Inland Marine Coverage - Are your tools insured?

Are your tools covered? If someone breaks into you pickup truck and steals your tools will your insurance company pay for them and more importantly can your business survive without your tools.

Many contractors believe that their tools are covered under their General Liability policy. It's a shocking revelation when a claims adjuster informs you that tools are not covered under your General Liability policy.

Typically contractor tools are covered under an Inland Marine policy.

The definition of Inland Marine:
A group of property insurance coverages designed to insure exposures that cannot be conveniently or reasonably confined to a fixed location or insured at a standard rate under a standard form. Includes coverage for property in transit over land, certain movable property, property under construction, instrumentalities of transportation and communication (such as bridges, roads, piers, and television and radio towers), legal liability coverage for bailees, and computerized equipment. Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called "floater" policies. Inland marine coverage forms are generally broader than property coverage forms due to the relative freedom from rate and form regulation of inland marine insurance as compared with property insurance.

Contractor tools cannot be reasonably confined to one location and therefor fall under an Inland Marine policy. Tools are either classified as "scheduled" or "unscheduled". Unscheduled tools (depending of the carrier) are usually the smaller hand tools of the contractor profession. Insurance companies usually lump the aggregate amount of tools (say $3800 of miscellaneous hammers, screwdrivers, hand saws etc..) into a blanket amount, apply a deductible and either provide Replacement Cost Coverage or Actual Cash Value Coverage (see separate blog about the differences).

Scheduled items are items over a set value (for some carriers $2500). Bobcats, Dumpsters, Skid loaders, Expensive tools all are classified in this category. The insurance company only provides coverage if the item is "scheduled" (thus the name scheduled item). The contractor provides the make/model/serial number and value and the item is scheduled onto the policy. If the item is added mid-term an endorsement is issued by the insurance carrier and mailed to the contractor showing the date the item was added, the information about the item and the value.

Smaller contractors can get a BOP (Business Owner Policy) which usually allows for "scheduled" or "unscheduled" tools but larger contractors, or contractors in fields where standard carriers are unwilling to provide insurance, need to ask their agent to provide an inland marine policy to cover the tools.

Martin Burlingame