MARINE CARGOINSURANCE:BASICS & COMPLEXITIES

WEBINAR SERIES

by Mojisola Jaiye-Gbenle

Topic: Key clauses to consider inpolicy documents

Definition ofMarine Insurance Marine insurance is a contract whereby oneparty, for a stipulated premium, undertakesto indemnify the other against certain perilsor sea risks, to which his ship, freight, orcargo, or some of them may be exposed,during a certain voyage, or a fixed period oftime

The Black's Law Dictionary

Marine CargoInsurance Marine cargo insurance covers the risks ofloss, damage, expense, and liability to yourgoods during transportation as cargo fromone place to another place.

For example - Cover for 50,000 metric tonsof basmati rice FOB Gujarat, India to Lagos,Nigeria.

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Types of marinecargo insurancecoverage

Marine cargo insurance coverage isdivided into three types of cover. Thisis provided under the Institute CargoClauses (ICC).The Institute Cargo Clauses (ICC) is aset of standard clauses used in manycargo policies

Institute Cargo (A) Clauses;

Institute Cargo (B) Clauses

Institute Cargo (C) Clauses

Introduced in 1982Revised in 1963 and 1982The latest version is2009 (widely used)

Merchant Shippingact 2007

Insurance Act Cap I18LFN 2004

United Nations Convention onCarriage of Goods by Sea 2005(Hamburg Rules)

Carriage of Goods by Sea Act2004 (Hagues Rules)

Admiralty JurisdictionProcedure Rules 2011

Admiralty Jurisdiction act1991

The main Act governing marine insurance in NigeriaEnglish Marine Insurance Act of 1906Marine insurance in Nigeria is governed by English Common Law Principles

Marine Insurance Act, Cap M2, LFN 2004

Other relevant laws include:

Covers of all risks of loss and/or damage to the cargo insured except loss ordamage or expense caused by the misconduct of the insured, any delay,ordinary leakage, wear and tear, loss of weight or volume, insufficiency orunsuitability of packing and inherent vice or nature of the subject matterinsured, insolvency or financial default of the owners of the vessel,unseaworthiness of the vessel, war, strikes, riots, and civil commotion.Can also cover transshipment, storing cargo in a warehouse, and inlandtransport where an extra premium is paid.Salvage and General Average

Institute Cargo A Clauses (widest cover)

Covers loss of or damage to the subject-matter insured reasonablyattributable to fire or explosion, vessel or craft being stranded, grounded,sunk or capsized, overturning or derailment of land conveyance, the collisionof a vessel with any external object, discharge of cargo at a point of distress,earthquake, volcanic eruption or lightning and loss or damage to the subject-matter insured, caused by general average sacrifice, jettisoning or washingoverboard, sea, lake or river water and total loss of any package lostoverboard or dropped whilst loading or unloading.

The exclusion can be obtained with an additional premium

Institute Cargo B Clauses (does not cover theft, pilferage, or non-delivery)

The cover is similar to those of Institute Cargo Clauses (B), exceptearthquake, volcanic eruption or lightning washing overboard, damage bysea, lake, and river water and total loss of any package lost overboard ordropped whilst handling, loading, or unloading.Only covers total loss

The exclusions can be obtained with an additional premium

Institute Cargo C Clauses (does not cover theft, pilferage, or non-delivery)

Key clauses in marine cargoinsurance policy documents

Law and Practice Clause

English Law applies to Marinecargo policy documents in Nigeria

ICC - standard form documentsused in Nigeria's insurance industry

EXCLUSION CLAUSE

None of the ICC cover strikes, lock-outs, riots, civil commotion,terrorism, or acts of persons acting under a political,ideological, or religious motive e.g Boko Haram

Require the payment of additional premiums to cover suchexclusions

Exclusion - ICC Clause 4, 5 6 7

Any deviation with respect to the Port of Loading or the Port of Discharge must becommunicated to the Insurer as soon as possible to ensure cover.

See Edokpolor & Co. Ltd v. Bendel Insurance Co. Ltd (SC 134/1990SC Held - insurer can not be held liable for the loss of insured's goods at sea where theinsurance agreement stipulated that the goods were to be shipped from Hamburg toKoko port and the port of departure was Seville, not Hamburg.

CHANGE OF VOYAGE CLAUSE

CYBER ATTACK EXCLUSION CLAUSE

Does not cover "...loss, damage, liability or expense directly or indirectlycaused by or contributed to by or arising from the use or operation, as ameans for inflicting harm, of any computer, computer system, computersoftware program, malicious code, computer virus or process or any otherelectronic system"

No cover where goods are lost due to cyberattack on a shipping line (MSC - useof e-bills of lading)

Can be obtained for an additional premium

IMPORT DUTY CLAUSE

Under this clause, the insured iscovered for the import dutypaid on goods which were apartial loss.

Insured can obtain theadditional cover to mitigate theloss

Port Delay ClauseInsurance shall terminate on the expiry of 60days from midnight or the day of arrival of theOverseas vessel at the final Port of Discharge ofthe goods hereby Insured if their discharge hasnot by then been completedSee Jacob A. Adefuye & Co. v Royal ExchangeAssurance 1962 1 N.S.C 57

Insured can obtain an extension after the 60 daysNegotiate for cover from Port of Loading toInsured's warehouse anywhere in Nigeria

Section 80 of the Marine Insurance ActDefinition- occurs when an insurance company that has paid off its injured claimanttakes the legal rights the claimant has against a third party that caused the injury andsues that third party.Insurers must sue in the name of the insured and not in their own name. See Prestige Assurance v Wasa Delmas Nig. Ltd 1997 7 N.S.C 193 and Lion of AfricaInsurance Co. Ltd v Scanship Ltd 1969 N.C.L.R 317Letter of subrogation or formal assignment of the right to sue

Express SubrogationClause

Conclusion It is therefore important for a party seekingto take out a policy to carefully review theclauses in the policy document, to ensurethat they are properly covered for anyeventuality therein. This will avoid protracteddisputes in the event that any occurrence ofa foreseeable peril.In the case of a breach of any of the clauses,Nigerian Insurance Companies generally donot refuse to pay. They do pay up to 70% ofthe claim

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Questions

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