THE BASICS OF CARGO INSURANCE

The current policy is designed for the frequent shipper. It automatically covers approved merchandise that
assureds are obliged to insure under terms of sale. This eliminates the need for the importer or exporter to
negotiate terms, conditions, rates, and limits for each shipment insured. Under an open cargo policy, goods can
be insured ALL!I"#$, %ree of &articular Average '%&A( or )ith Average ')A(. These coverage variations are
explained belo*.
ALL-RISK COVERAGE
The broadest form of coverage is ALL!I"#$. An ALL!I"#$ policy insures approved general merchandise in
the event of physical loss or damage from any external cause. This includes ne*, pac+aged goods *ithout
unusual susceptibility to loss from brea+age, pilferage, or the nature of the goods themselves. ALL!I"#$
policies do not cover all losses possible in the course of an international shipment.
Typical exclusi!s i! a! ALL-RISK "licy a#e$
,. Improper pac+ing
-. Abandonment of cargo
.. !e/ection of goods by customs
0. %ailure to pay or collect accounts
1. Inherent vice 'infestation or loss due to the nature of product itself(
2. 3mployee conversion or dishonesty
4. Losses due to delay or loss of mar+et
5. Losses in excess of policy limits
6. Losses at port city more than ,1 days after discharge of cargo
,7. Losses inland more than .7 days after discharge of cargo
,,. Losses in "outh America more than 27 days after discharge of cargo
,-. 8arge shipments
,.. 9oods sub/ect to an ondec+ bill of lading
,0. Losses caused by temperature or pressure 'air shipments(
,1. %ailure to notify air carrier of preliminary loss in timely fashion:
a% ;bvious damage < 4 days
&% =idden damage < ,0 days
c% >ondelivery < ,-7 days
,2. Used goods
FREE OF "ARTICULAR AVERAGE 'F"A( COVERAGE) A*ERICAN CLAUSE
%&A is limited coverage that usually applies to used merchandise, *aste materials and goods shipped sub/ect to
an ondec+ bill of lading. It covers partial and total losses due to %&A perils. %&A perils include the sin+ing,
stranding, burning or collision of the vessels or catastrophic perils on shore such as earthqua+e, derailment,
collapse of doc+, fire, etc.
"licy +#i,,e! -# F"A C!.i,i!s Lss Cause. By #
Resul,i!/ F#0$
&artial Loss
?overage
Total Loss
?overage
1% =eavy *eather, lightning, barratry of the @aster or @ariners,
assailing thieves except:
)hile on dec+, if a direct result of stranding, sin+ing, burning,
fire or collision
)hile under dec+, if the vessel strands or is burnt during the
insured voyage or if loss or damage can reasonably be
attributable to fire or collision
>ot ?overed
?overed
?overed
?overed
?overed
?overed
2% %ire or explosion ?overed ?overed
3% Aessel or craft being stranded, sun+ or burnt ?overed ?overed
4% ?ollision or upset to an air or land conveyance ?overed ?overed
5% ?ollision or contact of a *ater borne conveyance *ith any
external ob/ect 'ice included( other than *ater
?overed ?overed
+ITH AVERAGE '+A( COVERAGE
)ith average coverage extends %&A coverage to include the peril of heavy *eather. %requently, %&A and )A
can be extended to include theft, pilferage and nondelivery.
CO*"ARISON OF CARGO COVERAGES

Lss Cause. By # Resul,i!/ F#0$

F"A

+i,6 A7e#a/e

All Ris8s
"tranding B3" B3" B3"
"in+ing B3" B3" B3"
8urning B3" B3" B3"
?ollision B3" B3" B3"
%aults or errors in the management of the vessel B3" B3" B3"
8ursting of boilers B3" B3" B3"
Latent defects in hull or machinery B3" B3" B3"
3xplosion B3" B3" B3"
Cettison B3" B3" B3"
=eavy *eatherD >;D B3" B3"
"ea*ater as a result of heavy *eatherD >;D B3" B3"
%resh*ater >; >; B3"
Improper sto*age by the carrier >; >; B3"
=oo+ damage, mud and grease >; >; B3"
Theft of an entire shipping pac+age >; >; B3"
>onEelivery of an entire shipping pac+age >; >; B3"
&ilferage >; >; B3"
Lea+age >; >; B3"
8rea+age >; >; B3"
* Refers to partial losses. Total loss of cargo from these perils would be covered.
Although above perils are indicated as covered under All !is+s$, depending upon commodity, certain
exclusions may apply. &lease refer to policy for exact coverages.
+AREHOUSE-TO-+AREHOUSE "ROTECTION
@ost cargo insurance protects goods in transit from the time they leave the shipperFs *arehouse until they reach
the consigneeFs *arehouse, as long as they are not ta+en out of the normal course of transit by the insured.
=o*ever, there are circumstances *hen:
,. The terms of purchase or sale determine *hen insurance is in effect.
-. Insurance may not go into effect until the goods are placed on the conveyance.
.. Insurance may cease *hen the goods are discharged from the conveyance or *hen the conveyance
arrives at the port.
In addition, insurance is not in effect if the goods do not travel via common carrier, i.e., they are pic+ed up or
delivered by the shipper or consignee. If you have any questions on a specific shipment, please call @itchell
8axt.
THE NEE9 FOR CARGO INSURANCE
A7i. ,6e U!ce#,ai!,y - Rec7e#y -#0 Ca##ie#s
Importers and exporters are exposed to countless financial ris+s *hen they donFt insure their international
shipments. Trying to recover losses from carriers is difficult and time consuming. The best *ay to protect their
financial interest is *ith All !is+s$ insurance coverage. All !is+s$ insurance relieves them of their financial
exposure from physical loss or damage to their goods *hile in transit, since carriers have limited liability.
Ai# S6ip0e!,s Ocea! S6ip0e!,s
U"G6.74 per pound U"G177 per ?ustomary "hipping Unit '?"U(
U"G-7.77 per +ilo
Vessel O:!e#;s Li0i,e. Lia&ili,y
The Ha/ue<COGSA Ac, *as developed to protect vessel o*ners against legal liability to shippers for
circumstances out of their control. It *as conceived during the post )orld )ar I era *hen vessel o*ners had
little /urisdiction over their ships once they left port. ?;9"A, the ?arriage of 9oods by "ea Act, limits vessel
o*nerFs liabilities to U"G177 per shipping unit. It also relieves all their liability to shippers in ,4 situations +no*n
as the =agueH?;9"A Eefenses. This means shippers have no legal recourse against vessel o*ners *hen
their goods are lost or damaged by these ,4 causes.
T6e 1= Ha/ue<COGSA 9e-e!ses
Nei,6e# ,6e ca##ie# !# ,6e s6ip s6all &e #esp!si&le -# lss # .a0a/e a#isi!/ # #esul,i!/ -#0$
,. Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation
or in the management of the ship
-. %ire, unless caused by the actual fault or privity of the carrier
.. &erils, danger, and accidents of the sea or of other navigable *aters
0. Act of 9od
1. Act of *ar
2. Act of public enemies
4. Arrest or restraint of princes, rulers, or people or seiIure under legal process
5. Juarantine restrictions
6. Act or omission of the shipper or o*ner of the goods, his agent or representative
,7. "tri+ers, loc+outs, stoppage or restraint of labor from *hatever cause, *hether partial or general:
&rovided that nothing herein contained shall be construed to relieve a carrier from responsibility for
the carrierFs o*n acts
,,. !iots and civil commotions
,-. "aving or attempting to save life or property at sea
,.. )astage in bul+ or *eight or any other loss or damage arising from inherent defect, quality, or vice
of the goods
,0. Insufficiency of pac+aging
,1. Insufficiency or inadequacy of mar+s
,2. Latent defects not discoverable by due diligence
,4. Any other cause arising *ithout the actual fault and privity of the carrier *ithout the fault or neglect
of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the
benefit of this exception to sho* that neither the actual fault or privity of the carrier nor the fault or
neglect of the agents or servants of the carrier contributed to the loss or damage
Ai# Ca##ie#s; Li0i,e. Lia&ili,y
The )arsa* ?onvention *as developed to protect air carriers against liabilities to shippers. Unless sub/ect to
@ontreal &rotocol >o. 0, air carriersF liabilities are limited to U"G6.74 per pound for international shipments and
G7.17 per pound for domestic shipments. To recover the actual value of their lost or damaged goods, shippers
decide many times to declare value *ith air carriers. 3ven *hen the value is declared *ith the airline, there are
provisions *hich can still ma+e recovering losses from air carriers difficult and time consuming.
All Ris8s I!su#a!ce 7s% 9ecla#e. Value
All Ris8s I!su#a!ce
All !is+s$ insurance protects the shipper against physical loss or damage to their cargo from external causes,
sub/ect to policy terms and conditions. It is not necessary to prove the carrierFs liability.
9ecla#e. Value
Eeclaring value to a carrier is not the same as providing insurance protection for merchandise in transit. If there
is a claim against a carrier, the shipper has to prove the merchandise *as damaged and prove the carrier
caused the damage. This ma+es recovering losses very difficult.
+6a, ,6is *ea!s , yu# Clie!,s
If merchandise is damaged in transit and the carrier did not cause the damage, the shipper *ould not be able to
recover the loss. All !is+s$ insurance provides protection *ithout having to prove carrier liability.
CLAI*S
The most common problem *ith marine cargo insurance claims is that fe* claimants +no* *hat to do in the
event of a claim. This lac+ of +no*ledge is *hat often creates havoc in documenting and processing claims.
This section details the guidelines and procedures to follo* in the event of a claim.
O+NERSHI" OF 9A*AGE9 CARGO
@ost assureds have the impression that the title to all damaged goods is automatically transferred to the
insurance company and that the assured *ill have no further interest in the cargo. This is not the case and any
claimant *ho acts in accordance *ith such belief may find himself /eopardiIing the very rights heHshe may be
trying to protect. The most important thing to remember is that the cargo belongs to the assured and the
assured alone is the one *ho has sustained the loss.
?ontrary to popular belief, the insurance company has no legal title to the goods and is not a party to the
contract of carriage *ithin the terms of the bill of lading. The insurance company can only pursue the claim
against carriers after proving the loss has been paid under the policy. The assured must protect the insurance
companyFs right to subrogate.
The fact is that the cargo remains the property of the assured, and under limited circumstances *ill an
insurance company agree to ta+e title to or sell it.
ONUS OF GOO9 FAITH
An assured does not have the right to abandon cargo or fail to ta+e any action *hich could result in averting or
minimiIing a loss or damage. In other *ords, assureds must at all times act in the same manner as they *ould
in the event they *ere uninsured. This is called the ;nus of 9ood %aith$ and it is the basis on *hich all
insurance is governed.
*INI*I>ING A KNO+N LOSS
"ome assureds *ill question the right to incur an expense in order to minimiIe a loss before receiving the
insurance companyFs authority to incur that expense. &rovided the expense incurred is reasonable relative to
the amount of loss you are trying to avoid, the insurance company *ill pay for those expenses. This
contingency is covered under the sue and labor$ clause of most marine policies.
"ROCE9URES
CONTACT ?OUR FOR+AR9ER OR BROKER +HEN IN 9OUBT OR +ITH AN? @UESTIONS ON HO+ TO
"ROCEE9%
&repare a preliminary claim form and send it to the carrier for signature. @I% has a claims pac+age that
includes the required forms on our *eb site.
If pilferage or damage has occurred, a survey may be required. As a general rule, amounts under G177.77 E;
>;T require a survey. If the damage is noted, you are to stop unloading or unpac+ing until a decision has been
reached on the need for a survey. %ailure to follo* these instructions may pre/udice any future recovery. E;
>;T discard any dunnage or exterior containers as they *ill be part of any survey.
SUBSTANTIATE THE CLAI*
A vital component of our claims procedures is the substantiating of the claim. The consignee must prove the
claim *as caused as a result of transit and occurred during the period of insurance coverage. &lease follo* the
steps belo* to substantiate the claim.
1% EAA*INE EATERNAL CON9ITION OF "ACKAGES
Upon delivery, examine the external condition of all pac+ages before signing the delivery receipt. This may
seem impossible *ith todayFs business pace as it can delay truc+s and cargo elevators. The truc+ing
companies may charge you a minimal fee for the delay. =o*ever, *hen you thoroughly examine pac+ages and
note damage on delivery receipts, you protect your rights of recovery and minimiIe your losses.
2% NOTE EACE"TIONS ON 9ELIVER? RECEI"T
All steamship companies, airlines, rail*ays, truc+ing companies and harbor authorities must obtain a signature
on a delivery receipt from the person or company ta+ing delivery of cargo. All delivery receipts contain a clause
stating the cargo *as delivered in apparent good condition unless noted to the contrary.
If your receiving department or cartage company signs a delivery receipt *ithout noting damage, your coverage
is at ris+. 8y signing the delivery receipt *ithout noting damage, you have legally ac+no*ledged receiving the
goods in apparent good condition$. This destroys your chance to prove the goods *ere damaged before
arriving at your premises and also destroys the chance that your insurance company *ill successfully recover
the loss from the carrier. 8y signing the delivery receipt *ithout noting damage, you are providing the carrier
*ith a clean receipt.
It is important to note some tactics truc+ing companies may use to obtain clean receipts from you. They may try
to convince you to sign for a visibly damaged pac+age by saying it had been opened by ?ustoms$. Also, they
may attempt to convince you a damaged pac+age *as signed for from the *harf or last carrier in damaged
condition. Bou should not accept these claims until you have determined the goods are in proper condition.
!emember, the consignee is sole /udge in deciding ho* the pac+ages appear and ho* they should be signed
for.
If delivery carriers attempt to prevent you from noting their delivery receipt, you should advise the truc+er to hold
the merchandise. ;n future shipments, you should request your insurance company to send a surveyor to
inspect the shipment on the truc+erFs vehicle. Also, you should refuse a carrier if heHshe suggests you sign for
damaged pac+ages sub/ect to inspection$. This notation does not imply that the pac+age is damaged, and it
becomes the responsibility of the consignee to prove *hen it occurred.
%inally, there is another reason not to sign for damaged pac+ages. In the event your loss is not insured, signing
for the damaged goods in apparent good condition$ /eopardiIes your o*n rights to recover your loss from the
carrier.
3% RECOR9 NU*BERS OF "ACKAGES
)hen noting delivery receipts, record all case numbers that appear damaged. It is not enough to indicate %ive
?ases Eamaged$ on the receipt. Bou must record the numbers appearing on each case. %or example: ?ase
K1, K2, K4 and K,- are in damaged condition$.
9OCU*ENT THE CLAI*
"LACE ALL CARRIERS ON NOTICE
Along *ith noting delivery receipts, it is vital to place all carriers on notice$ in the event of a claim. "ample
letters are included in this manual. The follo*ing are time limitations for placing carriers L;n noticeF of the
nature and extent of the claim:
OCEAN CARRIER$ ;ne Bear from Eate of Eelivery.
AIR CARRIER$ &ilferage and ;bvious Eamage 4 Eays
=idden Eamage ,0 Eays
>onEelivery ,-7 Eays
'DAir ?arrierFs Tariff may provide different time limits that prevail
over a 8ill of Lading or ;ral !epresentation.(
9O*ESTIC CARRIERS$ 4 Eays from Eate of Eelivery
)hile it is necessary to place the carrier on notice *ithin the given time frame, payment from them should never
be accepted *ithout first advising the insurance company. Accepting payment from the carrier *ithout notifying
the insurance company pre/udices the insurance companyFs right of subrogation and violates a provision of your
policy *hich may /eopardiIe the outcome of the claim.