1 CHAPTER VIII MARINE CARGO INSURANCE Risks Covered Voyage and Time Policies Causes of Loss Covered Coverage by Additional Endorsements Conveyances

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CHAPTER VIII MARINE CARGO INSURANCE

Risks Covered Voyage and Time Policies Causes of Loss Covered Coverage by Additional Endorsements Conveyances Covered Types of Marine Cargo Insurance Coverage War Risk Only Policy Rejection Clause, Warranties, Express or Implied Amount of Insurance, Insurance Documents,

Claims Letter of Credit and Marine Insurance Policy

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Types of Marine InsuranceTypes of Marine Insurance Property Insurance

Hull Insurance: Loss or damage to the vessel itself

Cargo Insurance: Loss or damage to the cargo Freight Insurance: Loss of freight income

Indemnity Insurance: Liability of ship owners Collision liability insurance: Liability of insured

vessel for damage resulting from collision Protection and indemnity insurance: Liability

for bodily injury including death or property damage and unexpected vessel related expenditures

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Risks Covered by Marine Risks Covered by Marine Cargo InsuranceCargo Insurance

Loss of or damage to the cargo occurred during the insured voyage Loss: Disappearance of the cargo Damage: Arrived not intact. Not the same

condition as shipped by the seller Total loss:

Actual total loss Constructive total loss

Partial loss : Average

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Partial Loss

Particular average: Total loss of part of the shipment: one

container out of 5 Partial loss to the whole shipment

General Average Extraordinary sacrifice for the common

safety: Jettison of cargo, Damage from fire fighting, Voluntary stranding, Repairing the vessel

To be borne proportionately by all interests: owners of vessel and cargoes

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Voyage Policy and Time Voyage Policy and Time PolicyPolicy Voyage policy:

Duration of a particular voyage in the policy

Time Policy: Duration of a particular period of time, usually one year Open cargo policy or Open policy A beginning date but no expiry date Cancelable by either party with 30 days written

notice All lawful merchandise All shipments from or to all countries except

those excluded in the policy such as embargoed countries

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Causes of Loss CoveredCauses of Loss Covered

1. Heavy weather, lightning, barratry of the masters and mariners & assailing thieves

2. Fire or explosion

3. Vessel being stranded, sunk or burnt

4. Collision or contact of vessel with any external objects including ice except water

5. Jettison

6. Bursting of boilers, latent defect in the machinery or hull

7. Faults or errors in the navigation or management of the vessel

8. Discharge of cargo at a port of refuge or distress

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Causes of Loss CoveredCauses of Loss Covered

9. Fumigation of the vessel or dock

10. While ashore, sprinkler leakage, earthquake, cyclone, hurricane, collapse of docks and flood

11. Accidents during loading or unloading from the vessel

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Coverage with Additional Coverage with Additional Endorsements to Open Cargo Endorsements to Open Cargo

PolicyPolicy

1. FOB & FAS shipments coverage: Transit between premises and vessel

2. Export contingency (Unpaid vendors) coverage: FOB or CFR without L/C & buyer fails to buy insurance & refuses to pay for damaged goods

3. Difference in Conditions(D.I.C.) Coverage: Difference between two coverages by the seller and the buyer

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Coverage with Additional Coverage with Additional Endorsements to Open Cargo Endorsements to Open Cargo

PolicyPolicy 4. Warehouse to Warehouse Clause: The

seller's warehouse to the buyer's warehouse, but if not delivered after discharge, ceases after 15 days if the final warehouse is within port or 30 days outside the port limit

5. Marine Extension Clause: From the seller's warehouse to the buyer's warehouse without a specific time limit

6. South American Clause: Warehouse to warehouse but ceases 60 days after discharge

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Conveyances or CarriersConveyances or Carriers

Metal self-propelled vessel & connecting conveyances

Aircraft & connecting conveyances Metal barge Mail or express

Institute Cargo Clauses

Sets of terms for marine cargo insurance policies internationally recognized and voluntarily adopted in 140 countries

Latest 2009 version by Lloyd’s Market Assn. and International Underwriting Assn. of London

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Marine Cargo Insurance Marine Cargo Insurance CoverageCoverage

Three Levels of Coverage Institute Cargo Clauses (A):

– Similar to former AR (All Risks) coverage

Institute Cargo Clauses (B): – Similar to former WA (With Average)

coverage

Institute Cargo Clauses (C): – Similar to former FPA (Free of Particular

Average)

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Institute Cargo Clauses (A)

Covers all risks of loss of or damage to insured cargo except as excluded by– General Exclusion Clause

– Unseaworthiness & Unfitness Exclusion Clause

– War Exclusion Clause

– Strikes Exclusion Clause

Broadest coverage: Loss or damage from any external cause

Similar to former AR (All Risks) coverage

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Institute Cargo Clauses (A) General Exclusion Clause

– Willful misconduct of the assured

– Ordinary leakage, loss, wear & tear

– Insufficiency or unsuitability of packing or preparation of insured cargo

– Inherent vice or nature

– Delay

– Insolvency or financial default of owners or operators of vessel

– Weapon or device employing atomic or nuclear fission and/or fusion or radioactive force

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Unseaworthiness & Unfitness Exclusion Clause– Unseaworthiness or unfitness of vessel or craft: If

the assured are privy to unseaworthiness or unfitness at the time the insured cargo is loaded

– Unfitness of container or conveyance: If the assured are privy to unfitness at the time of loading

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War Exclusion Clause– War, civil war, revolution, rebellion, insurrection,

or civil strife

– Capture, seizure, arrest, restraint or detainment but piracy is excepted, that is, covered

– Derelict mines, torpedoes, bombs or any derelict weapons of war

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Strikes Exclusion Clause– Caused by strikers, locked-out workmen,

participants in labor disturbances, riots or civil commotions

– Resulting from strikes, lock-outs, labor disturbances, riots or civil commotion

– Caused by any act of terrorism

– Caused by any person acting from political, ideological or religious motive

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Institute Cargo Clauses (B)

Loss or damage reasonably attributable to– Fire or explosion

– Vessel or craft being stranded, grounded, sunk or capsized

– Overturning or derailment of land conveyance

– Collision or contact with any external object except water

– Discharge of cargo at port of distress

– Earthquake, volcanic eruption or lightning

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Institute Cargo Clauses (B)

Loss or damage caused by– General average sacrifice

– Jettison or washing overboard

– Entry of sea, lake or river water into vessel, craft, hold, conveyance, container or place of storage

Total loss of any package overboard or dropped during loading or unloading

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Institute Cargo Clauses (B) General Exclusion Clause

– General Exclusion Clause Items 1 to 7 of Institute Cargo Clause (A)

– 8. Deliberate damage or deliberate destruction of insured cargo by wrongful act of any person (s)

War Exclusion Clause– All exclusions of War Exclusion Clause of Institute

Cargo Clauses (A) including Piracy

– Piracy is covered Institute Cargo Clauses (A) but not under (B)

Strikes Exclusion Clause– The same as those of Institute Cargo Clauses (A)

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Institute Cargo Clauses (C)

Loss or damage reasonable attributable to– Fire or explosion

– Vessel or craft being stranded, grounded, sunk or capsized

– Overturning or derailment of land conveyance

– Collision or contact with any external object except water

– Discharge of cargo at port of distress Earthquake, volcanic eruption or lightning not

covered under Clauses (C)

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Loss or damage caused by– General average sacrifice– Jettison or washing overboard

Entry of sea, lake or river water into vessel, craft, hold, conveyance, container or place of storage is not covered under Clauses (C)

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General Exclusion Clause Unseaworthiness and Unfitness Exclusion

Clause War Exclusion Clause Strikes Exclusion Clause

– The same as those of Institute Cargo Clauses (B)

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Institute War Clauses (Cargo)

Loss or damage caused by– War, civil war, revolution, rebellion, insurrection,

or civil strife

– Capture, seizure, arrest, restraint or detainment

– Derelict mines, torpedoes, bombs or any derelict weapons of war

General Exclusion Clause Unseaworthiness and Unfitness Exclusion

Clause– The same as those of Institute Cargo Clauses (B)

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Institute Strikes Clauses (Cargo)

Loss or damage caused by– Strikers, locked-out workmen, or persons taking part in

labor disturbances, riots or civil commotions

– Any terrorist or any person acting from a political motive

General Exclusion Clause: Additional exclusions– Loss, damage or expense from the absence, shortage or

withholding of labor

– Loss, damage or expense caused by war, civil war, revolution, insurrection or civil strife

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Marine Cargo Insurance

Recommendation– Purchase Institute Cargo Clauses (A)– Purchase Institute War Clauses (Cargo)– Purchase Institute Strikes Clauses (Cargo)

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Rejection ClauseRejection Clause

Covers the rejection of the goods by the Government of importing countryFresh fruits, vegitablesFoodsAny good which must pass inspections

by federal or state government

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Express WarrantiesExpress Warranties

Exceptive warranties indicating causes expressly excluded from the coverage(a) FC & S (Free of Capture & Seizure) Warranty

• To cover, stamp word “DELETED” over the exclusion clause and attach Institute War Clauses (Cargo)

(b) FSR & CC (Free of Strike, Riot and Civil Commotion) Warranty

• To cover, stamp word “DELETED” over the exclusion clause and attach Institute Strikes Clauses (Cargo)

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Warranties, Express or Implied Implied Warranties

Warranties which are understood to apply even though not actually printed in the policy

• Seaworthiness: Not older than 20 years, over 1,000 net registered tons and classified A-1 Seaworthiness is admitted because cargo owners have no control

• No deviation: Covered with Marine Extension Clause

• Legality: Voyage and cargo must be legal.

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Amount of InsuranceAmount of Insurance

Minimum amount of insurance coverage: Minimum amount of insurance coverage: 110% of CIF or CIP value110% of CIF or CIP value

Insures against loss of expected profitInsures against loss of expected profit 120% or 130% if both exporter and 120% or 130% if both exporter and

importer agreeimporter agree

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Insurance DocumentsInsurance Documents

Insurance date not later than shipment date

Same currency as that of the L/C Insurance policy

Issued by insurer (insurance company) Insurance certificate

Issued by assured (exporter) under its open cargo policy with insurer

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Claims for Loss or DamageClaims for Loss or Damage Initiated by the importer or consignee

Ocean B/L, Airway Bill, Post Office Receipt Original Marine Insurance Policy A copy of the claim filed against the carrier A copy of the shipper's invoice A copy of delivery receipt showing exceptions Confirmation of non-delivery from the carrier if

not delivered Customs entry report Survey report

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Marine Insurance Policy & Marine Insurance Policy & Letter of CreditLetter of Credit

Banks will not accept an insurance policy or certificate: Coverage date later than the shipment

date Currency different from L/C Coverage less than 110% of CIF or CIP Different coverage from L/C

Comparison of Marine Cargo Insurance Coverage

Institute Cargo Clauses (A) Institute Cargo Clauses (B) Institute Cargo Clauses (C)

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