Chapter 4 Ocean Marine & Aviation Flashcards
4 other methods covered under Marine Cargo Insurance Policy
Air
Land
Rail
Vessels operated on inland waterways and lakes
Who has insurable interest in cargo shipped
Sellers
Buyers
Carriers
Financial Institutions
Which documents are to be reviewed that relate to the shipment for proper determination of existence of insurable interest
Terms of sale
Bills of Lading
Buyers and sellers may have ownership interest what does the broker need to focus on identifying when reviewing terms of sale
INCOTERMS - under which goods are being shipped
Method of payment
What does INCOTERMS address
Point in transit at which seller has fulfilled obligation
Which of buyer or seller is responsible for carriage from one point to another
Which buyer or seller is responsible for the insurance
Where will method of payment be addressed
Terms of sale
Who has insurable interest when goods purchased by loans or credit
Financial Institutions
Sellers
Cash in advance
when buyer is not well know to seller or the order involves custom manufacture of special type of goods
Open account
Charge account where buyer arranges settlement at regular intervals
Usually made when customers are reliable
Draft
payment on presentation (sight draft) or at a specified future
date (time draft)
Letter of credit
Most common
Seller agrees to provide buyer with goods pending receipt of letter credit
Bill of Lading
Document issued by carrier responsible for transporting or forwarding the goods
Who issues the Bill of Lading
The carrier
Bill of Lading serves 3 functions
As a contract of carriage between ship-owner and shipper
As a receipt of goods
As a document title to the goods
includes description of person to who goods are being delivered
Straight Bill of Lading
Carrier instructed to deliver goods to named consignee only
Order Bill of Lading
Carrier instructed to deliver the property to the order of named consignee
Released Bill of Lading
No specific value has been declared
Valued Bill of Lading
Indicates the value of goods declared by shipper
On Deck Bill of Lading
Shipper request goods to be on deck to save premium
Stowed at shippers risk, carrier not liable for damage
Optional Stowage Bill of Lading
Carrier can store cargo wherever they see fit
Received Shipment Bill of Lading ( Dock Receipt)
Proof of evidence the goods were received by the carrier
Clean Bill of Lading
Declares no indications of problems with condition of cargo when accepted for carriage
On Board Bill of Lading
Confirms goods were loaded on board the vessel
Causes of loss that carriers are not responsible for
Fire - unless caused by the carrier
Perils, danger, accidents of the sea
Acts of God
Acts of war
Acts of public enemies
Strikes, riots and civil commotions
Cargo Insurance can be purchased 2 ways
Individual Policy - used for single shipments
Open policy - used large volumes of shipments over seas
Characteristics of an Open Policy
Sums insured are not stated
Limits are established for any one location
Stowed under deck may have separate limit
Can insure goods of every description
Can be issued with no expiry date
Generally no expiry date
Premium rate stated on policy
What indemnity is used to Ocean Marine Cargo policy
Agreed value on cargo
Types of losses can be insured under ocean marine policy
Value of cargo
Shipping costs or freight / inland freight
Other expenses
Export packing
Insurance premiums
Duties and taxes
Levied at point of entry
plus 10%
Why is there not much concern for settlements to exceed the value of property in marine insurance
Insured usually has a limited ability to create deliberate loss
Valuation clause helps to avoid unrealistic values
What advantage is there using percentage insured valued method for a cargo marine claim
When total loss, amount paid is amount of insurance purchased
On partial loss, only immediate market value needs to be known
Percentage loss in the market and amount of insurance determine the amount of insured claim
What 3 clauses is cargo risk coverage available
Institute Cargo Clauses A - All risks
Institute Cargo Clauses B - Named Perils
Institute Cargo Clauses C- Named Perils
Transit Clause
Coverage for cargo from the time it leaves the warehouse until the time it reaches its destination
Termination of Contact or Carrier Clause
Termination when there are circumstances beyond the control of the insured
Terminated at port or place other then the destination named on policy
Forwarding Charges Clause
Any extra charges properly and reasonably incurred in unloading and storing.
Change of Voyage Clause
Insurer agrees to continue coverage as long as prompt notice was given to insurer and an additional premium may be required
Insurable Interest Clause
Only parties that have an insurable interest in the goods at time of loss will be entitled to payment
Lost or not lost basis
Coverage applies even if the property already had been lost at time policy was negotiated provided that:
Insured did not know of loss
Insured had no reason to suspect a loss
Coverage for Ocean Marine Policy can be limited by
Policy exclusions
Warranties that are either written in contract or acknowledged in law as being implied
Exclusions found in all Institute Cargo Clause
Unseaworthiness and unfitness exclusion clause
Must be properly crewed and fueled
Strikes, lockouts, labour disputes
War risks
Discharged over side at final port
2 types of warranties available under Ocean Marine Cargo Insurance
Express warranties - Agreement that all facts relating to risk are true or have/shall be done
Implied warranties- Don’t appear on policy wordings but understood by parties present are binding
Implied warranties include
Legality- implied venture is legal
No delay
No deviation
2 statutory statutory exceptions for breach of warranty
Owing to change in circumstance, warranty is no longer applicable
When compliance would be unlawful
3 types of total loss under marine policy
Actual Total Loss - property totally lost or badly damaged there is no value left
Constructive Total Loss- cost of salvaging is too high relative to value saved
Total loss of a part- Total loss to one shippers cargo without total loss to the other shipments
2 types of partial losses
Particular Average- partial loss to specific shipment other then the general average
General Average- losses voluntarily incurred for safety of entire venture
Insured can elect coverage based on following cargo losses
Total losses only
Total losses with provision to cover partial losses
Percentage of loss
All partial losses
7 factors considered by underwriters for cargo insurance in determining whether to insure particular exposure or terms and conditions
Carriers used in transporting cargo
Experience of ship owner - shipper
Route which ships will operate
Condition of harbors
Type of cargo insured
Perils to be insured against
Method of packing
Issues relating to susceptibility of cargo
Damage through breakage, leakage, sweating, combustion
Theft and pilferage
Special trade conditions
When is hull insurance required
When clients who own, operate or charter any kind of marine hull
Running down clause
Provides collision loss to other vessels
Policy which covers third party liability for injury or damage
Protection and indemnity clause (P and I )
Ship Repairer’s Legal Liability
Covers shipyards for repair to vessels while in their care, custody and control
Stevedore’s Legal Liability
Covers land based operations for loading and unloading vessels
3 air craft hull categories
Privately owned aircraft, not used for reward or hire
Commercial aircraft (excluding instruction and rental)
Commercial aircraft ( including instruction and rental)
The ministry of transport (M.O.T.) is often called
The police in the air
Aircraft (Hull) coverages available on what basis
Hull coverage A - All risks
Hull coverage B- ground and taxiing Risks
loss only while on ground or in motion
Hull coverage C- Ground risk only
on ground and not in motion
Aircraft is in motion when
It is in flight
It is moving under its own power
A propeller or a rotor on the aircraft is caused to be rotated by the engine power
3 different deductible amounts under Aviation (Hull) Policy
In motion deductible
Not in motion deductible
Moored deductible
Insurer requires how many days of its receipt of proof of loss under an aviation policy
30 days
Lay-up Endorsement eligibility for refund
Endorsement must have been purchased at the inception date of policy
Reports of lay-ups must be provided to insurer within 90 days or expiry of policy
Usual lay-up clause is for 30 days and refund is withheld until policy expires
Detached Undercarriage Endorsement
Coverage for wheels, skis or floats when detached from the air craft when not in use
liability limit for private business/pleasure aircrafts based on
Maximum permissible take of weight
if weight exceeds 50000 Lbs minimum of $300 000 per passenger seat must be purchased
Liability Coverage F- Bodily Injury and property damage (excluding passengers)
Coverage extends to hangers leased or occupied
Additional $25000 coverage per occurrence provided for labour and equipment required to deal with emergency situations
Foaming runway for emergency landing
Exclusions for Aviation ( Hull ) policy
War, seizure, high-jacking
Unapproved pilot
Exclusions not applied for Aviation ( Hull) policy
Operated by a pilot providing an approved pilot with upgrading flight instruction
Pilot employed by Transport Canada
When not in flight, aircraft started and operated by competent person
Pilots Record and REoirt
Class of license and endorsements
Total hours as pilot in command
Record of all accidents in the previous 5 years
Similarities between Marine and Cargo Insurance
Liability of carrier limited by law
Valuation
Coverages
Exclusions
Rating
Non-owned Liability
Businesses that don’t own the aircraft but whose employees may fly while engaged in business
Contingent Liability
Liability for a business that does not own the aircraft but rent charter or borrow for company business
