Ch12 international cargo transportation insurance

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Ch12 international cargo transportation
insurance
12.1 the scope of insurance coverage 12.2
CIC 12.3 ICC 12.4 Insurance clause
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emphasis

• Scope of marine insurance
• CIC
• Insurance practice

• difficulty

• Type of cargo loss
• Insurance coverage

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From Titanic
1.Which risk did TITANIC encounter? Can this kind
of risk be avoided? 2.Did all the cargoes sunk
with the ship? What type of loss they belonged to
?(actual loss, constructive loss, particular loss
or general loss). 3.What measures were taken
after TITANIC encountered the risk? What was the
nature of the Expense caused by the measures?
Did the insurance compensate for it? 4.Who
relieve the survivor on TITANIC ? what was the
nature of this kind of expense? Who must
undertake it?
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12.1 scope of insurance
Natural calamity
Perils of sea
Fortuitous accidents
risk
General Extraneous risks
Extraneous risks
Special Extraneous risks
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natural calamity
Heavy weather, lightening, earthquake, volcanic
eruption -----basic coverage
fortuitous accidents
Fire, explosion, vessel being stranded, grounded,
sunk or capsized, collision or contact of vessel
with any external object other than
water ---basic coverage
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general extraneous risks
1)theft , pilferage and non-delivery ----TPND
2) fresh water/ rain damage 3) shortage 4)
intermixture contamination 5)
leakage -------general additional coverage
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general extraneous risks
6) clash and breakage 7) taint of odor 8)
sweat heating 9) rust 10) hook damage 11)
breakage of packing -------general additional
coverage
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additional extraneous risks
War, strike, failure to deliver due to some
special laws or regulations ----special
additional coverage Perils of sea ? all risks
on the sea
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From Titanic
1.Which risk did TITANIC encounter? Can this kind
of risk be avoided? 2.Did all the cargoes sunk
with the ship? What type of loss they belonged to
?(actual loss, constructive loss, particular loss
or general loss). 3.What measures were taken
after TITANIC encountered the risk? What was the
nature of the Expense caused by the measures?
Did the insurance compensate for it? 4.Who
relieve the survivor on TITANIC ? what was the
nature of this kind of expense? Who must
undertake it?
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Actual total loss
Total loss
Constructive total loss
loss
General Average
Partial Loss
Particular Average
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Definition of total
Total loss of goods on an insurance policy
Total loss of goods catalogued on an insurance
policy
Total loss of goods on an B/L
Total loss of goods on a lighter
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1. Actual total loss
Non-existence of the insured cargo
The insured cargo is damaged seriously , and
lost its original function and value
The insured was deprived of the ownership to the
cargo irretrievablyCOSCO
A cargo ship has missed for certain time span and
has no message
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He is the son of the seaHe was kidnapped by six
pirates at strait of Malacca on Feb. 6th ,1982.
---Mr. Wei Jiafu (CEO of COSCO)
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Damaged carcharge for repairsfreight280thousand
,spare parts20thousand
Perfect car----250 thousand
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2. constructive/presume total loss---CTL

the damaged cargo cant be recovered or
the cost of recovery freightgtthe value of the
subject matter difference ATLthe loss
of subject matter CTLthe loss of economy
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How to deal with CTL
1. Indemnity against partial loss the insured
gets 230 thousand, and also owned the (spare
parts) 20thousand 2. Indemnity against partial
loss abandonment
The insured is abandoned any right to the
salvaged cargoes
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General Average
Partial Loss
Particular Average
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3. General Average
during transportation, when the ship,
cargoes and other properties was threatened by
general risk, Reasonable measures must be taken
to get rid of the general risk ,which may
directly caused special sacrifices and expense.
GA must be shared proportionally by those
interests whose property was saved.
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Conditions
Risk is general
Risk is not guess but existence
Action is man-made and conscious
Measures taken are reasonable
Expense is extra
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Adjustment regulation
internationalYorkAntwerp ChinaBeijing
Adjustment regulation
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4. particular average---PA
A partial loss directly suffered from the covered
perils. (e.g.)
two characteristics 1)Loss directly suffered
from the risks. 2)The cargo owner whose goods
were damaged or lost should undertake the loss by
himself
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Relationship between G.A. and P.A.
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2.Did all the cargoes sunk with the ship? What
type of loss they belonged to ?(actual loss,
constructive loss, particular loss or general
loss).
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Sue and labor expenses
expenses
Salvage charges
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5. sue and labor expense
The insurer /assured safeguard /recover the gods
Encourage the insured to defense themselves
Encourage the assured to defense themselves
Agent servants
6. salvage charge
Expenses incurred in reducing the loss of the
subject matter insured by a party other than the
insurer /assured
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What measures were taken after TITANIC
encountered the risk? What was the nature of the
Expense caused by the measures? Did the insurance
compensate for it?
Who relieve the survivor on TITANIC ? what
was the nature of this kind of expense? Who must
undertake it?
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Scope of insurance
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12.2 CIC

• Coverage
• W-W Clause
• exceptions of insurance company
• obligation of the assured

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1. Coverage
Free from particular average
basic Coverage
With particular average
All risks
General Additional Coverage (11categories)
Additional Coverage
Special Additional Coverage (62)
Special coverage
Ocean marine insurance clause (frozen products)
Ocean marine insurance clause (wood oil bulk)
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(1) basic Coverage

• Jan. 1st,1981

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(free from particular average---F.P.A.)

• 1.Total loss suffered from natural calamity
  (excluding partial loss)
• 2.Total or partial loss suffered from fortuitous
  accidents
• 3.Partial loss suffered from natural calamity if
  there is fortuitous accidents before or after
  natural calamity.
• 4.Hook damage---total or partial loss from the
  hook during loading/ unloading and transshipping.
  
• 5.Sue and labor expenses
• 6.Special expenses after distress
• 7.General average and salvage charges
• 8.collision between ships clause

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illustration for FPA
Perils of the sea
G.A.
Particular average because of fortuitous
accidents
Total loss
Suffered both natural calamity and fortuitous
accidents during the same voyage
Particular average suffered from natural calamity
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2) With particular average---W.P.A.
Water stainssea water attentionsweat of ships
hold and fresh water/ rain damage are excluded
WPAFPAP.A. from natural calamity
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3) All risks
All risks WPA General additional coverage
general
WPA
additional
coverage
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General Additional Coverage (11categories)
Additional Coverage
Special Additional Coverage (62)

• cant be covered alone

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Additional Coverage

• ?theft, pilferage and non-delivery clause,
  (TPND)apply for inspection and get certification
  with 10 days.
• ? fresh water and rain damage clause, (FWRD)
• ? shortage clause---free from natural loss and
  there is a rate.
• ? inermixture and contamination clause
• ?leakage clause
• ?clash and breakage clause

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Additional Coverage

• ? taint of odor clause
• ?sweat and heating clause
• ?hook damage clause
• ?breakage of packing clause
• ?rust clause

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Special additional coverage

• ?failure to deliver clause
• ?import duty clause
• ?on deck clause
• ?rejection clause
• ?aflatoxin clause
• ?fire risks extension clause (for storage of
  cargo at destination Hongkong, including Kowloon
  or Macao ),F.R.E.C.

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Special additional coverage

• ?war risks clause
• ?cargo strike clause

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2. Insurance span
Warehouse --- warehouse (of shipment)
(of destination) For 60 days since
unloading from the ship Cargoes are disposed at a
place in midway
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(W / W Clause)
Basic coverage
General additional coverage
Cargo strike clause
Special additional coverage
war risks
Water risks
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3.exceptions of insurance company

• 1)the assureds deliberation and fault
• 2)The consignors responsibilities
• 3)The insured cargo has quality flaw or
  under-quantity before insurance becomes
  effective.
• 4)The insured cargos natural loss , inner defect
  or characteristics , decline of market price and
  delay of shipment
• 5)Exception of war and strikes risks

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4. claim span---2 years
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5. Obligation of the assured

• 1)Take delivery promptly
• 2)Take measures to reduce loss of the damaged
  goods
• 3)Notify the insurer immediately if there is any
  change of voyage and any mistakes or omission
  about cargo and name of ship.
• 4)Present documents to claim--- original
  insurance policy, B/L, Packing list, Measurement
  list, certification of loss, inspection report
  and claim list

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12.3 ICC

• 1) institute cargo clauses A
• 2 ) institute cargo clauses B
• 3 ) institute cargo clauses C
• 4 ) institute war clauses cargo
• 5 ) institute strikes clauses cargo
• 6 ) malicious damage clauses

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To determine
12.4 Insurance clause

• the assured
• the insurance average and coverage
• insurance company
• the insurance value of the goods to be
  insured
• insurance premium
• an insurance policy
• Insurance claim

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1. the assured ----trade terms

• 1) Choose FOB/CFR/FCA/CPT

insurance to be effected by the buyers.
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• 2) Choose CIF/CIP

insurance to be covered by the seller for xx of
total invoice value against xx and xx as per
ocean marine cargo clauses of the peoples
insurance company of China dated 1/1/1981?
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2.the insurance average and coverage

• 1) the nature of the product oil, corn,
  electric appliance
• 2) packing consideration bulk, sacks or paper
  boxes
• 3) Use of products tea , chemicals
• 4) The carriers of the transport air or sea
  transport (vesselgt15years old or lt1000mt.)
• 5) Shipping route and ports considerations
  transshipment
• 6) Shipping season----iceberg in winter and
  putrid in summer

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3. insurance company

• (1)economical power and stability
• (2.)insurance premium rate
• (3)Attitude to claim

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• the insurance value of
• the goods to be insured

(UCP500) and (INCOTerms2000)
-----CIF value plus 10 if gt10,the buyer
undertakes the exceeded premium if
gt30,need the insurance company to approve
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5. insurance premium

• premium the insurance value premium rate

?CIF?????USD20000.00,?????????,?????0.8?0.3,????
??????
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Case Study
??????CIF???????,????CIF?????2000??,?????
??????????,?????1.2?0.3,????????????CFR??????
CFRCIF1-(1?????)???? ???33?? CFR?1967??
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??2
Case Study
?????????CFR?????5000??,???????CIF???????
??????????,????0.8,??CIF?????????????????????????
CIF?5044.39??,????5548.83??
???44.39??
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6. insurance policy
Insurance Policy Insurance
Certificate Open Policy
Date of insurance before that of B/L
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7. Lodge an insurance claim
Require the following documents
Commercial invoice
Original bill of lading
The original policy or certificate
The survey report or other documentary evidence
detailing the loss or damage incurred
Extended protest for salvage loss
Any exchange of correspondence with the carriers
and other parties regarding their liability for
the loss or damage