Cargo Insurance: 4 Clauses Not to Miss in a Policy
September 04, 2017
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Elena Dziuba Account Manager, Property Department
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Cargo insurance can boast constant demand in Ukrainian insurance market since quite wide range of entities are entitled to act as the Insured under the contracts. Shippers, consignees, carriers and freight forwarders may have the insurable interest in the cargo and conclude the policies accordingly. Judging by our experience, the party which is the most interested in the cargo safely reaching the destination point is more likely to pay for the insurance.
Although the insurance policies contain mostly identical provisions, there are still a few nuances which insurers view differentlyAlmost all insurance companies in Ukraine have the license for insuring cargo. Their Terms and Conditions are based on well-known Institute Cargo Clauses which have been recognized by the vast majority of nations. Therefore they correspond with the rules of international law and have been successfully used worldwide for over 30 years. Although the insurance policies contain mostly identical provisions, there are still a few nuances which insurers view differently. They will be revealed in this article.
First, the damage caused by cargo handling operations (mostly referring to loading and unloading operations) is covered differently depending on the insurer’s terms and conditions. Some guarantee their coverage within ICC A option with directly excluding them from ICC B or ICC C clauses while others view it as extension to coverage and require that it be specifically mentioned in the policy. That’s why this nuance deserves close consideration before signing the policy.
Second, if the loaded vehicle goes missing, it should normally be considered an insured event under ICC A clauses though particular insurers choose to directly exclude it from the coverage.
The third nuance refers to the opportunity for the Beneficiary under the contract to receive indemnity in the foreign currency. This is often the case if the Insured is the producer of the shipped goods liable to insure it in favour of the consignee in accordance with the INCOTERMS. It’s worth mentioning that only CIP and CIF terms contain such a requirement while all other terms leave this issue to the discretion of the parties under the contract. Two aspects come to light in this regard. First, insurance policy with ICC C type of coverage is considered sufficient by INCOTERMS while it does not necessarily cover all risks of loss and damage of the cargo. It won’t hurt consignee to inquire about the extent of the coverage the policy provides. Second, not all insurance companies are willing to incur costs associated with foreign currency transactions as they are quite significant in accordance with national legislation. Make sure to discuss all the details in advance.
Last, but not the least, refers to the coverage of war risks. Common insurance practice recognizes the unified list of certain hotbed territories which fall out of the insurance coverage. However it’s best to read closely the provisions referring to those territories. In accordance with some of them the whole shipment is not considered insured if the route lays across the territories under sanctions or those in which military operations or on-going conflicts take place. Others insurers, on the contrary, prefer to withhold the coverage for the period of time when the shipment is transported through the hotbed territories but resume the coverage once it hits the safe ground. What is more, it is possible to conclude the cargo insurance policy which would cover damage caused by war risk provided that they arise unexpectedly during the term of the agreement.
Finally, it should be stressed out that insuring cargo especially by means of general agreement requires constant attention on behalf of the insured in order to monitor the changes in the announced routes, freight nomenclature or terms of shipments and to sign the necessary amendments to the policy in the timely manner.
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