Chapter 4 – Ocean Marine and Aviation Insurance Flashcards
Ocean Marine Cargo Insurance
Most commercial property insurance policies covering property away from the insured’s premises exclude coverage for such property
following documents must be reviewed to determine who has an insurable interest
Bills of Lading
Terms of Sale/Contract
Buyers and sellers may both have an ownership interest in a shipment of goods. A review of the terms of sale will be necessary and focus on
- The INCOTERM under which the goods are being shipped
- The method of Payment for the goods
INCOTERMS identify
- The point in transit at which the seller has fulfilled its obligation
- Which of the buyer or seller is responsible for carriage from one
point to another - Which of the buyer or seller is responsible for insurance
Financial Institutions
Have a an insurable interest on property that has been purchased by loans that have not yet been repaid, named as a loss payee in the event of loss or damage to the cargo.
Cash in Advance
The seller, having been paid, has no interest in the goods once shipped. Sellers insurable interest ends ceases from the moment payment has
been made.
Open Account
Payment arranged from buyer monthly or quarterly. Only arranged with very reliable customers and with consumer goods that have a ready market.
Draft
Either on presentation (sight draft) or at some specified future date (time draft),
widely used in international commerce.
Letter of Credit
Seller agrees to provide the goods to the buyer pending receipt of a letter of credit. Terms of this letter must be followed exactly, the seller takes all documentation to the bank and requests payment.
Sellers Interest
The seller usually obtains insurance from the buyer as a matter of custom. Sellers cannot rely on such policy to protect their interest if goods are lost or damaged, they should purchase insurance in their own name.
Bills of Lading
document issued by the carrier responsible for transporting or forwarding the goods
serve the following functions:
- As a contract of carriage between the ship-owner and the shipper
- As a receipt for the goods
- As the document of title to the goods
Strait Bill of Lading
Carrier is instructed to deliver the good to the named consignee only. Used when the good have been paid for by the consignee
Order Bill of Lading
The carrier is instructed to deliver the property to
the order of the named consignee - others may accept delivery of the goods on
the consignees behalf.
Short Form Bill of Lading
Does not include all the obligations and responsibilities of both parties.
Released Bill of Lading
No specific value has been declared by the shipper to the carrier.
Valued Bill of Lading
Value of goods as declared by the shipper, the carrier is liable for this amount in the event of a loss
On Deck Bill of Lading
shipper may require goods to be on deck during transport, this is at the shippers risk - carrier cannot be liable for loss or damage due to gross negligence
Optional Stowage Bill of Lading
Gives the carrier option to stow cargo where ever it sees fit
Received for Shipment Bill of Lading
Also called Dock Receipt, evidence that the good were received by the carrier for shipment
Clean Bill of Lading
The carrier declares there are no indications of problems with the condition of the cargo at the time of acceptance for carriage. Can be important in losses involving perishables.
Count Bill of Lading
Shows the actual number of units being shipped, evidence that the carrier received all such units for shipment.
On Board Bill of Lading
Confirms receipt of the goods, and that they were loaded on the vessel
carriers are not responsible for the following
causes of loss:
- Fire, unless caused by the actual fault or private knowledge of the carrier
- Perils, dangerous and accidents of the sea or other navigable waters
- Act of God
- Act of War
- Act of Public Enemies
- Strikes, riots and civil commotions
Individual Policy or Certificate
Used for single shipments or when goods are sent on an irregular basis.
Open Policy
Sums insured are not stated
Limits are established for any one conveyance or location
Distinction is made between on deck and under deck stowage.
Can be extended to insured goods of every description shipped any where in the world
Coverage is terminated when, owing to circumstances beyond the control of the insured:
The contract of carriage is terminated at a port or place other than the destination named in the policy
Transit is otherwise terminated before delivery of the goods under the conditions provided in the Transit Clause
Lost or Not Lost Provision
Coverage applies even if the property has already been lost at the time the policy is negotiated, provided that a) the insured did not know of the loss b) had no reason to suspect that there had been a loss.
Coverage may be limited by:
- Policy exclusions
- Warranties that are either explicitly written in the contract or that are acknowledged in law as being implied
Unseaworthyness and Unfitness Exclusion Clause
if it can be shown that the insured or their servants had knowledge of such facts at the time of loading. However this is not applied by most insurers
Strikes Exclusion Clause
Institute Strike Clause (Cargo) can be added to the policy to provide this coverage.
War Exclusion Clause
Can be insured under the Institute War Clauses (Cargo) to the policy.
If Institute War Clauses (Cargo) is added, war risks are covered from the cargo is loaded onto the the vessel and continues until the cargo is:
- Discharged over side at final port
- After expiry of the 15 days counting from midnight of the day of arrival of the overseas vessel at the final port of discharge
Which ever occurs first
Express Warranties
Agreement where by the insured stipulates that certain facts relating to the risk are or shall be true, or certain acts relating to the same subject have been or
shall be done
Implied Warranties
Do not appear in the policy wordings but are tacitly understood by the parties to be present ad are as binding on the parties as are express warranties.
An underwriter may try to avoid liability as form the date of the breach, the following two statutory exceptions apply:
- Where owing to a change in circumstances, the warranty is no longer valid
- Where compliance would be unlawful owing to the enactment of a subsequent
law
Actual Total Loss
Property that is lost or is so badly damaged that is has no value left.
Constructive Total Loss
The cost of salvaging the cargo is too high relative to the value saved
Total Loss of Part
The total loss of one shipper’s cargo, without total loss to the other shipments
Particular Average
Partial loss to a specific shipment
General Average
Payment of those losses voluntarily incurred for the safety of the entire venture.
Ship Repairer’s Legal Liability
Covers shipyards for their liability to an owner during repairs
Stevedore’s Legal Liability
Covers land based operations responsible for loading and unloading vessels
Charterer’s Legal Liability
Covers the risks a charterer assumes when contracting the use of a vessel either bare boat time or voyage
Aircraft (Hull) Insurance
divided into the following hull categories:
- Privately owned aircraft, not used for hire or reward
- Commercial aircraft (excluding instruction and rental)
- Commercial aircraft (including instruction and rental)
Hull Coverage “A” - All Risks
Damage covered while the aircraft is on the ground, in motion or not, or while in flight
Hull Coverage “B” - Ground and Taxiing Risks
Damage covered while the aircraft is on the ground or while in motion taxiing
Hull Coverage “C” - Ground Risks Only
Damage covered while the aircraft is on the ground and not in motion
Aircraft is deemed in flight
the time it is moving in an attempt to take-off
until the time it has completed it’s landing roll
Aircraft is deemed in motion
when in flight, moving under it’s own power, propeller or rotor is rotated by its engine power
Three different deductibles (Aviation)
- In Motion deductible
- Moored deductible - applies when aircraft operates on floats or amphibian aircraft, or ski equipped
- Not in Motion deductible
Lay-Up Endorsement
Refund of premium when aircraft is not used for an extend period of time. If a loss is paid that exceeds the premium paid there is no refund
Detached Undercarriage Endorsement
Hull ground risks coverage for wheels, skis, or floats detached from the aircraft and not in use
