If you're thinking of shipping goods to another country, getting ocean marine cargo insurance may be a good thing to do. Ocean marine cargo insurance is the oldest type of insurance known, which originated probably in the middle ages. Ocean marine insurance covers shipments traveling internationally by sea. Since the cargo travels via many countries, the insurance is not regulated by any particular country.
Risks of cargo shipping
There are many risks associated with cargo shipping - the goods are loaded and unloaded, handled by a number of people, in addition there are potential hazards like defects in the ship, fires and explosions. However there are exceptions that are not covered by the ocean marine insurance policy and these ought to be looked at by a qualified risk manager, such as an insurance agent. These may include damage due to riots, strikes, commotions, breakage or damage due to dampness.
Types of marine cargo insurance
There are different types of ocean marine cargo insurance such as hull insurance, cargo insurance, and protection and indemnity insurance, each of which covers something different. Hull insurance protects the vessel itself and the machinery in case of damage. Cargo insurance is that which protects the goods or the cargo that is being shipped.
Protection and indemnity insurance are also known as yacht policies and cover liability due to damage to cargo, piers, underwater cables and death and injury to people. These types of ocean marine insurance policies are used to cover larger vessels.
All risks insurance
The broadest type of coverage is the 'All Risk' Policy, which protects from physical loss or external damage to goods. However, there are exclusions to the policy which include improper packing, rejection of goods by customs, losses due to pressure and temperature in the case of air shipments, abandonment of cargo, failure to pay for the service and failure to inform the carrier in case of damage to goods within the specified period of time - being 7 days for obvious damage, 14 days in case of hidden damage and 10 days in the case of non-delivery of the goods.
Declared value is the value you claim on the packages you intend to ship. This is often required on the paperwork that comes along with shipping by a courier service for insurance purposes. You should provide an accurate value as this is the amount you will receive in case the packages are damaged.
If the shipper wants to make a claim against a carrier, the shipper must prove that the merchandise was damaged, and that the damage was caused by the carrier. This is the difficult part of recovering damages. If the damage was caused during transit and not within the carrier itself, the shipper cannot recover the loss.
The difference between the two is that in 'All Risks' Insurance, one does not have to prove carrier liability to claim losses borne.
It is important to be well informed about what to do when dealing with ocean marine cargo claims. In most cases, lack of knowledge jeopardizes the assured's insurance coverage. In the event of a claim, it is therefore essential to know the following procedures.
Ownership of damaged cargo: Contrary to popular belief, the title of all damaged goods is not automatically transferred to the insurance company. The cargo belongs to the assured who alone has sustained the loss. The insurance company has no legal title to the goods and the insurance company is not a party to the contract of carriage within the terms of the bill of lading.
Only under extreme circumstances the insurance company will take the title or sell the cargo. On proving that the loss has been paid as per the ocean marine cargo insurance policy, the insurance company can pursue the claim against the carrier.
Onus of good faith: If your cargo is damaged, you must take the due measures to prevent further damage to the cargo. You do not have the right to abandon the cargo or fail to take any measure which would minimize a loss or damage to the cargo. The assured must continue to act in the same manner that they would, had they not insured the cargo. This is known as the 'Onus of Good Faith' on the basis of which all insurance is governed.
Minimizing a known loss: The assured might need to incur an expense so as to minimize a loss. This may have to be done before receiving the insurance company's authority to incur that expense. Provided the expense incurred is reasonable when compared with the amount of loss that is being avoided, the insurance company is likely to pay for it. This contingency is covered under the 'sue and labor' clause of most marine policies.
Procedure for claims
Substantiating the claim is the first thing you must do in the event of a claim. The consignee must prove the claim was caused as a result of transit and occurred during the period of insurance coverage. Here are the steps to follow in order to substantiate the claim.
It is important to examine the external condition of all the packages before signing the delivery receipt. This may seem like a difficult procedure as it can delay trucks and cargo elevators. However, the trucking companies may only charge you a minimal fee for the delay. Examine the packages, and note down the damage on the delivery receipts as this will protect your rights of recovery and minimize your losses.
Note exceptions on delivery receipt: All steamship companies, airlines, railways, trucking companies and harbor authorities must obtain a signature on a delivery receipt from the person or company taking delivery of cargo. All delivery receipts contain a clause stating the cargo was delivered in apparent good condition unless noted to the contrary.
If the receiving department does not note the damage, it destroys the chance that your insurance company will successfully recover the loss from the carrier.
It is important to record all case numbers that appear damaged. Document the claim and place all carriers on notice.