Marine Insurance

MARINE CARGO INSURANCE AND CLAIMS
Cargo insurance policy and certificate It is most important to have insurance cover against loss or damage that may occur during shipment. The export sales contract with the buyer must clearly state who is responsible for arranging the insurance at all stages from the time the merchandise leaves the exporters premises until the buyer takes possession. This embraces awaiting transportation of the goods to the seaport, airport, or inland clearance depot, the period during which the merchandise is store shipment or loading, the periods whilst the goods are on board the ship, aircraft or other conveyance such as the through international road transport, the off-loading and storage on arrival, and finally transportation to the buyer. Basically, the insurance policy certificate must embrace the following relative to the processing of the international consignment !"# !%# !&# !'# !(# cover the risk detailed in the credit arrangements$ be in a completed form$ be in a transferable form$ be dated on or before the date of the document evidencing dispatch, for example, bill of lading$ be expressed in the same currency as that of the credit.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
)verall, the insurance policy certificate must contain the following !a# !b# !c# !d# !e# !f# !g# the name and signature of the insurer$ the name of the assured$ the endorsement of the assured when applicable so that the rights to claim may be transferred$ a description of the risk covered$ a description of the consignment$ the sum or sums to be insured$ the placed where claims are payable together with the name of the agent to whom claims may be directed. The insurance policy certificate must avoid containing the following discrepancies when presented under a letter of credit. !"# !%# !&# !'# !(# !+# !,# !.# The amount of cover is insufficient or does not include the risks mentioned in the credit. The insurance is not issued in the currency of the credit. The insurance policy certificate is not endorsed and*or signed. The certificate or policy bears a date later than date of shipment*despatch. The goods are not correctly described. The alterations on the insurance policy certificate are not authenticated. The insurance policy certificate is not in a transferable form when re-uired. The carrying vessels name is not recorded.
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The insurance policy certificate does not cover transshipment when bills of lading indicate it will take place.
0hen a policy is called for under a letter of credit, a certificate is not acceptable. 1owever, a policy is acceptable when a certificate is re-uested. Brokers cover notes are not acceptable unless specifically permitted in the credit. It is important to bear in mind when the shipper, exporter, or agent is preparing the insurance document for presentation to the bank, that it is the currency of the documentary letter of credit$ the insurance is for the value specified in the credit$ it covers all risks specified in the credit$ the insurance document is dated prior to the dispatch of goods or indicates that cover is effective from the shipment date$ and finally the insurance policy is presented when the credit so stipulates. Insurable interest The 2arine Insurance 3ct "/4+ provides that a person has an insurable interest in a marine adventure !any ship goods or other moveable exposed to maritime perils# where he or she stands in any legal or e-uitable relationship to the adventure or insurable property at risk therein in conse-uence of which he may !a# !b# benefit by the safety or due arrival of the insurable be pre5udiced by its loss, or by damage thereto, or by the detention thereof, or
property, or
!b#
incur liability in respect thereof.
It is important to understand the difference between the sub5ect matter insured and insurable interest. Insurable interest is the financial interest of a person in the sub5ect matter insured - but his financial interest in such goods and, accordingly, he should insure to the extent of that interest. 0hilst ownership of property 6 the sub5ect matter insured - is the prime example of insurable interest, there are other circumstances in which a person may possess an insurable interest. 7or instance, persons responsible for goods while in their care, custody and control !e.g. a warehouseman#, have an insurable interest in respect of their legal liability for such goods, even if the owner himself has affected insurance. 0here goods are consigned to an agent for sale on commission, the agent has an insurable interest because, if the goods are lost, he will be precluded from earnings his commission on their sale. In this instance, his insurable interest is his financial interest, i.e. the amount of his anticipated commission. The underwriter who insures goods has an insurable interest insofar as, if they are lost or damaged by one of the perils insured against, he will have to pay the claim made against him under the policy. underwriters. This is known 8reinsurance. 3 policy affected without insurable interest is void, i.e. it has not legal value and is unenforceable at law. In all classes of insurance there is, therefore, a legal re-uirement that insurable interest exists at the time the insurance is affected. 3n exception to this rule applies in the case
3ccordingly, he may limit
his liability in respect of such a claim by insuring part of it with other
of cargo insurance. The 2arine Insurance 3ct "/4+ provides that the person entering into a contract of marine insurance must have an insurable interest or an expectation of ac-uiring one. This effectively covers the case of the buyer under a 9I7 contract who ac-uires his interest when the title to the goods purchased is transferred to him sometime after transit has commenced from the sellers premises. :roof of insurable interest is not re-uired at the time of effecting insurance. But when making a claim, it is necessary for the assured to be able to show that he had an insurable interest at the time of loss. 9argo insurance effected in respect of 9I7 contracts of sale is invariably based on what is known as 8lost or not lost conditions which means that the assured may recover any loss, even although he may not have ac-uired his interest until after the actual time of loss. The most common forms of insurable interest in cargo insurance are !"# )wnership of the goods. The cargo owner has an insurable interest in the goods since he will benefit by their safe arrival or be pre5udiced by loss of or damage thereto. )wnership usually involves two parties 6 seller and buyer, or consignor and consignee. !%# The insurance re-uirements of these parties will depend upon the terms of the contract of sale. 9harges of insurance !premium#. The assured has an insurable interest in the premium paid in respect of any insurance he may affect. 0hilst in hull insurance the ship-owner effects a separate policy to cover the amount expended upon insurance premiums, in cargo insurance the sum insured reflects the cost of the goods plus the cost of insurance.
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7reight.
This is the cost of transporting the goods from the In most cases, it is
consignors premises to the consignees premises and is either .pre-paid or payable at destination. advanced or pre-paid freight not returnable even if the goods are lost and not delivered. In these instances, therefore, the freight pre-paid is at the risk of the cargo owner and, as in the case of premium, plus the is cost merged of in with the value of the the goods. cost of 9onse-uently, the sum insured reflects the cost of the goods insurance !premium# plus transportation !freight#. )ther forms of insurable interest in cargo insurance are !"# ;efeasible interest. This term describes an interest which
may cease for reasons other than the operation of maritime perils. 7or example, the insurable interest of the seller of goods ends when the title to the goods passes to the buyer. The seller has a defensible interest. !%# 9ontingent interest. 3s the defensible interest of the seller The contract of 0here interest ceases the interest of the buyer commences.
sale may contain a provision allowing the buyer to re5ect the goods in certain circumstances, e.g. delayed delivery. the !&# buyer exercises this right of re5ection, the immediately and automatically reverts to the seller. 7orwarding expenses. The contract of affreightment will probably include a clause allowing the carrier to discharge the goods at a port other than the one designated where, for some reason, they cannot be delivered or discharged at the destination port. 7or example, the destination port may be strikebound and
the ship-owner diverts the ship to another port.
This would
involve the cargo owner incurring 8forwarding expenses, i.e. the cost of getting his cargo carried to its intended destination. These charges are not covered under the standard cargo clauses, and when this situation occurs, it is usually too late for the cargo owner to effect insurance as the risk has already occurred. 3 prudent cargo owner would cover his interest by effecting insurance on an annual basis for an amount sufficient to cover his possible expenditure in such circumstances. !'# 9ommission. 3n agent may act for a cargo owner on a commission basis. The amount he or she anticipates earning will depend upon the arrival of the goods and he or she accordingly has an insurable interest to this extent. It is also important to appreciate the relationship of insurable interest to the delivery terms specified in the contract of sale 6 i.e. where the individual insurable interests of the seller and the buyer attach and terminate 6 as this governs the extent of the insurance cover re-uired by both. 3s an example, however, under a 7ree on Board !7)B# contract the seller is re-uired to arrange transport of the goods to the port and ensure that they are loaded into the vessel. 3t this point, when the goods pass over the ships rail, this insurable interest ceases, and that of the buyer commences and continues until arrival of the goods leave his or her warehouse to 7)B ship$ the buyer needs insurance cover from 7)B ship to arrival at his or her warehouse.
)n the other hand, a 9ost Insurance and 7reight !9I7# contract places responsibility on the seller for arranging the transport of the goods from his or her warehouse to that of the buyer and paying the freight involved. 1e or she is also responsible for effecting insurance cover It is essential, from 8warehouse to warehouse in accordance with the buyers instructions and paying the premium re-uired. therefore, that the insurance is arranged so that, in line with the transfer in title to the goods from the seller to the buyer, the beneficial rights of the insurance may be similarly transferred. This is known as assignment of the policy. 3ssignment of the insurance is effected by the seller !the assignor# endorsing the policy or certificate of insurance by blank endorsement to the buyer !the assignee#. Blank endorsement means that the assignor signs his or her name above the company stamp on the back of the document and passes it to the assignee. It is important to understand that assignment of the interest does not automatically assign the policy, and an agreement to assign the policy must exist before the seller parts with his or her interest. In practice, under a 9I7 contract there is an implied agreement that the policy will be assigned before the interest passes. By assigning the policy, the assignor passes to the assignee all the beneficial rights afforded by the insurance, he or she had an insurable interest throughout the duration of the transit. It must be emphasi<ed that the assignee cannot be in a better position that the assignor$ his or her interest is derivate, i.e. he or she has exactly the same rights as the assignor. 3 breach of good faith or warranty on the part of the assignor would pre5udice the assignee since the underwriter has exactly the same rights in relation to him or her as he had against the assignor.
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Cargo insurance rating :remium rates are determined by numerous factors which are detailed below. !"# The carrying vessel. The age, classification, flag,
ownership. 3nd management of the ship is an important consideration. !%# =ature of the packing used. This has to be related to the mode of transport and its ade-uacy as a form of protection to the cargo. !&# 3ir freight and maritime container shipments tend to re-uire less packing. Type of merchandise involved. >ome commodities are more vulnerable to damage than others. experience, if any, of conveying such cargo. !'# =ature of transit and related warehouse accommodation. pilferage. influence ?enerally, the shorter the transit 3dditionally, one must relate this to the cover provided and
time, the less vulnerable the cargo is to damage or 3gain the mode!s# of transport involved premium determination. 2aritime
containeri<ation has tended in many trades and cargoes to reduce risk of pilferage, but the cargo still remains susceptible to damage. !(# :revious experience. If the cargo involved has been sub5ect to significant damage or pilferage the premiums are likely to be high. In the main, the shipper and broker tend to work well together in devising methods
to !+#
minimi<e damage and pilferage and overcome This is a critical area and
inade-uate packing. The type of cover needed. obviously the more extensive the cover re-uired, the higher the premium rate. 3gain the broker will advise the shipper on the extent of cover re-uired, but much depends on terms of delivery. !,# The volume of cargo involved. 3 substantial -uantity shipment of export cargo may obtain a more favourable premium, but much depends on the circumstances, particularly transport mode and type of packing, if any. =ormally, alternative rates are available for different covers. 7or example, glassware may be insured at a high rate against all risks including breakage, or at a much lower rate excluding breakage, cracking or chipping. The degree of fragility is not the same for all commodities and obviously there cannot be a universal rate for breakage. To the exporter fresh to the business, it is wise to shop around to obtain the most favourable rates or seek advice from the freight forwarder.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /4 "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
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INS!I!U!E CARGO CLAUSES
=ew Institute 9argo 9lauses were introduced in @anuary "/.%. The cargo insurance market is underwritten by Aloyds underwriters and insurance companies. The 9ompanies 2arine :olicy serves as a contract of insurance for cargo and as detailed below there are three main types of policy single shipment, annual, and open. !"# >ingle shipment or 7acultative shipment. !a# )ptional type of policy in that, having agreed to cover a specific shipment, there is no obligation to cover further shipments. !b# Bsed mainly for importers*exporters with occasional shipments, or can be used as a means of building up experience on a new venture prior to the issuing of a longer term contract. !%# 3nnual policy !a# Issued for a twelve-month period sub5ect to payment at inception of a minimum and deposit premium or deposit premium, with a minimum retention. !b# 3d5ustable at the end of the period on the total value of sendings made declarable as either !i# an annual figure, or
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, // "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!ii# throughout the period, on an individual or monthly basis. !c# !d# >uitable for risks where sendings are regular and low value goods are involved. It ensures premium up front for the broker and underwriter. !&# )pen policy !a# )nce issued this policy remains in force until no longer re-uired, i.e. can be cancelled by either the 3ssured or the Insurer. !b# !c# 3nnually reviewed to ensure that the 3ssureds re-uirements continue to be met. :remium is normally payable in arrears, being calculated according to the value of shipments in a particular month. 7lexibility to meet each customers individual re-uirements and variations in the latter two covers may be negotiated. policy offered will depend on !"# !%# !&# fre-uency of shipments$ annual value of shipments ease of operation. The type of
The above policies may be sub5ect to Insurance :remium Tax.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /"athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
Met"od of declaration !"# 3ssureds typed declaration letter !a# !b# !c# !%# =o documentation issued usually by the assured. Bsed where an annual value of sendings or turnover is re-uired for ad5ustment purposes. Bsually utili<ed in small annual policies.
small declaration !h# !i# Issued by assured companies to brokers*agents*assureds. Bsed for declaring individual shipments on an import cover or as a re-uest for a 9laims :ayable 3broad certificate to be issued on an export cover !where certificates have not been issued to a broker, etc.#
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Aarge declaration !a# !b# !c# Issued by assured companies to brokers*agents*assureds. Bsed when there are regular multiple shipments involved, usually on an import cover. =ormally submitted on a monthly basis.
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9ertificate of insurance !a# !b# Issued by assured companies to brokers*agents*assureds. =ormally issued on export covers for individual shipments.
!c# !(#
Bsually submitted in monthly batches.
Cvidence of the contract of insurance !a# !b# !c# 7reely assignable document. Deflects cover of the master policy. Indicates details of the claims setting agent to be used.
Scope of co#er 2arine insurers use standard wordings known as Institute 9lauses. Earious clauses are used depending on the nature of the goods being carried. follows. The three basic levels of protection offered are detailed as
$i%
Institute Cargo Clauses $A%
This represents the widest form of protection and provides all-risks cover against physical loss of or damage to the goods, including both total and partial losses. Cxclusions are !"# !%# !&# !'# !(# willful misconduct of the assured$ ordinary leakage, loss in weight*volume or ordinary wear and tear$ inade-uate packing including stowage in a container by the assured$ inherent vice$ delay$
!+# !,#
insolvency or financial default of carriers$ war and strikes and nuclear risks*
3s well as these exclusions, some cargoes warrant more specific exclusions, e.g. !"# !%# !&# !'# 2achinery or electrical items 6 excluding electrical and*or mechanical derangement. >teel goods !if unprotected 6 excluding rust, oxidi<ation or discolouration. Tinned goods 6 excluding blowing and *or bursting of tins. 9hocolates 6 excluding heating and * or sweating.
It is important to note that only storage cover given is in the ordinary course of transit. for sendings by air. $ii% Institute Cargo Clauses $&% If the storage is intentional it is not covered. The e-uivalent cover is also provided by the Institute 9argo 9lauses !3ir#
These clauses are sub5ect to the same exclusions as per the Institute 9argo 9lauses !3#. :rotection, however, is limited to the ma5or named peril listed below
!"# !%# !&#
7ire and explosion. Aoss following upon a ma5or accident to the ocean-carryingvessel or over-turning or derailment of the land conveyance. ;ischarge of cargo at a port of distress.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /: "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!'# !(# !+# !,# !.# !/#
Carth-uake, volcanic eruption or lightening. ?eneral average sacrifice. @ettison or washing overboard. >ea, lake or river water damage !not rain water#. Total loss of any package lost overboard or dropped during loading*unloading. ?eneral average or salvage charges.
9over can be extended to include theft or non-delivery if necessary. These clauses are used when underwriters are not prepared to give 83 clauses as in the case of secondhand goods or packaged bulk cargoes. $iii% Institute Cargo Clauses $C% These afford the minimum protection available and are really only suitable for goods which are customarily insured against ma5or casualties only or which are shipped in bulk, or where the condition of the goods is not known by the underwriter. 9argo 9lauses !B# except numbers ', , and .. $i#% Additional Clauses Institute 0ar 9lauses and Institute >trikes 9lauses are usually added and give cover against the risks of war, strikes, riots and civil commotion. It should be noted that terrorism cover is granted by the strikes clauses whilst the goods are in the ordinary course of transit. The cover is loss or damage arising from any of the ma5or perils listed under the Institute
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /; "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
3s mentioned previously, the preceding are the basic clauses which are used to cover most cargoes. special market trade clauses, e.g. 9oal 7ro<en meat Institute 9oal 9lauses Institute 7ro<en 2ean 9lauses 9ocoa, 9offee, 9otton, 7ats and )ils not in bulk, 1ides, >kins and Aeather, 2etals, )il >eeds, >ugar !raw or refined# and Tea Ot"er aspects The 9ompanies 2arine :olicy is not valid unless it bears the embossment of the :olicy ;epartment of the Institute of Aondon Bnderwriters. It is sub5ect to Cnglish law and must contain an identical description of the cargo as found on the bill of lading, air waybill and feature the valuation and transportation details. C"ec' list( discrepancies $i)e) li'ely errors% and t"eir Institute 9ommodity Trades 9lauses !3# There are, however, some commodities, goods and situations which are normally dealt with under
conse*uences If an insurance document is re-uired check the following !"# It has been issued and*or signed by an insurance company or underwriter or an agent on their behalf.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /. "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!%# !&#
It is not a brokers certificate or cover note unless the presentation of such has been specifically authori<ed. If the insurance document indicates it is issued in more than one original, all originals are presented unless otherwise authori<ed in the credit.
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It is not dated later than date of shipment, dispatch or taking in charge. It is issued in the currency of the creditor. If cover in a different currency is re-uired, that it is presented in that currency. It provides sufficient cover and contains the same details in respect of special risks as stated in the credit terms. 9I: value. Bnless otherwise stipulated, cover must be "4 per cent above the 9I7 or
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It has been enclosed to the order of a specified party, issued in a transferable form, or endorsed by the insured if issued in the latters name.
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It shows marks, numbers, weights and -uantities and a description of goods that match the Bill of Aading and other documents.
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It does not show unauthenticated alterations. loading on board, dispatch or taking in charge, the name of the carrying vessel if appropriate and the port of discharge or place of delivery.
!"4# It shows the method of carriage of the goods, the point of
!""# It
specifically
covers
transshipment
when
the
transport
document shows this will take place. !"%# It states a named place where claims are payable when re-uired.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /< "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!"&# It covers 8Aoaded on ;eck when this is permitted within the 9redit Terms or when dispatch is effected in containers which may be loaded on deck 6 check appropriate 5ettison clauses. Cargo insurance clai+s 2ost insurance company policies re-uire that immediate notice be given to the nearest branch or agency in the event of damage giving rise to a claim under a policy on goods. Aloyds policies stipulate that a Aloyds agent shall be called in should damage occur. 0hen notified of damage, the companys agent of Aloyds agent proceeds to appoint a suitable surveyor to inspect the goods and to report on the nature and extent of the damage. 3 common practice is for a report a certificate of loss incorporating the surveyors findings to be issued to the consignees, the latter paying the fee. This is the usual procedure relative to the Aloyds agent. This certificate of loss is included with the claim papers and, if the loss is recoverable under the insurance cover, the fee is refunded to the claimants. In some circumstances, the claim papers are returned to the place where the insurance was effected and subse-uently presented to the underwriters. 1owever, especially where goods are sold on 9I7 terms and the policy is assigned to the consignees$ arrangements are made for any claims to be paid at destination. In such cases, the consignees approach the agents named in the policy for payment of their claims. Aloyds agents undertake this service. The policy must be produced by the claimant when a marine claim is put forward because of the freedom with which the marine policy may be assigned. In
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, /= "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
circumstances where the policy or certificate of insurance has been lost or destroyed, underwriters are generally willing to settle the claim, provided that the claimant completes a letter of indemnity. The presentation of claims is by negotiation on documents supporting the assured case. It is very difficult to state with any degree of legal precision exactly on whom the onus of proof falls in every case, but generally speaking, the assured must be able to prove a loss by a peril against which he or she was insured. )nce the assured has presented a prima facie case of loss by a peril insured against, the onus is on the insurers to disprove liability. The following documents are re-uired when making an insurance claim !"# !%# !&# !'# !(# The export invoice issued to the customer together with shipping specification and*or weight notes. The original bill of lading, charter party, air waybill. The original policy or certificate of insurance. The survey report or other documentary evidence detailing the loss or damage occurred. Cxtended protest or extract from ships logs for salvage loss, particular average in goods, or total loss of goods for maritime consignments. !+# !,# Aetters of subrogation for total loss or particular average on goods. 3ny exchange of correspondence with the carriers and other parties regarding their liability for the loss or damage.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -4 "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!.# !/#
3ny landing account or weight notes at final destination. 3ccount sale !salvage# or invoice for reconditioning charges.
The following figures depict the process of 9laim :rocedure for Bulk >hipment and ;evelopment of 9argo 9laim.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -/ "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
CLAIM ,ROCEDURE -OR &UL. S/I,MEN!
>wners P ? ! Club
1hip
$(ent Club correspondent
Buyer (consi(nee)
Goods dama(ed
Car(o insurance
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -"athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
DE0ELO,MEN! O- CARGO CLAIM
'actory
Goods
Contact of carria(e
'rei(ht forwarder
!nland transport
Deli&ery to port Bill of ladin( >wners P?! 1hip
Contact of sale $(ent
1ea &oya(e
Deli&ery to port
Buyer (consi(nee)
!nland transport
Car(o insurance
Brief details are given below of the claims procedure, which involves a bulk shipment. !"# Deceiver notifies his agent of damage*loss and allows the ships agent three days to examine cargo. !%# 0hen extent of damage is ascertained by receiver or ship owners agent, the ship owner and : F I 9lub must be told. !&# 3 large claim may re-uire a : F I 9lub surveyor or a consultant to examine the cargo. 3n early examination is essential and the agent must establish from the ships 2aster and confirm with the ship owner* : F I 9lub, the actual name of : F I 9lub involved. !'# 0hen the cargo claim facts are established, correspondence starts involving interested parties ship owner, receivers agents, : F I 9lub, cargo receiver, ship owners agent, and cargo insurance company*Aloyds, lawyers, etc. !(# The receivers agents role is decisive in all stages to ensure prompt settlement is obtained and -uick action is essential in the early stages. It will be appreciated circumstances will vary. destination port as found in the example above. The claim could
emerge at the factory warehouse of the buyer rather than at the
It is important to bear in mind that clean receipts for imported cargo acceptance should never be given when the goods are in a doubtful condition, but the receipt should be suitably endorsed and witnessed if possible, for example, if one package is missing. 7urthermore, if the loss of damage incurred was not readily apparent at the time of taking delivery, written notice must be given to the carriers or other bailees within three days of delivery acceptance. It is desirable the claim be progressed as -uickly as practicable. It is advantageous for the exporter to have a good comprehension of the term general average !?3# which features in any standard maritime policy. It is defined as a 8loss arising in conse-uences of extraordinary and intentional sacrifices made or expenses incurred, for the common safety of the ship and cargo. Cxamples of general average include 5ettison of cargo, damage to cargo, etc. In the event of a ship owner declaring a general average loss occurring, each party involved in the voyage must contribute in proportion to their interest in the maritime venture. This, of course, involves shippers who may not have suffered any damage or loss to their cargo. The cargo is only released in such a situation when the shipper*importer has given either cash deposit or provided a general average guarantee given by the insurers. )verall, this involves signing a general average bond, which confirms the importer will pay his general average contribution following the average ad5usters assessment.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -: "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
Cargo clai+s pre#ention 9laims prevention is the process of devising a system to reduce or eliminate the level of claims emerging from the carriage of goods on an international transit. It is important that the exporter gives special attention to claims prevention and thereby maintains a good relationship with the buyer through the goods arriving in an The circumstances which
undamaged condition with none missing. the situations !"# !%# !&# !'# 2issing goods. ;amaged goods. >tained*mutilated*soiled goods.
give rise to a cargo claim vary and the following is a broad summary of
=on-saleable*marketable goods arising through frustration of the transit such as transit delays causing perishable goods to deteriorate beyond a marketable*saleable product.
!(# !+# !,# !.#
7ailure of the goods to arrive on a specified date resulting in a compensation claim. :oor*inade-uate packing. Inade-uate*poor stowage. :oor handling*stacking of cargo resulting in damage, crushing, etc.
To minimi<e the level of cargo claims it is most desirable that ade-uate measures be taken. The following list should not be regarded as exhaustive but merely as a selection of the more important areas where measures can be taken to reduce claims
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -; "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!"#
3 transit test should be employed to determine where the delays, damage or pilferage were encountered and any remedial practical measures necessary should be instituted.
!%#
;ocumentation should be continually improved to specify the circumstances of a claim and the reasons for a claim. 9omprehensive claims reports permit a realistic analysis of causes and thereby produce a possible pattern of circumstances.
!&# !'#
Guality control of product, transport service and packaging should be improved. !>ee also item !'#.# :ackaging should be analysed for its ade-uacy, both for handling and stowage and for compatibility with atmospheric conditions, including weather exposure.
!(#
:ilferage 6 aim to improve security and properly evaluate alternatives for routing, packaging, cargo packing, marking identity, etc.
!+#
Breakage 6 aim to improve packaging and better handling and stowage techni-ues and*or transport mode, i.e. breakbulk to containers.
!,#
3n evaluation of the cost of alternative means and*or remedies should be made and their likelihood of success assessed.
!.#
>taff training should be provided, especially on the handling and stowage of cargo and on measures to lessen such cargo claims$ this to include cargo claims report forms and their comprehensiveness and prompt submission.
!/#
3 code of procedure should be devised to report damaged or missing cargo, thereby ensuring that prompt action can be
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -. "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com
!"4# taken to lessen the prospect of further claims and to institute earlier en-uiries in order to produce -uick remedial measures. !""# 3de-uate preventative claims staff resources should be provided to lessen such risk. !"%# 3ll available modern technology should be used to lessen$ such claims. !"&# :roduce a brochure on claims prevention and packaging, stowage and handling techni-ues. !"'# Initiate early discussions with the carrier!s# and other interested parties to devise remedial measures to resolve the difficulties and claims encountered. It is most important that claims be kept to a minimum and thereby ensures cargo insurance premiums remain competitive and, at the same time, that the buyer is well-satisfied, with goods received in a -uality condition. The need to deal with claims promptly and ade-uately cannot be overstressed.
Prepared and compiles by Prof (Dr) R K Wadhwa, Director, Global Business Consultant former Director, !B", G#$ %ni&ersity, -< "athura former Professor, !ndian !nstitute of 'orei(n )rade, *ew Delhi +,port !mport Consultant, -./0 1ector -2, Gur(aon3/-4/., 5aryana, !ndia, +3mail6 r7wadhwa8(mail9com

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Marine Insurance

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MARINE CARGO INSURANCE AND CLAIMS

incur liability in respect thereof.

3ccordingly, he may limit

his liability in respect of such a claim by insuring part of it with other

the ship-owner diverts the ship to another port.

INS!I!U!E CARGO CLAUSES

The above policies may be sub5ect to Insurance :remium Tax.

Bsually submitted in monthly batches.

Institute Cargo Clauses $A%

!"# !%# !&#

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!"4# It shows the method of carriage of the goods, the point of

CLAIM ,ROCEDURE -OR &UL. S/I,MEN!

$(ent Club correspondent

DE0ELO,MEN! O- CARGO CLAIM

Deli&ery to port Bill of ladin( >wners P?! 1hip

Contact of sale $(ent

emerge at the factory warehouse of the buyer rather than at the

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