1、chapter 5 Insurance 5.1The scope of marine cargo insurance coverage 5.2 Conditions of marine cargo insurance 5.3 London Insurance Institute Cargo Clauses5.4 Insurance Clauses in the contract and forms of Insurance Contract The scope of marine cargo insurance coverage includes :1. Perils of the sea 海
2、上风险5.1 The scope of marine cargo insurance coverage 2. Marine losses 海上损失3. Maritime charges 海上费用4. Extraneous risks 外来风险 Perils of the sea are those caused by natural calamities and fortuitous accidents. Natural calamities: They are caused by the forces resulting from the changes of nature, e.g., v
3、ile weather, thunder, lightning, tsunami, earthquake, flood, etc. Fortuitous accidents: They include accidents resulting from unexpected causes, e.g., ship stranded, striking upon the rocks, ship sinking, ship collision, colliding with icebergs or other objects, fire, explosion, ship missing, etc.1.
4、 Perils of the sea 海上风险 Marine losses are damages or losses of the insured goods incurred by perils of the sea. According to the extent of damage, losses，marine losses fall into two types: total loss and partial loss. Total loss is further divided into actual total loss and constructive total loss;
5、partial loss can be divided into general average and particular average. Average means loss sustained in sea transportation. 2. Marine losses 海上损失 (1)Actual Total Loss: It means that the insured cargo is totally and irretrievably lost or damaged or totally valueless on arrival. Specifically speaking
6、, the loss is actual total loss: when the insured goods are totally destroyed;when the insured goods are so damaged as to be valueless; when the insured is irretrievably deprived of the goods. In case of Actual Total Loss, the insured can get indemnity against the total loss of the insured value of
7、cargo. Total loss 全部损失 (2)Constructive Total Loss: It is estimated that the actual total loss of cargo is inevitable or the cost of salvage or recovery could have exceed the value of the cargo. The cost of salvage or recovery includes the cost to be incurred in recovering or reconditioning the goods
8、 together with the forwarding cost to the destination named in the policy. Total loss 全部损失 (1)General average: It refers to a certain special sacrifice and extra expense intentionally incurred for the general interests of the ship-owner and the owners of the various cargoes aboard the ship. For exam
9、ple, a ship may have stranded and all efforts to refloat it have failed. In order to save the ship from breaking up, the master may decide to jettison part of the cargoes to lighten the ship. The cargo loss sustained by the owner of the goods is General Average. Partial loss 部分损失 According to mariti
10、me law, those interests whose property was saved must contribute proportionally to cover the losses of the one whose property was voluntarily sacrificed. So this loss is borne by all the parties concerned mentioned above in proportion. Partial loss 部分损失The Carrying vessel must really run up against
11、the risk that threatens the safety of the ship and the cargoes. The following conditions of G.A. must be provided with: The risks must be real and actually existed. If mistakes are made, the underwriters shall decline the payment. Partial loss 部分损失The sacrifice of general average and the expenses pa
12、id must be reasonable. ”Reasonable” means that the master of a vessel must act reasonably when making a sacrifice for preserving the property. And any expenses incurred must be reasonable. The sacrifice of general average must be a willing and intentional action. ”Willing and intentional” means that
13、 the action of making a sacrifice is intentionally made on willingness rather than the orders of others. The sacrifice and expenses must be extraordinary in natureThe sacrifice and expenses are made for the benefit of all parties.The purpose of the sacrifice and expenses is to save the ship, cargo a
14、nd freight and the action should be successful in saving the ship and cargo. Partial loss 部分损失 (2)Particular average: It refers to the partial loss of cargo or ship resulting from the risks within the scope of insurance coverage. When there is a particular average loss, other interests in the voyage
15、 dont contribute to the partial recovery of the one suffering the loss. The cargo owner whose goods were damaged or lost should refer to his insurance company, if his policy covers the specific type of loss suffered. Partial loss 部分损失 Sue and Labor charges: When the insured cargo suffers natural cal
16、amities 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 expanding. The insurer is held responsible to compensate for such charges. 3. Maritime charg
17、es 海上费用 Salvage charges: When the insured cargo suffers natural calamities or fortuitous accidents within the scope of insurance cover, the third party who has no contracted relations with the insured and the insurer salvages the cargo. According to the relative laws, the salvor shall be paid. The e
18、xpenses paid to the third party are called salvage charges. But there is a principle, i.e., “no cure-no pay”.3. Maritime charges 海上费用 Extraneous risks are risks caused by extraneous reasons, including general extraneous risks and special extraneous risks. General extraneous risks: It includes theft
19、or pilferage, fresh and rain water damage, shortage, leakage, sweating and heating, intermixture and contamination, taint of odor, hook damage, breakage of packing, rusting, etc. Special extraneous risks: It includes war risks, strikes, non-delivery of cargo, refusal to receive cargo, etc4. Extraneo
20、us risks 外来风险1. Basic coverage and Additional coverage 5.2 Conditions of marine cargo insurance2. Exclusions of basic coverage3. Commencement and Termination of Insurance Duty According to Peoples Insurance Company of China Ocean Marine Cargo Clauses, the insurance is mainly classified into two grou
21、ps: Basic coverage and Additional coverage. The applicant can only purchase Basic coverage. But Additional Risks cannot be purchased individually. 1. Basic coverage and Additional coverage 1. Basic coverage and Additional coverage (1) Free from particular average (F.P.A.) (2) With particular average
22、 (W.P.A.) (3)All risks Actual total loss or constructive total loss of the whole consignment hereby insured caused in the course of transit by natural calamities, such as vile weather, thunder and lightning, etc. Total or partial loss caused by accidents-the carrying vessel being grounded, stranded,
23、 sunk, or in the collision with floating ice or other objects, as well as fire or explosion. Partial loss caused by bad weather, lightning, and/or tsunami, etc., where the conveyance has been grounded, stranded, sunk, irrespective of whether the event or events to take place before or after such acc
24、idents. (1) scope of F.P.A. includes:Basic coverage Partial or total loss consequent on falling of entire package or packages into sea during the process of loading, unloading or transshipment. Reasonable cost incurred by the insured in salvaging the goods or preventing or minimizing a loss recovera
25、ble under the policy, providing that such cost shall not exceed the sum insured of the goods saved. Special charges arising from loading, unloading, warehousing and forwarding of the goods at an intermediate port or refuge when conveyance meets natural calamity and fortuitous accidents. Sacrifice in
26、 and contribution to general average, and salvage charges resulting from the above mentioned accidents as well as other reasonable expenses in salvaging the cargoes from perils. Under the carriage contract “both to blame collision” clause, such proportion of loss sustained by the ship owners as is t
27、o be reimbursed by the cargo owner. The above-mentioned scope indicates that F.P.A. doesnt cover partial losses and expenses caused by Natural calamity. Aside from the risks covered under the F.P.A. and W.P.A. conditions as above, this insurance also covers all risks of losses or damage to the insur
28、ed goods whether partial or total, arising from general external causes in the course of transit.(3)All risks As above-mentioned, this kind of risk cant be covered independently; they shall be covered depending on one kind of the basic risks. According to the nature of goods insured, the cargo owner
29、 may choose any of the three basic covers. If more protections are needed, he may further insure his goods against one or several additional risks.Additional coverage Risk of theft, pilferage and non-delivery (TPND) Risk of theft and pilferage refers to the risk against the cargos being stolen in tr
30、ansit of voyage. Risk of non-delivery refers to the risk against loss of complete packages due to improper unloading or for some unknown reasons. Risk of fresh water and/or rain damage Risk of shortage General additional risks Risk of intermixture and contamination Risk of clash and breakage Risk of
31、 taint of odor Risk of sweat and heating Risk of hook damage Risk of breakage of packing Risk of rust General additional risks Special additional risks differ from general additional risks. The special additional risks cover loss or damage caused by some special extraneous reasons such as political
32、events, military affairs, national policies and acts, and administrative measures. Special additional risks mainly include: Special additional risks War risks Strike risks On deck risks Rejection risks Aflatoxin risks Failure to delivery Strike, riot and civil Commotion (SRCC) Special additional ris
33、ks Exclusions refer to losses and expenses for which the insurance company declares clearly not to be responsible. Exclusions of F.P.A., W.P.A. and All Risks include: (1) Loss or damage caused by intentional act or fault of the insured; (2) Loss or damage due to the responsibility of the consignor;2
34、. Exclusions of basic coverage (3) Inferior quality or storage in quantity before the commencement of the insurance duty; (4) Natural losses, inherent vice or nature of the insured goods; (5) Loss of the market price of the insured goods; (6) Loss due to delay in transportation and any expenses aris
35、ing there from. (1)Commencement and Termination of Basic Insurance The commencement and termination of basic insurance are usually stipulated by adopting the customary “W/W” clause. (2)Commencement and termination of marine war insurance .The insured goods are covered from the time when they are loa
36、ded on board the ship or lighter at the port of shipment named in the policy 3. Commencement and Termination of Insurance Dutyand continue to be covered until they are discharged at the port of destination named in the policy. If the cargoes are not discharged from the ship or lighter, then the time
37、 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. The Chinese companies usually adopt CIC clause, but the foreign firms adopt ICC clause. The newly revised London Insurance Institute Cargo Clauses include 6 kinds:
38、 ICC A; ICC B; ICC C; Institute War Clause Cargo; Institute Strikes Clause Cargo; Malicious Damage Clause.5.3 London Insurance Institute Cargo Clauses1.Insurance Clause in the contract 2.Examples of insurance clause in contracts3.Forms of Insurance Contract5.4 Insurance Clauses in the contract and f
39、orms of Insurance Contract Insurance clause mainly includes: The insurance coverer (who shall cover the insurance，the seller or the buyer) The insurance company and the insurance clauses (CIC clause or ICC clause)1. Insurance Clause in the contractThe insurance conditions Total amount insured Calcul
40、ation of insurance amount and premium Insurance amount=CIF price (1 + markup percentage) Premium=insurance amount premium rateExample A Chinese company exported his goods to an American trader. The contract stipulates: quantity is 100 M/TS, and US$1000 per metric ton CIF New York. The seller covered
41、 W.P.A. and Shortage for the invoice value plus 10%. The premium rate is 0.3% and 0.2% respectively. Please calculate the insurance amount and the premium payable to the insurer.Solution: The insurance amount=CIF price (1+ markup percentage) = 1000100 (1+10%) =US$110,000 Premium = Insurance amount p
42、remium rate = 110,000（0.2%+0.3%）=US$550 (1) Insurance to be effected by the seller against F.P.A. for invoice value plus 10% subject to the relevant Ocean Marine Cargo Clauses of the Peoples Insurance Company of China. (2) The shipment under contract No.234516 is to be covered by the seller against
43、W.P.A. plus War risk for 150% of invoice value with PICC; extra premium shall be for buyers account. (3) Insurance to be effected by the buyer.2. Examples of insurance clause in contractsInsurance Policy 保单 It is the most widely used insurance document. Contents of the insurance policy usually inclu
44、de: (1) Names and addresses of the insured and the insurer; (2) Subject matter insured; (3) Kinds of risks and accidents covered;3. Forms of Insurance Contract (4) Commencement date of insurance as well as time limit; (5) Insurance amount; (6) Insurance premium; (7) Date and place of taking out the
45、policy; (8) Signature of the insurer; (9) Words evidencing the establishment of the insurance relationship between the insured and insurer; (10) Particulars of the insured goods; (11) Coverage, place of claim and satisfaction and declaration of the insurer that the insured goods will be compensated
46、in case of any loss or damage due to any risk within the scope of insurance cover; (12) Rights and obligations of the two parties (on the back of the insurance policy).Insurance Certificate 保险凭证 It is a kind of simplified and short insurance policy, and the rights and obligations of two parties are
47、omitted. But it has the same legal validity as the insurance policy. There is an agreement between the insured and the insurance company. The particulars of these shipments should be supplied to the insurance company later on in the form of shipment advices which include the names of cargoes, quanti
48、ties, insurance amounts, kinds of conveyance, ports of shipment, destinations, dates of shipment, etc. Open policy 预约保单 It is a convenient method for insuring the goods where a number of consignments of similar export goods are intended to be covered. This is a certificate which combines the invoice
49、 with the insurance policy. It is the simplest insurance certificate in use. When the goods are exported to Hong Kong, and some countries in Southeast Asia, the insurance company sometimes adds the coverage, insurance amount and serial number of insurance on the commercial invoice which is made out by a foreign trade company. Combined Certificate 联合凭证
