All risk marine insurance, as the name suggests, provides comprehensive protection for cargo and vessels during transportation. This coverage is broader than named-peril policies and typically covers physical loss or damage from various external causes.
There are exclusions, which are spelled out in the policy document. For instance, if sensitive cargo is inadequately blocked and braced for the ocean voyage and this is validated by an independent survey, then any damage would not be covered. That’s why shippers must pay careful attention to how products are packaged for shipment.
However, despite the extensive protection, all risk policies do have exceptions. These exclusions can be crucial for policyholders to understand to avoid surprises in the event of a claim.
Common Exclusions in All Risk Marine Insurance
- Willful Misconduct and Negligence Any loss or damage caused by the willful misconduct of the insured is not covered. If an individual intentionally causes harm to the insured cargo or vessel, the insurer will deny the claim. Similarly, severe negligence, such as failing to maintain the vessel or ignoring essential safety protocols, can also lead to claim rejection.
- Inherent Vice Inherent vice refers to the natural characteristics of certain goods that make them susceptible to deterioration or damage without any external force. For example, perishable items like fruits or vegetables may decay even under ideal transportation conditions. Likewise, metals prone to rusting may corrode over time. Losses from such inherent qualities are not covered under all risk policies.
- Ordinary Leakage or Loss in Weight or Volume During the shipping process, some cargo may naturally lose weight or volume due to evaporation or minor leakage. This common occurrence, known as ordinary leakage, is excluded from coverage. All risk policies do not cover these anticipated, unavoidable losses because they are not considered accidental damage.
- War and Political Risks Standard all risk marine policies exclude damage or loss resulting from war, civil war, revolution, rebellion, or other politically driven events. Piracy may be covered under some circumstances, but insurers typically offer separate war risk policies to cover more extreme political and war-related risks.
- Nuclear and Radiation Hazards Losses caused by nuclear events, such as radiation, nuclear contamination, or atomic explosions, are not covered. The catastrophic nature of such events leads insurers to exclude them from standard all risk policies. Special coverage is often required to address these high-severity risks.
- Unseaworthiness and Unfitness of Vessel If a vessel is unseaworthy or unfit for the intended voyage, any loss or damage occurring as a result will not be covered. The insured must ensure that the vessel is in good condition and suitable for transporting the cargo. Failure to maintain proper vessel standards can invalidate coverage.
- Delay in Transit Any financial loss resulting from delays in transit, even if they are beyond the insured’s control, is not covered. For example, if a delay causes perishable goods to spoil, the insurer will not compensate for the spoilage. Cargo owners may need to seek specific delay coverage if necessary.
- Wear and Tear Routine wear and tear or gradual deterioration of a vessel or cargo is also excluded. This encompasses damage from normal usage, aging, or environmental exposure over time. Insurers do not view wear and tear as an insurable risk, as it is expected and unavoidable.
- Insufficiency of Packing If the cargo is improperly packed or inadequately secured, any resulting damage will not be covered. The insured must ensure that the packaging is suitable and meets industry standards to protect the goods during transit. This exclusion highlights the importance of proper packing and handling practices.
- Loss from Strikes or Riots Similar to war risk exclusions, damage caused by strikes, riots, or civil commotions is generally not covered under standard all risk policies. Separate insurance is often available to cover these risks.
