considerable day to day fluctuation. The maximum amount payable for all other covered property is its value as recorded by the insured.
Cancellation: If the policy is canceled, all covered property mailed up to the date and time of cancellation continues to be insured.
Duties in the event of loss: An insured's statement of loss must include: proof of interest in the property; affidavits of mailing and of non-receipt by the addressee and, if requested, the property's owner; and receipts of mailing from any government postal service, if applicable.
Loss payment: Payment for covered losses is made within seven days after an agreement is reached with the insured, or an appraisal award is filed. This condition replaces the loss payment condition found on CM 00 01.
Other insurance: The mail coverage form participates on a pro rata basis when other insurance (such as a blanket bond) exists, unless the loss is due to theft by employees of senders or addressees. It then provides excess coverage over the other insurance, whether that insurance is collectible or not.
If a loss, other than theft by employees, is covered by a blanket bond—destruction of a package in a fire or outside hold-up, for example—the mail coverage form provides primary coverage for that loss and the insurer has no recourse against any blanket bond.
Collecting a loss under a blanket bond adversely affects the insured's experience credit. Under an earlier first class mail policy, coverage existed for the amount of premium credit that would have been earned. However, this provision is not carried over to the current mail coverage form. Likewise, the special provisions regarding advancement of loss payment, payment of expenses of recovery and reinstatement premiums, and waiver of insurer reimbursement for loss advances have been dropped.
Coverage territory: For covered property sent by first class mail, certified mail, and United States postal service express mail, coverage territory includes the United States, Puerto Rico, Canada, the Virgin Islands, and any other territories or possessions of the United States . Property sent by registered mail is covered anywhere in the world.
Records: The named insured is required to keep accurate records for all mailings of covered property. Such records must contain a description of the property and its destination, the value of the property in each package on the date of shipment, and the type of mail used—express, certified, etc.
Reports and premium: The reporting schedule specified by the insured—annual, monthly, or other—is shown on the reporting declarations. Reports listing the total values of all property sent during the reporting period are due thirty days after the period ends. Values reported must be broken out for each type of shipment (inter-office, to or from other eligible institutions, to other addresses), type of property (nonnegotiable securities, detached coupons, other covered property), and class of mail (first class, certified, express, registered) for which rates are shown on the declarations.
A deposit premium is calculated based on the estimated value of outgoing shipments. This estimated premium is adjusted at the end of each reporting period in accordance with the value of shipments actually made and reported. In any case, the named insured must pay at least the minimum annual premium shown in the declarations.
Definitions
E. DEFINITIONS
”Non-negotiable securities” means securities that cannot be negotiated or converted to cash by unauthorized persons without resort to forgery.