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

Types 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

Risks Covered by Marine Cargo 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

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

Voyage Policy and Time 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

Causes of Loss Covered Heavy weather, lightning, barratry of the masters and mariners & assailing thieves Fire or explosion Vessel being stranded, sunk or burnt Collision or contact of vessel with any external objects including ice except water Jettison Bursting of boilers, latent defect in the machinery or hull Faults or errors in the navigation or management of the vessel Discharge of cargo at a port of refuge or distress

Causes of Loss Covered Fumigation of the vessel or dock While ashore, sprinkler leakage, earthquake, cyclone, hurricane, collapse of docks and flood Accidents during loading or unloading from the vessel

Coverage with Additional Endorsements to Open Cargo Policy FOB & FAS shipments coverage: Transit between premises and vessel Export contingency (Unpaid vendors) coverage: FOB or CFR without L/C & buyer fails to buy insurance & refuses to pay for damaged goods Difference in Conditions(D.I.C.) Coverage: Difference between two coverages by the seller and the buyer

Coverage with Additional Endorsements to Open Cargo Policy 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 Marine Extension Clause: From the seller's warehouse to the buyer's warehouse without a specific time limit South American Clause: Warehouse to warehouse but ceases 60 days after discharge

Conveyances 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

Marine Cargo Insurance Coverage 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)

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

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

Institute Cargo Clauses (A) 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

Institute Cargo Clauses (A) 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

Institute Cargo Clauses (A) 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

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

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

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)

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)

Institute Cargo Clauses (C) 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)

Institute Cargo Clauses (C) General Exclusion Clause Unseaworthiness and Unfitness Exclusion Clause War Exclusion Clause Strikes Exclusion Clause The same as those of Institute Cargo Clauses (B)

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)

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

Marine Cargo Insurance Recommendation Purchase Institute Cargo Clauses (A) Purchase Institute War Clauses (Cargo) Purchase Institute Strikes Clauses (Cargo)

Rejection Clause Covers the rejection of the goods by the Government of importing country Fresh fruits, vegitables Foods Any good which must pass inspections by federal or state government

Express Warranties Exceptive warranties indicating causes expressly excluded from the coverage FC & S (Free of Capture & Seizure) Warranty To cover, stamp word “DELETED” over the exclusion clause and attach Institute War Clauses (Cargo) 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)

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.

Amount of Insurance Minimum amount of insurance coverage: 110% of CIF or CIP value Insures against loss of expected profit 120% or 130% if both exporter and importer agree

Insurance 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

Claims 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

Marine Insurance Policy & Letter 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)