1
Marine Cargo Insurance
April 25, 2008
Svante O. Johansson
2
The commercial wheel
Contract relations
Seller Buyer Sender Carrier Shipper Sub-carrier Receiver Policy Seller’sbank 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
5Simultaneously 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
6The influence from London
• The English clauses are known all over
the world
– Used in export trade
• Norwegian plan not that commonly used
7
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)
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
• Under revision
9
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
10
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
12
Swedish legislation
• Sweden
– Insurance Contract Act 2006 – Swedish Marine Insurance Plan 2006 – Cargo conditions 2006
13
Danish legislation
• Denmark
– Insurance Contract Act 1930 (2006) – Danish Marine Convention 1934
• The first one already 1850 – Danish conditions 1989
• Restricted • Extended - All risks
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 • 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
16
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 dischargeU 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
18
Exclusions
• Four categories
– General exclusion
– Unseaworthiness and unfitness – War
– Strikes
• This counts for English clauses
19
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 refrigeration3.11 §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
21
War and strikes exclusions
• War cover
– Inside or outside normal cover? – 1898 left outside if not agreed
• Strike cover
22
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
23
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?
25
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.
26
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
