Insurance Documents

Insurance Documents
Insurance
• A coverage by contract whereby one party undertakes to indemnify or
guarantee another against loss by a specified contingency or peril.”
• Insurance can cover a wide range of activities including but not
limited to agricultural insurance, health insurance, life insurance,
vehicle insurance etc…
• Cargo insurance can be defined as an insurance policy taken up to
protect insurance policy holder/assured against loss of or damage to
the goods during the transportation.
Cargo Insurance Process
Who is Going to Arrange and Pay for the Cargo
Insurance:
• If CIF /CIP????
• If Not??
Cargo Insurance
• There are 3 main cargo insurance types available for sea and road shipments.
• Institute Cargo Clauses (A),
• Institute Cargo Clauses (B)
• Institute Cargo Clauses (C)
• Institute Cargo Clauses (A), which is also known as all risk insurance, has the
widest protection coverage.
• Institute Cargo Clauses (C) has the minimum insurance coverage.
• Institute Cargo Clauses (Air) used in air shipments.
• Some of the most frequently used additional cargo insurance clauses are,
Institute War Clauses (Cargo)
Termination of Transit Clause (Terrorism) Amended
War and Strikes Cancellation Clause (Cargo)
C Clauses – Risks covered
• 1.1.1 fire or explosion
• 1.1.2 vessel or craft being stranded grounded sunk or capsized
• 1.1.3 overturning or derailment of land conveyance
• 1.1.4 collision or contact of vessel craft or conveyance with any
external object other than water
• 1.1.5 discharge of cargo at a port of distress
• 1.2 loss of or damage to the subject-matter insured caused by
• 1.2.1 general average sacrifice
• 1.2.2 jettison
B Clauses – Risks covered
• All the above plus:
• 1.2 loss of or damage to the subject-matter insured caused by
• 1.2.1 general average sacrifice
• 1.2.2 jettison or washing overboard
• 1.2.3 entry of sea lake or river water into vessel craft hold
conveyance container or place of storage
• 1.3 total loss of any package lost overboard or dropped whilst
loading on to, or unloading from, vessel or craft.
A Clauses – Risks covered
• All risks are covered.
• Please do remember that “All risks” are not “All Risks” in that there has to have
been a happening. Something has to have happened which is NOT EXPECTED.
Most Common Exclusions
• Inherent Vice
• Latent Defect - Damages due to quality of goods.
• Improper Packaging
• Willful Misconduct
Inherent Vice
• Inherent vice is generally referred to as any damage caused to cargo
due to the inherent nature of the product as opposed to any damages
inflicted on the goods by t
• In other words, it’s damage done by internal causes rather than
external ones. he carrier themselves.
• Examples of inherent vice would be
• deterioration due to product instability (Fruits and vegetables)
• Rust forming due to metal materials/ moisture ( Steel)
• Combustion (Batteries, Coal or other chemical substances)
Most insurance providers clearly outline in their contracts that damages due to
inherent vice will not be covered by the policy.
Latent Defect
• The term latent defect refers to issues with a product that would not
be easily noticed upon inspection.
• An example of this exclusion would be a product that's welds show
cracks or separations as a result of improper manufacturing.
• The damage would be attributed to the quality of labor or
manufacturing of the products.
LOSS DUE TO IMPROPER PACKAGING
• Careful packaging and crating play an important role in the supply

chain, both, on land and at sea.
• When a shipper fails to properly secure cargo with proper packaging
techniques, products can easily be damaged while in transit.
• Reusing corrugate boxes or crates that are loosely built can result in
losses that would not be covered by cargo insurance.
WILLFUL MISCONDUCT BY ASSURED
• This exclusion protects carriers and forwarders from damages and

losses caused by the willful misconduct of the assured or their
employees.
• The term assured refers to the insured party. In most cases, the party
receiving the cargo is the assured.
• In essence, this exclusion can be summed up as insurance fraud.
• For example, a company could intentionally import damaged products
to make a claim to the insurance company.
warehouse to warehouse Coverage
• Normally the cargo insurance covers the losses that is occurred
between the starting and ending point of the main carriage.
• But sometimes issuing banks may demand an extended coverage.
Types of Insurance Documents
• Insurance Policy
• Insurance policy is a legally binding written document, which is issued by
insurance company or underwriter to policy holder or insured/assured.
• International marine cargo insurance policies are generally issued subject to
ICC Cargo clauses such as Institute Cargo Clauses (A), Institute Cargo Clauses
(B) and Institute Cargo Clauses (C).
• May also mention additional risks covered such as war risks and strike risks.
• Insurance policies issued by the insurance companies for specific transactions
• An insurance policy generally issued when the goods are loading and
expires on completion of unloading from the carrying vessel at the port of
destination
• Insurance Certificate
• Exporter sign an insurance cover for a certain period of time such as 1 year.
• During the insurance period, as illustrated 1 year on the above example,
exporter's all shipments will be covered with a cargo insurance.
• This Cover is Called “Open Cover”
• Then the insurance company issues an insurance certificate for each
individual shipments
• Insurance Certificate does not stand alone always issued under a open cover
• Cover Notes
A cover note is a temporary certificate of insurance issued by the
Insurer before the issuance of a policy after the Insured has given a duly
filled in proposal form and has paid the premium in full
A cover note is valid for a period of 60 days from the date of issue of
the cover note and the insurer shall issue the Certificate of Insurance
before the cover note expires.
How to Use Insurance Documents in Letters of Credit Transactions:
• An insurance document, must appear to be issued and signed by an

insurance company, an underwriter or their agents or their proxies.
Any signature by an agent or proxy must indicate whether the agent
or proxy has signed for or on behalf of the insurance company or
underwriter.
• An insurance policy is acceptable in lieu of an insurance certificate
or a declaration under an open cover But reverse situation is not
valid.
• Cover notes will not be accepted.
How to Use Insurance Documents in
Letters of Credit Transactions:
• The date of the insurance document must be no later than the date of
shipment, unless it appears from the insurance document that the
cover is effective from a date not later than the date of shipment.
• The insurance document must indicate the amount of insurance
coverage and be in the same currency as the credit.
• An insurance document indicating that it covers Institute Cargo
Clauses (A) satisfies a condition in a credit calling for an “all risks”
clause or notation.
Details in an Insurance Document
• Insurance terms and additional risks covered
• Amount of insurance premium
• Shipment details such as port of loading, port of discharge, vessel
name and voyage number, description of goods etc.
• Currency of the insurance cover
• Insurance cover amount
• Insurance company's agent at the port of destination
• Procedures for the claim and required documents
Average
General Average
• The basic idea of general average pertains to property that is
voluntarily sacrificed to preserve the remainder of the property from
destruction
• The owners of the property saved must contribute to the owners of
the property sacrificed in such an amount that all will have
contributed proportionately to the value of the lost property.
Example 1
The ship ran aground and became lodged. Since the rescue operation
was carried out, tugboats managed to pull the ship out. The rescue
operation cost 6 million. The ship is valued at 40 million, the cargo – 50
million, the freight (Compensation paid for transportation of goods ) –
10 million. 6 million was spent to save 100 million, so the general
average value is 6%. If someone had a total of 12 million worth of cargo
abroad the vessel, such person would be charged 6% of 12 million, 720
thousand.
Example 2
The value of the entire ship is 40 million, cargo – 50 million, freight – 10
million. The ship made a dangerous turn and was about to capsize. The
captain decided to sacrifice some cargo, so a 5 million worth of cargo
was thrown overboard. Costs are divided to all participants, and every
participant must contribute 5%. The owner of the jettisoned cargo also
contributes 5% of the amount due out of 5 million (250 thousand) but
should get reimbursed 475 thousand.
Average
• Particular Average
if some parts of cargo get damaged due to sea water during the
voyage, the loss will be considered as particular and hence it will be
borne by persons who directly get affected due to damage to the said
cargo.
Act of God (Force majeure )
• Act of God was considered to be "an accident that is due directly and exclusively
to natural causes without human intervention and which no amount of foresight
or care reasonably exercised could have prevented. The accident must be one
occasioned by the violence of nature
• This means the accident would need to be caused by some kind of natural
phenomena, like:
• Earthquake
• Hurricane or other serious storm
• Lightning
• Extreme waves
• In that case vessel owner is not responsible for damages
• Acts of God do not absolve people from a duty to exercise reasonable care.
Act of God (Force majeure )
• Generally speaking, for events to constitute force majeure, they must
be unforeseeable, external to the parties of the contract, and
unavoidable.
• If a natural or other disaster happened in a place before, even many
years ago, a repeat occurrence may not be considered unforeseeable.
Is COVID-19 considered force majeure?
Discuss

Insurance Documents

Uploaded by

Copyright:

Available Formats

Insurance Documents

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Insurance Documents

Uploaded by

Copyright:

Available Formats

Insurance Documents

• Careful packaging and crating play an important role in the supply

• This exclusion protects carriers and forwarders from damages and

• An insurance document, must appear to be issued and signed by an

You might also like