Accounts receivable was one of the classes of inland marine insurance established in the early 20th century — and losses to accounts receivable records have commonly been insured under inland marine policies or endorsements based on those policies.
A typical accounts receivable coverage form provides for open perils coverage, thus surpassing the limitations of a named perils property policy. Limits are usually established for each declared location, with a separate limit for losses occurring away from insured locations.
These forms commonly exclude coverage for damage to electronic records due to errors in installing, programming or maintaining data processing equipment — but not necessarily for losses caused by hacking, viruses or other “cyber” perils originating outside the insured organization.
Like coverage for valuable papers and records, accounts receivable insurance compensates an insured for the cost to research and restore lost records of purchases and amounts owed. It goes beyond that, however, to cover amounts that cannot be collected, interest on loans incurred because accounts were uncollectible, and additional expenses incurred to collect amounts owed, to the extent that these losses and expenses were the result of an insured loss.
Given that accounts receivable coverage addresses economic losses as well as the cost to restore records, agents, adjusters and insureds will want to determine if coverage for the latter is available under another policy. If so, they can devote the accounts receivable limit to the economic losses, which are likely to be more extensive than the costs to reconstruct and less likely to be insured elsewhere.
Mr. Harrington is an independent insurance writer and communications specialist. He served for over 20 years as communications director for the American Association of Insurance Services (AAIS). His work has been published in Best’s Review, Rough Notes, publications of The Institutes, and elsewhere.
Adjusting Today Basis for Institutes CE Courses The Institutes, the leader in providing knowledge solutions for risk management and the property/casualty insurance industry, offers continuing education courses based on technical information compiled from issues of Adjusting Today . The courses — “Valuing a Property Insurance Claim” and “Natural Disasters: Coverage Issues”— include seven modules each and are approved for credit by insurance departments in most states. They are offered to property insurance producers, adjusters or both, depending on the state, for up to three continuing education credit hours per course. More information is available at CEU.com.
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Ronald A. Cuccaro, SPPA
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