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See all Premium member Presentation Transcript MARINE CARGO INSURANCE : MARINE CARGO INSURANCE Presented BY: Fx.Sugiyanto Dedicated Especially for the MARITIME LAW & PRACTICE SEMINAR, on 24 + 25 January 2011 at Shangrila Hotel JakartaINTRODUCTION: INTRODUCTION Having a good risk management policy makes good business practice. Examining and evaluating carrier’s risks and the cargo owner are likely to be more careful and prudent since appreciating risk is one step closer to acting more cautious. Insurance is the most common form of risk management. This presentation shall look at the risks of the carrier and cargo owner are exposed to, and the process of insurance.WHENEVER GOODS ARE MOVED THEY ARE PRONE TO POTENTIAL HAZARDS: WHENEVER GOODS ARE MOVED THEY ARE PRONE TO POTENTIAL HAZARDS Understanding what happens when and where goods are damage, who is at fault and how to claim from the responsible party enables carrier to safeguard the cargo owner/interest as well as handle claims expediently and competently.Slide 4: CARGO INSURANCE-FULL VALUE OF THE CARGO CARGO INSURANCE CARRIER LIABILITYWHAT IS INSURANCE?: Insurance is essentially a contract between two parties. The first party is the assured, insured or policyholder: These terms are used interchangeably and are all synonymous with the person who wishes to transfer a risk. The second party is the insurance company, insurer or underwriter: Again these names are all used interchangeably and are all synonymous with the party agreeing to take on the risk of the assured in return for a premium. WHAT IS INSURANCE?PRINCIPLES OF MARINE CARGO INSURANCE: INSURABLE INTERESTS UTMOST GOOD FAITH (UBBERRIMA FIDES) PRINCIPLE OF INDEMNITY PRINCIPLE OF RECOVERY/SUBROGATION PRINCIPLES OF MARINE CARGO INSURANCEINSURABLE INTERESTS: INSURABLE INTERESTS One may only buy insurance in a marine venture if there is an insurable interest i.e. if the person stands to benefit, or expects to benefit from the safe arrival of the insured goods and will be adversely affected by any damage or loss. Consequently, different persons may have an insurable interest in the goods at any one time, e.g. an exporter, or confirming house or bank which advances funds to the exporter under, say, a letter of credit. The assured must have an insurable interest at the time of effecting the insurance , except in the case of marine insurance where in order to recover under the policy, the person must be 'interested' at the time of the loss.UTMOST GOOD FAITH (UBERRIMA FIDES) : UTMOST GOOD FAITH ( UBERRIMA FIDES ) The assured must disclose to the insurer all material circumstances of which he is aware of or, ought to be reasonably aware of, which could affect the risk he is transferring. A material circumstance is something that had the insurer been aware of, at the time of inception of the insurance policy, may have affected his decision in either underwriting the risk, deciding on the level of premium or, terms applicable. Failure to do so will result in a void contract giving the insurer the legal right to refuse to compensate the assured should a loss occur, irrespective of whether the non-disclosure was intentional, inadvertent or not directly related to the loss.INDEMNITY: INDEMNITY The contract of marine insurance is a contract of indemnity, i.e. in the event of the assured experiencing financial loss or having to incur certain expenses arising from loss of, or damage to the goods, caused by any of the perils stated in the insurance contract, the insurer undertakes to compensate the assured for the financial loss he has suffered. This is opposed to other forms of insurance, such as, building insurance where the underwriter would undertake to build a new building to replace one destroyed by fire.PRINCIPLE OF RECOVERY/SUBROGATION : PRINCIPLE OF RECOVERY/SUBROGATION Subrogation happens when any rights which the assured may have against third parties, such as carriers, are transferred to the underwriter. Thus for cargo contaminated by saline water the cargo insurers would compensate the assured and through their right of subrogation pursue the carrier for compensation of their loss. The assured, however, may only recover from one source, e.g. the insurer, in respect of loss or damage. In case of total loss the insurer retains title to the damaged good which he may dispose of as he wishes.SUE & LABOUR: SUE & LABOUR The assured should act as if he was a prudent uninsured person . If the owner of goods who just watched his goods being destroyed would not be covered by his insurance as he failed to ameliorate the loss. There are various costs incurred by cargo owner/carrier during the process of investigating a claim, defending his interests and mitigating his loss, e.g. legal and survey fees, storage, separation of cargo, unloading etc. If there is an insurance policy in force these expenses may be recoverable under sue & Labour. Even if the Forwarder is not himself responsible, he may not be able to recover all the costs he has incurred from another party, hence the need to insure against this risk.MORAL HAZARD : MORAL HAZARD Moral hazard is the risk arising from the nature and behaviour of human beings connected with the subject matter of the insurance e.g.: fraud - “staging” of a loss carelessness - not performing duties unreasonableness – in interpreting the policy trend of events – factors affecting the larger picture such as economy of a nation. Moral hazards are different from physical hazards e.g. packaging, loading conveyance etc.THE SHIPOWNER AND INSURANCE: THE SHIPOWNER AND INSURANCE Shipowner’s Insurance Liability Insurance Placed with either a mutual Protection and Indemnity Club (P&I Club) or fixed premium insurer e.g. a syndicate at Lloyd’s of London Hull & Machinery Insurance Policies incorporating either Institute Time Clauses Hulls 1983 or 1995 or International Hulls Clauses 2003HULL AND MACHINERY INSURANCE : HULL AND MACHINERY INSURANCE Loss / Damage to ship, equipment or stores Salvage General Average 3/4 ths Collision Liability towards damage to the shipother Hull & Machinery InsuranceSHIPOWNER’S LIABILITY INSURANCE: SHIPOWNER’S LIABILITY INSURANCE Loss / Damage to cargo Damage to 3 rd party property including 1/4 ths RDC* Compensation for illness/injury or death of crew, stevedores Shipowner’s Liability Insurance (Usually P&I Club) Oil Pollution Including clean up costs and fines CARGO INSURANCE : CARGO INSURANCE Cargo Owner’s exposure Shipper / Receiver Loss / Damage to goods Cargo owner’s contribution towards cost of: General Average SalvageINSURANCE OF THE ROAD “HAULIER AND RAILWAY OPERATOR”: INSURANCE OF THE ROAD “HAULIER AND RAILWAY OPERATOR” Insurance of the Road Hauler Insurance of the Railway Insurance for Truck Insurance for third-party liability Insurance for wagon Insurance for third-party liability Loss / damage to goods carried Loss / damage / injury to other property and persons Loss / damage to goods carried Loss / damage / injury to other property and personsDAMAGE TO CARGO CARRIED: DAMAGE TO CARGO CARRIED Excessive compression on corner post, leading to failure of the postSlide 19: Container damaged and ‘repaired’ for this single voyageSlide 20: HEAD ON COLLISION CLOSES PORT Italian 56,800gt Ro/Ro M/V Grande Nigeria (built 2002) & 43,101gt Panamanian vehicle M/V Nada V (built 1984), both 200 meters in length & with thousands of automobiles, in collision -- Antwerp BelgiumSlide 25: M/V APL Panama – 2 months relaxing on the beach in 2006CARRIAGE CONVENTIONS: CARRIAGE CONVENTIONSINSTITUTE CARGO CLAUSES : INSTITUTE CARGO CLAUSES Institute cargo clauses As written by International Underwriting Association (IUA) Formerly known as: Institute of London Underwriters (ILU) The Institute Cargo Clauses were introduced on 1 January 1982. There are three main sets of these clauses depending of the level of cover required. (A) Known as All risks (AR). (B) Known as With average/With Particular average.( WA/WPA) (C) Known as Total Loss only (TLO)Slide 29: ALL POLICIES (A,B &C) COVER: EXW SELLER FCA FAS FOB DAT CPT CIP DAP DDP BUYER CFR CIF v ² Bob's.ppt http://www.geocities.com/bkip20002/index.html Graphics by Bob http://home.att.net/~kip20002/ The cover commences from the time the goods leave the seller’s premises, and terminates upon arrival at the consignee’s warehouse, or upon expiry of 60 days after completion of discharge of the goods from the overseas vessel at the port of discharge, whichever first occurs. And who has intersest ??? Depends on Incoterms used in its tradingINSTITUTE CARGO CLAUSES (A): INSTITUTE CARGO CLAUSES (A) cover all risks of loss of or damage to the goods. Including malicious damage and piracySlide 31: Institute Cargo Clauses (A) (B) & (C) Cover: 1.1. loss of or damage to the subject-matter insured reasonably attributable to:- 1.1.1. fire or explosion M/V Hanjin Pennsylvania 2002Slide 32: Institute Cargo Clauses (A) (B) & (C) Cover: 1.1.2. vessel or craft being stranded, grounded … M/V Sea-Land ExpressINSTITUTE CARGO CLAUSES (A) (B) & (C) ….cont: INSTITUTE CARGO CLAUSES (A) (B) & (C) …. cont 1.1.5. discharge of cargo at a port of distress 1.1.6. earthquake, volcanic eruption or lightning.INSTITUTE CARGO CLAUSES (A) (B) & (C) ….cont: INSTITUTE CARGO CLAUSES (A) (B) & (C) ….cont 1.2.1. general average sacrifice 1.2.2. jettison or washing overboardSlide 35: 1.3. total loss of any package lost overboard whilst loading on to, or unloading from, vessel or craft. Institute Cargo Clauses (A) &(B) [Not (C)] 1.2.3. entry of sea, lake or river water into vessel, craft, hold, conveyance, container, liftvan or place of storage.EXCLUSIONS FOR A, B & C: EXCLUSIONS FOR A, B & C 4.1. Wilful misconduct of the Assured 4.2 Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear 4.3. Claims from insufficient/unsuitable packing…cont EXCLUSIONS: …cont EXCLUSIONS 4.4. Inherent vice 4.5. delay 4.6. Insolvency or financial default of the owners, managers, charterers or operators of the Vessel 4.7 (B & C) [4.8 (A)] loss, damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.Exclusion (B) & (C): Exclusion (B) & (C) 4.7 deliberate damage to or deliberate destruction of the subject- matter insured or any part thereof by the wrongful act of any person or persons N.B. But covered under (A) clausesFurther EXCLUSIONS FOR A, B & C: Further EXCLUSIONS FOR A, B & C 5.1 Unseaworthiness of vessel or craft, unfitness of vessel, craft or conveyance, container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness NB. 5.2 The Underwriters waive any breach of the implied warranties of seaworthiness or the ship and fitness of the ship to carry the subject-matter insured to destinationFurther EXCLUSIONS FOR A, B & C: Further EXCLUSIONS FOR A, B & C 7.1 Strikes 7. 3 TerrorismTRANSIT CLAUSE: Regardless of whether cargo is insured under (A), (B) or (C) clauses, the cover commences from the time of cargo leaves the seller’s premises, continues during the ordinary course of transit and terminates upon arrival at the consignee’s warehouse. In transit Policy clause the cargo during the transit and the insurance will be terminate : After completion of discharge of the cargo from the overseas vessel at the port of discharge , or named place which stated in it policy, or from the cargo complete discharge from the ocean going vessel or upon expiry of 60 days whichever first occurs. In the Indonesian marine cargo Policy coverage, common practice, the transit claused to be less, i.e. 21 days and especially for inter islands to be 15 days. In case of delay of the voyage, the insurance cover still valid until the cargo complete to be discharged at the destination port, where the delay was beyond the Insured control. i.e: in case of the deviation of the carrying vessel for temporary repair or other reasonable incidents where justified in the contract of carriage (Bill of Lading) TRANSIT CLAUSEGENERAL AVERAGE: There is a “General Average act where an extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure” (Marine Insurance Act 1906 s66) GENERAL AVERAGETHE FOLLOWING MUST BE PRESENT:: Sacrifice must be extraordinary There must be a common adventure The common adventure must be in peril There must be a sacrifice (of property) or expenditure (of money) The sacrifice must be made reasonably and intentionally The sacrifice must be made for the sole purpose of preserving the adventure from immediate peril THE FOLLOWING MUST BE PRESENT:EXAMPLES OF GENERAL AVERAGE ACTS INCLUDE:-: EXAMPLES OF GENERAL AVERAGE ACTS INCLUDE:- Putting into a port of refuge Voluntarily stranding to avoid sinking Working of engines (i.e. Temporary/emergency repairs) Further damage to hull through efforts to refloat vessel Repair costs incurred in efforts to refloat vessel Essential temporary repairs from grounding damage, needed for vessel to get to destination Slipping of anchor and cable SalvageGeneral Average expenditure (costs) includes:-: General Average expenditure (costs) includes:- Cost of discharging cargo to assist in refloating Hire of tug to assist refloating Wages and provisions of crew during period of delay at the port of refugePARTIES WHO MUST CONTRIBUTE IN G/A: Shipowner (for value of ship saved) Cargo owner (for value of cargo saved) Shipowner (in respect of freight payable) Charterer (under Time Charter in respect of freight) PARTIES WHO MUST CONTRIBUTE IN G/APARTICULAR AVERAGE: PARTICULAR AVERAGE Damage to ship and cargo from fire will be borne by the shipowner and cargo owner (loss lies where it falls). A particular average loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss. It is also the expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, and are called particular charges.Institute Strikes Clauses (Cargo) Cover:: Institute Strikes Clauses (Cargo) Cover: 1.1. strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 1.2. any terrorist or any person acting from a political motive.INSTITUTE WAR CLAUSES (CARGO) COVER:: INSTITUTE WAR CLAUSES (CARGO) COVER: 1.1. war, civil war, revolution, rebellion, insurrection, or civil strike arising there from, or any hostile act by or against a belligerent power 1.2. capture, seizure, arrest, restraint or detainment, arising from risks covered under 1.1 above, and the consequences thereof or any attempt thereat 1.3 derelict mines, torpedoes, bombs or other derelict weapons of war. M/V Limburg - rammed by a boat packed with explosives 2002INSTITUTE CARGO CLAUSES (AIR): INSTITUTE CARGO CLAUSES (AIR) Similar to Institute Cargo Clauses (A) 30 days (not 60) to reach final destination Excludes deliveries by postSlide 52: Risk A B C Cargo Handling √ √ χ Wet Damage (saline) √ √ χ Theft √ χ χ Contamination (from other cargo) √ χ χ Fire/Exp √ √ √ Stranding/sinking √ √ √ Overturning of land Conveyance √ √ √ Heavy Weather √ χ χ Piracy √ χ χ SUMMARY OF ICC CLAUSEMain types of P&I claims: Chapter 5c 53 Main types of P&I claimsSTEPS TO LODGE A CLAIM: STEPS TO LODGE A CLAIM Notice of claim Investigation Asessment Settlement of claim Loss Prevention Recourse/Recovery Never admit liaibility neither acknowledge that the loss was your fault/negligenceNOTIFICATION AND THE SUPPORTING DOCUMENTS : Immediately notice to the insurer and at same time to the carriers as well. Appoint an independent surveyor in order to indentify who are liable and to ascertain the extent of loss and or conduct a join survey with the carriers. Alternatively ask the cargo underwriter to appoint a surveyor. Preparing the relevant supporting documents, including but not limited. The original of the Policy; Original of the B/L; copy of the commercial invoice and the packing list.; other relevant evidence of the incident. Ask from the carrier of the evidence of the incident, i.e. Statement of Facts, accident report etc. Estimation/claim calculation detail. NOTIFICATION AND THE SUPPORTING DOCUMENTSSlide 56: Please record weather condition when the discharge operation, whether it contributes to the incident Check The master/CO, whether he made Note of Protest Check Mate’s receipt, whether was there any remark ? And what Bs/L clause ?? Is there any LOI ? If there attend other party of interest, check and put in the reporty name and from which party did they attend.CONCLUSION: CONCLUSION Liability and risk are facts of life, identifying, recording, mitigating and managing risk is a serious business. Clearly provide standard procedures of the company to the staff, applied standard trading operating (STC), and The rest of this training manual will help in managing these risks.GENERAL AVERAGE (GA) AND PARTICULAR AVERAGE (PA): Illustration one Fire takes place in the ships engine room and spreads to the cargo holds. A cargo of rice stowed in hold number one is partly damaged by fire. Fire also damages part of the engine room. The master uses foam and water to extinguish the fire. There is further damage to cargo and the ship by the extinguishing efforts. The fire is finally extinguished and the ship arrives at destination. The shipowner declares General Average. GENERAL AVERAGE (GA) AND PARTICULAR AVERAGE (PA)Slide 59: Illustration two Ship runs aground (error in navigation) and suffers hull damage. Water enters one of the cargo holds and a cargo of machinery spare parts is damaged by sea water. The Master attempts to refloat the ship through its own power but this leads to further hull damage. Master then calls for help and a salvage company provides assistance and tows the vessel to a port of refuge. Vessel is repaired and completes the voyage. The Shipowner declares Particular Average.Slide 60: Thank You You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.