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Seminar | Paper 2
PAPERS
2ND ILAN IN-HOUSE
SEMINAR/TRAINING
PROGRAMME
TOPIC
PAPER 1
MARINE INSURANCE POLICY & CLAIMS HANDLING
[CARGO CLAIMS PROCESSING, DOCUMENTATIONS & ADJUSTMENT]
1.
MARINE CARGO PLOCY & INSURANCE CLAIMS
INTRODUCTION
Over the last
twenty (20) years since 1976, when Marine Insurance
of Imports Decree was enacted in Nigeria, Marine Insurance in
Nigeria as well as in some other West-African Countries has grown
tremendously into a vast industry writing many marine risks,
largely Cargo Imports and to a lesser extent on Cargo Exports.
The insurance of
Hull and Machinery risks is equally growing tremendously as many small and
medium-size Vessels such as
Fishing Vessels, pleasure crafts, passenger vessel operating
within the West Coast of Africa are invariably registered under Nigeria Flag and
insurance cover provided within the local market.
The Marine
Insurance Act of 1906, defines the Contract of Marine Insurance as one whereby,
"the Assurer undertakes to indemnify
the Assured in manner and to the extent thereby agreed, against Marine Losses,
that is to say, the losses incident to marine adventure".
Duration of Cover
Under the standard Institute Cargo Clause A, B, & C insurance
attaches from time the goods leave the warehouse or place of storage at the
place named in the policy for the commencement of the transit, continues during
the ordinary course of transit and terminated after:
(a) On delivery
of the consignees or other final warehouse or place of storage at the
destination named in the policy.
(b) On delivery
in 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 :
(b) i. for storage other than in the ordinary course of transit or
ii. for allocation or distribution, or
iii. on expiry of 60 days after completion of discharge overside of the goods
hereby insured from the overseas vessel
at the final port of discharge. "Whichever shall first occur".
The above
wordings form part of the "transit clause" and appears
very straight forward but it is particularly important to note
that cover does not attach until the goods leave for the
commencement of the transit.
Simply, where the
transit has not been interrupted and sixty
days limit has not come into operation, the insurance under the transit clause
terminates on delivery to the consignees' or
other final warehouse, or place of storage at the destination
named in the policy.
Within our ports,
delays in taking delivery after discharge of goods have prompted underwriters to
impose one form of "Clearance Warranty" on insurance contracts making it
obligatory for cargo to be cleared from port area or airport premises within a
period specified in the policy. This is in view of the aggravated damage or loss
that may befall the policy through insecurity of goods in our ports.
If after
discharge of goods from the vessel or at any time prior to
delivery at final
warehouse, a loss or damage recoverable under the policy becomes apparent, the
Assured is expected to perform certain essential duties imposed on him by law.
In the main, the duties of the Assured in the making of a valid claim are as
follows:
(1) To
give notice of the loss:
In practice, the
policy almost invariably contains a condition requiring the Assured to give
notice and specifying the manner in which it is to be given.
(2) To
furnish particulars of loss:
It is the
practice of marine Insurers to insert in the policy an express condition, that
the Assured must deliver to the Assured within a specified time, full
particulars of the loss or damage in respect of which the claim is made, unless
this condition is complied with, the claim under the policy may be avoided.
(3) To
furnish proof of loss:
Insurers are
empowered by stipulation in the policy to call upon the Assured to prove that
the loss is covered by the policy and they also verify the particulars given by
such documentary evidence.
It is the duty of
the Assured to observe the utmost good faith in his dealing with the Assurers
throughout, therefore any claim he puts forward must be honestly made and if any
part or portion is fraudulent, he will forfeit all benefits under the policy
whether there is a condition to that effect or not.
Burden of Proof
The onus of
proving that the loss was caused by a peril insured against lies upon the
Assured and unless he discharge the onus, the claim may not subsist.
When goods are
shipped from abroad, cover commences from the time the goods leave the shipper's
premises say by road or rail, continue until delivery to carriers, it then
undergoes the sea voyage until arrival at a port of destination, and discharged
from the vessel or aircraft, thereafter, the goods are left in the custody of
the Ports or Airport authority, who in turn release them to the Assured or their
agents after having performed customs formalities before delivery to final
destination.
As the goods
change hand from one carrier or bailee to the other, receipts are exchanged and
responsibility to exercise due care is also transferred from one carrier to the
other, each carrier having its own liability to protect.
Naturally, clean
receipts should in all appropriate cases be given before property is handed
over, otherwise it is the duty of every carrier to note the order and condition
of the cargo at the time of transfer, in other words, when a discrepancy or
shortage is noted at any stage during transit, the receipt should be claused
noting the discrepancy or shortage.
In commercial
practice there are numerous documents which have been introduced for particular
purposes, which are also useful in verifying claim under policies of marine
insurance.
When considering
a claim, it is always necessary to determine whom and what
gave rise to the loss and on whom responsibility fall.
The cover granted
by underwriter is designed to protect the insured, who in turn is required under
the provisions of the policy, in all cases to take reasonable measures to ensure
that all rights against the carriers, bailees or other third parties are
properly preserved and exercised.
Therefore, it is
very important that in the event of loss or damage, the insured is required to
protest against the negligent party and lodge claim for the full amount of the
loss.
It is important
to note that Underwriters, only protect the Assured and do not protect
Stevedores, Carriers or Bailees who are paid for their services and all of whom
have legal liability and are expected to have their own insurance protection.
CLASSES OF LOSS
The classes of
loss can be summarized as follow:
(a) Total losses
(b) All losses
other than total losses.
(a) The total
losses can be sub-divided into
- (i)
Absolute or actual total losses and
- (ii)
Constructive total losses (including salvage losses)
(b) The losses
other than total losses can be subdivided into
following
groups.
- (i)
Particular Average (i.e partial loss from accidental cause)
- (ii) General
Average (i.e partial loss from voluntary sacrifice
- (iii)
Particular Charges
- (iv) Sue and
labour charges (recoverable under the sue and labour Clauses).
- (v)
Contributions to general average and salvage
Actual Total Loss
:-
Absolute or
actual total loss can be briefly summarized into following three categories.
Where the insured
interest is destroyed- e.g. cargo burnt or sunk entirely.
Where the insured
interest is so damaged by a peril insured against as to case to be a thing of
the kind insured. This is known as "loss of specie" e.g. Potatoes so damage as
to be fit only fertilizer or cement which has solidified as a result of the
action of seawater.
Where the assured
is irretrievable deprived of his property by a peril insured against e.g. Cargo
in a vessel that got stranded on a remote island which is inaccessible as a
result of sea waves and actions and with no or very remote possibility of
salvage.
Constructive
Total Loss :-
There is a
constructive total loss of cargo when the assured is deprived of the possession
of his property and
- it is unlikely
he will recover it. or
- the cost of
recovery will exceed the value of the goods when recovered, and
- where goods
are damaged and the cost of reconditioning and forwarding to
destination will exceed their value on arrival.
It is essential
that "notice of abandonment" be given in a case of constructive total
loss, except where it has been waived or notice would confer no benefit on an
assurer. In practice, it is wise for the assured to always tender notice of
abandonment, and by abandonment proprietary rights and liabilities are
transferred.
The interest in
the insured property is transferred from the Assured to the Underwriter, while
notice of abandonment once tendered and accepted is irrevocable. If the
Underwriter however realizes more on sales of cargo abandon to him than he has
paid on claims, the assured is not entitled to participate in any of the
proceeds of the sale.
However in
practice, the Insurer do not always accepts abandonment due to the addition
liabilities that might be conferred on them through the acceptance of such
notice of abandonment.
It then falls on
the Assured to take proceedings to enforce his claim by the issue of a writ. The
state of facts existing at the time when a writ is issued will then determines
whether or not a constructive total loss has occurred.
Particular
Average
:-
Particular
average is a partial loss or damage sustained through fortuitous causes which is
borne by the interest to which the damage is occasioned as against the general
average where all those interested in the adventure has to contribute to make
good the loss.
In the adjustment
of particular average loss on cargo insurance, consideration has to be given to
the fact of the nature of that partial loss itself -i.e. whether the goods
arrived short-landed from the conveying vessel; total loss of apportionable
parts; theft or pilferage; breakages and chipping of parts, and/or damages(fresh
water, sea-water, ship's sweat or condensation damage). Where there is a total
loss of an apportionable part of the consignment, or the proportion of the
particular average is easily ascertainable in relationship to the total value of
the consignment, then there is little or no problem in arriving at the amount of
the loss as most cargo policies in use are invariably "value policies".
However, where
cargo arrived in a damaged condition and could only be sold at a discount in the
market, then the percentage of depreciation will have to be taken into
consideration in such an adjustment.
To arrive at the
percentage of depreciation for a particular average adjustment, the "gross
arrived sound value - GASV" should be compared with "gross arrived
damaged value - GADV". This is the only means of obtaining a constant
measure of depreciation irrespective of market fluctuations.
Also, whether the
goods are damaged or not, the freight and landing charges usually remain
unaltered, the amount of custom duty also remains the same and this therefore
makes the system the most equitable mean of the application of the principle of
indemnity under this section.
The following
example will illustrate the points better.
Example: A
consignment of goods is insured for US $ 20,000
The
goods are damaged, the GASV = US $ 22,500;
the GADV
= US $ 17,500
The sale
charges are US $100.00 and Survey fee US $ 40.00
GASV
= $ 22,500
GADV
= $ 17,500
Depreciation = $ 22,500 - $ 17500 = US $ 5,000 = 22.22%
22.22%
of the Insured Value of US $ 20,000 = US $ 4,444.40
Sale
Charge = 100.00
Survey
Fee = 40.00
The
amount of claim US $ 4,584.40
It should be
observed from the above example that the original policy not only pays survey
fee expenses (including sue and labour and particular and special charges) but
also is alone due to receive rights of subrogation relating to the cargo, since
the original valued policy incorporates an agreement between insured and
underwriter that the cargo value is the value stated in that policy.
Particular Charge
:-
Particular charge
are expenses incurred by the insured or on his behalf for the safety or
preservation of the subject matter insured. Provided these expenses are incurred
before the arrival of cargo at destination, they are covered under a marine
cargo policy. This existing position is reinforced and specifically covered
under Clause 16.1 of the current sets of the Institute Cargo Clause as follows:-
"It is the
duty of the Assured and their servants and agents in respect of loss recoverable
hereunder to take such measures as may be reasonable for the purpose of averting
or minimizing such loss and the Underwriters will, in addition to any loss
recoverable hereunder, reimburse the Assured for any charge properly and
reasonably incurred in pursuance of these duties".
Sue and Labour
Charges:-
Sue and labour
charges are also expenses incurred by the insured or his agents in attempting to
avert or minimize a loss covered by the policy and in fact sue and labour
charges could also be referred to as a particular charges described above
because, they serve the same purposes with the exception that while sue and
labour charges are incurred following loss or damage to cargo, particular
charges may be incurred when loss is threatened or imminent but is avoided by
the expenses incurred to that end.
Sue and labour
charges are recoverable under the policy even where the Underwriter has to pay
the full sum insured for the loss in respect of which the sum and labour charges
were incurred to avert provided that they were reasonably incurred. It should be
noted that the liability to pay sue and labour charges is not reduced in the
case of under-insurance of cargo, unless there is special provision in the
contact wordings. In addition, they are also payable if there would have been a
claim under the policy but because of steps taken, the loss is reduced below the
policy xs.
Salvage Loss :-
Salvage loss may
occur when part of or the whole goods is sold short of destination in
circumstances which would probably justify a claim for constructive total loss
and this therefore makes it difficult to distinguish between constructive total
loss and salvage loss.
While CTL is
defined in the M.I.A. 1906, the salvage loss is not defined in the Act or
specifically mentioned in the current sets of the Institution Cargo Clauses
(1982 Sets) and therefore no legal warrant for salvage loss or its mode of
adjustment and settlement.
This requires
flexibility on the part of the Underwriter and each cases treated according to
the circumstances of the loss and in most cases an amicable settlement will have
to be reached.
Salvage loss
could be incurred where a vessel suffered serious damage that also resulted in
serious loss to the cargo and the cargo thereby landed at a port of refuge
(where the vessel is undergoing repairs) short of destination and the cost of
reconditioning and/or re-forwarding is substantial while the price available for
sale at the port where the cargo in lying is relatively high. The best solution
might be for all parties concerned to effect an immediate sale short of
destination rather than to incurred relatively high expenses with the strong
possibility that the ultimate net market value at destination will be loss.
MARINE CARGO CLAIMS ADJUSTMENT
Before a cargo
loss could result into a legitimate claim from Underwriter, the Assured must be
able to prove that he has an insurable interest in the policy and that he has
exercised an utmost good faith in dealing with the Underwriter.
It should also be
remember that marine insurance contract is rooted in the principle of indemnity-
(though not a strict, but a commercial indemnity) and hence the Underwriter's
rights of subrogation against the negligent third party (ies) responsible for
the loss after the settlement of the loss.
The Cargo Loss
Adjuster must be a marine expert who thoroughly understand the local laws and
legislation, the Marine Insurance Act, 1906, the particular provision of the
contract (the cargo policy) and the Rules of practice of the Association of
Average Adjusters.
The terms,
conditions, clauses, warranties and the cover provided by the policy has to be
examined vis-a-viz the nature and the circumstances of the loss in determining
whether the loss falls within the scope of cover provided by the policy. The
first consideration here is whether the loss has been proximately caused by a
peril insured against, and if so, then the manner in which they are to be
indemnified.
BASIC OF ADJUSTMENT
The adjustment of
claims on marine cargo policies is controlled by the followings :-
(a) The
particular provision of the contract (i.e Cargo Policy)
(b) The Marine
Insurance Act, 1906
(c) In cases of
General Average and Salvage Charges, the York- Antwerp Rules of 1974 and 1994.
Marine Cargo
Policy:-
The interpretation of the condition of marine cargo policy follow the general
rules of insurance policies interpretation in the following order of precedent:-
(1) Warranties,
Expressly incorporation into the policy.
(2) Handwritten
words endorsed/stamped on the face of policy.
(3) Type-written
endorsements incorporated into the policy.
(4) Printed or
Stamped clause impressed on or attached to the policy.
(5) Marginal
printed clauses.
(6) The body of
the text of the policy
Kindly note items
(5) and (6) are only of academic interests as the new cargo policy in use
currently do not have any condition of insurance or the perils covered or
excluded printed on them,
but instead only
provided for the name of the insurer and a "binding" clause and in some cases,
the schedule identifying the risk are printed thereon.
It should further
be remember here that the "expressed warranties" in a marine policy has to be
literally compiled with and they take precedent over whatever else is in policy
that is inconsistent with them.
DOCUMENT
SUPPORTING CLAIMS
The document
necessary to support a claim will depend largely on the type of the claim and
also in some cases the nature of the subject-matter insured. However, before a
claim can be presented, the Assured must be able to prove loss by a peril
insured against while the "onus of proof" may shift from one party to the other
depending on the nature of the claim
The documents
supporting all claims could roughly be categorized into four classes namely:
- Evidence of
loss,
- Evidence of
Value,
-
Evidence of
Shipment, and
- Evidence of
interest
The following are
the important local documents required for the purpose of verifying marine
claims :
1. Detailed
Statement of claim
2. Original
policy or Certificate of Insurance
3.
Copy of Suppliers Invoice, including packing specification and weight-notes.
4. Original
Bill of Lading or Air Waybill or any other contract of carriage.
5. Clean Report
of Inspection (CIR), Form M, Custom Duties Payable/Paid, and Bill of Entry.
6. Ship's or
Airline's Short-landing/Discrepancy Certificate(s).
7. Photo copies
of N.P.A Import Tally Sheets.
8. Photo copies
of stamped Customs Bill of Entry.
9. Landing
account or weight note issued at Port of discharge, e.g. vessels
landing Tally Notes, N.P.A T. Form 38 - where applicable and copy
of joint survey reports in respect of damages noticed whilst cargo
is still on board.
10. Road
Delivery Waybills.
11. Approved
Surveyors' report on the condition of cargo at final warehouse.
12. N.P.A.
Non-production letter
13. Copies of
correspondence exchanged with the Carrier, Bailees and other third
parties responsible for the loss, regarding their liability.
One of the
primary functions of documentation is to display the physical existence of the
property insured at the inception of the risk and these documents also assist in
demonstrating the cause and probable place or time of loss, thus enabling
conclusion of liability.
The following are
brief notes on a few of the documents afore-mentioned:
1.
Insurance Certificate or Policy
This document
enable Underwriters to trace receipt of the declaration in their record
and also confirms the insured value of the goods and the conditions of
cover.
It also fulfill
an important function in proving the claimant's right to the proceeds of any
claim which may be due from Assurers.
2. Bill of
Lading:
This document is
usually issued by shipowner or charterers acknowledging receipt of the goods for
shipment. It also states the conditions of carriage, the marks, numbers and
quantity of cargo shipped. It is also a document of title and negotiable
document. If the goods are damaged or insufficiently packed, prior to the vessel
sailing, a note of the defect is made on the Bill of Lading.
3.
Shipper's Invoice
This document
contains a detailed description of the goods sold and serve as evidence of
value. It enable the adjuster to identify the actual consignment with the
description of the goods insured. This document also provides the necessary
quantity and prices essential for the calculation of claim for partial loss.
4.
Packing List:
This document
provides the precise content of each package or carton and will often reveal the
weight and information which is useful to the underwriter both for claims and
subrogation purpose.
5.
Survey Report:
The Particular of
a loss, where the loss is not total, is usually contained in the reports of
surveyors called in to asses the damage. Most cargo policies usually contain
instructions as to where to apply for survey in event of loss, usually either
application for surveyor is made to the Lloyd's agent at the port of discharge
or directly to the Underwriter who will appoint a surveyor to asses the loss.
In most cases,
where the consignment is of a high value, joint survey is usually held
with the representative of Consignee, the Assurer and the Carrier's
agent in attendance.
The fees charged
by a Surveyor will be paid to him by the party who
instructed him.
But generally, a cargo claim will include a report
giving the
required information, and if as a result a claim is
payable, the fees
incurred as a result of the surveyor instruction
given will be
added to the claim and form a special charges.
The Surveyor
cannot be expert in all commodities and may need to
appoint a
Specialist in certain cases, also he may need to consider
particular
problems of the area in which the loss occurred so as to
ensure that
delays, and consequently additional deterioration do not
occur, and also
help in arranging on-carriage or reconditioning and if necessary help
to arrange sale of the goods in damaged condition.
A surveyor report
is a document drawn up by experienced surveyor and
should state the
following facts among many other relevant Information such as :
- The nature and
cause of the damage,
- The percentage
of depreciation, (if damaged goods unsold).
- Recommendations
for reconditioning and /or sale for whosoever it may concern in case of
damaged goods.
- The sound
values (gross arrival) on date of sale, (if damaged goods are sold)
- The conveying
vessel, voyage, date of arrival and transhipment (if any)
- The date of
discharge,
- The date of
delivery to consignee's warehouse
- The date of
application for survey,
- The date of
survey,
- Delays (if any)
and reasons for delay
- Attestation as
to the accuracy of amount charged as expenses of sale and certify the amount
of sales.
- Custom Duties
paid and any rebate due or allowable on the damaged goods.
- Any further
comments or special observation of the survey,
- Name and
signature of Surveyor, date and place of issue of the Survey Report.
Guidelines for
Cargo Survey Report:
For a cargo
surveyor report to be useful, it must not be prejudicial and/or biased for or
against the interest of either party and must contain all the cogent and
necessary information to help the Cargo Loss Adjuster in arriving at an
equitable settlement.
Furthermore, the
report should be able to pinpoint and ascertain the area or place where the loss
actually occurred in order for the Underwriter to know where to direct his
efforts in pursing his subrogation rights. Most important, the ability, the
repute, the honour and integrity of the Surveyor most not be in doubt or in
question.
The following
guideline should be observed when preparing cargo survey report:-
(a) Form:-
The Lloyd's standard survey report form or any other standard form
approved for use in the Marine Market by the
Underwriters.
(b) Prompt
Report:- The need for urgent report to Claims Adjusters and
Underwriters cannot be over-emphasized. Preliminary report is often necessary
and telephone details of preliminary findings should be given when necessary.
(c)
Delay:- Where there has been delay, the Surveyor should obtain the
consignee's explanation for the delay and just "No explanation was given for the
delay"
(d) Joint
Survey :- Ship's agent are expected to be represented when it has
been established that damage was noted during discharge of cargo from vessel.
The Ship's agent should endorse the report for Carrier to accept liabilities.
If it is not
possible for ship's agent to be present a statement to this effect should be
obtained. Sometimes independent Surveyors are appointed by the ship's agents,
especially following incident of heavy casualty to vessel and/or cargo. A joint
survey for cargo and ship's interest is then desirable. The two independent
surveyors should be able to produce a joint report.
(e) Short
Delivery:-
Where part of the goods are short-landed or short
delivered, the Surveyor must be able to give the reply of the ship's
agent or master as to whereabouts of the undelivered part. They
must be able to obtain or apply for a form of short-landing
certificate from the ship's master.
(f) Packing:-
If packing has been removed prior to survey, full explanation as to
the reason should be given. The adequacy of packing must be properly
considered bearing in mind the entire transit and the customary
packing for particular commodity. The surveyor should check and
ensure that labels and instructions on outside packing referring
secured contents are complied with.
(g) Cause
of Damage:-
The independent opinion of Surveyor should be
noted e.g "Machine casing cracked as though by dropping" or "Machine
casing bent inward - damage consistent with forklift entering
crate" "Damage consistent with insufficient or improper
packing, improper stowage or cargo not properly secured inside
containers etc.
(h)
Constructive Total Loss:-
When Surveyor quote consignee as saying that goods are no longer satisfactory for purpose for which
imported, the names and status of the consignee's representative
to be stated.
The surveyor should give his own independent view and, if necessary, call in an
independent expert.
(i)
Percentage of Depreciation:-
A note of percentage of depreciation is required. An independent opinion of the Surveyor
backed up if necessary with the opinion of an independent expert is
desirable. The Surveyor should endeavour to reach an agreement with an
authorized representative of the Consignee as to the extent of damaged and the
percentage of depreciation, and have same confirmed in writing.
(j)
Salvage:- Where necessary, a precise indication of salvage value should be given, and assistance given towards its speedy
disposal by obtaining an offer from likely buyers. This is of
particular importance where perishable goods are involved.
(k)
Independent Checks:-
The surveyor must make an independent heck as to the arrival date of the vessel, discharge date and date
cargo removed from port area. Report should not be prepared solely on what
the Consignee or their representative told the Surveyor. The Surveyor
should also endeavor to do some underground
investigation where he doubt the accuracy of the information given by
the Consignee.
This assist
the Loss Adjuster in reaching a conclusion regarding liability.
It is the only means of verifying to what extent the claimant should
be indemnified.
The purpose
of a survey is to establish the cause of the loss or damage and to
assess fairly the degree thereof. To a very large extent, the
successful achievement of this object is dependent upon the
experience and efficiency of the person undertaking the work of
surveying and in the case of damage, it often happens that the surveyor
needs to have an understanding of the special characteristics or properties of the goods with which he is called
upon to survey.
Where losses
are trivial, it may be possible to dispense with the survey report, in which
case claimants will be expected to make available for examination, any
correspondence or other similar evidence relating to the loss or damage in
support of their claim.
In cases of
non-delivery or short-landing the intervention of a surveyor is usually
unnecessary.
In order to
substantiate claims for shortage and non-delivery, claimants are expected to
produce short-landing certificate from the shipping company or Non production
letter from Nigeria Ports Authority.
Airway
Bill:
Airfreight
operators issue this document to acknowledge receipt of goods. If damage or
loss becomes evident after receipt, protests must be tendered to the air carrier
within 7 days.
In addition
to the aforementioned, there are specific documents that are required to be
submitted for the various classes of marine cargo claims.
(a) Total
Loss of Cargo
(i) Documents
of title i.e full sets of "shipped" bills of Lading endorsed
over to insurers.
(ii) Sets of
invoice
(iii) Account of
Charges along with the receipts (application in cases of particular, Sue
and labour charges)
(iv) Policy (in
case of a single voyage) or certificate of insurance in cases of a
floating or open cover).
(v) Letter of
protest (if necessary) and copies of correspondence exchange with the
carrier or the negligent party responsible for the loss.
All
documents in the case of total loss can be retained by the Underwriters, because
having paid a total loss, they are entitled to assume ownership of the lost
cargo.
(b)
Particular Average on cargo
(i) Copy
of the "shipped" Bill of Lading and Shipping Specification, if necessary giving fuller detail of quantities and measurement shipped.
(ii)
Invoice
(iii) The
Packing List
(iv) Port
Authority Tally Sheet or Container Inspection report.
(v) The
Way Bills, if goods damaged or lost during inland transit.
(vi) Survey
Reports.
(vii)
Short-landing or Discrepancy Certificate from the Carrier
or its agent.
(viii) Accounts
of Sales, if goods sold.
(ix)
Extended protest or extract from log book, if necessary.
(x) Copies
of correspondence exchanged between the Assured or his agent
against the negligent party responsible for the
loss.
(xi) Policy
or the Certificate of Insurance(original copy).
** Documents can
be retained by Underwriters only in so far as necessary to exercise assured's rights under subrogation.
(c)
Salvage Loss on Cargo
(i)
Surveyor's Report
(ii)
Accounts of Sales
(iii) Full
sets of the Bills of Lading unless the sales proceeds
have already been collected on behalf of the assured
(iv)
Export invoices
(v)
Packing List
(vi)
Extended protest
(vii) The
policy or the certificate of marine insurance (original
copy)
All the document
can be retained by the Underwriters in as much as the loss is treated in a
similar way to Constructive total loss.
(d)
Documentation of
General Average Claim:
The documents
which are called into being as a result of a general average act on cargo
are as follow:-
(i) General
Average Deposit Receipt:-
This is a receipt for money
deposited as general average security. In addition to the
ordinary essentials of a receipt, the document usually states the
vessel's name, the value of hull and machinery casualty,
marks and numbers of goods, provisional contributory value,
percentage of deposit and the name of the Average Adjusters.
There is usually
a provision inserted thereon stating that refund if any, will only be paid on
production of the original deposit receipt.
(ii)
General Average Bond:-
This is an agreement signed by owners of goods binding themselves to pay the general average
contribution attaching to their goods and further agreeing to
deposit a sum as security for this purpose. The Corporate of
Lloyd's Average Bond is know as L.A.B.77 (Lloyd's Average Bond,
1977).
iii)
Underwriter's Guarantee:-
This is a document completed by underwriters guaranteeing the payment of the amount of general
average contribution properly payable in respect of the cargo.
The form requires and stipulate that, if the consignee
cannot or will not pay the amount due as stated in the bond, the
Underwriter will settle the amount.
(iv)
Counter-Guarantee :-
This is a guarantee prepared by the Underwriter for the insured's execution to protect himself
whereby if he pays under the guarantee (item iii above) amounts
which are in excess of his liability under the such over-payment
from his assured.
(v) Valuation
forms :-
Where the Lloyd's Average Bond is used, the
valuation form is in a form of attachment to the "L.A.B.77"
Form. It is used for recording the arrived value of the cargo
and other particular to assist the Average Adjuster. The
receiver of goods should completed the A.B. part of the L.A.B.
77 as soon as he receives it and return is duly signed as soon
as possible.
The
valuation part is to be detached and retained until delivery
when the receiver can ascertain the conditions of the goods and
completed the particulars of valuation and than send the form to
the duly appointed average adjuster.
In addition
to the above; the following specified documents are
necessary
for general average (cargo) claim documentation:
(vi)
Certified extract from General Average adjustment
(vii)
Invoice
(viii) Shipped
Bill of Lading
(ix) Policy
or certificate of cargo Insurance.
Sacrifice of
Cargo :-
Jettison is the commonest and most characteristics form of general average
sacrifice. Concerning jettison of deck cargo, Rule I of the York-Antwerp Rules
states that "no jettison of cargo shall be made goods as general average, unless
such cargo is carried in accordance with the recognized custom of the trade".
The jettison
of deck cargo will, therefore be allowed if the goods are stowed on deck
according to custom, and this will also apply to containers stowed on the decks
of purpose built container vessels.
As jettison
is one of the perils covered by marine cargo policy, the liability of the
Assurer is direct to the Assured and the cargo owner can claim directly from the
Assurer for the loss without waiting for the contributions of all other
interested parties in the voyage in making goods his loss. The Assurer is of
course on settlement of such claim, is entitled to the rights of subrogation by
recouping his loss from the general average contributions to be made by all
those interested in the adventure. As the law of equity and the principles of
general average demands that any amount made good in respect of sacrifice shall
itself contribute to the loss; the net loss to the insurer therefore will be the
amount assessed as contributions to be paid by the cargo insured that was
sacrificed as general average act.
Expenditure on
Cargo :-
The most common type of general average expenditure consists of port of refuge
expenses and these expenses generally arise in consequence of an accident,
sacrifice or other extra-ordinary circumstances which make it necessary for the
ship to enter a port or place of refuge or to return to her port or place of
loading.
The
following expenses therefore are usually allowable in general average on the
principle that the expenditure was in consequence of a general average act:-
(a) Cost of
entering the port, i.i inward port charges pilotage, port due, etc.
(b) Cost of
discharging cargo, in order to effect repairs.
(c)
Warehouse rent while repairs were being effected
(d) Cost of
reloading cargo
(e) Outward
port charges, pilotage etc.
Contributory
Value on Cargo:
The amount
assessed to extinguish the general average loss is termed the "contribution"
while the value on which this is assessed are known as the "contributory value".
Any amount made good in respect of general average sacrifice shall itself
contribute to the loss as earlier explained, otherwise the interests making the
sacrifices would be in a relatively better position by reason of being fully
reimbursed for a loss which the other interests were bearing. The CIF (Cost,
Insurance, Freight) value is usually the contributory value of cargo, if
however, freight is payable at destination, and is at the risk of interests
other than the cargo, such freight can not be included in the contributory
value.
It is of an
utmost important to state here that in arriving at the contributory value, any
loss or damage which has arisen during the adventure must be taken into
consideration.
Such a loss
or damage could be a particular average or even an earlier general average act,
whether it resulted from the same casualty or not, provided that all the
casualties, incidents resulting in damage to cargo and general average acts
occurred during a single voyage. In as much as the value and the benefits to the
owner of goods that has been damaged during the voyage is reduced and the value
saved thereof as a result of a general average is also reduced, it is therefore
immaterial whether the damage occurred before, at the time of, or even after the
casualty. It is therefore the duty and it is imperative upon the cargo
underwriter/loss adjusters to advise the general average adjusters of any
particular average that either settled or outstanding as failure to do so would
produce an incorrect apportionment of
the general average contributions and the damaged cargo would be called upon to
contribute more than what is a fair proportion of its own contribution. In cases
where cargo has to be sold short of destination for one reason or another, the
contributory value shall be the actual net proceeds of sales, plus any amount
made good as general average.
Documentary Evidence for loss occurring with the Port:
The
following additional documents are required to substantiate marine cargo claims
depending on particular circumstances and locality, especially if the loss is
deemed to have occured while the goods are in the custody of Port Authorities:
1.
Vessel's Agreed out-turn report
2. NPA
Extra Services Report
3. NPA T.
Form 38 Notice of cargo landed damaged.
ADJUSTMENT IN CASES WHERE DOUBLE INSURANCE EXISTS
A large number of person can be interested in
a single marine adventure at the same time such as the shipper, the consignee,
the forwarding/clearing agents, the financier, etc and each can take up a policy
to cover his interests as the only necessity is that the assured must have an
insurable interest at the time of loss in order to be able to recover under his
policy.
Such a
peculiar circumstance could not be referred to as double insurance. Double
insurance can only exist in a situation where "two or more policies"
are issued on behalf of "one insurable interest" and the total sums
insured exceed the indemnity allowed by section 32 of the Marine Insurance Act
1906.
Double
insurance can occur in two ways:-
(a)
Purposely:
This is rare in practice. The case, however may happen, when a bank refuses to accept policies unless provided
by a particular sets of insurers, or alternately, refuses a certain
security or where the position is made mandatory through
legislation. It can also happen where there is a fraudulent
intent.
(b)
Inadvertently: This may happen in practice especially when an agent is
covering under a policy the insurable interest of, say, a buyer, whereas the
buyer himself insures his interest not being aware of the other policy issued on
his behalf. If the total sum insured exceed the indemnity allowed by section 32
of the M.I.A. there would be a case of double insurance.
In such cases the
assured can claim in any order he may think fit, provided that he does not
recover more than indemnity, i.e the full sum insured or the insurable value of
the cargo. If the assured received more than indemnity, he holds the excess in
trust for the insurance concerned.
Furthermore, if
the double insurance has been effected by inadvertence, that part of the premium
corresponding to the excess over the insurable value may be recovered by the
assured.
However, if a
policy has borne the entire risk or if any claim has been paid on a policy in
respect of the full sum insured, no premium is returnable in respect of that
policy.
CONCLUSION
With the present
technological know-how and rate of growth which affect virtually all aspects of
human endeavours in world of nowadays, such as with the advent of Satellites
which has made easy and highly sophisticated communication possible, thereby
eliminating the problems of frontiers.
The world is now
indeed a small place !.
I personally look
forward to the time (which will no doubt be sooner than later) when an
Underwriter would be able to monitor the progress of a highly expensive Cargo
insured through its sea voyages in any part of the world on a Computer screen in
his office through either Internet or some other communication gadgets.
We, as
Professionals Loss Adjusters therefore have to constantly update our knowledge
in line with progress of development in the world due to the international
nature of marine insurance.
The subject of
"Marine Cargo Insurance Claim (Presentations, Documentations, Adjustment &
Recoveries after Indemnity)"
is a vast and an extensive branch of marine insurance that embraces both claim
assessment and good insight into the underwriting aspect as well, and therefore,
notwithstanding the length of this paper I cannot claim to have treated the
subject to the fullest details but could only hope that these notes would be a
good working guide and that you found this lecture stimulating enough to
encourage more interests and researches in the marine insurance field.
I thank you for listening.
This is the text of speech presented at the 2nd ILAN
In-House Seminar/Training. ©
Copyright 2002 by
SAMMY A.I. SOTOMI
[DIP. INS. & RISK MGT. (CIRM -WAII), ACII, AILA]
EXECUTIVE CHAIRMAN
EQUITY TRUST LOSS
ADJUSTERS
LAGOS, OCTOBER 10, 2002
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