Chapter 7 Cargo Insurance

Aims and Requirements 7.1 Scope of Cargo Insurance 7.2 Terms and Coverages of Ocean Marine Cargo Insurance 7.3 London Insurance Institute Cargo Clauses (I.C.C.) 7.4 Cargo Insurance Practice in Import and Export Business 7.5 Insurance Clauses in Sales Contract

Aims and Requirements

Teaching Methods: Discussion, Comparison, Case Study, Team

Study, English Teaching

Aims: To grasp ocean marine cargo insurance; To learn how to write insurance clause.

Key Points: General Average and Particular Average, FPA, WRA, All Risks, ICC, Insurance Clause

The Basic Principle of Insurance

Principle of Insurable Interest ( 保险利益 )Principle of Utmost Good Faith ( 最大诚信 )Principle of Indemnity ( 补偿原则 )Principle of Proximate Cause ( 近因原则 )

7.1 Scope of Cargo Insurance

7.1.1 Risk or Peril 7.1.2 Loss and Expense Case Study

7.1.1 Risk or Peril

Sea Peril (1) Natural

calamities Heavy weather,

lighting, tsunami, earthquake, flood and volcanic eruption etc.

(2) Accidents The carrying vessel

being grounded, stranded, sunk, burnt or in collision, fire, explosion etc.

Extraneous risks(1)General extraneous

risks Theft, fresh or rain water

damage, shortage, leakage, breakage, sweating and heating, intermixture and contamination, hook damage, breakage of packing etc.

(2) Special extraneous risks

War, strike, non-delivery and rejection etc.

Perils are mainly divided into two kinds:

7.1.2 Loss and Expense

Partial LossGeneral AverageParticular Average

Loss

Total loss

Partial loss

Loss

Expense

Expense

Sue and labor charges

Salvage charges

Total Loss

Actual total loss

Constructive total loss

Total Loss

Actual total loss

1. Totally lost;2. So damaged to the

extent that it is without its original shape and validity;

3. No longer be in the possession of the insured;

4. Missing for a certain period of time without any information.

Constructive total loss

1. The actual total loss of cargo is inevitable or unavoidable;

2. The cost of salvage or recovery could have exceeded that the value of the cargo;

3. the insured shall submit to the insurance company the notice of abandonment （委付通知）

Partial LossGeneral Average

--- refers to sacrifices voluntarily made and extraordinary expenses incurred to rescue a ship and its cargo from impeding danger or for the common safety under fortuitous circumstance while it is at sea or at anchor in port.

--- when such a loss occurs, it is paid on a pro rata basis by the ship owner and all cargo owners (General average contribution)

Particular Average

--- refers to a partial loss of the subject matter insured proximately caused by an insured peril, other than a general average loss.

--- The loss should be borne by the party who suffers.

Usually caused The loss is often borne by

Particular Average

Directly by sea perils

The party whose cargo is damaged

General Average

By intentional measures taken

All the benefited parties proportionately

Distinctions

ExpendituresSue and labor charges

--- when the insured cargo suffers natural calamities or fortuitous accidents within the scope of insurance cover, the insured or his agent or any employees pays the expenses caused in saving the insured cargo in order to prevent the losses from further expending. These charges shall be covered by the insurer.

Salvage charges--- when the insured cargo suff

ers a natural calamity or a fortuitous accident within the scope of insurance cover, the third party who has no contracted relations with the insured and the insurer salvages the cargo successfully. The insurer shall pay to the salvor.

--- Principle:" no cure-no pay”

Case Study 1某货轮从天津新港驶往新加坡，在航行途中船舶货舱起火，大火蔓延到机舱，船长为了船货的共同安全，下令往舱内灌水，火很快被扑灭。但由于主机受损，无法继续航行，于是船长雇用拖轮将船拖回新港修理，修好后重新驶往新加坡。这次造成的损失主要有：（ 1） 600 箱货被火烧毁；（ 2） 500 箱货被水浇湿，无其他损失；（ 3） 200 箱货既受热熏损失，又受水渍损失，但未发现任何火烧的痕迹； （ 4） 100 箱货被火烧过且有严重水渍；（ 5）主机及部分甲板被烧坏；（ 6）拖轮费用；（ 7）额外增加的燃油和船上人员工资。试分析上述损失的性质，并指出需投保何种险别，才能取得保险公司的赔偿？

7.2 Terms and Coverage of Ocean Marine Cargo Insurance

7.2.1 Basic Coverage 7.2.2 Additional Coverage 7.2.3 Terms and Coverages of Other Modes of Transportation Cargo Insurance

7.2.1 Basic CoverageBasic coverage is also called main insurance which may be underwritten independently. It is classified into three conditions:

Free fromParticularAverage

F.P.A.F.P.A.

Include F.P.A.

and W.A.

AllAllRisksRisks

With Average

W.A.W.A.

The commencement and termination of basic insurance are usually stipulated by adopting the customary “W/W” (warehouse to warehouse ) clause.

But the policy provides an overriding （溢额） time limit of sixty days after the completion of discharge of the insured goods from the seagoing vessel at the final port of discharge.

The Commencement and Termination of Basic Coverage

Case Study 2

一批货物投保 F.P.A., 载运这批货物的海轮于 5月 3日在海面遇到暴风雨的袭击，使该批货物受到部分水渍，损失货值 1000 元，该货轮继续航行中，又于 5月 8日发生触礁事故，又是该批货物损失 1000元。试问：保险公司如何赔偿？

Case Study 3

某进出口公司向澳门出口坯布 100 包，按合同规定投保 W.P.A ，货物运输途中因舱内食用水管漏水，致使 30 包浸有水渍。保险公司应如何赔偿？

7.2.2 Additional Coverage

Additional coverage can not be covered independently, they shall be underwritten depending on one kind of the basic coverages.

General additional

risks

Special additional

risks

Attention

Theft, Pilferage & Non- delivery (T.P.N.D) c.f. Failure to DeliveryWar RiskStrike Risk (S.R.C.C)On DeckAflatoxin Risk

Commence and termination of Marine War Risk

The insured goods are covered from the time when they are loaded on board the ship or lighter at the port of shipment named in the policy and continue to be covered until they are discharged at the port of destination named in the policy. ( 以水上危险为限 ,waterborne risks)If the cargoes are not discharged from the ship or lighter, then the time of insurance duty shall be limited to 15 days counting from the midnight of the day when the vessel arrives at the port of destination.Strike risk follows the W/W clause too.

Case Study 4

我按 CIF 条件向中东某国出口一批货物，根据合同投保了 W.P.A.plusT.P.N.D 。但在海运途中，因两伊战起船被扣押。尔后进口商因提货不着便向保险公司进行索赔。保险公司是否理赔？应投保何种险别更为合理？

Case Study 5

我按 CIF 出口冷冻食品一批，合同规定投保 F.P.A. plus War Risk and Strike Risk 。货到目的港后恰逢码头工人罢工，港口无人作业，货物无法卸载。不久货轮因无法补充燃料以致冷冻设备停机。等到罢工结束，该批冷冻食品已变质。问这种由于罢工而引起的损失，保险公司是否负责赔偿？

7.2.3 Terms and Coverages of Other Modes of Transportation Cargo Insurance

Overland Transportation Cargo Insurance – Train, TruckAir Transportation Cargo InsuranceParcel Post Insurance

7.3 London Insurance Institute Cargo Clauses (I.C.C.)

The newly revised London Insurance Institute Cargo Clauses (I.C.C) include 6 kinds:

I.C.C.(A)

I.C.C.(B)

I.C.C.(C)

Malicious Damage Clause

Institute Strikes Clause

Institute War Clause

The commencement and termination of I.C.C. follows the customary “W/W” clause too.

7.4 Cargo Insurance Practice in Import and Export Business

7.4.1 To Determine Insurance Amount 7.4.2 To Make an Application and Pay Insurance Premium 7.4.3 To Obtain an Insurance Document 7.4.4 Claim

7.4.1 To Determine Insurance Amount

Insurance amount is the highest amount of indemnity or benefit of an insurance contract and also the basis which the insurer calculates the insurance premium.

The insurance amount under CIF trade term includes:

①Invoice value which is made up of 3 parts, i.e., cost of the goods, amount of freight, insurance premium.

②Markup percentage which is usually 10 percent of the CIF value.

The formula used to calculate the insurance amount under CIF trade terms is shown as follows:

Insurance amount= CIF price× (1+markup percentage)

Under FOB or CFR terms, in order to simplify procedures, foreign trade enterprises usually sign open policies with the insurance company in which an average freight rate and an average insurance premium rate are stipulated. The formula is as follows:If under FOB trade terms

Insurance amount

=FOB price× (1+average freight rate + average premium rate)

If under CFR trade termsInsurance amount

=CFR× (1+average premium rate)

7.4.2 To Make an Application and Pay Insurance Premium

Fill in the application form, state all the description of goods and coverage, pay the premium.

Formula of Insurance Premium computation:

Premium=Insurance Amount × premium ratePremium=CIF price × (1+markup percentage) ×premium ratePremium=FOB price× (1+average premium rate + average

freight rate) ×average premium ratePremium=CFR price× (1+average premium rate) × average

premium rate

7.4.3 To Obtain an Insurance Document

Insurance Policy

Open Policy

Insurance Certificate

Combined Certificate

Endorsement

7.4.4 Claim

To send out a loss noticeTo lodge a claim against the carrier or other responsible partiesTo take reasonable measures to salve and recondition the damaged goodsTo get all claim documents readyRight of subrogation

7.5 Insurance Clauses in Sales Contract

所保的货物 “ ~+on” ，如 insurance on the 100 tons of soft wool ；投 保 的 险 别 “ ~+against” ，如 insurance against all risks ；保额 “ ~+for” ，如 insurance for 110% of the invoice value ；保险费或保险费率 “ ~+at” ，如 insurance at a slightly higher premium, insurance at the rate of 5% ；向保险公司投保 “ ~+with” ，如 insurance with the People’s Insurance Company of China ．

Exercise Translate the following sentence into English: 由卖方根据中国人民保险公司 1981 年 1 月 1

日有关海洋货物运输保险条例，按发票金额的110% 投保一切险和战争险。

To be covered by the Seller for 110% of total invoice value against All Risks and War Risk as per relevant Ocean Marine Cargo Clause of the China Insurance Clauses of January 1, 1981.