Chapter6Chapter6

Cargo InsuranceCargo Insurance

Basic concepts of insuranceBasic concepts of insurance

The definition of riskThe definition of risk Uncertainty, probability and chanceUncertainty, probability and chance

The components of riskThe components of risk Hazard: physical, morale, moralHazard: physical, morale, moral perilperil LossLoss

The basic principles of insuranceThe basic principles of insurance

1. principle of insurable interest1. principle of insurable interest A person has an "insurable interest" in A person has an "insurable interest" in

something when loss or damage to it would something when loss or damage to it would cause that person to suffer a financial loss or cause that person to suffer a financial loss or certain other kinds of losses.certain other kinds of losses.

legal, financial interest, definite: present and legal, financial interest, definite: present and expectedexpected

the principle which requires a person effecting the principle which requires a person effecting insurance to have a legally recognized insurance to have a legally recognized relationship to the subject matter of the relationship to the subject matter of the insuranceinsurance

2. principle of utmost good of faith (uberrimae fidei)2. principle of utmost good of faith (uberrimae fidei) the duty of good faith imposed on both parties to an insurthe duty of good faith imposed on both parties to an insur

ance contract to disclose all material facts. ance contract to disclose all material facts. RepresentationsRepresentations Oral or written form, important informationOral or written form, important information warrantywarranty Express: promissory(future) & affirmative(past and preseExpress: promissory(future) & affirmative(past and prese

nt) nt) Implied: practice and customsImplied: practice and customs waiver and estoppel (mainly for the insurer)waiver and estoppel (mainly for the insurer)

3.principle of indemnity 3.principle of indemnity the placing of the insured in the same the placing of the insured in the same

financial position after a loss as he was in financial position after a loss as he was in immediately prior to the occurrence.immediately prior to the occurrence.

restrictions: restrictions: Actual loss, sum insured, insurable Actual loss, sum insured, insurable

interestinterest

4.principle of proximate cause 4.principle of proximate cause the direct cause of a loss. the direct cause of a loss. identification of proximate causeidentification of proximate cause Single cause; multiple causeSingle cause; multiple cause

Scope of cargo insuranceScope of cargo insurance

Ocean marine cargo insuranceOcean marine cargo insurance Overland transportation cargo insuranceOverland transportation cargo insurance Air transportation cargo insuranceAir transportation cargo insurance Parcel post insuranceParcel post insurance 1. Ocean marine cargo insurance1. Ocean marine cargo insurance 1) risk1) risk Perils of the sea 海上风险 / 海难

a. Natural calamities: 自然灾害 Caused by the forces resulting from the changes of nature, e.g. vile weather, thunder, lightning, tsunami, earthquake, flood, etc.

b. Fortuitous accidents: 意外事故 The accidents resulting from unexpected causes, the carrying conveyance being grounded, stranded, or in collision with floating ice or other objects, as well as fire or explosion.

Extraneous risksExtraneous risks 外来风险外来风险 a.General extraneous risks （一般外来风险） :

theft, shortage, leakage, dashed by fresh and raitheft, shortage, leakage, dashed by fresh and rain water, sweating and heating, intermixture and n water, sweating and heating, intermixture and contamination, taint of odor, hook damage, breacontamination, taint of odor, hook damage, breakage of packing, rusting, etc.kage of packing, rusting, etc.

b.Special extraneous risks （特殊外来风险） :

on deck, war, strikes, failure of delivery, rejection,on deck, war, strikes, failure of delivery, rejection, etc. etc.

2. Ocean losses and expenses 2. Ocean losses and expenses Total loss 全部损失 It is classified into 2 kinds: Actual Total Loss: 实际全损 The insured subject matter is totally and irretrievab

ly lost. Constructive Total Loss: 推定全损 It is estimated that the actual total loss of cargo is i

nevitable or the cost of salvage or recovery could have exceed the value of the cargo.

Partial loss 部分损失 General Average: 共同海损 It refers to a certain special sacrifice and extra expen

se intentionally incurred for the general interests of the ship owner, the insurer, and the owners of the various cargoes abroad the ship.

Particular Average: 单独海损 It means that a particular cargo is damaged by any c

ause and the degree of the damage does not reach a total loss, i.e., only a partial loss, which shall be borne by the owner of this individual consignment.

ExpensesExpensesSue and labor charges: 施救费用 施救费用 The reasonable expenses to save, protect, or The reasonable expenses to save, protect, or

reduce the loss by insured and the policy benefireduce the loss by insured and the policy beneficiary. It shall be covered by the insurer. ciary. It shall be covered by the insurer.

Salvage charges: 救助费用 救助费用 The expenses of the third party to save the cargThe expenses of the third party to save the carg

o and the ship successfully. o and the ship successfully. According to the relative laws, the insurer shall pAccording to the relative laws, the insurer shall p

ay to the salver. But there is a principle, i.e., “no ay to the salver. But there is a principle, i.e., “no cure-no pay”.cure-no pay”.

Terms and coverage of ocean Terms and coverage of ocean marine cargo insurance in Chinamarine cargo insurance in China

Basic coverage and termsBasic coverage and terms Basic risks 三大基本险别： There 3 conditions: F.P.A. Free from Particular Average ( 平安险 ) W.A. or W.P.A With Average, With Particular Average

（水渍险） All risks ( 一切险 )

F.P.A.8 circumstances:8 circumstances:

(1)(1) Actual total loss or constructive total loss from natural calamity, Actual total loss or constructive total loss from natural calamity, i.e.i.e. vile weather, bore, earthquake, floodvile weather, bore, earthquake, flood……

The Insured must authorize the insurer if it is the constructive total loss.The Insured must authorize the insurer if it is the constructive total loss.

(2) Total loss or partial loss caused by fortuitous accidents, (2) Total loss or partial loss caused by fortuitous accidents, i.e.i.e. stranded, stranded, collision with floating ice or other objects, fire or explosion……collision with floating ice or other objects, fire or explosion……

(3) Partial loss caused from natural calamity again before and after fort(3) Partial loss caused from natural calamity again before and after fortuitous accidents uitous accidents

(4) Total or partial loss of one or several pieces of cargo dropping into t(4) Total or partial loss of one or several pieces of cargo dropping into the sea when shipment or transshipment.he sea when shipment or transshipment.

(5) Reasonable expenses to save, protect, or reduce the lo(5) Reasonable expenses to save, protect, or reduce the loss by insured, but no more than the insured value. ss by insured, but no more than the insured value.

(6) Special expenses of unloading, storage and shipping in (6) Special expenses of unloading, storage and shipping in harborage after ship getting perils of the sea.harborage after ship getting perils of the sea.

(7) The sacrifice, sharing and the charges of general avera(7) The sacrifice, sharing and the charges of general average. ge.

(8) If the term of “(8) If the term of “collision withcollision with shipsships” is involved in transp” is involved in transport contract, the owners of the cargoes should compensaort contract, the owners of the cargoes should compensate the loss of the ship’s owner.te the loss of the ship’s owner.

W.A. or W.P.A. ( 水渍险 ) It covers partial loss due to vile weather, lightning, tsunami, earthq

uake and/or flood as well as the risks covered under F.P.A. condition as mentioned above.

All risks ( 一切险 ) Aside from the risks covered under the F.P.A. and W.A. conditions

as above, it also covers all risks of losses or damage to the insured goods whether partial or total, arising from external causes in the course of transit (extraneous risks) .

W / W Clause ““ 仓至仓仓至仓””条款条款Warehouse to warehouse clause:Warehouse to warehouse clause: From the warehouse in departure to the final warehouse in destinatioFrom the warehouse in departure to the final warehouse in destinatio

nn or 60 days after unloading.or 60 days after unloading.

W.P.A.(W.A.) = F.P.A. + Particular W.P.A.(W.A.) = F.P.A. + Particular Average caused by natural calamityAverage caused by natural calamity

All Risks = W.P.A. + General Additional All Risks = W.P.A. + General Additional RisksRisks

Additional risks 附加险 This kind of risk can’t be covered independently; This kind of risk can’t be covered independently;

they shall be underwritten depending on one kinthey shall be underwritten depending on one kind of the basic risks.d of the basic risks.

General additional risksGeneral additional risks 一般附加险一般附加险1. 1. Clash & breakageClash & breakage / / 碰损破碎险2. 2. Taint of odorTaint of odor / / 串味险3. 3. Fresh water &/or rain damageFresh water &/or rain damage / / 淡水雨林险4. 4. T.P.N.D. Theft, pilferage and non-delivery / Theft, pilferage and non-delivery / 偷窃、

提货不着险5. 5. ShortageShortage / / 短量险

6. 6. Leakage Leakage / / 滲漏险

7. 7. Intermixture & contaminationIntermixture & contamination / / 混杂玷污险

8. 8. Hook damageHook damage / / 钩损险

9. 9. Sweat and heatingSweat and heating / / 受潮受热险

10. 10. RustRust / / 锈损险

11. 11. Breakage of packingBreakage of packing / / 包装破碎险

Special additional risksSpecial additional risks 特殊附加险特殊附加险1. 1. War risksWar risks / / 战争险战争险 direct loss & general average of it; odirect loss & general average of it; o

nly on board of ship or lighter, but not for loss of atom bomb.nly on board of ship or lighter, but not for loss of atom bomb.

2. 2. Strike risksStrike risks / / 罢工险罢工险 direct loss & general average of itdirect loss & general average of it

3. 3. Aflatoxin Aflatoxin / / 黄曲霉素黄曲霉素险险4. 4. Failure to deliverFailure to deliver / / 交货不到险交货不到险 nono after 6 monthsafter 6 months

5. 5. On deck On deck / / 舱面险舱面险6. 6. Import dutyImport duty / / 进口关税险进口关税险 total duty for damaged goodtotal duty for damaged good

s.s.

7. 7. Rejection Rejection / / 拒收险拒收险 rejected by importing governmentrejected by importing government

8. 8. F.R.E.C.F.R.E.C. Fire risk extension clause Fire risk extension clause / / 港澳存仓港澳存仓火险险扩展条款火险险扩展条款

Ocean insurance-frozen productsOcean insurance-frozen products Ocean insurance-wood oil bulkOcean insurance-wood oil bulk Ocean insurance-livestock & poultry Ocean insurance-livestock & poultry

insuranceinsurance

Overland transportation insuranceOverland transportation insurance

Overland transportationOverland transportation Overland transportation all risksOverland transportation all risks Frozen productsFrozen products War risksWar risks

Air transportation insuranceAir transportation insurance

Air transportation risksAir transportation risks Air transportation all risksAir transportation all risks Air transportation war risksAir transportation war risks

Parcel post insuranceParcel post insurance

Parcel post risksParcel post risks Parcel post all risksParcel post all risks Parcel post war risksParcel post war risks

Institute Cargo clausesInstitute Cargo clauses

Institute Cargo Clauses A:most extensive Institute Cargo Clauses A:most extensive coverage, except:coverage, except:

General exclusionsGeneral exclusions Unseaworthiness and unfitness exclusionsUnseaworthiness and unfitness exclusions War exclusionsWar exclusions Strikes exclusionsStrikes exclusions Institute Cargo Clauses B:Institute Cargo Clauses B: Institute Cargo Clauses C:Institute Cargo Clauses C:

Determination of insurance amountDetermination of insurance amount

Rate of Insured AdditionRate of Insured Addition:: CIF CIF or or CFR x 10%CFR x 10%

Insured amountInsured amount = = CIF CIF ((or or CIPCIP) ) x x ((1+10%1+10%))

If an importer covers the insurance under FOB term:If an importer covers the insurance under FOB term:

Insured amountInsured amount = = FOB (or FCA)FOB (or FCA) xx ((1+ average transit rate + average insured rate1+ average transit rate + average insured rate))

If CFR or CPT price is given:If CFR or CPT price is given: CIFCIF((CIPCIP)) = = CFR (or CPT)CFR (or CPT) // 1 - 1 - 【【 premium ratepremium rate x x ((1+10%1+10%))

】】

PremiumPremium = = CIF CIF ((or or CIPCIP) ) x x ((1+10%1+10%) ) xx PremiumPremium rate rate

Insurance documentInsurance document

PolicyPolicy Insurance certificateInsurance certificate Open policyOpen policy endorsementendorsement

ClaimClaim

Loss noticeLoss notice Reasonable measures to salveReasonable measures to salve Right of subrogationRight of subrogation