Actually, there is a maritime law called “General Average” that makes you liable for losses suffered by other shippers on the vessel. For instance, if the vessel needs to jettison cargo to save lives or the vessel, the expense of this lost cargo is shared by all shippers on the vessel, even if their cargo is fine. Carrier liability does not cover General Average, but all risk cargo insurance does.
One I.C.E. Transport customer had cargo aboard the Ever Given, which got stuck in the Suez Canal in 2021. The company did not have its own insurance and had to pay to reclaim its containers under a General Average claim by the vessel operator.
Marine cargo insurance primarily covers the loss or damage of goods during transit, but its applicability extends beyond just these situations. This type of insurance provides comprehensive protection tailored to various risks that may arise while cargo is being shipped, transported by sea, air, or even overland in multimodal arrangements.
Core marine cargo insurance coverage
Marine cargo insurance’s fundamental role is to safeguard the financial interests of cargo owners against damage or loss. Coverage often includes protection from perils of the sea, such as sinking, collision, and adverse weather conditions. Other potential threats, like fire, theft, or piracy, are typically part of the standard insurance package. The scope of coverage varies based on the policy type—whether it’s “All Risks” coverage or a more restrictive “Named Perils” policy.
“All Risks” policies are broader, covering most unforeseen and accidental losses, with a few specified exclusions like improper packing or inherent vice (an inherent defect in the goods themselves).
On the other hand, “Named Perils” policies cover only risks explicitly listed, such as stranding, collision, or particular acts of nature.
Beyond Loss or Damage
While the primary purpose of marine cargo insurance is to handle scenarios of physical loss or damage, the policy may also include various additional protections. These extensions help cover expenses related to unforeseen events, enhancing the coverage beyond just lost or damaged goods. Some of these include:
- General Average Contributions: One key aspect that marine cargo insurance addresses is the concept of General Average. This principle applies when a ship’s crew must sacrifice part of the cargo or incur special expenses to save the vessel and the remaining cargo during an emergency. In such cases, the cost of the sacrificed goods or expenses is shared proportionally among all cargo owners. Marine cargo insurance typically covers the insured party’s contribution to General Average, alleviating potential financial burdens.
- Sue and Labor Clause: Marine cargo insurance often includes a “sue and labor” clause, which obligates the insured to take reasonable measures to protect and recover their goods when facing imminent loss or damage. The policy may cover expenses incurred in taking such protective measures, ensuring the policyholder is reimbursed for proactive actions that minimize losses.
- Delay and Extra Costs: Although marine cargo insurance generally does not cover losses resulting purely from delays, some policies may offer extensions or add-ons that cover specific expenses arising from delays. This could include costs incurred due to rerouting, storage, or other logistics-related issues.
- Contingency Coverage: Sometimes, cargo owners may sell goods on terms where the buyer is responsible for arranging insurance. If the buyer fails to do so or the coverage proves inadequate, contingency insurance can step in, covering the seller’s interest in the cargo.
- War and Strikes Coverage: Standard marine cargo insurance usually excludes damage or loss caused by war, strikes, or civil unrest. However, policyholders can opt for additional coverage to protect against these risks. This extension is crucial when shipping to or from regions prone to political instability or conflict.
Exclusions and Limitations
Marine cargo insurance, while extensive, has notable exclusions. It generally does not cover losses caused by willful misconduct of the insured, delay (unless specifically included), normal wear and tear, or loss resulting from insufficient packaging. Inherent vice, where the nature of the cargo leads to damage (such as fruit rotting during transit), is also typically excluded.
