Q

The question here is not what valuable papers coverage applies to, but just how much coverage the insured can purchase. A new client of ours wants a $1,000,000 limit of insurance on his valuable papers but that is an amount far beyond what we have handled in the past. We are a small agency and not quite sure if any of our companies would write that much of an exposure on one policy, especially an inland marine form. Before we send the application to a company, what do you think about a $1,000,000 limit on valuable papers coverage?

Mississippi Subscriber

A

Valuable papers coverage can be written for any amount that the insured and the insurer agree on, so a $1,000,000 limit of insurance is possible. And, the current valuable papers form does state that the value of each item of property that is specifically declared and described in the declarations is the applicable limit of insurance shown in the declarations. So, again, the insured could set a $1,000,000 limit of a specific item if that is what is needed.

However, through the use of the commercial inland marine conditions form, the insurer has set controls over the amount to be paid in event of loss. The insurer will pay the least of: the ACV of the property, the cost of reasonably restoring the property, or the cost of replacing the property. So, even though the insured may have a $1,000,000 limit of insurance, that does not mean the insurer will pay that amount automatically.

Of course, there is an appraisal clause on the conditions form. So, if the insured and the insurer disagree on the value of the property or the amount of loss, either party may make a written demand for an appraisal of the loss. The appraisal may end up in the insured's favor.

So, in sum, the insured can have a $1,000,000 limit of insurance on the valuable papers policy. But, there is no guarantee that that amount will automatically be paid out by the insurer in the event of a loss.