Marine insurance is the oldest form of insurance and plays a very important role both in internal and international market. It is closely connected with important commercial institutions like banking and shipping. Marine insurance can be traced to London market which is the actual place of origin of Marine Insurance. The policies were simplified and streamlined in the London market and all the marine policies not only in India but anywhere in the world have been adopted from London market.
Lloyds for Marine Insurance: The origins of insurance business as practiced today, is traced to the Lloyd’s Coffee House in London during 1779. Traders, who used to gather there, would agree to share the losses to their goods being carried by ships, due to perils of the sea. Such losses used to occur because of maritime perils, such as pirates who robbed on the high seas or bad sea weather spoiling the goods or sinking of the ship due to perils of the sea.
Abstract of the salient features of marine insurance:
1. Marine Insurance is the oldest form of insurance that was found in practice in the world.
2. Cargo policies are freely assignable.
3. In Marine Insurance insurable interest must exist at the time of loss.
4. INCOTERMS – It indicates rights and obligation of buyers and sellers, to ascertain from which point the marine insurance will be required and to provide suitable cover for the requirements of the clients.
5. Sum Insured under the policy – The S.I. of the policy shall not be more than CIF + 10% unless specifically declared and mentioned in the policy.
6. Recovery – against carriers, bailees and other third parties is mandatory.
7. Agreed Value Policy -Marine policy is an Agreed Value policy.
8. Marine Insurance Act, 1963 – The insurance business of Marine Cargo & Hull is governed by this Act. The Act deals with basic principles, basis of valuation under the policies, basis of settlement of losses etc.
9. Sec 19 of MIC Act states that “A contract of Marine insurance is a contract based upon the Utmost Good
Faith, and if the utmost good faith be not observed by the either party, the contract may be avoided by the other party.
10. Sec 3 of MI Act states that “A contract of Marine Insurance is an agreement whereby the Insurer undertakes to indemnify the Assured, if the manner and to the extent thereby agreed against Marine Losses, i.e. to say, the losses incidental to Marine Adventure.
11. Sec 79 of MI Act states that whether the loss is total or partial, the Insurer are subrogated to all rights and remedies of the Insured.
12. The terms and conditions of the Marine Cargo Policy shall be as per Institute Cargo Clauses and Inland Transit Clauses
13. Marine policy is an evidence of contract.
14. As per section 24 of Marine Insurance Act, a contract of marine insurance is inadmissible in evidence unless it is embodied in a policy.
15. Survey fees and stamp duty shall be paid by the insured.
16. All policies/certificate of insurance should be claused and duly stamped as per Indian Stamp Act, 1899.
17. Sec-7 of Marine Insurance Act – It relates to Insurable interest.
18. If the recovery rights of the insurance company is not protected the claim will be settled on Non-standard basis.
19. Marine business was detariffed in 1994.
The UK Marine Insurance Act 1906 – The basics of Global Marine Insurance Underwriting.
Some of the following IMPORTANT Acts to be read in details while opting for Marine Insurance for exam:
- The Carriers Act, 1865
- Carriage by Road Act,2007
- The Carriage by Air Act, 1972
- The Multimodal Transportation of Goods Act, 1993
- The Inland Vessels (Amendment) Act, 2007
- Indian Stamp Act, 1899
- The Foreign Exchange Management Act, 1999
- Sale of Goods Act, 1930
- The Public Liability Insurance Act, 1991
- The Railways Act, 1989
- The Carriage of Goods by Sea Act, 1925
- The Merchant Shipping Act, 1958
- The Bill of Lading Act, 1855
- The Indian Ports (Major Ports) Act, 1963
- The Indian Railways Act, 1890
- The Carriers Act, 1898
- The Carriage by Air Act, 1972
Salient feature of principle of proximate cause
1. The common law principle of Proximate Cause is codified under Sec 55(1) of MI Act , 1963.
2. The contract of insurance embodied in the policy promises to indemnity the insured against any loss which bears clear and direct relationship with the insured peril.
3. The loss should not be the result of an expected peril.
4. The onus of proving the loss due to the peril insured against lies primarily on the insured.
5. The insurers to prove that the loss was approximately caused by an excepted peril.
6. The insurers cannot afford to indemnity those losses which are the effect of any remote cause which is specifically not covered under the policy.
7. The phenomenon of determination of cause of loss gives rise to the Doctrine of proximate Cause which, inter-alia, provides that immediate and not the remote cause is to be regarded.
8. The insurers can decide about the liability if it is known that the loss is caused by an insured peril or an uninsured peril or an excluded peril.
9. The rule says that once the cause is identified, it is not necessary to go further.
10. Under marine All Risk Policy, the insured has simply to prove that the damage has occurred during the currency of the policy and burden of proof shifts to the insurer if the contends that the proximate cause of loss is in fact an excluded or excepted peril.
Specific details of Marine Policy for exam preparation:
Marine Insurance is distinct from other classes of insurance in the following aspects:
1) Insurable Interest: Unlike other classes of insurance in Marine Cargo insurance, the insurable interest need not be there at the time of taking insurance policy but claimant is required to establish insurable interest in the goods at the time of loss.
2) Commercial Indemnity: The principal of insurable interest is modified in marine cargo and the value of the goods is fixed at the time of granting insurance. The value so fixed or so agreed is the basis of settlement of claim.
3) Assignment of policy: Unlike other policies Marine Cargo Policy is freely assignable i.e insured is free to assign the policy without consent of underwriters.
4) Recover of Stamp Duty: In Marine Cargo Policies the stamp duty is recovered from the insured along with premiums.
5) Coverage of War Risks: Any loss or damage to goods by war risks is not covered in Marine insurance just like
other insurance the risk of war can be covered on payment of additional premium.
6) Applicability of various Acts: Marine insurance is complex as compared to other classes of insurance because it is governed by various Acts, Rules, Regulations throughout the world.
7) Survey fee payment: In marine cargo insurance, the survey fee is first paid by insured/ claimant and this amount is reimbursed along with claim amount if the claim is found to be admissible/ payable.
8) Proposal Form: In general it is not required but it is mandatory for custom duty insurance, special declaration policy etc.
9) De-tariff: in Marine Cargo insurance, there is no tariff and underwriters can grant coverage after assessment of the risk, since 1994.
10) One policy form: In Marine Cargo there is only one policy form and any type of policy can be issued by attaching relevant clauses.
11) Marine Hull Policy is of 2 types:
a) Voyage Policy: It is issued for a specific voyage/transit and in known as specific policy/ voyage policy.
b) Time Policy: This is issued for a particular time e.g. open policy, special declaration policy.
Details of types of Marine Cargo Policy:
These are typically seven in number as given below:
1) Specific Policy;
2) Open Policy/ open cover;
3) Special declaration Policy;
4) Annual Policy;
5) Custom Duty insurance policy;
6) Increased value policy;
7) Special storage risk insurance policy.
1. Specific Policy
Marine policies are basically transit policies. A marine policy covers the physical loss/ damage to goods during transit. A specific policy covers the specific transit e.g. goods in transit from Delhi to Mumbai – this is one transit and a policy covering transit risks from Delhi to Mumbai will be a specific policy. Once the goods arrive at destination, the policy ceases and the insured has no further rights under this policy.
Open Policy / Open Cover
Open Policy
The Marine Insurance Act refers to such policies as floating policies. When a regular trader is sending the goods from one place to other places within India, the turnover is quite high, the dispatches are frequent in such cases it is quite cumbersome to the trader to approach the insurer every time for taking specific policies. Salient features of open policy are as under:
1) Open policies are issued for a maximum period of one year.
2) Open policies are issued only for inland transit.
3) It is a stamped document.
4) Sum insured is fixed but can be increased during the currency of the policy.
5) The insured furnish the declarations, which are accounted for by the insurer.
6) Policy will expire after 12 months of insurance on an exhausting of sum insured whichever shall occur first.
7) It is a legal document, which can be enforced in the court of law.
8) If the policy has run 12 months and an unutilized sum insured is available, the balance prorate premium is refunded.
9) This policy offers automatic and continuous insurance protection.
10) There is a considerable saving of stamp duty because stamp duty of Re1 is affixed in the policy, which is valid for 12 months.
Open Cover
This is also a document of insurance issued in care of export/ import where a trader is regularly exporting/importing goods. Like open policy, here also insured need not approach the insurer every time for each dispatch separately.
The salient features of open cover are as under:
1. It is issued for export / import only.
2. It is not a stamped document.
3. It is not a legal document.
4. Specific policies/ certificates of insurance are issued for each dispatch.
5. An open cover describes the cargo, the voyage and cover in general terms.
6. Like open policies it also offers automatic and continuous protection.
Important Clauses of Open Policy/ Open Cover:
1) Limit per bottom or per conveyance: It indicates the value of one shipment (single shipment) e.g. value of goods at any place/ time which may become liability of the insurer in the event of loss.
e.g. S.I. = 10 Crores
Limit per bottom = 10 Lacs
Insured is not expected to exceed the limit per bottom, unless agreed to specifically by the insurer.
2) Basis of Valuation: Basis of valuation is indicated to ascertain the components of sum insured. Normally the value of the cargo includes prime cost of goods + freight + other charges incidental to shipment + cost of insurance plus 10-15% to cover profits. Profit can be upto 25% depending upon case to case.
3) Location Clause: The limit per bottom restricts the exposure of insurers to goods in transit. But sometimes the goods in transit may accumulate at a particular point e.g. goods being sent by sea may accumulate at port of shipment awaiting vessel to arrive. In order to restrict the liability, the insurers incorporate location clauses – which specifically limit the liability of the insurers at a particular location in the event of any loss. In common practice the limit per bottom and limit per location are the same but there can be variation too.
4) Premium Rate: The details of premium rate chargeable under Open Policy /Open Cover are to be known specifically, by the examinees.
5) Terms of Insurance: In order to ascertain the value of goods dispatched and utilization of sum insured, the insured is bound to submit details of dispatches in the prescribed format to the insurance company. These declarations may be sent weekly / fortnightly/monthly/ quarterly/ half yearly.
6) Cancellation Clause: Since open policy is issued for a year, it provides for premature cancellation by either side by giving one-month notice.
3. Special Declaration Policy
1) This is a special type of Floating policy.
2) Issued to clients with a turnover more than 2 Crores.
3) Issued for Inland transit only.
4) Cannot be issued in joint names.
5) Policy cannot be assigned.
6) Proposal form is required.
7) Policy is issued on the basis of turnover of the previous year.
8) Slab wise turnover discount is given.
9) Maximum slab wise T.O discount cannot exceed 50%
10) Sum insured can be increased twice during the currency of policy.
11) Periodical declarations are submitted by the insured.
12) Insurance claim ratio is to be within 60%
13) If incurred claim ratio is more than 60% premium is loaded to bring down the claim ratio to 60%
14) For new risks, where previous year T.O is not known, SDP can be issued but discount will be granted at the time of completion of one year provided T.O is not less than 2 Crores.
4.Annual Policy
1) This policy is issued for transit within India.
2) Policy is issued for transit by rail/road from specified depots/ processing units to other specified depots/processing units.
3) Cover is provided in terms of Inland Transit (Rail/Road) clause.
4) Premium rates are charged on the basis of value of risk at any point of time and distance between 2 points of transit.
5) Proposal form is mandatory for this type of insurance.
5. Custom Duty Insurance:
1) This policy is issued in respect of imported goods, which are subject to custom duty.
2) Custom duty policy is a policy of true indemnity and it is not agreed value policy. Claims are paid on the basis of actual custom duty or sum insured whichever is less.
3) Custom duty policy is issued for the benefit of importer only and cannot be assigned.
4) The premium chargeable for custom duty policy is 75% of the normal transit policy.
5) The custom duty policy can be issued only if there is policy on CIF value of the cargo.
6) Custom duty policy is not issued after arrival of ship/aircraft.
7) The claim under Custom duty policy is admissible only if claim under CIF value is payable.
8) All vessel extras as applicable to CIF value policy are also chargeable for custom duty policy.
9) Scope and duration of CIF value policy and custom duty policy are identical.
6. Increased Value Policies:
1) This policy is also issued in case of imported cargo.
2) Sometimes after arrival of cargo it is observed that market value of cargo is more than CIF value + landing charges + Handling charges + Custom duty.
3) The difference in market value and total landed cost
cargo can be covered under increased value policy.
4) Again this policy cannot be granted after arrival of vessel/ aircraft in India.
5) The policy is a true indemnity policy and claim is settled on the basis of market value of the cargo on the day of arrival of the cargo at destination.
6) The maximum liability is limited to 75% of sum insured under this policy.
7. Special Storage Risk Insurance Policies:
1) As stated under cover under Marine policies is valid for a specified no. of days at destination after arrival of vessel, unloading cargo from the aircraft.
2) In case of any delay in clearance of cargo, delay in commencement of inland transit, the insured can opt for insurance cover under SSRI Policy.
Marine sale contracts that an examinee must know:
Normally in any insurance such as Fire & Miscellaneous the insurance policy is taken by the owner of goods because only owner possesses insurable interest in the goods. The position is however different in Marine cargo because the goods are in transit and ownership of goods keeps on changing when the goods are still in transit. In view of this peculiarity who will take the policy i.e. seller or buyer and from which stage to which stage – will be determined by nature of sale contract between seller and buyer.
There are different types of sale contract recognized
universally all over the world and the contracts mean the same thing in any part of the world and there sale contracts have been defined and explained by International Chamber of Commerce, Paris.
A brief analysis and interpretation of some of the important contracts in relation to insurance arrangements is mentioned below:
1) FOB (Free on Board): The seller is responsible for placing
the goods on board the vessel. He is required to pay all expenses till goods cross the ship’s rail and invoice will indicate the price of goods as “FOB Price”. Seller is also responsible for arranging insurance of goods from his warehouse till FOB point. Once the goods cross the ships rail/ loaded on to the vessel subsequent responsibility will be of buyer and who has to arrange insurance from FOB point till his (buyer’s) warehouse.
2) FAS (Free alongside): Here seller’s responsibility is to bring goods at the store by the side of the ship. It is the responsibility of the buyer to fix the vessel. The seller’s responsibility ceases once the goods arrive safely alongside the ship. The buyer is also \responsible for loading of the goods on to the vessel at his risk and responsibility. In this case insurance by seller can be arranged from his Ware house till FAS point and buyer can arrange insurance from FAS point till his (buyer’s) warehouse.
3) CIF contracts: Here seller is expected to arrange everything and his duty is to deliver goods safely in buyer’s warehouse. Seller has to take insurance policy from his warehouse till warehouse of the buyer. Buyer need not take any insurance policy.
4) CI contracts: (Cost and Insurance): Seller is required to do everything as is the case in CIF contract except that Freight is payable by buyer at destination. The shipping company is expected to collect freight from the buyer before cargo is delivered to the buyer at destination.
5) C & F contracts: Here freight is paid by seller but insurance beyond FOB point is arranged by buyer in his account. The nature and duties of seller and buyer in FOB and C&F contract are same. The term FOB is used for consignments going by sea whereas the term C&F is used for consignments going by Air.
Details of Marine Policy Form:
Earlier SG Form (Ship & Goods) policy was in voyage in U.K
Markets. The London market finally simplified and streamlined the wordings of the policy and clauses. The revised policy and clauses were adopted w.e.f. 1.1.1982. The Indian market introduced this new policy form with revised clauses w.e.f. 1.4.1983. In a marine cargo department only one policy form is used and any type of policy can be issued attaching relevant clauses. That means form remains the same and for any policy relevant clauses are attached.
Contents of Marine Cargo Policy Form:
1. Assured: He can be seller or buyer depending upon nature of sale contract.
2. Sum Insured: Amount to be mentioned in Indian currency and also in foreign currency for export policies.
3. Premium: Rate and Amount to be mentioned.
4. Stamp Duty: Stamp duty is charged as per Indian Stamp Act. Stamps of requisite value are affixed on the policy.
5. Vessel Name: Which is used & intimated as to ship the cargo.
6. Voyage / Journey: Place of commencement of transit and place of termination of transit.
7. Affreightment Particulars:
a) (B/L) Bill of Landing No – Sea borne consignment;
b) (AWB) Airway Bill No – Air borne consignment;
c) RR railway Receipt No – Rail borne consignment;
d) GR/LR Lorry/ Goods receipt No – Truck borne consignment;
e) RPP (Registered Post parcel receipt) by Post of other consignment.
8) Subject Matter: Insured goods details.
9) Type of cover: Whether all risk cover Road Risk cover etc.
10) Clauses to be attached: Depending upon nature of cover.
11) Place of issue of policy.
12) Date and signature.
Particulars of Marine underwriting documents
Various types of documents are used in Marine Underwriting department and that are:-
1) Questionnaire
2) Proposal Form
3) Cover note
4) Policy form
5) Marine clauses
6) Endorsements
7) Certificate of Insurance
1) QUESTIONAIRE: There is an exception that unlike other insurances, proposal form in general is not required in Marine cargo insurance. Instead the proposer fills up a questionnaire and insurance is granted on the basis of information furnished in the questionnaire. In Marine cargo, policy can be issued on the basis of information provided on telephone/ fax/e-mail etc.
2) PROPOSAL FORM: It is mandatory to obtain proposal form in special declaration policy; custom duty insurance, increased value insurance, Annual policies and special storage risk insurance policies.
3) COVER NOTE: This document is used in all claims of insurances. A Marine policy can be insured only when all the relevant information is furnished to the insurers. At times the insurers assume risk pending nonavailability of some information. For example the insured is unable to provide lorry receipt no and date or Bill of loading no. and date. In such cases after acceptance of risk, premium is collected and a temporary document of insurance is insured. Such a document is called cover note, which is valid for 15 or 30 days. After the insured furnish the relevant information, a duly stamped policy is issued.
4) POLICY FORM: As stated earlier in Marine cargo department only one type of policy form is issued and any type of policy can be prepared by attaching relevant clauses. The column in Marine cargo policy is to be stamped as per provisions of Indian Stamp Act and to be signed as specified in Marine Insurance Act 1963.
5) MARINE CLAUSES: Depending upon the type of policy and coverage of risks desired by the insured, relevant clauses are attached to the policy before it is issued to the insured. The clauses will specify the scope of insurance, exclusions under the policy and important slip attached with the policy mention the steps to be taken by the insured/ claimant in the event of loss/damage.
6) ENDORSEMENTS: Sometimes after insurance of Marine policy, some amendments are required to be done in a policy. Such amendments after insurance of policy are done by issuing an endorsement e.g. insured had declared that goods are packed in wooden boxes but subsequently it is found that goods would be dispatched in cardboard cartons. The insured in such cases approach insurance company for insurance of endorsement to change the mode of packing in the policy.
7) CERTIFICATE OF INSURANCE: This document is primarily issued in care of export/ import policies where the insurers have issued ‘OPEN COVER’. It gives information about the goods shipped/ sent. This certificate of insurance is also stamped as per provisions of the Indian Stamp Act. Sometimes Certificate of Insurance (COI) is issued under open policy also but in such cases the COI need not be stamped because the open policy is a stamped document.
Marine Cargo Rating & Underwriting Considerations
In any Insurance Department, the underwriting department is most important portfolio. This is because it is the underwriting department, which decides as to whether:
i) to accept / or reject the risk
ii) if accepted what premium to be charged
iii) what conditions / warrantees to be put.
Prior to 1/4/1994 there was All India Marine Cargo Tariff, which provided for basic rates for inland transit and major commodities export/ import rates. This Tariff was however withdrawn w.e.f. 01/04/1994 and now insurers are free to charge any premium rate for any policy in Marine Cargo Department in view of unhealthy competition GIC came forward with certain guide rates in 1994 to be followed by all Public Sector Companies. There guide rates can now be reduced/ loaded depending upon the risk involved. In a detariffed regime the role of underwriter is very important. In Marine Cargo department the following factors are taken into account to assess the risk:-
1) SUBJECT MATTER: Risk varies depending upon subject matter (insured cargo). Different types of goods are susceptible to different types of damage/ losses e.g. sugar, glass sheets, leather goods, liquid cargo, are subjected to different types of losses.
2) PACKING: Goods may be fragile but if packed properly, the risk is considerably reduced. If Rice cargo is packed in gunny bags risks of water damage is more than what when it is packed in HDPE bags. Wooden packing is better than cardboard carton packing. New drums are better risk than second hand drums.
3) VOYAGE: The destination of voyage is very important. There are many restrictions for insurance of export of cargo to Russia & CIS countries became of frequent losses. If voyage is not direct and involve transhipment – the risk increases. For transits within India dispatches to North Eastern states is considered as bad risk.
4) MODE OF TRANSIT: Air is better than Sea. Transit by Rail within India is better risk than transit by Road within India.
5) TERMS OF INSURANCE: Wider the insurance cover more will be the premium. If cover is for IT (C) alone, only bare minimum premium is charged. When insured agrees for imposition of excess in a policy – a rebate in premium is given.
6) VESSEL: When goods are sent by sea then name of the vessel is very important. Depending upon vessel involved in transit of goods, extra premium may be required to be charged in following cases:-
a) Overage extra: When the vessel is more than 15yrs of age, an extra premium called overage extra is charged.
b) Under tonnage extra: Small vessels are considered as bad risks for which under tonnage extra is charged.
c) Non-approval: When the vessel is not approved by the company, an extra premium @1% extra is charged.
d) Non- classification extra: There is a system of classification of vessels by classification Societies. If the vessel by which cargo is being supplied is classified by any of these societies, then it is considered as good risk. If the vessel is not classified by the societies then it is considered as bad risk and non classification extra premium is charged @ 0.10% on sum insured.
Some of the classification societies are as under:
1) Bureau Veritas
2) American Bureau of shipping
3) Norske Veritas
4) Lloyds Register
5) Register Italiano.
Important Marine Clauses:
As stated earlier in Marine Insurance there is only one policy form and any type of policy can be issued by attaching relevant clauses. There are different clauses for Marine cargo and Marine Hull business. Some of the important clauses used in Marine cargo business are as under:
1) Institute cargo clause ‘C’
2) Institute cargo clause ‘B’
3) Institute cargo clause ‘A’
4) Institute cargo clause (Air)
5) Duty insurance clause
6) Increased value Insurance clause
7) Inland Transit (Rail or Road) clause C
8) Inland Transit (Rail or Road) clause B
9) Inland Transit (Rail or Road) clause A
10) Institute war clause (cargo)
11) Institute strike clause (cargo)
12) Institute theft, Pilferage & Non-deliver clause
13) Institute war clause (Air)
14) Institute strike clause (Air)
15) Strike, Riots & Civil commotion clause
16) Institute classification.
Transit (Rail /Road) Clause – C
Inland Transit (Rail / Road) clause C
This clause is used when goods are in transit within India and it provides the minimum cover and the risks of physical loss / damage caused by:-
a) Fire
b) Lightning is covered under the policy
Duration: Insurance attaches with the loading of each bale / package into the wagon / truck for commencement of transit and continues during ordinary course of transit, including customary transshipments and ceases immediately on unloading of each bale/ package
a) at destination railway station for rail transit
b) at destination in the policy in respect of road transits
Since this policy offers minimum cover, lowest premium is charged for issuing this policy. However if the insured desire to have wider cover – i.e. to cover risks more than Fire lightning, then he can opt for Inland Transit (Rail/ Road) – clause B.
Inland Transit (Rail / Road) clause B
This policy covers the risks of physical loss / damage to insured goods caused by:-
a) Fire
b) Lightning
c) Breakage of Bridges
d) Collision with or by carrying vehicles
e) Overturning of carrying vehicles
f) Derailment or accidents of like nature to the carrying railway wagon / vehicle.
A comparison of IT(C) & IT (B) would reveal that the IT (B) clause covers more risks as compared to IT (C). Therefore more premium is charged to issue IT (B) policy than IT(C) policy.
In addition to the above risks the IT (B) claim can be extended to cover the risks of
a) Theft
b) Pilferage
c) Non-delivery
d) Strikes, riots, civil commotion (SRCC) etc and additional premium is charged for covering these risks.
Inland Transit (Rail /Road) ‘A’
An insured may like to cover his goods for the maximum risks (i.e. widest cover) so as to have full protection. In such cases IT (A) policy is insured which cover every type of risks but there are some exclusions i.e. IT (A) although covers every type of risk but there are some exclusions which can be relied upon by the insurers to deny the liability. There exclusions are known as General exclusions.
Duration of Policy:
The duration of the risk under IT (C) has already been explained. The duration under IT (B) & IT (A) is same and under both these clauses the risk attach from the time the goods leave the warehouse / or the place of storage mentioned in the policy, for the commencement of transit and continues during the ordinary course of transit including customary transshipment if any,
1) Until delivery of the goods to the final warehouse at the destination named in the policy or
2) In respect of transit by rail only or rail & road, until expiry of 7 days after arrival of railway wagon at the final destination railway station or
3) In respect of transit by road only, until expiry of 7 days after arrival of the vehicle at the destination town named in the policy whichever shall occur first.
Registered Postal Sending:
Sometimes goods are sent through Post office from one place to other place through registered parcels. In such cases risks can be covered by attaching Registered Post Parcel clause. The risk is covered from the time of insurance of RPP receipt by the concerned post office and the risk terminates on deliver of the parcel to the addressee.
Institute Cargo Clause – C
In case of export / import of goods by sea, Institute cargo clause are issued. Institute cargo clause C offers the minimum cover for export import of goods by sea.
This clause covers the following risks:
1) Fire or explosion
2) Vessel / craft being stranded / grounded / sink or capsized.
3) Overturning / derailment of the land conveyance
4) Collision or contact of vessel craft / conveyance with any external object other than water
5) Discharge of cargo at the post of distress
6) General average sacrifice
7) Jettison.
It may be noted that just like IT (C) clause, ICC – (C) clause covers the minimum risk but IT (C) clause is used for inland transit only whereas ICC (C) is used for export / import policies.
Institute Cargo Clause (B)
ICC-B cover is wider than ICC-C, i.e. ICC-B covers more risks than ICC-C. In other words ICC-B covers the risks mentioned in ICC-C plus the following:
Physical loss / damage caused by:
a) Earthquake, volcanic eruption or lighting
b) Washing overboard
c) Entry of sea, lake or river water into vessel, craft or hold, conveyance, container, lift van or place of storage
d) Total loss of any package lost overboard or dropped whilst loading onto or unloading from vessel or craft.
In addition to this there are some extraneous risks which can be covered under ICC-B on payment of additional premium e.g. risks of
i) Theft, pilferage, non-delivery
ii) Fresh water & rainwater damage
iii) Breakage
iv) Leakage
v) Hook and oil damage etc.
Institute Cargo Clause -A
Just like other ICC clauses, this clause is also used only for export / import of goods via sea. This clause offers the widest cover like IT (A). All types of damages are covered except general exclusions.
Out of the 7 exclusions mentioned under General Exclusions, only one exclusion i.e. 46 which deals with the insolvency / Financial default, can be deleted on payment of additional premium.
Duration of cover: Unlike difference between IT(C) and IT (B) or IT (A), the duration of risks under ICC A, B, C is same. The duration clause describes the time of commencement of risk and time of expiry (termination) of risk under the marine policy. The clause is also known as warehouse to warehouse clause and its meaning would be evident from following wording:
‘The cover commences from the time the goods leave the warehouse at the place named in the policy, continues during the ordinary course of transit and terminates either / or the following:-
a) On delivery to the consignees or other final warehouse
at the destination mentioned in the policy.
b) On deliver to any intermediate warehouse used by the insured for the purpose of storage or distribution or
c) On the expiry of 60 days after discharge from the vessel at the final port of discharge whichever shall occur first.
In other words the cover is valid for maximum period of 60 das and inland transit if any should be completed within this time limit. The time limit of 60 days can be extended on payment of additional premium provided request for extension is received before expiry of 60 days.
Institute Cargo Clause (Air)
Whenever goods are in transit by Air, either within India or export/ import of goods from India to anywhere in world or vice versa, then policies are subjected to Institute cargo clause -Air. This is an all risk cover like ICC-A and with similar exclusions.
The cover under ICC- (Air) is similar to ICC (A) and duration cover is also similar but with some changes.
The cover is warehouse to warehouse as in ICC (A) but the period of cover after unloading of cargo from the aircraft at the final place of discharge is limited to 30 days. In case of export / import of goods by Air, the war & SRCC risks can be granted on payment of additional premium.
Concept of General Average
The concept of General Average originated much before Marine Insurance. This system was based on the principal of equity. In simple terms here losses are incurred deliberately for the benefit of cargo owners, Ship owner and Freight earner, and losses are restored by contribution of all those whose interests are saved.
General average has following important ingredients:
1) It is either a sacrifice or an expenditure.
2) The entire adventure should be in danger.
3) The act must be extra ordinary in nature.
4) The loss/ expense incurred should be for the common safety of the vessel, cargo and freight.
5) The loss / expense are shared by all those whose interests are saved.
6) The GA is declared by Master/ Ship owner.
7) G.A adjusters are appointed by insurers to settle such claims.
8) The amount paid by the interests saved is called ‘contribution’.
9) G.A claims are payable provided ____ of loss is covered under the policy.
Charges in Addition of Claim:
In addition to payment of claim in respect of damage to cargo, there are certain charges / expenses which are paid over and above the claim.
There are following types of charges:
1) Loss Prevention & Minimization charges: The insured is expected to take all steps so as to prevent / minimize losses. In terms of Marine Insurance Act insurers agree to pay all reasonable expenses incurred by the insured to achieve this objective e.g.
A) Sue and Labour Charges: These charges are incurred after operation of marine peril and before arrival of the cargo at destination. Further there expenses must be incurred by insured, their agent / servant and for the benefit of insured’s goods only.
B) Particular Charges: These charges are incurred to avoid a loss and expenses should be for the benefit of insured’s property only and not for common adventure.
C) Salvage Charges: Sometimes the services of third party are utilized to save property during transit.
So, salvage charges are remuneration payable to third parties. These services are rendered on noncure-no-pa basis i.e. no recovery- no charges.
D) Extra Charges: The services of surveyors are utilized for survey and assessment of loss for Export claims the services of settling Agents or survey agents are utilized. Survey free is paid to insured over and above
E) The Marine claim: Sometimes damaged cargo is auctioned through the surveyors; in such case auction charges are also paid over and above the claim.
Marine Claims:
When cargo is in transit, it is exposed to various risks during Rail/ Road/ Sea/ Air transit. Due to operation of one or more perils there may be claim under a Marine Policy. The nature of various claims can be put under following:
1) Non- deliver
2) Short-delivery
3) Pilferage
4) Leakage
5) Damage
The liability under Marine Cargo Policy can be ascertained analyzing the cause of loss and correlating the same with the scope of cover under the relevant policy. Due to operation of any peril the consignment can be totally lost (e.g. non-delivery of entire consignment, consignment totally damaged b water etc. Sometimes the consignment is lost/ damaged but in a manner that the cost of its retrieval is more than the value of cargo. So any total loss can be either – actual total loss or constructive total loss. The consignment may be partially damaged – it is known as Particular average.
Marine Claim Documents / Types of Losses / Expenses under Marine Cargo Policy Losses:
When the goods are in transit; different types of losses may arise e.g. Non-deliver, Leakage, Breakage, Water damage, Pilferage, Theft etc. The Marine claims are, therefore, required to be supported by certain documents, depending upon nature of loss, type of carrier, stage at which loss took place.
There may be some documents which are required in all types of claims. Some of the important documents are enumerated below:
1) Original Policy/Original certificate of Insurance/
Original declaration – This is a document of title because Marine cargo policy is freely available.
2) Contract of Affreightment – This is a document in support of carriage of goods. It specifies the place of commencement of journey and place of termination of journey. The nature of this document depends upon mode of transit.
Sl. No. Mode of Document Transit
1) Railways Rail receipt (RR)
2) Road Goods Receipt (GR)
3) Sea Bill of Landing (B/L)
4) Air Airway bill (AWB)
5) Post Regd. Post Parcel Receipt (RPP)
3) Invoice: It specifies the name of the seller, buyer, description of goods, Unit value/ total value of goods, nature of sale contract (CIF, FOB, CIC &F etc).
4) Packing List: It gives details of packages dispatched under relevant B/L, AWB, RR, GR etc. their mark no., contents in a box / package.
5) Survey Report / Investigation Report: On this basis of this report insurer ascertain cause of loss, nature of loss, coverage under insurance policy, salvage value etc.
6) In case goods have been lost then investigation is carried out by an investigator who submits his investigation Report.
7) Discharge Voucher: This document is required in all claims. It is signed by insured in confirmation of having received the payment.
8) Claims Form: Not essential in Marine cargo claim but some insurers collect it.
9) Recover Documents: These documents are meant for affecting recovery from carriers where loss/ damage has taken place due to negligence/ misconduct of the carriers. There documents are as follows:
a) Letter of Subrogation – B this letter the rights of the claimant against carriers are transferred to insurer. The document is obtained on a stamp paper of requisite value and therefore it is a legal document.
b) Special Power of Attorney – This is also a legal document obtained on a stamp paper of requisite value. By virtue of this document insurer can file suit against the carrier for recovery of claim amount from the carrier.
c) Open delivery certificate – This is a document showing condition of the cargo at the time of deliver. It is signed by insured, representative of carrier.
d) Non-Delivery / Short-Delivery Certificate – Issued by the carriers in support of non-delivery/ shortdelivery / damage to cargo.
There are some other miscellaneous documents too, which are required for one or other type of claim which are:-
1) Letter of undertaking – Obtained from insured when there is a claim for non-delivery / partial delivery.
2) Bill of Entry – Obtained in case of import claim so as to ascertain payment of custom duty.
3) Lost overboard certificate (LOB) – Obtained in case of Sea transit when some packages are lost from the ship.
4) Landed but Missing (LBM) – Obtained in case of sea / Air transit when packages arrive at port of destination but subsequently misplaced or lost.
5) Landing remarks – Obtained in case of air / sea transit. Issued by port authorities to confirm the state of cargo at the time of arrival.
6) Exchange Control Form (GR-1) – Required in case of export claim org.
7) Letter of Protest – A sworn statement of master of vessel with regard to any adverse factors / conditions he faced during voyage. This document is only applicable in case of sea-transit.
Annexure – A
Sl. Mode of NOTICE OF CLAIM AGAINST TRANSPORTERS FILING OF THE SUITS
No. Transport DAMAGE NON-DELIVERY DAMAGE NON-DELIVERY
1 By Railway Within 60 days from Within 60 days from Within 3 years and Within 3 years and
the date of RR. the date of RR. three years will be three years will be
calculated from the calculated from the
date of unloading of date of goods ought to
goods. have reached the final
destination.
Before filing a suit against Railways a 60 days’ notice is mandatorily to be serve on General Manager, of that concerned
Railway Authority.
2 By Road Within 60 days from Within 60 days from Within 3 years and Within 3 years and
Carrier the date of RR. the date of goods three years will be
three years will be ought to have been
calculated from the calculated from the received.
date of unloading of date of goods ought to goods.h a v e
reached the final
8) Copy of claim lodged on carriers – This document
indicate the date on which claim notice was served on
carriers.
Marine Recovery Aspects:
You are already aware that Marine Cargo insurance deals with insurance of good whilst in transit. It implies that goods are entrusted to carriers by conveyer/ seller for safe deliver to the consignee or buyer. It is quite possible that goods are not delivered at all or a part of the consignment is not delivered or the goods are delivered in partially or totally damaged condition. It may be noted that carrier is a trustee or bailee of goods and legally he is responsible for safety of goods.
In case the goods are damaged or non-delivered than the owner of goods (consumer/consignee) is entitled to sue the carrier for his wrong doing. In such circumstances the insured is expected to file a claim notice/ suit as per law against the carrier. There are different statutory provisions depending upon the carriers, which define the liability, responsibilities, duties and immunities of the carrier e.g.
1) Carriers Act 1865 (Road Carriers)
2) Railway Act 1989 (Railways)
3) Carriage of goods by Sea Act 1971 (Ocean Carrier)
4) Carriage by Air Act.
In the event of damage to cargo / non-delivery of the cargo whilst in the custody of the carriers, the rights are subrogated to insurers at the time of claim settlement under letter of subrogation. The insurers thereafter pursue recover from the carriers.
There are three important things to keep in mind for Marine Cargo Recovery as given below:
1) Time limit for filing claim notice- This is the time limit within which the notice of damage / non-delivery is to be filed against carriers, e.g. time limit is six months in case the goods are sent by Rail/ Road. It is 7-21 days for airborne cargo depending upon domestic international shipment and nature of damage.
2) Time limit for filing suit- If the carrier does not make good the loss then insurer can file suit against the carrier within specified time limit e.g. 3 yrs in case of Rail / Road, 2yrs in case of Airborne cargo and 1 yr in case of Sea borne cargo.
3) The law also specifies the limit of liability of carriers in the event of loss/ damage in certain cases.
Sometimes when the goods are in transit it is quite possible that goods are lost / damaged whilst in the custody of custom Authorities, Port Trust Authorities or any other third party. In such cases also statute provides for rule for recovery from such authorities.
Lastly for the ready reckoner for the examinees the Standard Recovery Schedule is given below:- destination.
Sl. Mode of NOTICE OF CLAIM AGAINST TRANSPORTERS FILING OF THE SUITS
No. Transport DAMAGE NON-DELIVERY DAMAGE NON-DELIVERY
3 By Air Transit Within 14 days from Within 21 days from Within 2 years from Within 2 years from the
the date of delivery the date of booking the date of delivery. date of goods ought to
of goods (7 days in of goods (14 days in have reached the final
case of domestic case of domestic destination.
air lines). air lines).
4 Port of Trust Within 7 days from Within 7 days from Within 6 months Within 6 months from
the landing of goods. the landing of goods. from the date of the date of landing of
landing of goods. goods.
Before filing a suit against Port a 30 days notice is mandatory
5 By Ocean Immediately when Within 3 days when Within 1 year from Within 1 year from the
Carrier the damage is the damage is not the date of unloading date of unloading of
apparent. apparent. of goods. goods.
6. Through Liability is limited to Rs. 25-00 per parcel until & unless is insured with postal authorities but
Postal liability is limited to actual cost of the goods.
Authority
7 By Sea Transit Within 6 months from Within 6 months from Within one year from Within one year from the date of discharge. the date of discharge. the date of discharge the date of discharge.
