CARGO MARINE INSURANCE

LECTURER: MR ZARIR YUSOFF

2Cargo insurance

MARINE CARGO INSURANCE covers physical damage or loss of merchandise transported by sea, land or air.

The coverage of the products can be:

• All risks: it covers physical damage or loss of the goods and partial damage for any external theft or catastrophe.

• Total loss cargo insurance: it covers against total loss or physical damages.

The companies sending their products to expect that they arrive at

destination’s port in perfect conditions, they spending money in carriers

that assume the responsibility of transportation and careful of goods.

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Carrier

- a transport company that ships a product for the general public

Charter

- finds the right carrier for the customer

Consignee

- the party who the shipment is being delivered to

Consignor

- the party sending the shipment

PARTIES INVOLVED

5A common Carrier serves

the general public

These are the main shipping companies

THE CARRIER

• They own the ships and thus the Marine Insurance for their vessels

• Examples include Hapag-Lloyd and one of the oldest Maersk

• They own the ships and thus the Marine Insurance for their vessels

• Examples include Hapag-Lloyd and one of the oldest Maersk

6A basic voyage charter is hiring a vessel for a voyage between a load port and a discharge port.

The Charter does the actual hiring and renting of a vessel and crew. In some cases they own the actual cargo.

THE CHARTER

7In a contract, the consignee is the person to whom

the shipment is to be delivered to.

The Bill of Lading require the good to be delivered to the named consignee.

THE CONSIGNEE

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Is the person sending a shipment to be delivered.

Some carriers, use the term "sender" or "shipper” however the legal term is "consignor”

THE CONSIGNOR

9 Document issued by carrier/agent to the shipper as

a contract for the shipping of goods.

Contains:- Port of departure and arrival - name of ship - departure and arrival dates - itemised list of goods being shipped - cargo weight and volume - freight weght and amount

A Bill of Lading is required in all claims for compensation for example loss, damage or delay in arrival

BILL OF LADING

10MARINE 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

11TYPES OF MARINE TYPES OF MARINE

INSURANCEINSURANCE 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

12RISKS COVERED RISKS COVERED

BY BY MARINE CARGO INSURANCEMARINE 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

13PARTIAL 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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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

15CAUSES 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

Perils

Perils of the Sea

Extraneous risks and losses

Natural Calamities

Fortuitous Accidents

General ～

Special ～

Losses Covered by Marine Insurance

Expenses

Sue and labor expenses

Salvage charges

Losses sustained by the insured because of the risks come from not only the loss of

the goods or the damage done to the goods, but also from the expenses the

insured sustained in rescuing the goods in danger. Transportation insurance not only

insures the losses caused by risks but also the losses of expenses.

18Marine 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)

19INSTITUTE 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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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

22INSTITUTE 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

23INSTITUTE 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

24INSTITUTE 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

25INSTITUTE 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)

• 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)

27INSTITUTE 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)

28INSTITUTE 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)

29INSTITUTE 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)

30INSTITUTE 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)

31INSTITUTE STRIKES CLAUSESLoss 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

Risk Covered ICC (C) ICC (B) ICC (A)

1. Fire or Explosion2. Vessel being stranded, grounded, sunk or capsized3. Overturning or derailment4. Collision or contact5. Discharge of cargo at port of distress6. General average sacrifice7. Jettison8. Liability (both to blame collision)9. GA charges, Salvage charges

YES YES YES

10. Earthquake, volcanic eruption or lightning11. Washing overboard12. Entry of seawater, lake water or river13. Total loss of any package during loading / unloading

NO YES YES

14. Other accidental loss NO NO YES

33INSURANCE 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 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

INITIATED BY THE IMPORTER OR CONSIGNEE

• Original policy / insurance certificate.• Invoice.• Original Bill of lading.• Survey report.• Out – turn report• Consignment note• Master’s protest or extracts of ship’s log• Correspondence exchange with carriers• Letter of subrogation signed by claimant

36THE CARRIER’S LIABILITY IN OCEAN TRANSPORTATION

• The ship owner is responsible only for failure to exercise due diligence

The responsibility of the carrier is to

• Make the ship seaworthy

• Employ proper crew

• To equip and supply the ship

• Make all holds and other carrying compartments safe and fit for the goods stored there

• Exercise due care in loading, handling, and stowing cargoes

37THE CARRIER’S LIABILITY IN OCEAN TRANSPORTATION

The carrier is definitely not liable for certain things, including loss resulting from

• Errors in navigation or management of the vessel

• Strikes or lockouts

• Acts of god

• Acts of war or public enemies

• Seizure of the goods under legal process

• Quarantine

• Inherent vice of the goods

• Failure of the shipper to exercise due care in the handling or packing of the goods

• Fire

• Perils of the seas

• Latent defects in the hull or machinery

• Other losses where the carrier is not at fault

RELATIONS OF INCOTERM (CIF, CFR & FOB) TO THE RESPONSIBILITY OF PROCURING THE INSURANCE OF CARGO.

CIF (COST, INSURANCE & FREIGHT)

•Seller supplies the goods and arranges at his own expenses the shipment of the goods to the named port of destination and pay for the freight

•Seller has to effect and pays for a marine insurance to cover the goods throughout the transit.

•Seller bears all the risk of the goods until they are loaded on the board the ship at port of loading

•Present the usual documents for acceptance of buyer i.e. bill of lading, marine policy, invoice)

•Buyer Bears all the risk after the goods have been loaded on board vessel Accept the documents presented and pay the price

CFR ( COST & FREIGHT)

•Similar to CIF except the responsibility for arranging marine insurance is upon the buyer not the seller

FOB (FREE ON BOARD)

•Seller Has to supply the goods, deliver the goods on board the vessel at the port of loading Bear all the risks on the goods until loaded on board Notify the buyer without delay that the goods have been delivered

on board to enable buyer to effect marine insurance to cover such shipment •Buyer

Has to arrange and pay for the expenses of shipment of goods Bear the risks on the goods from the time loaded on board Arrange marine cargo insurance to cover the shipment

•The sale contract determines who should bear the risk of goods during the transit and therefore determines who has insurable interest and who should arrange cargo insurance

17/10/12

THANK YOU