MONDAY EXPORT CLASS

 With

DR GODWIN OYEFESO (SUCCESSEDGE EXPORTERS NETWORK)

 Topic: Cargo Insurance (Part 2)

Terms Used in Marine Insurance

  • ‘Fire’ includes direct and indirect fire damage including loss while extinguishing
  • ‘Assailing thieves’ refer to forcible taking, does not cover clandestine theft or mere
  • ‘Jettison’ is the throwing of articles, usually to lighten the vessel in  times  of
  • ‘Barratry’ is the willful misconduct of the master and crew that would include international casting away of the vessel, theft or wrongful conversion with dishonest
  • ‘All other Perils’ do not cover all the perils that befall a shipment, but only connected sea
  • ‘Perils of the Sea’: It includes out of the ordinary wind and wave action, stranding, lightning, collision, and damage by sea water when caused by peril such as opening of the seams of the vessel by stranding or

 

  KINDS OF LOSSES

There are two kinds of marine losses. Broadly, they are Total loss and Average loss.

  1. Total Loss

Total loss  can  be  further  classified  into  actual  loss  or  constructive  loss.

  • Actual Total Loss may occur when:
    • The insured cargo is physically destroyed such that there is no possibility of salvage or recovery of the
    • The insured cargo is damaged that it ceases to be  a  thing  or  description E.g. Cement bag turns into concrete due to sea-water contact.
    • The cargo is irretrievably For example, when the ship sinks, the cargo can be retrieved only after a long time and the salvaged goods cannot be of any value to the insured.
  • Constructive Total Loss can take place when the cargo  is  damaged  to  such  an extent that the cost of saving and repairing or reconditioning of the goods is more than the value of the
  1. Average Loss

If loss is less than total, it is called an average loss in insurance. Average loss may be particular or general.

  • Particular Average Loss: There are two types of particular average losses e.  the total loss of a part of goods and goods arrived in damaged condition.
  • Total loss of a Part of Goods: When a part of total consignment is lost, this method is applied. Value will be arrived by multiplying the number of items lost with per unit value declared in the
  • Arrival of Damaged Goods: In case, the goods arrive in a damaged condition at the point of destination, the consignee or his agent and ship surveyor attempt to arrive at the agreed percentage of depreciated value of goods for Say, the depreciated value is arrived at 30%, insurance company will pay the balance 70% of the declared value. If both the parties fail to arrive at a settlement, the damaged goods will be sold, locally, in the open market. To arrive at the claim amount, the sale proceeds will be deducted from the wholesale value of those goods at that place and time where damaged goods are sold. The claim amount and sale proceeds are given to the insured. Auction charges and other incidental expenses have to be borne by the insurer. If the damaged goods can advantageously be repaired, the underwriter pays the repair charges to the insured, not exceeding the insured value.
  • General Average Loss: This may occur whether the goods are insured or It results from an intentional sacrifice or expenditure incurred by the master of  the vessel to save the ship or goods from danger for the common benefit of the owners of the ship and goods. It needs to be emphasised that the sacrifice or expenditure should be made knowingly, but prudently, and in a reasonable manner.

General average  loss  would  arise  in  the  following  circumstances:

  • Some goods are thrown to lighten the ship when the ship is caught in a rough
  • Make payment to the nearby agency to tow the ship in danger of sinking to the nearby safe port or
  • Pour water to extinguish

When general average loss occurs, captain of the ship reports the matter of loss to the port authorities. The port authorities appoint an Average Adjuster for preparing the statement of general average adjustment and fixing the contribution to be made by the owner of the vessel and various shippers. After cargo owners make payment of their contribution, the shipping company gives delivery of goods to the concerned owners.

The preparation of general average adjustment is a complex accounting operation. This job is normally entrusted to the professionally trained average adjuster (not the insurance company). This entire exercise frequently  requires two or three years  for completion.

The average adjuster also  gives  a  certificate  of  contribution  to  the  shippers  in  respect of the amount of contribution, payable by different parties. The insured would be able to get the contribution certificate from the shipper, soon after payment. The insured can  get settlement of claim from the insurance company, producing the evidence of contribution certificate and its payment.

 

 

  TYPES OF LOSSES

  • Total Loss
    • Actual Total Loss
    • Constructive Total Loss
  • Average Loss
    • Particular Average Loss
      • Total Loss of a part of Goods
      • Arrival of Damaged Goods
    • General Average Loss

 

Procedure and Documentation for Filing Claim and Duties of the Assured

  • Notice to Insurer: In the event of loss or damage to the goods, insured or his agent has to give immediate notice to the insurance
  • Reasonable Care: It is a condition of the policy that the insured  and  his  agents should act as if the goods are uninsured and should take all  such  measures  and actions as may be reasonable and necessary to minimise the loss or damage.   They must also ensure that all the rights against carriers, bailees or third parties are
  • Survey and Claim: At the time of taking delivery, if any package shows signs of outward damage, insured or his agents must call for a detailed survey by the ship surveyors and lodge the monetary claim with the shipping company for the loss or damage to the
  • Outward Condition: Many a time, when the outward condition of the packages is in apparent sound condition, the insured takes delivery, unsuspectingly. After reaching warehouse, on opening the packages, they find damages to goods. In such an event, the insured and/or agent should immediately inform the insurance company and call for the ship surveyor for detailed survey. They should not make any delivery of They should not disturb the packing materials or the contents in packages.
  • Missing Packages: In case any package is  found  missing,  the  insured  must  lodge the monetary claim with the insurance company and its bailees (shipping company) and obtain a proper acknowledgement from
  • Time Limit: The time limit for filing suit against the  shipping  companies  is  one year from the date of discharge of

Documents Required: The following  documents  are  to  be  submitted  by  the  insured to enable the insurance company to settle the claims expeditiously:

  1. Original Insurance Policy or Certificate
  2. Copy of Bill of Lading
  3. Survey report/Missing  certificate
  4. Original Invoice and Packing List together with shipping specification or weight notes
  5. Copies of Correspondence  exchanged  with  the  carriers  or  bailees
  6. Claim

Precautions: While procuring insurance, exporter should observe the following precautions:

  • Amount of insurance is 110% of I.F. value of goods. 10% covers anticipated profits. In other words, exporter is allowed to take a policy to cover profits up to a maximum amount of 10% of CIF value.
  • Insurance document is not later than the date of
  • Amount insured must be in the same currency invoice to take care of the exchange
  • Insurance document is issued by the insurance company or its agents  or The document issued by the brokers is not a good document.

 

 

If you have questions on today’s class send them on whatsapp to +2348037163281 for answers to such questions.

Till then, you will succeed

 

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