MARINE CARGO INSURANCE

Marine Insurance covers the loss or damage of ships, cargo, terminals, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination.

UNIT 9: MARINE CARGO INSURANCE What risks are these? Several people were walking along when suddenly tons of earth came crash down the hillside and blocked the road in front of them +Landslide Over 50,000 people in Ethiopia have died of starvation in the past month Questions are being asked concerning the delay in the supplies of rice and grain which were recently sent to them +Famine The winds have already strengthened considerably and the sea is now very rough indeed As a result, ferries across the harbor have stopped sailing and all large ships have put out to sea +Typoon The river overflowed in several places and huge areas of farming land are now several feet under water Boats are being used to rescue people in nearby village +Flood Suddenly the ground shook beneath our feet and the tall building opposite the college began to sway Windows and doors rattled, and several bookcases in the college library came crashing down +Earthquake Tankers full of water were sent, but it was too late to save many of the animals and crops there The whole area was like a vast desert +Drought Smoke poured out of the crates but no one expected an eruption A week later, however, red hot lava began to flow down the side of the mountain +Volcano It swept onwards, covering everything in its path The travellers had to get off their camels and lie down until it had eventually passed +Sandstorm Flames swept through the block of offices, burning everything inside Two hours later only the empty shell of the building remained +Fire 10 The first sign if illness was a pain in the chest, followed by a great thirst and a burning fever Few medical supplies reached the area and consequently almost all the victims died +Plague 11 It must have been at least twenty feet high as it swept towards the shore In a few seconds it destroyed all the houses in its way, drowning everyone inside +Tidal wave Other types of risks Operational risks: Regulatory non-compliance, supply chain failure, or failure of governance within an organization Financial risks: cash flow, credit or exchange risks Hazards: safeguarding the health, safety of employees, the public natural events, consequent business interruption impact, environmental impact Strategic risks: market changes, increased competition, failure to adapt or change by an organization Risks faced by the buyer and the seller when goods are transported: loss by accident, theft, pilferage or damaged by fire, water, deterioration, force majeure, difficulties getting custom clearance, strikes, port congestion Marine insurance  Marine Insurance covers the loss or damage of ships, cargo, terminals, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination Feature of marine insurance It is based on “Utmost good faith” -I.e: both the insured and the insurer’s must disclosed: - Everything which is in their knowledge and - Can affect the contract of insurance  It is a contract of indemnity  Insurable interest  Proximate cause  Types of marine insurance     Hull insurance relates to the vessel and its fixtures, providing cover for loss or damage at sea -A time policy gives cover for a specified period -A voyage policy relates to a particular voyage Cargo insurance provides cover for loss or damage of the cargo while it is in transit Freight insurance provides the shipowner with indemnity in case he has to repay the charge because of his failure to deliver Shipowners’ liability insurance gives the shipowner cover for a variety of possible liabilities including those for damaging another vessel in a collision, injuring the crew or passengers, polluting beaches, etc Total loss or partial loss   Total loss: the insurer is entitle to take over what ever may remain of the subject matter Partial loss: subrogation is to extent of loss paid, excess recovery if any, is to be disbursed to the insured Parties involed     Carrier Charter Consignee Consignor MARINE STANDARD POLICY FORM THE FORM CONTAINS THE FOLLOWING PARTICULARS:             NAME OF INSURED: -POLICY NO.: SUM INSURED: -PREMIUM: STAMP DUTY: -CONVEYANCE/STEAMER: VOYAGE OR JOURNEY: -B/L; LR/GR, RR, AWB NO.: TYPE OF COVER: AND DATE: CLAUSES ATTACHED INTEREST/PROPERTY : DESCRIPTION OF THE ITEM WITH PACKING DETAILS : NAME AND ADDRESS OF SURVEYOR AT DESTINATION CLAIM SETTLING AGENT: PLACE WHERE CLAIM SHALL BE SETTLED: POLICY ISSUING OFFICE ADDRESS AND DATE: SIGNATURE OF AUTHORISED PERSON: Comparison Open cover/ open policy OPEN COVER   OPEN COVER: FOR REGULAR SHIPMENTS AN AGREEMENT OF INSURANCE WITH THE INSURED  TO GOVERN THE INSURANCE COVERAGE OF FUTURE TRANSITS OR SHIPMENTS  COVERAGE LIKE ICC-’A’ OR ‘B’ ETC IS AGREED,  RATE, TERMS, WARRANTIES, CLAUSES, EXCLUSION ARE AGREED  VOYAGE BY SEA OR AIR, TRANSHIPMENT IF ANY IS AGREED  BASIS OF VALUATION OF GOODS IS THERE BUT NO SUM INSURED SPECIFIED IN THE OPEN COVER  LIMIT PER BOTTOM (SENDING) AND LIMIT PER LOCATION ( ACCUMULATION OF RISK) OPEN COVER…  THE INSURER UNDERTAKES TO INSURE ALL SHIPMENTS DECLARED BY THE INSURED  THE ASSURED UNDERTAKES TO DECLARE EACH AND EVERY SHIPMENT WHICH COMES WITHIN THE SCOPE OF OPEN COVER  PREMIUM AND STAMPDUTY PAYABLE AGAINST EACH AND EVERY SHIPMENT  A MARINE POLICY OR CERTIFICATE OF INSURANCE SHALL ISSUED DULLY STAMP DUTY AGINST EACH DISPATCH  A DEPOSITE PREMIUM, EQUIVALENT TO ONE TO THREE MONTH’S TURNOVER SHALL BE ACCEPTED BY INSURER OPEN COVER…  FOR LEGAL PURPOSE OPEN COVER IS LIKE A COVERNOTE AND THEREFORE A STAMPED POLICY OR CERTIFICATE IS ISSUED AGAINST EACH SHIPMENT  THE ADVANTAGES ARE:   AUTOMATIC AND CONTINUOUS COVER IN REGARD TO COVERAGE, RATE, TERMS AND CONDITIONS AND NO NEED FOR ANY NEGOTIATION ON EACH SHIPMENT  ANY INADVERTANT OMMISSION TO INSURE OR DELAY IN SHIPMENT ADVICE IS IGNORED BY THE INSURER PROVIDED THERE IS SUFFICIENT DEPOSIT  SINCE THE RATE IS AGREED AT INCEPTION AND IT HELPS THE INSURED TO KNOW THE COST OF INSURANCE THE INSURER CAN CHECK THE RECORDS OF THE ASSURED ABOUT THE SHIPMENTS COMING UNDER TERMS OF OPEN COVER OPEN POLICY   Open Policy/ Floating Policy: A stamped document Sum Insured: Estimated Annual Turnover  Details of cargo or goods to covered, mode of transport, voyage from –to, basis of valuation, Limit per sending, Rate of premium etc are mentioned on the policy  All the shipments coming under the scope are covered to the extent sum insured is available  Policy can be issued for an amount to take care of shipments for 03 months or so at the commencement and can be increased subsequently but before the sum insured is exhausted  Policy is issued for 12 months but lapses if the sum insured is exhausted Open Policy…  For increase in S I additional premium at rate agreed is paid  Fresh policy if sum insured is exhausted  Declarations are made, giving details of dispatches made during the fortnight or month as agreed, to Insurer and S I is reduced accordingly  Details of dispatch: GR/RR no Date Description of goods Qty/wt Balance Amount Open Policy……  A Certificate of Insurance is issued against declarations for the fortnight or month as the case may be  Since policy is a stamped document, certificates are not stamped  Open policy is issued for inland transit  At the end of the policy period, the policy is adjusted and premium against the balance unutilized S I is refunded  Advantages of Open Policy:  Automatic and continuous insurance protection  Administrative labour is reduced  Saving in stamp duty Open Policy……  The insurer can check the records of the insured in regard to dispatches made in terms of the open policy  The policy can be cancelled by either party after giving a notice of 30 days  Location limit at any one location should not exceed a specified amount mentioned in the open policy conditions Cargo insurance  Cargo insurance is underwritten on the Institute Cargo Clauses, with coverage on an A, B, or C basis, A having the widest cover and C the most restricted Valuable cargo is known as specie Different types of marine loss A Total loss B Partial loss A1 Actual total loss B1 General average loss A2 Constructive total loss B2 Particular average loss Marine Insurance Claim Procedure • In case of loss/damage in transit, a monetary claim should be lodged with the carrier within the time limit to protect recovery rights • Appointment of surveyor or claim representative in agreement with the insurer to determine the nature, cause and extent of loss/damage • The surveyor informs the insurer of the approximate value of loss incurred • The claim procedure takes from one to three weeks Documents Required for Marine Insurance Claim • Original Invoice & packing List – if forming part of Invoice • Document of declaration of consignment • Damage Certificate from the carrier • The farmer must furnish area sown confirmation certificate, if required How to claim       Take immediate steps to minimize loss Inform nearest office of the insurance company or claim settling agent mentioned on the policy In case of damage to goods whilst on ship or port, arrange for joint ship survey or port survey Lodge monetary claim with carrier within stipulated time period Submit duly assigned insurance policy/certificate along with the original invoice and other documents required to substantiate the claim such as: • Bill of Lading • Packing list • Copies of correspondence exchanged with carriers • Copy of notice served on carriers along with acknowledgment/receipt • Shortage/Damage Certificate issued by carriers ... clearance, strikes, port congestion Marine insurance  Marine Insurance covers the loss or damage of ships, cargo, terminals, and any transport or property by which cargo is transferred, acquired,... conditions Cargo insurance  Cargo insurance is underwritten on the Institute Cargo Clauses, with coverage on an A, B, or C basis, A having the widest cover and C the most restricted Valuable cargo. .. those whose cargo has been lost or damaged 'Particular Average' is levied on a group of cargo owners and not all of the cargo owners Insurance premium   Financial cost of obtaining an insurance