Chapter 4 Flashcards
In addition to transportation over the ocean 4 other incidental methods of transportation covered under a marine cargo policy
Air
Land
Rail
On vessels, operating on inland waterways or lakes
4 parties, who may have an insurable interest in cargo being shipped
- Sellers
- Buyers
- Carriers
- Financial institutions
2 documents to be reviewed to determine the insurable interest of parties
Terms of sale/contract
Bill of lading
Two items the broker will normally focus on identifying under the terms of sale
- INCOTERMS - under which foods are being shipped
- Method of payment for goods. 
3 questions which address the issue of insurable interest under INCOTERMS
- The point in transit where seller has fulfilled it’s obligation.
- Which of buyer or seller is responsible for carriage from one point to another
- Which of buyer or seller is responsible for insurance
Cash in advance
Used when the buyer is not well-known to the seller, and the order involves a custom manufacture of special types of goods without a ready market.
Open account
A charge account where the buyer arranges to pay the seller at regular intervals usually monthly or quarterly
Draft
Requires the buyer to pay the seller on presentation (site) of the invoice or at some specified future date (time).
Letter of credit
Seller agrees to provide the buyer with goods pending receipt of a letter of credit.
When goods are purchased on credit, who has insurable interest in them?
Seller
Financial institution
Bill of Lading
Document issued by the carrier, responsible for transporting or forwarding the goods.
Bill of lading served what function
- Contract of carriage between the ship owner, and the shipper.
- As a receipt for the goods.
- As the document of title to the goods
Straight bill of lading
The carrier is instructed to deliver the goods to the named consignee only and any arrangements to the contrary, are not permitted
Order bill of lading
The carrier is instructed to deliver the property to the order of the named consignee. Others make take delivery of the goods on the consignees behalf.
Released bill of lading
No specific value will have been declared by the shipper to the carrier. Carriers will still be responsible for a specific amount per package, according to the international agreements relating to the carriage of goods by water.
Valued bill of lading
Indicates the value of the goods has declared by the shipper.
On deck bill of lading
To reduce premium cost, the shipper may request that goods be situated on deck during transport. Confirms to the shipper that the cargo has been stored on deck and is at shippers risk.
Optional stowage bill of lading
Gives the carrier the right to store cargo wherever it sees fit
Received for shipment bill of lading
Issued by the carrier or its representative as evidence that the goods were received by the carrier for shipment.
Clean bill of lading
Carrier declares that there are no indications of problems with the condition of the cargo at the time of acceptance for carriage.
Count bill of lading
Shows actual number of units being shipped
Onboard bill of lading
Confirms the receipt of goods, and the fact that they were loaded on board a vessel.
Losses for which the carriers are not responsible at law to the shipper
Act of god
Act of war
Act of public enemies
Strikes, riot, and civil commotions
Perils, dangers and accidents of the sea or other navigable waters
Two types of cargo insurance that may be purchased by either shippers or consignees
Individual policy
Open policy
While most types of property insurance do not allow for settlements exceeding the value of the property, why is it of less concerned in marine insurance?
Because the insured usually has a limited ability to create a deliberate loss
Open policy characteristics
- Sums insured are not stated
- Can be extended to ensure goods of every description shipped anywhere in the world
- Can be issued with no expiry date
- Premium rate stated on the policy
How much to insure?
The indemnity provided by ocean marine cargo policy is for the agreed value of the cargo regardless of the fact that this value may be below, or above the true value.
Transit clause
Provides coverage from the time goods leave shippers warehouse until they arrive at point of destination on policy.
Termination of contract or carrier clause
When contract of carriage is terminated before goods reach their final destination, coverage under the policy is terminated
Change of voyage clause
If the destination of the cargo is changed by the insured, the insurer agrees to continue coverage so long as prompt notice is given.
Insurable interest clause
In the event of a claim, only those parties actually having an insurable interest to the cargo at the time of loss will be entitled to payment.
Lost / not lost provision
Coverage applies even if the property has already been lost at the time the policy is negotiated provided that;
- The insured did not know of the loss
- Had no reason to suspect that there had been a loss.
Marine cargo insurance is limited by
Exclusions and warranties written or implied.
3 exclusions founds in all institute cargo clauses
Unseaworthiness and unfitness
Strikes
Wars
3 implied warranties in marine cargo insurance
Legality
No delay
No deviation
Types of warranties
Implied warranties
Express warranties
2 exceptions to warranties
- Warranty no longer applicable
- Compliance would be unlawful
Actual total loss
Property totally lost or is so badly damaged that it has no value left
Constructive total loss
Cost of salvaging cargo is too high relative to the value saved
Total loss of a part
Total loss of one shippers cargo, without total loss to other shipments.
Particular average
Partial loss to specific shipment, other than a general average
General average
Payment of those losses voluntarily incurred for the safety of the entire venture.
Basis of settlement provided to cargo losses
- Total losses only
- total losses with provision to cover partial losses caused by perils of the Sea, when they exceed a certain percentage of the insured value.
- all partial losses
“Average” means
Partial losses
Ship repairers legal liability
Covers shipyards for their liability to an owner during repairs to the vessel, and while it is in their care, custody and control.
Stevedore’s legal liability
Coverage for land, based operations responsible for loading and unloading vessels. Damage to both cargo and vessel, upon which it is being carried are addressed by this policy.
Charterers liability
Covers risks a charterer assumes when contracting the use of a vessel either bear boat time or voyage
Risks are divided into one of the following aircraft hull categories
- Privately owned aircraft, not used for hire or reward
- Commercial aircraft, excluding instruction and rental.
- Commercial aircraft, including instruction and rental.
Aircraft Hull coverages are available on the following basis
- Hull coverage “A” - All risks
- Hull coverage “B” - ground and taxiing risks
- Hull coverage “C” - ground risks only
A - all risks
Occurring while the aircraft is on the ground either while it is in motion, or not, or occurring, while the aircraft is in flight.
B - ground and taxiing risks
Occurring while the aircraft is on the ground, or while, it is in motion taxiing.
C - ground risks only
Occurring while the aircraft is on the ground, and not in motion
Lay-up endorsement
Provides for a refund of a portion of the premium when the aircraft is not used for extended periods of time.
- No refund if the insurer has paid for a loss which is an excess of the premium charged
Detached undercarriage endorsement
Provides for hull ground risk coverages on wheels, skis, or floats, when detached from the aircraft and not in use
Public liability / property damage
The liability limits for aircraft of the private business/pleasure type are based on the aircraft’s maximum permissible takeoff weight.
3 different deductible types
In motion deductible
Moored deductible
Not in motion deductible
Passenger liability when the maximum permissible takeoff weight exceeds 2268 kgS
Maximum of $300,000 / each passenger seat must be purchased
2 exclusions under aviation policies
- War, seizure, or hijacking’s
- Unapproved pilot
Three exceptions to the unapproved pilots exclusion
- Is being tested by a pilot employed by transport Canada.
- Is being operated by a pilot, providing an approved pilot with upgrading flight instruction.
- We’re not in flights the aircraft, maybe started and operated by a person who is competent to control the aircraft a qualified to do so.
Aviation operators, having potential liability, exposures, can insure them in the following ways
- Premises property, or operations liability (airport liability)
- Employers liability.
- Products liability
- Hangerkeeper’s liability.
Cargo liability
