Topics covered by Insuring Cargoes

The Witherby website ( www.witherbyinsurance.com)gives an overview and full details of topics covered in the book. However the following are some of the topics discussed in the book:

1 MARINE INSURANCE AND INTERNATIONAL TRADE

Need for marine insurance in international trade, restrictive legislation in some countries, Cargo Classification, Major Commodities, Dangerous Goods, Containerisation, financing of trade etc.

2 BASIC PRINCIPLES OF MARINE CARGO INSURANCE

Identification of an assured (who is an assured), Agreed Value-a detailed discussion with examples, multi party transactions, Effect of agreed valuation in partial and total loss claims, Successive Losses, Double Insurance adjustments, Good faith

3 CURRENT TRENDS IN DETERMINING DEPRECIATION

Increasing use of Salvage Loss adjustments as opposed to the PA method enshrined in MIA1906, Auction sale of salvage, other clauses relating to assessment of depreciation, Manuscript wordings such as Brands Clause, Control of Damaged Goods, Debris Removal, Cutting Clause , Peak Value Clause, Automatic Increased Value etc.

4 INSURABLE INTEREST

This is an important chapter in the book. It covers Incoterms, ideal insurance coverage for each term, Issues relating to Incoterms, insurable interest, Risk versus Title dichotomy, Modern trends in UK and other market-Legal Validity of “Warehouse to Warehouse Cover Irrespective of the Terms of Sale” type of clauses, implication of “For Whom it May Concern” provision in the policy, banks financing trade and insurable interest.

5 CONTINGENT INSURABLE INTEREST

This chapter gives a very detailed analysis of Sellers and Buyer’s Contingency covers, not found in any other book. Different versions of Seller’s, Buyer’s and DIC/DIL clauses are given.

6 MARINE OPEN COVER

This chapter provides the main features of an Open Cover, discusses a recent case law regarding implication of a delayed declaration (after loss) of a voyage, a detailed discussion on limits per bottom and location, 200pct Accumulation Clause, definition of what a location is, discusses implication of terms in Certificate differing from underlying Open Cover, Stock Throughput (including a diagrammatic illustration) and Annual Sales Turnover policies, Process Clause etc.

7 INSURING TERMS - 1, INSTITUTE CARGO CLAUSES (A), 1.1.82 209

8 INSURING TERMS - 2, THE NEW INSTITUTE CARGO CLAUSES - A, CL. 382, 1.1.09

Chapter 7 and 8 contain a detailed commentary including all relevant case laws on warehouse to warehouse. Many complex situations are explained in detail in these chapters with supporting case laws.

9 INSURING TERMS 3 - FROZEN FOOD CLAUSES

A detailed analysis of temperature sensitive cargoes and how they are insured, special clauses for frozen cargoes, a critique of standard frozen food clauses available in the market, a chart showing different types of claims of frozen cargoes and to what extent standard clauses cover such eventualities. The chapter also gives examples of wider wordings available in international markets.

10 OTHER INSTITUTE CLAUSES AND ENDORSEMENTS 329

Here ICC B and C Clauses are covered and compared with the Norwegian market versions. Various examples are given for each peril.

Other clauses covered are Institute Classification Clause, Radioactive Contamination Clause, Termination of Transit (Terrorism) Clause, ISM and ISPS endorsements and implication for cargo owners.

11 CONSTRUCTION OF A POLICY AND EXTRANEOUS PERILS 357

This is an interesting chapter on rules of underwriting/construction of a policy, deck cargoes, contra proferentem rule and how far it is applicable when there is a sophisticated assured and/or a specialist broker involved. A detailed treatment of extraneous perils such as non delivery, heat sweat and spontaneous combustion, leakage discussed in detail with supporting case laws.

This chapter also contains a discussion on proximate cause doctrine including rules of concurrent causation, burden of proof/balance of probability, Mechanical etc derangement Clause, RODC Clause, Country Damage etc

The chapter contains a detailed discussion on deductibles including meaning of “each and every loss”, deductible and ordinary loss, comingling warranty, deductible application when multiple consignees are involved under the same open cover etc

12 PHYSICAL LOSS OR DAMAGE TO CARGO

Meaning of “Physical loss or damage” including some modern trends are discussed in detail particularly for hi-tech electronic and pharmaceutical industry, Fear of Loss covers, Control of Damaged Goods Clause/Brands Clause including removal of brand names are discussed in considerable detail.

Manufacturer’s warranty issues is another topic that is discussed in detail.

Various packing clauses, Guaranteed Outturn (including example of calculation of a bulk liquid cargo claim) etc are other topics discussed.

13 PHYSICAL LOSS OR DAMAGE TO CARGO - OTHER CLAIMS ISSUES 431

This chapter covers Concealed Damage Clause, Seals Clause, Fraudulent B/L Clause, sweat ,odour ,vermin and Pollution Hazard claims.

GA and Salvage are discussed at length including procedure for LOF claims at arbitration.

A special note on treatment of Lloyds Open Form of salvage in marine insurance-whether LOF is sue & labour or Salvage Charges?

Finally a note on Exchange Rate/fluctuation of currency values.

14 CARGO LOSS PREVENTION - INCLUDING SOME CURRENT TRENDS 467

Loss/Damage from container shipments including principal causes of loss , loss prevention steps etc.

Moisture/Condensation/Sweat including Origin of Sweat

A highlight of this Chapter is a discussion on various damage detection devices such as tilt monitors, shock indicators, humidity indicators etc.

Project Cargo and difficult destination are also contained in this Chapter

The book ends with a few annexes containing Cargo Families, types of containers, dangerous goods classification, case studies of dangerous cargoes, list of P&I clubs, list of classification societies and a library of clauses.

The Clauses covered in this book are:

Accumulation Clause

Acquired Company Clause

Aircraft Clause

Airfreight Replacement Clause

Apportionment of Recovery Clause

Art and Antiques Clause

Atmospheric/Climatic Conditions Clause

Automatic Increased Value Clause

Average Clause

Bagged Cargo Clause

Brands Clause

Buyer’s Interest Clause

Cancellation Clause

Captions Clause

Cartons and Cases Clause

Certificate of Insurance (Hold Harmless)Clause

Civil Authority Clause

Claused B/L Clause

Co-mingling Clause

Concealed Damage Clause

Consequential Damage to Garments Clause

Container Clause

Container Clause(handover agreement)Clause

Container Demurrage Charges Clause

Control of Damaged Goods Clause

Copper Coil Warranty

Country Damage Clause

Country Damage-Definition of

Crude Oil Warranties

Customs Clause

Cuttings Clause

Debris Removal Clause

Deck Cargo Clause

Deductible Clause

Deliberate Damage-Pollution Hazard Clause

Deletion of Exclusion 4.6 of ICC

Delivery of Goods without Payment Clause

Depreciation Payment Clause

Difference in Conditions/Difference in Limits Clause

Drying Clause

Duration of Coverage(irrespective of terms of purchase)

EEC Restitution Clause

Expediting Expenses Clause

Expenses to replace packages Clause

Ex Works Clause (imports)

Exhibition Risk Extension Clause

Fear of Loss Clause

First Loss Clause

Fish Catch Clause

FOB or FAS Purchase Clause

Fraudulent B/L Clause

Frozen and Chilled Product by Air Clause

Frozen/Chilled Product Clause-whilst in store and transit

Frozen Food Extension Clauses-Institute

Fumigation Clause

GA in full Clause

Gas wordings

Glass Clause

Goods mechanically refrigerated Clause

Guaranteed Outturn Clause

Inspection of Records Clause

Institute Classification Clause

Institute Replacement Clause

Insufficiency of Packing Clause

Insurable Interest Clause

ISM Endorsements

ISPS Endorsements

JC93 Clause

Labels Clause

Letter of Credit Clause

Liquid Gas Coolant Clause

Loading and Unloading Clause

Location Clause-Institute

Location definition

Lost Certificate Clause

LSA Project Cargo warranty

Manufactured Machinery Warranty

Marine and Non-Marine Sharing Clause

Mechanical etc Derangement Clause

No Policy Defence Admitted Clause

Odour (extraneous odour) Clause

Over-carried goods Clause

Own Vehicles Clause

Packer’s Premise Extension Clause

Packing Clause

Pair and Set Clause

Pair and Set –If Lost Clause

Partial Loss Clause

Parties insured by the Policy Clause

Peak Value Clause

Presentation Packing Clause

Process Clause

Profit Commission Clause

Proof of Loss Clause

Radioactive etc Contamination Clause

Recoopering/Repackaging Clause

Reinstatement of original manufacturer’s or repairer’s guarantee:

Reissue Clause

Rejected or Returned Shipments Clause

Repacking Clause

Repairer’s Clause

Rest Clause

Rust Oxidation and/or Discolouration Clause

Salvage Loss Clause

Seals Clause

Seller’s Interest Clause

Shipments sold on FOB or CFR Clause

Shipments under temperature control Clause

Shut Out Clause - imports and exports only

Skimming Clause

Sorting Charges Clause

Special Replacement Clause

Strikes Diversion Expenses Clause

Subrogation Clause

Temperature sensitive goods-non-mechanically etc refrigerated Clause

Termination of Transit (Terrorism) Clause

Travel and Accommodation Expense Clause

Unpaid Vendor’s Clause

US Economic & Trade Sanctions Clause

Waiver of Subrogation Clause

Wilful Misconduct Clause

WA (With Average) Refrigeration Clause

Sound Market Value Clause

Special Replacement Clause

Details of 14 chapters-section wise details:

1 Marine Insurance And International Trade 1

1.1 The Need For Marine Cargo Insurance 3

1.1.1 Responsibility for Arranging Insurance 3

1.1.2 Restrictive Legislation 3

1.1.3 Trade Sanctions 4

1.2 Cargo Classification 5

1.2.1 Cargo Families 5

1.2.2 Examples of Major Commodities 5

1.2.3 Dangerous Goods 18

1.3 The Container Revolution 18

1.3.1 Types of Container 20

1.3.2 Mechanism of Containerisation 20

1.3.3 Impact on Marine Insurance 21

1.3.4 Containerisation and Terms of Sale 22

1.4 Vessels and Classification 23

1.4.1 Types of Vessel 23

1.4.2 Classification 23

1.4.3 Protection & Indemnity Clubs 24

1.4.4 The Ism Code 27

1.4.5 The ISPS Code 27

1.4.6 Vessel Selection 28

1.5 Financing of International Trade 28

1.5.1 Documentary Credit 28

1.5.2 Documentary Collection 29

2 Basic Principles of Marine Cargo Insurance 31

2.1 The Assured 33

2.1.1 Identification of an assured 33

2.1.2 Norwegian market 36

2.1.3 Position of a buyer holding an assigned certificate 37

2.1.4 Assignor and assignee relationship 40

2.1.5 Multiple assureds 41

2.2 Indemnity 41

2.3 Agreed Value – A Detailed Discussion 43

2.3.1 Binding nature of agreed valuation 43

2.3.2 Multi-party transactions and agreed valuation 45

2.3.3 Effect of agreed valuation on total and partial loss claims 47

2.3.4 Corollary to the principle of indemnity 50

2.3.5 Circumstances where indemnity exceeds Sum Insured 57

2.3.6 Payment of Interest on claims 59

2.4 Utmost Good Faith and Disclosure 59

3 Current Trends in Determining Depreciation_63

3.1 Increasing use of salvage loss method rather than PAM 65

3.2 Are Instances of Salvage Sales Decreasing? 67

3.3 Other Methods of Determining Depreciation 68

3.3.1 Commodity-specific methods of computation 72

3.4 Practice in Other Markets 74

3.4.1 Antwerp market 74

3.4.2 Norwegian market regulations 74

3.5 Manuscript wordings currently in vogue and their impact on indemnity 75

3.6 Other modification to MIA 1906 provisions 77

3.6.1 Brand protection clauses 77

3.6.2 Institute Replacement Clause 83

3.6.3 Pair and Set Clause 88

3.6.4 Cutting Clause 89

3.6.5 Debris Removal Clause 91

3.7 Other Commonly Used Clauses 93

3.7.1 Fumigation clause 93

3.7.2 Peak Value Clause 95

3.7.3 Automatic Increased Value Clause 95

4 Insurable Interest_97

4.1 General Introduction 99

4.2 Assignment of interest and policy 101

4.3 Incoterms (International Commercial Terms) 104

4.3.1 Shipment and destination terms 105

4.3.2 Mode of Carriage and Incoterms 106

4.3.3 Marine Cargo Insurance and Incoterms 106

4.3.4 Incoterms in practice – some practical difficulties 114

4.4 The risk vs title dichotomy 120

4.5 Modern Trends in UK and US markets 120

4.5.1 When the assured is the buyer 121

4.5.2 When the assured is the seller 122

4.5.3 Legal validity of warehouse to warehouse cover irrespective of the Terms of Sale 123

4.6 CIF Term and Nature of the Insurance Policy 130

4.7 For Whom It May Concern 132

4.8 Banks and Marine Insurance 136

5 Contingent Insurable Interest_141

5.1 The Origin of Seller’s Interest cover 143

5.1.1 Reasons for rejection of documents 144

5.2 Key Features of Seller’s Interest Covers 144

5.2.1 Assessment of exposure 144

5.2.2 Seller’s Interest and documentary credit system 147

5.2.3 When does cover incept under a Seller’s Interest policy? 147

5.2.4 Cause of rejection of documents/goods by the buyer 152

5.2.5 MIA 1906 requirement of insurable interest on date of loss 153

5.2.6 Additional clauses in Seller’s Interest 153

5.3 Summary 154

5.4 Buyer’s Interest and Difference in Conditions 155

5.5 Specimen wordings 156

6 Marine Open Cover 165

6.1 Open Cover 167

6.1.1 Advantages of an open cover 167

6.1.2 Features of an open cover 167

6.1.3 Limit of liability 171

6.1.4 Declaration (bordereau) 177

6.2 Limits of liability 180

6.2.1 What is a location? 181

6.2.2 Is Location meant for land based accumulation or onboard vessels or both? 183

6.2.3 Does the location clause refer to port of loading or port of discharge

or any port or place during a voyage? 185

6.2.4 Location Limit and overseas buyers 186

6.2.5 Do the limits apply to each party mentioned as assured? 186

6.2.6 Loading and Unloading clause and location limit 186

6.2.7 Limits of liability and condition of average 187

6.2.8 200% Accumulation clause 189

6.3 Example of Limits per Bottom and Location Operating 194

6.4 Certificate System Under an Open Cover 195

6.4.1 Web based certificate generation 199

6.5 Annual Sales Turnover policies 199

6.5.1 How are premiums computed? 200

6.5.2 Annual policies – a critique 201

6.6 Stock Throughput Policies 201

6.6.1 Advantages of a stock throughput policy 201

6.6.2 A Diagrammatic Illustration of a stock throughput policy 203

6.6.3 Challenges in Administering Stock Throughput Covers 205

6.6.4 Process Clause in Stock Throughput Covers 206

6.6.5 Standard exclusions in a stock throughput policy 207

7 Insuring Terms - 1, Institute Cargo Clauses (A), 1.1.82 209

7.1 MAR Policy Form 211

7.2 Institute Cargo Clauses (A) 1982 211

7.2.1 Risks covered 211

7.2.2 Exclusions 214

7.3 Duration of cover 228

7.3.1 Leaving the warehouse 229

7.3.2 Ordinary Course of Transit 235

7.3.3 Termination of Cover 238

7.4 Termination of transit – some further issues 241

7.4.1 Limits of a port town 241

7.4.2 60 days - counting of 242

7.4.3 Discharge ‘overside’ 242

7.4.4 Delivery of whole consignment or each portion thereof? 242

7.4.5 Delivery to a consignee’s warehouse, but under bond 244

7.4.6 Return of goods for repair 244

7.5 Other Clauses of the ICC (A) 249

7.6 Piracy 260

8 Insuring Terms - 2, The New Institute Cargo

Clauses - A, Cl. 382, 1.1.09 267

8.1 General Changes 269

8.1.1 Removal of side headings 269

8.1.2 Contract (open cover) and cover provided by ICC 269

8.1.3 Modernising the language 270

8.1.4 Defining assured 270

8.1.5 Major Changes 271

8.2 Institute Cargo Clauses 2009 - A detailed analysis 271

8.2.1 RISKS COVERED 271

8.2.2 Exclusions 272

8.3 Duration of Cover 285

8.4 Other Clauses 295

9 Insuring Terms 3 - Frozen Food Clauses_301

9.1 Temperature Controlled Cargoes 303

9.2 Underwriting Considerations 303

9.3 Temperature Recording Devices 305

9.4 Institute Frozen Food Clauses 309

9.4.1 Institute Clauses 309

9.4.2 Institute Clauses amended to include chilled and/or cooled 314

9.4.3 Extension Clauses 315

9.4.4 Manuscript wordings 316

9.4.5 Warranties 320

9.5 Frozen Food Clauses, Some Issues 322

9.6 Frozen Foods AND Perishables Claims 325

10 Other Institute Clauses and Endorsements_329

10.1 Institute Cargo Clauses – (B) and (C) 331

10.1.1 ICC (B) and (C) - 1982 and 2009 versions 331

10.2 (B) and (C) causation 331

10.3 (B) and (C) exclusions 333

10.4 Comparison of ICC (B) with Extended Transport Accident -

B Clauses of Norwegian Market 334

10.5 Institute Classification Clause 341

10.6 Radioactive Contamination Clause 345

10.6.1 Institute Radioactive Contamination Clause, CL 356, 1.10.90 346

10.6.2 Amendment to RACE - Extended RACE Clause 346

10.6.3 Further Amendment – Introduction of Clause 370 346

10.7 Termination of Transit (Terrorism) JC2001/056 348

10.8 ISM Endorsements 349

10.8.1 ISM Code and Marine Cargo Insurance 350

10.8.2 Compliance with ISM – some further explanation 352

10.9 ISPS Endorsements 355

10.9.1 The International Ship AND Port Facility Security (ISPS) Code 355

10.9.2 ISPS endorsements of JCC 356

10.9.3 ISPS – implication for cargo owners 356

11 Construction of a Policy and Extraneous Perils_357

11.1 Rules for underwriting 359

11.2 Some Manuscript Wordings 359

11.2.1 Deck cargoes 359

11.3 Rules of Construction 362

11.3.1 Rules of construction 363

11.3.2 Contra Proferentem 363

11.4 Rules of Proximation 365

11.4.1 What is proximate cause? 365

11.4.2 Phraseology of Institute Cargo Clauses 366

11.4.3 Concurrent Causation 366

11.5 Burden of Proof 368

11.5.1 Manuscript clauses 369

11.6 Need for Careful Drafting of Policies 369

11.6.1 Mechanical, Electrical and/or Electronic Derangement (MEED) Clause 369

11.6.2 Rust, oxidation, discolouration and/or corrosion 371

11.6.3 Country Damage 372

11.6.4 Shortage risks 374

11.7 Extraneous Perils 375

11.7.1 What are extraneous perils? 375

11.7.2 Interpretation of extraneous perils 376

11.7.3 Non-Delivery 381

11.8 Deductibles 383

11.8.1 Expression of a deductible 383

11.8.2 Each and every loss 384

11.8.3 Major casualty, sue and labour, salvage charges and General Average 384

11.8.4 Meaning of ‘each’ and ‘whole’ in ‘each and whole shipment value’ 384

11.8.5 Deductible and ‘ordinary loss’ 385

11.8.6 A series of losses detected after a time 386

11.8.7 Deductible contrasted with a co-insurance clause 387

11.8.9 Co-mingling warranty, multiple B/Ls covered under separate

certificates issued off open covers 388

11.9 Warranties 390

12 Physical Loss or Damage to Cargo 393

12.1 Changing Trends 395

12.1.1 ‘Fear of loss’ as opposed to ‘physical’ loss 397

12.2 Widening of cover 400

12.2.1 Control of Damaged Goods 400

12.3 Manufacturer’s Guarantee or Warranty 407

12.3.1 Does the policy valuation include the warranty? 407

12.3.2 Does the policy valuation exclude the warranty? 408

12.3.3 Possible Solutions 409

12.3.4 Examples of satisfactory resolution of claims 411

12.3.5 The French Marine Cargo Insurance Policy 414

12.3.6 The Norwegian Marine Cargo Insurance Policy 414

12.4 Guaranteed Outturn Covers 414

12.4.1 Recovery of Shortage/Leakage under ICC (A) terms 416

12.4.2 Recovery of Shortage/Leakage under ICC (A) including

“leakage/shortage howsoever caused or arising” 417

12.4.3 Example of re-adjustment of claim under ICC (A) terms 418

12.4.4 Guaranteed Outturn Cover 419

12.5 Packing 420

12.5.1 Is packing material part of the subject-matter insured? 421

12.5.2 Damage to packing material leading to rejection of the goods 425

12.5.3 Packing exclusion clause in Institute Cargo Clauses 426

12.6 Treatment of delay in marine insurance policies 426

12.6.1 French cargo conditions 428

12.6.2 German cargo conditions 428

12.6.3 Norwegian cargo conditions 428

12.6.4 Russian cargo conditions 429

12.6.5 Swiss cargo conditions 429

12.6.6 Wider covers including delay 429

13 Physical Loss or Damage to Cargo - Ot her Claims Issues_431

13.1 Concealed Damage or Delayed Discovery of Loss 433

13.2 Shortage from ‘Seal Intact’ Containers 434

13.2.1 Fraudulent Bill of Lading Clause 438

13.3 Sweat Damage 439

13.3.1 Cause of sweat 440

13.3.2 Is sweat damage covered in ICC (A)? 441

13.3.3 Pattern of wetness and cause of loss 443

13.3.4 Sweat/condensation in Norwegian Cargo Clauses 445

13.4 Odour Claims 445

13.5 Vermin Damage 446

13.6 Pollution Hazard Clause 447

13.7 General Average (GA) 449

13.7.1 Definition 449

13.7.2 Elements of the GA Act 449

13.7.3 Distinction between General Average (GA) and Particular Average (PA) 449

13.7.4 Contributory values 449

13.7.5 GA and Cargo Insurance 450

13.7.6 Examples of GA 450

13.7.7 GA Security 451

13.8 Salvage 456

13.9 Nature of LOF (and other forms of salvage) - Liability under Clause 2 or 16 of ICC? 457

13.10 Exchange Rates in Marine Cargo Insurance 464

13.10.1 Exchange rate for claims calculation 464

14 Cargo Loss Prevention - Including Some Current Trends_467

14.1 Loss/Damage from Container Shipments 470

14.1.1 Principal causes of loss 470

14.1.2 Loss prevention steps for container movements 472

14.1.3 Loss prevention: moisture/condensation/sweat 476

14.1.4 Some Case Studies 477

14.1.5 Origin of Sweat 482

14.2 Damage Detection Devices 485

14.3 Dry Bulk Cargoes 488

14.3.1 Principal causes of loss 488

14.4 Project Cargo 493

14.5 Difficult destination 496

Annexes

ANNEX A: CARGO FAMILIES

ANNEX B: DANGEROUS GOODS CLASSIFICATION

ANNEX C: CASE STUDIES ON DANGEROUS GOODS

ANNEX D: TYPES OF CONTAINER

ANNEX E: CLASSIFICATION SOCIETIES

ANNEX F: INTERNATIONAL GROUP OF PROTECTION & INDEMNITY CLUBS

ANNEX G: LIBRARY OF MANUSCRIPT CLAUSES