Marine Cargo Insurance

Full text

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Marine Cargo Insurance

April 25, 2008

Svante O. Johansson

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The commercial wheel

Contract relations

Seller Buyer Sender Carrier Shipper Sub-carrier Receiver Policy Seller’s

bank Buyer’sbank

B/L Cargo Insurer Money Goods 3

Risk assessement in Cargo

Insurance

• 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 must

A1 Goods in conformity A2 Licences and formalities A3 Contract of carriage and

Insurance A4 Delivery A5 Transfer of Risk A6 Division of costs A7 Notice to the buyer A8 Proof of delivery and

other documents A9 Checking, packing and

marking A10 Other obligations

The Buyer must

B1 Pay the price B2 Licences and formalities B3 Contract of carriage and

Insurance B4 Take delivery B5 Transfer of Risk B6 Division of costs B7 Notice to the seller B8 Proof of delivery and

other documents B9 Inspection of goods B10 Other obligations

INCOTERMS 2000

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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

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The influence from London

• The English clauses are known all over

the world

– Used in export trade

• Norwegian plan not that commonly used

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The 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)

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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

• Under revision

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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 – Losses covered

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Finnish legislation

• Finland

– Insurance Act 1994

– General contract for cargo insurance 2003 – General Cargo conditions 2003

• Basic cover • Extended cover • All risks 11

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

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Swedish legislation

• Sweden

– Insurance Contract Act 2006 – Swedish Marine Insurance Plan 2006 – Cargo conditions 2006

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Danish legislation

• Denmark

– Insurance Contract Act 1930 (2006) – Danish Marine Convention 1934

• The first one already 1850 – Danish conditions 1989

• Restricted • Extended - All risks

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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

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The structure of the clauses

• Perils covered • Exclusions • Duration • 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

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All risks

• Not at all All risks

• Something must have happened • Exclusions 17

Named perils

-B -B B -B B DK U B U3 B Total loss of package whilst laoding or discharge

U B U B Entry of (sea) water into container

-B U C/B Jettisson /washing overboard

G Loss G C GA-costs, salvage U C2 G1 B Earthquake, volcanic eruption or lightning

G B U C Discharge of cargo at a port of distress

G C G C Collision or contact with external

U C -C Overturning or derailment of land conveyance

G C G C Stranding and grounding, sunk or capsized

G C G C Fire and explosion

S N SF UK Risks Covered / Conditions

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Exclusions

• Four categories

– General exclusion

– Unseaworthiness and unfitness – War

– Strikes

• This counts for English clauses

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Excluded perils (apart from war

and strike)

4.5 4.6 4.5 -4.4 -4.7 4.7 5.1 4.3 4.2 4.1/7 UK 3.2 §6.1 3.2.5 K§63 Indirect losses 3.4-5 §18.5 3.2.4 4.6 Delay 3.3 -3.2.6 4.7 Carrier’s insolvency 3.12 §34 3.2.1 -Non maintenance of refrigeration

3.11 §18.1 3.2.1 4.2 Inherent vice 2.5 §6.2 3.1.9 -Liability for damages

2.4 §18.10 3.18 4.9 Radioactivity 2.3 §18.10 3.1.8 4.9 Weapon of war duclear fission

13.1.2 §22 3.1.4 4.5-8 Unseaworthiness or unfitness 13.1.1 §23 3.1.3 4.4 Insufficiency or unsutability of packing

2.2 §18.2 3.1.2 4.3 Ordinary leakage, loss or wear and tear

2.1/ 7.2 §4-9 FAL 3.1.1 4.1 Wilful missconduct of the Assured/Third

party damages S N SF DK Exclusion / Condition 20

The link from risk to damage

• Causal connection

– Damage caused by risk covered during period of insurance

• Two or more risk 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

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War and strikes exclusions

• War cover

– Inside or outside normal cover? – 1898 left outside if not agreed

• Strike cover

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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

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The risk attaches

Place of storage Warehouse

Transport conveyance

Swedish and Norwegian

Finnish

Danish and

English 24

Risk passes and

warehouse-to-warehouse cover

• Circumstances

– Buyers insurance

– Ex works or fob terms

– Delay

– Risk passes when?

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Risk cover: seller and buyer

insurance

Agreed delivery time The goods is ready

Risk passes Buyer’s late Time axis Actual delivery Cover attaches No Cover § 14 first para. But second para.

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When the risk terminates after

the sea leg

Custom Warehouse Port of Discharge Transport to Disposal or Distribution Final warehouse Warehouse at request 60 days

Figure

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References

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