Chapter Six Cargo Transportation Insurance

Learning objectives After learning this chapter you will be able to  be aware of the risks and losses in ocean transportation  outline the scope of the Ocean Marine Cargo Clauses of CIC  understand the procedure for lodging claims  describe methods of stipulating insurance clauses in Sales Contracts SEIB OF GDUFS2

Parties involved in an insurance practice the insurant / insured/assured  The party that procures insurance  Can be the exporter or importer depending on the Incoterms adopted in the transaction the insurer  The party undertaking to indemnify the insurant against losses or damages  Can be the insurance company In China, PICC is usually the insurer SEIB OF GDUFS3

6.1 Marine Risks and Losses SEIB OF GDUFS4 Perils of the sea 海上风险 External/Extraneous risks 外来风险 Risks 风险 Natural calamities 自然灾害 Unexpected accidents/ fortuitous accidents 意外事故 General risks 一般外来风险 Special risks 特殊外来风险

6.1.1 Marine Risks Two types of risks  Perils of the sea ( 自然灾害） Natural calamities ( 自然灾害） Caused by force majeure events such as heavy weather, lightening, Tsunami, earthquake, volcanic eruption, thunderbolt, etc. Unexpected accidents/fortuitous accidents （意外事故） Caused by accidents such as fire, explosion, vessel being stranded, grounded, sunk or capsized, collision, missing, etc. SEIB OF GDUFS5

6.1.2 Marine Risks  External risks/extraneous risks （外来风险） General risks （一般外来风险） Caused by common factors such as theft, fresh water rain, shortage, leakage, clash and breakage, odor, heating and sweating, hook damage, breakage of packing, etc. Special risks （特殊外来风险） Caused by military factors, political factors, government regulations such as war, striking, confiscation, etc. SEIB OF GDUFS6

6.2.1 Marine Losses SEIB OF GDUFS7 Total loss 全部损失 Partial loss 部分损失 Losses 损失 Actual total loss 实际全损 Constructive total loss 推定全损 General average 共同海损 Particular average 单独海损

6.2.2 Marine Losses Two types of losses  Total Loss : loss of the entire value of the subject matter Actual total loss cargo has been totally lost or has been damaged to the extent that it has lost its original usage Constructive total loss cargo is not totally lost, but the actual total loss shall be unavoidable or the restoration fees together with other miscellaneous expenses will exceed the anticipated amount of profit. SEIB OF GDUFS8

6.2.3 Marine Losses  Partial Loss: a partial damage to or the total loss of part of the insured cargo. Particular average A partial loss of the subject matter insured caused directly by a peril insured against, No other cargo sacrificed to save the voyage SEIB OF GDUFS9

6.2.3 Marine Losses  Partial Loss: a partial damage to or the total loss of part of the insured cargo. General average A partial & deliberate sacrifice of the ship, freight, or cargo, or additional expenses incurred to rescue a ship and its cargo from impeding danger or for the common safety of the adventure under a peril of the sea or some other hazards. SEIB OF GDUFS10

General Average Conditions for general average  Danger threatening common safety materially exists, not foreseen.  Measures shall be taken deliberately & reasonably for common interest, aiming to remove the common danger of both vessel and cargo  Sacrifice shall not be caused by perils directly  Actions shall be successful in saving the voyage SEIB OF GDUFS11

General average Differences between GA and PA  Causes PA is usually caused directly by sea perils, GA is caused by intentional measures taken to save the common interest.  Indemnification PA is often borne by the party whose cargo is damaged GA should be proportionally contributed among all parties benefited from the intentional measures. SEIB OF GDUFS12

6.2.4 Expenses incurred Two types of expenses SEIB OF GDUFS13 Sue or labor expensesSalvage charge

SEIB OF GDUFS14 实战分析 1 、连夜暴雨，致使船头 A 仓货物受潮 2 、船舶触礁后下沉，为使船只不至于沉没， 船长下令抛弃部分货物。 3 、两只船舶不甚相撞，致使其中一艘船只沉没， 货物散落海上无法打捞。 4 、船只海上行船时遭遇战争袭击，致使全船沉没。 自然灾害造成 的单独海损 意外事故造成 的共同海损 意外事故造成 的推定全损 特殊外来风险造 成的实际全损 BACK

6.3 Coverage of marine cargo insurance of CIC Basic coverage  Types FPA (Free from Particular Average) WPA (With Particular Average) A.R. (All Risks)  Features Can be covered independently Additional coverage  Types General additional insurance coverage Special additional insurance coverage  Features Should go with basic coverage SEIB OF GDUFS15

6.3.1 Basic insurance coverage FPA  Non-liability of indemnification to a particular average  The most limited scope of coverage WPA(WA)  One step further from FPA: the partial loss of the insured goods caused directly by natural calamities  WPA = FPA + partial loss due to natural calamities AR  Most comprehensive coverage  All risks shall not cover all risks, excluding special additional coverage and exclusions  AR = WPA + general additional insurance coverage SEIB OF GDUFS16

SEIB OF GDUFS17 风险 海上风险 外来风险 自然灾害 意外事故 一般外来 特殊外来 部分损失 全部损失 单独海损 共同海损 实际全损 推定全损 F P A

SEIB OF GDUFS18 风险 海上风险 外来风险 自然灾害 意外事故 一般外来 特殊外来 部分损失 全部损失 单独海损 共同海损 实际全损 推定全损 F P A W P A

SEIB OF GDUFS19 风险 海上风险 外来风险 自然灾害 意外事故 一般外来 特殊外来 部分损失 全部损失 单独海损 共同海损 实际全损 推定全损 F P A W P A ALL RISKS

6.3.2 Additional Insurance Coverage Types of additional coverage  General additional insurance coverage (11 types) TPND (Theft, Pilferage and Non-delivery) 偷窃提货不着险 Fresh Water Rain Damage 淡水雨淋险 Risk of Shortage 短量险 Risk of Intermixture and Contamination 混杂沾污险 Risk of Leakage 渗漏险 Risk of Clash and Breakage 碰损破碎险 Risk of Odor 串味险 Damage caused by Heating and Sweating 受热受潮险 Hook Damage 勾损险 Risk of Rust 生锈险 Loss for Damage Caused by Breakage of Packing 包装破裂险 SEIB OF GDUFS20

6.3.2 Additional Insurance Coverage Types of additional coverage  Special additional coverage (8 types ) War Risk 战争险 Strikes, Riots & Commotions (S.R.C.C.) 罢工民变险 Failure to Delivery Risk 交货不到险 Import Duty Risk 进口关税险 On Deck Risk 舱面风险 Rejection Risk 拒收险 Aflatoxin Risk 黄曲霉素险 Fire risk extension clause for storage of cargo at destination Hongkong, including Lowloon or Macao 出口货物到香港（包括九龙在内）或澳门在存仓火险责任扩张险 SEIB OF GDUFS21

6.4 Insurance terms in Contracts Example 1  who: Insurance is to be covered by the sellers  how much: for 110% of invoice value  what risk: against xxx and xxx  clause: as per Ocean Marine Cargo Clauses of the People’s Insurance Company of China dated Example 2  who: Insurance to be covered by the seller on behalf of the buyers  how much: for 110% of invoice value  what risk: against Marine Risks  clause: as per Institute Cargo Clause (A) dated Jan. 1, 1982,  who pay: premium to be for Buyer’s account SEIB OF GDUFS22