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The Myth of Postal Insurance

It Does Not Pay Full Market Value

By Mark H. Barinholtz

Imagine living in Homestead, Florida during the recent devastation of hurricane Andrew, but your homeowner's insurance policy didn't cover damage due to wind and water. Now imagine that you've shipped ten valuable original transparencies via the United States Mail having paid a premium to the post office for $15,000 worth of postal insurance coverage. Then, the shipment is lost at the fault of the postal service. Guess what the postal service will pay?

Current pertinent postal regulations are contained in the Domestic Mail Manual (DMM). Section 149.251(k) of the DMM limits indemnity coverage purchased to cover lost photography as follows: "Photographic film and negatives will be compensated for only at the cost of the film stock. No indemnity will be paid for the content of the film nor the photographer's time and expenses in taking the photographs." Moreover, even for this measly coverage, proof of purchase is required.

This DMM provision means that there will be no full market value coverage for $1,500 per transparency. Nor will there be coverage to re shoot, if that is even possible. Nor will there be coverage for the film processing. Surprised? Many unwitting customers of the postal service are - particularly photographers who have paid premiums for postal insurance. But how can it be, you argue, that the postal service is allowed to collect a premium for a useless insurance product. Good question. Perhaps there's an interesting class action there.

The scenario usually plays out as follows. The unwitting photographer values his or her original chromes at $1,500 each. Since the postal service only allows insured mail to a limit of approximately $20,000, the photographer carefully places less than that amount in full value in each package insured. The postal clerk who accepts the package for mailing is not well versed in the regulations, nor does the clerk probe too deeply into the nature of the contents of the package being shipped. The photographer tenders the premium for the insurance believing that the full market value of the shipment is covered, especially if any loss is due to the negligence of the post office. The postal clerk willingly accepts the photographer's premium paid. When the shipment is lost, the postal service will deny the photographer's claim by a letter citing the DMM regulation mentioned above.

Is there any purpose at all to insuring the postal package for full market value? The answer is a qualified yes. Your insurance purchase and declaration of value will likely have the effect of constituting your own admission as to the value of the contents. This could have a positive significance depending on the circumstances of the loss and with respect to any other persons or firms against whom you may assert a claim for recovery. But, it will mean little or nothing when you present your claim to the postal service - and this is probably a good reason for not squandering money on useless premiums.

Overnight carriers such as Federal Express, and other carriers such as United Parcel Service, also offer additional insurance coverage over the minimum basic coverage allowed all shipments. But those firms likewise do not insure for full market value coverage of photography which is considered to be original artwork. So the photographer who purchases coverage and pays the premium to such carriers is also not going to receive his or her insurance dollar value in the event of a loss. It is also unlikely that the photographer will even recover the cost to re shoot, although this may be a more realistic goal when seeking some kind of a recovery from the carrier.

Does anyone offer insurance for such losses? Lloyd's of London apparently might offer such a policy, but such coverage is expensive and will probably be cost prohibitive in circumstances most familiar to photographers. The ASMP has referred me to the firm of Taylor & Taylor in New York City. Coverages available may include costs to re shoot, or to reproduce a lost portfolio, but coverage is not generally available to indemnify a lost shipment of original transparencies at full market value.

Two other dilemmas to keep in mind are:
(i) the adverse effect of placing a high value on packages shipped
(ii) establishing a factual precedent in a specific instance where the return shipment is also insured but lost by the postal service.

In the first situation, by placing a high value on the package the special notice may be an enticement to those who are inclined to steal the contents. Certainly, it is convenient to thievery when the package or the insurance ledger clearly denotes the shipment as one containing "valuable original transparencies."

In the second situation, the photographer usually has paperwork which requires the person or firm to whom the transparencies are being shipped to return all of the transparencies undamaged. But, the photographer's purchase of postal insurance to cover the outbound shipment of the chromes may establish a precedent for the return shipment. If the return shipper (client) does not purchase insurance and the transparencies are lost, then the photographer's claims will have a better chance of surviving against the return shipper. On the other hand, if the shipper (client) returns the transparencies insured by the post office, that shipper may be deemed to have full discharged its responsibilities to the photographer, even though the insurance will never pay for a loss by the post office.

The solution, in part, is to be sure that your paperwork which accompanies shipments of original transparencies is designed to accommodate the postal insurance problem. This writer suggests that agreements with potential users of photographic transparencies avoid references to postal insurance as an acceptable means of coverage. Other requirements which may apply to particular circumstances call for tailoring paperwork to the situation.

Regardless of your individual solution, you should at least be aware of the myth of postal insurance. It does not pay for the full market value, nor re shoot costs, nor the cost of processing, for lost photographic negatives or transparencies.

© Mark H. Barinholtz. Mark H. Barinholtz is a Chicago attorney who often represents creative artists. This article originally appeared in the Chicago Midwest chapter newsletter Loupe.

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