Shipping of University property introduces special insurance issues that departments need to consider well in advance of the actual shipment. There are distinctly different requirements for University owned property, versus non-owned property for which we are assuming shipping and handling responsibility.
The University's property coverage is comprehensive. Coverage of University owned property is on an "all risk" basis for insurable losses anywhere in the world. Coverage is for the actual cash value (depreciated not replacement value) for items worth $100 or more. What this means is that additional shipping insurance for University owned property is usually not necessary, provided a loss event can be properly documented.
If an insurable loss happens to University property during shipment, departments have the burden of proving to the insurance adjustor the following:
- The University owned the property. Acceptable evidence includes purchase documents, inventory records, and gift reports.
- The value of the property at the time of loss. Evidence of the current value of like kind items and age are necessary.
- Evidence of the nature of the loss.
Of these, evidence of the loss can be problematic for several reasons. If University property is shipped without additional shipping insurance (relying on our normal property coverage described above), and a loss occurs, it is possible that the shipper will not bother to generate useful evidence of the loss. Similarly, the receiving department may dispose of a shipment that is received damaged, not realizing that the damaged goods are needed as evidence of the loss. Loss evidence includes exception reports, transfer receipts, or broken boxes or parts. Without appropriate evidence of the loss, adjusters will not pay a claim.
It is not uncommon for property to be shipped that the University does not own, but has a direct interest in. Examples include equipment or collections being loaned or rented to the U of A. Gifted property is also sometimes shipped before title transfers to the University. The specific arrangements with the lender or donor often dictate how shipping is arranged.
If the U of A is accepting title to gifted property prior to shipping, then the U of A department accepting the gift should take control of the shipping process to ensure proper record keeping in the event of a loss.
Non-owned property can be insured under the University's property coverage only if there is a contract, lease or other written agreement that assigns the responsibility for insurance to the University.
The contract must clearly identify the property to be covered, and define the basis on which any loss will be valued. Without a written agreement, the state has no obligation to insure the property, and will deny any claims that arise. University contracts must meet ABOR requirements, and may only be signed by authorized Contracting Officers.
How Can a Department Maximize the Recovery of Any Loss?
If you have any question about shipping insurance, contact the Steve Holland at 621-1556 well in advance of shipment for advice. This is especially important for non-owned property because contracts often require negotiation and revision to meet ABOR and state requirements.
The following general recommendations also apply:
- Verify evidence of University ownership or a fully executed contract concerning non-owned property before arranging or agreeing to any shipment.
- Use reputable shipping firms that are appropriate to the shipment. For example, use a fine arts shipper for valuable artwork. There are also shipping firms that specialize in transporting delicate scientific instrumentation.
- For items of significant value, know the procedures of your shipper. Verify that the shipper will create and save the evidence necessary for an insurance claim.
- Consult with Central Receiving and Shipping at 621-9129 for advice about shippers, proper packaging, etc.
Should a Department Purchase Insurance From the Shipper?
Although statutory state insurance coverage applies only with proper documentation as to cause and dollar amount of loss. Departments may wish to purchase full replacement coverage from shippers anyway. There is no policy prohibiting such duplicate coverage, but the full cost of such insurance must be borne by the department.
The benefits of purchasing insurance include:
- With insurance shippers generate transfer receipts, exception reports, and evidence of a less than satisfactory delivery.
- Shippers do a better job of tracking shipments that have even a nominal amount of insurance attached.
- When the shippers own records show a loss, payment can be rapid.
The disadvantage is the cost of the insurance to the department.
Do not purchase insurance on equipment for less than full value. Recovery is limited to the amount of purchased coverage. The shipping firm will not pay beyond the amount of purchased coverage when the option to purchase additional coverage was available. The State insurance coverage is secondary when there is other insurance.
Departments are advised by Risk Management to know that the shipper will generate the needed evidence and either purchase no insurance or purchase insurance to the full value of the item being shipped. If the department desires to purchase insurance and the value of the item being shipped exceeds the insurance offered by the shipper, call Joy Baine at 621-3482 for further instructions in particular situations.