CARGO MARINE INSURANCE LECTURER: MR ZARIR YUSOFF

CARGO MARINE INSURANCE LECTURER: MR ZARIR YUSOFF

Cargo 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.

PARTIES INVOLVED 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

THE CARRIER A common Carrier serves the general public These are the main shipping companies • They own the ships and thus the Marine Insurance for their vessels • Examples include Hapag-Lloyd and one of the oldest Maersk

THE CHARTER A 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 CONSIGNEE • In 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 CONSIGNOR Is the person sending a shipment to be delivered. Some carriers, use the term "sender" or "shipper” however the legal term is "consignor”

BILL OF LADING • 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

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

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

Losses Covered by Marine Insurance Natural Calamities Perils of the Sea Fortuitous Accidents Perils General ～ Extraneous risks and losses Special ～

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. Sue and labor expenses Expenses Salvage charges

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) • 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 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

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

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

THE 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

THE 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

THANK YOU

CARGO MARINE INSURANCE LECTURER: MR ZARIR YUSOFF