Shipping University property creates special insurance issues that departments must consider prior to actual shipment date. There are different requirements for NAU-owned property verses non-owned property (personal property owned by others) when NAU departments assumes handling/packing and shipping responsibilities.
University-owned property is covered by State Risk Management. This coverage is comprehensive on an all risk basis for insurable losses anywhere in the world. Coverage is on an actual cash value basis (ACV = cost to replace like-type property minus age of property) for property loss of $100 or more. The purchase of additional shipping insurance for University-owned property is usually not necessary, provided a loss event can be properly documented.
If an insurance loss occurs to University-owned property during shipment, departments have the burden of proving to the State adjuster the following:
- The property is owned by the University. Provide documentation proving the property was owned by NAU, to include the make/model of the equipment and date of purchase. This documentation can include purchase documents, inventory records, and gift reports.
- The value of the property at the time of the loss. Provide two original, written estimates to replace like-type property (no upgrades) and a copy of the purchase order/invoice.
- Evidence of the nature of the loss. Evidence of the nature of the loss can be problematic for several reasons. If University property is shipped without additional shipping insurance (relying on the State’s 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. In addition, the receiving agency, department, or person may dispose of the damaged shipment, not realizing the need to preserve evidence of the loss. Loss evidence includes exception reports, transfer receipts, or broken boxes or parts. Without appropriate evidence of the loss, the State adjuster will not pay a claim.
It is common for the University to ship non-owned property that is in the University’s care, custody, and control. Examples include equipment or collections that are on loan or rented to NAU, and gifted property shipped before title transfers to the University. Specific written conditions with the lender or donor often indicate shipping arrangements.
If NAU is accepting title to gifted property prior to shipping, then the NAU department accepting the gift should take control of the shipping process to ensure proper record keeping in the event of a loss.
State Risk Management can insure non-owned property under the University’s property coverage only if there is a written contract, lease, or agreement that assigns the responsibility for insurance to the University. The written contract, lease, or agreement must clearly identify the property to be covered (make/model, date of purchase, value, owner), and define the basis on which any loss will be valued. Without a written contract, lease, or agreement, State Risk Management has no obligation to insure the non-owned property, and will deny any claims that arise. University contracts, leases, or agreements must meet ABOR requirements, and may only be signed by authorized NAU Contract Administrators.
Questions concerning shipping insurance and losses
- How can a Department Maximize the Recovery of Any Loss?
Should a Department Purchase Full or Partial Insurance from the Shipper?
- Verify evidence of University ownership or a fully executed contract, lease, or agreement 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.
- 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.
Although statutory State insurance coverage for shipments is available as described above, some departments may wish to purchase full replacement coverage from shippers anyway. The full cost of such insurance must be borne by the department. However, prior to purchasing insurance from the shippers, the department must request authorization from State Risk Management. For more details, contact the Insurance Officer with Property and Liability Insurance Services (523-2009)
The benefits of purchasing insurance include the following:
- With insurance, the 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 shipper’s records show a loss, payment can be rapid.
The disadvantages of purchasing insurance include:
- The department is responsible for the cost of the insurance.
- When departments purchase insurance on university-owned property for less than full value, in an attempt to generate shipping records while minimizing departmental cost, the department may be restricting the State’s right of subrogation. Recovery is usually limited to the amount of purchased coverage. The shipping firm will not pay beyond the amount of the purchased coverage when the option to purchase additional coverage was available. The State may decide not to pay beyond the purchased coverage. With any loss paid by State Risk Management, the State will always have the right to subrogate the loss to any other potentially responsible party, such as a shipping company. The University can take no action that waives or restricts the State’s right of subrogation.
State Risk Management advises departments to either not purchase insurance or purchase insurance to the full value of the item being shipped.
For more information on Shipping Insurance, contact the Insurance Officer with Property and Liability Insurance Services, at (928) 523-2009.