• to the consignee's or other final warehouse or place of storage at the destination named in the policy,
  
   
• to any other warehouse or place of storage, whether prior to or at the destination named in the policy, which the assured elect to use either for storage other than in the ordinary course of transit or for allocation or distribution,
  
   
• on the expiry of 60 days after completion of discharge overside from the overseas vessel at the final port of discharge (or the 30 days limit applies in the case of air freight),

whichever shall first occur.

In certain countries, the insurance company may have the marine extension clauses to override the main clauses, for example the Fifteen (15) Days Clause, in which the insurance coverage terminates on the expiry of 15 days after completion of discharge overside from the overseas vessel at the final port of discharge.

Under the American Institute Clauses, the number of days of the expiry of insurance coverage after completion of discharge overside from the overseas vessel at the final port of discharge is 15 days (or 30 days if the destination to which the goods are insured is outside the limits of the port)

The general guiding rate of the insurance premium is 1% of the amount insured. The premium rates may vary, for example, from 0.5% to 2.5% or more depending on factors such as:

• Type of goods ---
  The goods that are more susceptible to damage demand a higher premium. For example, glassware has a higher premium rate than the hammer.
  
  
   
• The country and distance of destination ---
  Countries with a history of higher risks of loss or damage or at a war zone require a higher premium.
  
  The longer the distance of voyage, the greater is the risks of loss or damage, thus a higher premium rate.
  
  
   
• Value of the goods ---
  The higher the value of the goods, the higher the amount the insurer will compensate in the event of loss or damage, thus a higher premium rate. For example, the precious jewellery has a higher premium rate than costume jewellery.
  
  
   
• Mode of transportation ---
  Generally, ocean freight has a higher premium than land freight, and land freight has a higher premium than air freight. Air freight, in general, has better cargo security than ocean and land freight and it is faster to reach the destination by air, thus there is less exposure to the risks of loss or damage.
  
  
   
• The type of risks covered ---
  The more risks are covered, the higher the premium. In the Institute Cargo Clauses (A), (B) and (C), the Clauses (A) have the greatest extent of cover, followed by the Clauses (B), and then the Clauses (C). Any endorsement of the insurance clauses requires payment of an additional premium.
  
  
   
• Container or break-bulk shipment ---
  Containers provide better protection for the cargo. Therefore, container shipments have a lower premium than break-bulk shipments.
  
  
   
• Type of packing ---
  The better the goods are protected, the lower the premium. The risks of insufficient and unsuitable packing have been excluded in the new Institute Cargo Clauses.

In the trade contract terms FOB and CFR, the insurable interest transfers from the exporter to the importer at the time the goods pass over the ship's rail. It is very important that the exporter provides the details of the shipment to the importer promptly, so that the insurance can be arranged on time.

In practice, it is not uncommon that the importer arranges for insurance after the vessel has left the port of origin in the FOB and CFR terms. While it is the responsibility of the importer to arrange the insurance, the exporter may suffer loss if the goods are damaged before the insurable interest is transferred. As such, the exporter may insure the goods from the warehouse to the loading on board the vessel to overcome the contingency, without letting the importer know.

If the goods are exported on the open account basis where no letter of credit (L/C) is involved, there is a risk that the importer may reject the shipment if the goods are damaged on arrival. Contingency insurance may minimize the exporter's loss in such a circumstance. It is possible for the exporter to insure the goods from warehouse to warehouse. However, if the importer insures the goods too and claims the damage, the exporter cannot file for claims as he/she no longer has the insurable interest, and the exporter may not be able to provide the supporting insurance claim documents used by the importer to substantiate losses.

The assured is obligated in the policy to do everything to minimize the loss or damage, to file claims against the carrier or any other party who could be responsible for the loss or damage, and to notify the insurer or claim agent immediately of the loss or damage. The insurer or claim agent then appoints a marine surveyor (the adjuster) to inspect the subject matter insured and report on the cause of the loss or damage, the value of the cargo, and the extent of damage.

In some cases, the surveyor is named in the policy and the policy may require that request for survey to the surveyor or that claims against the carrier or any other party be made within a specified period of time after discharge of the goods from the vessel.

The surveyor issues a Certificate of Loss (Certificate of Survey), accompanied usually by the report of findings, to the consignee. The consignee may be required to pay a surveyor's fee, which may be refunded by the insurer or claim agent if the loss is recoverable under the policy.

When making an insurance claim, the claimant (the assured) usually is required to submit the following documents:

• Original insurance policy or insurance certificate ---
  It proves that the claimant has the insurable interest. It helps the insurer or claim agent to establish that the cargo in question is the subject matter insured and to check the amount and risks covered.
  
  
  
• Original bill of lading or other transport document ---
  It evidences the contract of carriage where the insurer or claim agent may take action against after paying the claimant. It helps the insurer or claim agent to determine that the claim is not the cause of a foul bill of lading, for example, a bill of lading with the "insufficient packing" notation where such risk is excluded in the coverage.
  
  
   
• Commercial invoice ---
  It helps the insurer or claim agent to determine the percentage of loss in a partial loss. It may prove that the cargo in question is the subject matter insured.
  
  
   
• Packing list ---
  It determines where in the consignment the loss or damage occurred. It may point to the cause of damage that might be excluded in the coverage, for example unsuitable packing.
  
  
   
• Certificate of Loss (Certificate of Survey) ---
  It shows the cause, value and extent of the loss or damage. It is issued by the marine surveyor appointed by the insurer or claim agent.
  
  
   
• The landing account or weight notes (notes on weight) at destination ---
  It helps the insurer or claim agent to identify where the loss or damage may have actually occurred. The records from the carrier or stevedoring contractor at destination may pinpoint that the loss or damage has happened on the vessel, in the container, during unloading, or while in the dock warehouse.
  
  
   
• Any correspondence with the carrier or any other party who could be responsible for the loss or damage ---
  It helps the insurer or claim agent to verify that the Not to Inure Clause is not violated.
  
  
   
• Master's protest ---
  A written declaration by the ship's master giving details of disaster, accident or injury at sea. This document is particularly important when a general average claim is involved.

Subrogation

 

When the assured is fully paid in an insurance claim, he/she normally signs a subrogation form giving the insurer the rights to the lost or damaged cargo. It is only then the insurer may take actions against the carrier or any other party who could be responsible for the loss or damage.

While the payment in a particular average claim (either partial or total loss) usually is prompt, in a general average claim it may take many months. Referring to the general average sacrifice, the appointed marine surveyor (the adjuster) carefully calculates the value of each shipment---the wholesale price of each type of goods less the applicable customs duties, taxes and other charges---in proportion to the total value of the shipments and vessel.

Cargo owners whose goods are fully insured---the amount insured equals or exceeds the value of the goods---the insurers may put up immediately a general average guarantee to cover the contribution in the general average sacrifice, so that the cargo owners may obtain the goods from the carrier instead of waiting for many months for the settlement date. In some cases, the assured is required to post a general average bond in addition to the insurer's guarantee.

The insurers are liable for the cost of the claim in a general average claim as provided in all three basic types of policies in the old and the new Institute Cargo Clauses.

In the case of uninsured goods, the cargo owners must wait until the settlement date to obtain the goods from the carrier, unless the cash is put up to cover their shares of the contribution. Still, it may be weeks before the amount of the individual contribution is available.

• Amount of Insurance Coverage
• Comparison of Institute Cargo Clauses (A), (B) and (C)

• Terminology in the Institute Cargo Clauses

• Principles of Cargo (Marine) Insurance