1

Marine Cargo Insurance

April 24, 2009Svante O. Johansson

2

The commercial wheel Contract relations

Seller Buyer

Sender Carrier

Shipper

Sub- carrier

Receiver

Policy

Seller’s bank

Buyer’s bank

B/L

Cargo Insurer

Money

Goods

3

Risk Assessement

in Cargo Insurance

•

Risk as a combination of findings of both law and fact

•

Sales contract–

Passing of Risk under this contract

–

Various options for the cargo owner•

Contract of carriage

–

Different modes–

Different carriers

•

Risk of loss–

What Cargo?

–

What Carriage?

4

Performance under the sale contract

The Seller mustA1 Goods in conformityA2 Licences and formalitiesA3 Contract of carriage and

InsuranceA4 DeliveryA5 Transfer of RiskA6 Division of costsA7 Notice to the buyerA8 Proof of delivery and

other documentsA9 Checking, packing and

markingA10 Other obligations

The Buyer mustB1 Pay the priceB2 Licences and formalitiesB3 Contract of carriage and

InsuranceB4 Take deliveryB5 Transfer of RiskB6 Division of costsB7 Notice to the sellerB8 Proof of delivery and

other documentsB9 Inspection of goods

B10 Other obligations

INCOTERMS 2000

5

Simultaneously Performance and Incoterms

•

E-terms–

Ex works

•

F-terms–

FCA

–

FAS–

FOB

•

C-terms–

CFR

–

CIF–

CPT

–

CIP •

D-terms–

DES

–

DEQ–

DAF

–

DDU–

DDP

6

The influence

from London•

The English clauses are known all over the world

–

Used in export trade•

Norwegian plan not that commonly known

–

Used in import trade

7

The ancient

S.G. Policy form•

S.G.

–

Sanctioned by Members of Lloyd´s

1779–

Annexed to the MIA 1906

•

An antiquated document•

Additional clauses to S.G.

–

All risks –

W.A. (With average)

–

F.P.A (Free from particular average)

8

The English Clauses•

The call for revision

–

UNCTAD in the 60-ies–

Response from the market

•

MAR 91 form–

No stand-alone insurance

–

A binder to the clauses•

ICC A

•

ICC B•

ICC C

•

Revised as from January 1, 2009

10

Norwegian legislation•

Norway

–

Insurance Contract Act 1989•

Mandatory as regards national transits

•

Not mandatory for international transits–

Norwegian Cargo Clauses (Cargo Plan) 1995 (version 2004)

•

A-Clauses•

B-Clauses

•

C-Clauses–

The Clauses follow the Act in many instances, even though the transit might be of an international character

13

The three

sets of conditions and three

levels

of cover

•

Three sets–

Marine Perils

–

War

Perils–

Strike Perils

•

Three levels

of cover–

A-clauses

–

All risks

–

B-clauses

–

Extended

transport accidents–

C-clauses

–

Transport accidents

14

Administration of cargo insurance

•

Facultative

insurance–

A policy for every

single

consignment

•

Open cover–

Declaration

of shipments

with value

•

Floating

policy–

Premium is calculated

on estimated

total value

of goods

during

the insurance

period–

Set off

according

to yearly

turnover

15

The structure

of the clauses•

Perils

covered

•

Duration•

Exclusions

•

Claims•

Other

provisions

•

Norway is different–

The Norwegian plan also

states

the ancilliary

obligation of the assured•

Duty

of disclosure

•

Safety

regulation•

Obligations in connection

with a casualty

16

Duties

of the insured•

Duty of disclosure–

Disclosure

–

Alteration of risk•

Duty of care–

Safety regulations

–

Forbear from causing the damage–

Duty to avert and minimise loss

17

Disclosure•

When concluding: Active and passive duty–

Passive CICG §

12, cf. ICA §

4-1

•

Answer questions–

Active only when understands significance to insurer

–

Active CICG §

12 (1) last sentence•

Substantial bearing on risk

•

During insurance period ( §

12 second para.)–

Duty to notify on becoming aware of•

Incorrect

•

Incomplete•

Sanctions–

Cancel §

56 and 57 CICG

–

Reduction §

4-2 ICA

18

Alteration of risk•

The general rule–

Change in circumstances that form the base of the contract and alter the risks

–

ICA §

4-5 and §

4-6•

Sanctions–

Free of liability or other terms

–

Termination

19

Forebear from causing the damage•

ICA §

4-9

•

Intent–

No responsibility

•

Gross negligence–

Reduced responsibility

•

Negligence–

Full responsibility

20

Safety

regulation•

Rules or orders concerning measures for the prevention of loss–

CICG §

21 to §

24

•

Domestic trade –

Insurance contract

•

International trade–

Also rules imposed by public authority

•

Reaction –

Only responsible unless shown not consequential to infringements

21

Duty

to notify

and avert

or minimise

loss

•

If a casualty threatens or has occurred–

Notify insurer

•

CICG §

25 second para.–

Reasonable measures to avert or minimise

•

CICG §

25 first para.•

Sanctions–

Intention or gross negligence

•

Only responsible as if the duty was fullfilled

22

Identification•

Problem–

Representatives for the association

–

Helpers•

Different relations–

Policy holder and helpers

•

Brokers–

Assured and helpers

–

Assured and policy holder CICG §

10–

Different insured

23

Costs

for avert

and minimise

loss

•

General Average –

Common safety v. common benefit

–

Contribution covered CISG §

40•

Peril covered

•

Particular measures–

Cover CICG §

39

–

Circumstances: casualty or threatened casualty–

Extraordinary measures

–

Aim at avoiding loss or damage–

All costs

•

Not economical or consequential loss and damage to third party

24

All risks•

Not at all All

risks

•

Something must have happened•

Exclusions

25

Named

perilsRisks Covered

/ Conditions UK DK SF N S

Fire and explosion C B G C G

Stranding and grounding, sunk

or capsized C B G C G

Overturning

or derailment

of land conveyance C - - C U

Collision

or contact

with external C B G C G

Discharge

of cargo

at a port of distress C B U B G

Earthquake, volcanic

eruption or lightning B - G1 C2 U

GA-costs, salvage C B G Loss G

Jettisson

/washing

overboard C/B - U B -

Entry

of (sea) water into

container B - U B U

Total loss of package

whilst

laoding

or discharge B - U3 B U

26

Exclusions•

Four categories

–

General exclusion–

Unseaworthiness

and unfitness

–

War–

Strikes

•

This counts foremost in connection with English clauses

–

The Nordic countries have various patterns

27

Excluded

perils

(apart from war and strike)

Exclusion

/ Condition UK DK SF N SWilful

missconduct

of the Assured/Third

party damages 4.1/7 4.1 3.1.1 §4-9

ICA2.1/7.2

Ordinary

leakage, loss or wear

and tear 4.2 4.3 3.1.2 §18.2 2.2

Insufficiency

or unsutability

of packing 4.3 4.4 3.1.3 §23 13.1.1

Unseaworthiness

or unfitness 5.1 4.5-8 3.1.4 §22 13.1.2

Weapon

of war

duclear

fission 4.7 4.9 3.1.8 §18.10 2.3

Radioactivity 4.7 4.9 3.18 §18.10 2.4

Liability for damages - - 3.1.9 §6.3.2 2.5

Inherent vice 4.4 4.2 3.2.1 § 18.1 3.11

Non maintenance

of refrigeration - - 3.2.1 §24 3.12

Indirect

losses 4.5 K§63 3.2.5 §6.3.1 3.2

Carrier’s

insolvency 4.6 4.7 3.2.6 - 3.3

Delay 4.5 4.6 3.2.4 §18.5 3.4-5

28

The link

from risk to damage•

Causal connection

–

Damage caused by risk covered during period of insurance

•

Two or more risks have caused loss and one is not covered

–

Two alternatives•

The manifest cause decides

•

Pro rata apportionment on different risks•

The Norwegian solution

–

Pro rata over the various risks–

If nuclear energy or chemical or the like has contributed: no cover

29

War

and strikes exclusions•

War

cover

–

Inside

or outside

normal cover?–

1898 left

outside

if

not agreed

•

Strike cover

30

Duration

of cover•

The risk attaches

–

When

the Transport starts•

It remains

in force

during

ordinary

transit and

•

Terminates–

Delivery

to the consignee

–

At delivery

to warehouse•

other

than

storage

during

transit

•

for allocation

and distribution

31

The risk attachesPlace of storage

WarehouseTransport conveyance

Swedish and Norwegian

Finnish

Danish

English

32

Risk passes

and warehouse-to- warehouse

cover

•

Circumstances–

Buyers

insurance

–

Ex works

or fob

terms –

Delay

–

Risk passes

when?•

No cover

during

the time the goods

are ready

for the buyer

and the time the carrier

takes

care

of

them

or loading

them.

33

Risk cover: seller

and buyer insurance

Agreed

delivery

timeThe goods

is ready

Risk passes

Buyer’s

late

Time axis

Actual

delivery

Cover

attaches

No Cover

§

14 first para.But

second

para.

34

When

the risk terminates

after the sea

leg

Custom

WarehousePort of Discharge

Transport to

Disposal

or Distribution

Final warehouse

Warehouse

at request

60 days

30 days

after discharge

at destination