Chapter 4 – Ocean Marine and Aviation Insurance

Question 1

Ocean Marine Cargo Insurance

Answer 1

Most commercial property insurance policies covering property away from the insured’s premises exclude coverage for such property

Question 2

following documents must be reviewed to determine who has an insurable interest

Answer 2

Bills of Lading

Terms of Sale/Contract

Question 3

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

Answer 3

• The INCOTERM under which the goods are being shipped

- The method of Payment for the goods

Question 4

INCOTERMS identify

Answer 4

• 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

Question 5

Financial Institutions

Answer 5

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.

Question 6

Cash in Advance

Answer 6

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.

Question 7

Open Account

Answer 7

Payment arranged from buyer monthly or quarterly. Only arranged with very reliable customers and with consumer goods that have a ready market.

Question 8

Draft

Answer 8

Either on presentation (sight draft) or at some specified future date (time draft),
widely used in international commerce.

Question 9

Letter of Credit

Answer 9

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.

Question 10

Sellers Interest

Answer 10

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.

Question 11

Bills of Lading

Answer 11

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

Question 12

Strait Bill of Lading

Answer 12

Carrier is instructed to deliver the good to the named consignee only. Used when the good have been paid for by the consignee

Question 13

Order Bill of Lading

Answer 13

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.

Question 14

Short Form Bill of Lading

Answer 14

Does not include all the obligations and responsibilities of both parties.

Question 15

Released Bill of Lading

Answer 15

No specific value has been declared by the shipper to the carrier.

Question 16

Valued Bill of Lading

Answer 16

Value of goods as declared by the shipper, the carrier is liable for this amount in the event of a loss

Question 17

On Deck Bill of Lading

Answer 17

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

Question 18

Optional Stowage Bill of Lading

Answer 18

Gives the carrier option to stow cargo where ever it sees fit

Question 19

Received for Shipment Bill of Lading

Answer 19

Also called Dock Receipt, evidence that the good were received by the carrier for shipment

Question 20

Clean Bill of Lading

Answer 20

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.

Question 21

Count Bill of Lading

Answer 21

Shows the actual number of units being shipped, evidence that the carrier received all such units for shipment.

Question 22

On Board Bill of Lading

Answer 22

Confirms receipt of the goods, and that they were loaded on the vessel

Question 23

carriers are not responsible for the following

causes of loss:

Answer 23

• 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

Question 24

Individual Policy or Certificate

Answer 24

Used for single shipments or when goods are sent on an irregular basis.

Question 25

Open Policy

Answer 25

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

Question 26

Coverage is terminated when, owing to circumstances beyond the control of the insured:

Answer 26

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

Question 27

Lost or Not Lost Provision

Answer 27

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.

Question 28

Coverage may be limited by:

Answer 28

• Policy exclusions

- Warranties that are either explicitly written in the contract or that are acknowledged in law as being implied

Question 29

Unseaworthyness and Unfitness Exclusion Clause

Answer 29

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

Question 30

Strikes Exclusion Clause

Answer 30

Institute Strike Clause (Cargo) can be added to the policy to provide this coverage.

Question 31

War Exclusion Clause

Answer 31

Can be insured under the Institute War Clauses (Cargo) to the policy.

Question 32

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:

Answer 32

• 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

Question 33

Express Warranties

Answer 33

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

Question 34

Implied Warranties

Answer 34

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.

Question 35

An underwriter may try to avoid liability as form the date of the breach, the following two statutory exceptions apply:

Answer 35

• 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

Question 36

Actual Total Loss

Answer 36

Property that is lost or is so badly damaged that is has no value left.

Question 37

Constructive Total Loss

Answer 37

The cost of salvaging the cargo is too high relative to the value saved

Question 38

Total Loss of Part

Answer 38

The total loss of one shipper’s cargo, without total loss to the other shipments

Question 39

Particular Average

Answer 39

Partial loss to a specific shipment

Question 40

General Average

Answer 40

Payment of those losses voluntarily incurred for the safety of the entire venture.

Question 41

Ship Repairer’s Legal Liability

Answer 41

Covers shipyards for their liability to an owner during repairs

Question 42

Stevedore’s Legal Liability

Answer 42

Covers land based operations responsible for loading and unloading vessels

Question 43

Charterer’s Legal Liability

Answer 43

Covers the risks a charterer assumes when contracting the use of a vessel either bare boat time or voyage

Question 44

Aircraft (Hull) Insurance

Answer 44

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)

Question 45

Hull Coverage “A” - All Risks

Answer 45

Damage covered while the aircraft is on the ground, in motion or not, or while in flight

Question 46

Hull Coverage “B” - Ground and Taxiing Risks

Answer 46

Damage covered while the aircraft is on the ground or while in motion taxiing

Question 47

Hull Coverage “C” - Ground Risks Only

Answer 47

Damage covered while the aircraft is on the ground and not in motion

Question 48

Aircraft is deemed in flight

Answer 48

the time it is moving in an attempt to take-off

until the time it has completed it’s landing roll

Question 49

Aircraft is deemed in motion

Answer 49

when in flight, moving under it’s own power, propeller or rotor is rotated by its engine power

Question 50

Three different deductibles (Aviation)

Answer 50

• In Motion deductible
• Moored deductible - applies when aircraft operates on floats or amphibian aircraft, or ski equipped
• Not in Motion deductible

Question 51

Lay-Up Endorsement

Answer 51

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

Question 52

Detached Undercarriage Endorsement

Answer 52

Hull ground risks coverage for wheels, skis, or floats detached from the aircraft and not in use