The role of the loss adjuster

When the claim exceeds the amount which a particular insurer is prepared to settle without further investigation (perhaps typically £ 1,000), a loss adjuster will be appointed. Although paid for by the insurer, he is an impartial agent who examines the circumstances of the claim and makes a recommendation on his opinion fair to both claimant and insurer. This will usually be followed by the insurer, so that it is in the claimant's interest to co-operate with the loss adjuster.

The Institute cargo clauses

Cargo insurance placed in the London market has since 1^st January 1982 been underwritten on the basis of the new MAR policy form with either "A", "B" or "C" clauses attached. This replaces the time-honoured Lloyd's SG form with its quaint phraseology and equally well-known "all risk', WA or FPA cover. It is by no means safe to assume that "A", "B" or "C" clauses respectively equate to the former "all risk", WA and FPA clauses as the process of revision led to some remodelling of cover. The "A" clauses provide comprehensive insurance for goods on an all risk basis subject to certain exclusions. On the other hand, the "B" and "C" clauses are based on a named perils approach and the cover is much more limited. They are mainly designed to cater for total loss of the goods.

The Institute "A" clauses

SCOPE OF COVER

Clauses 1-3 state that the insurance covers all risks subject to certain excepted perils, but does include general average and salvage charges and liability to the carrier under a "both to blame" collision clause found in some liner operators' bill of lading terms.

Clauses 4-7 contain the exclusions from cover and these are similar to the ones which appeared in the former "all risks" clauses. The main points are as follows:

1. Loss, damage or expense attributable to wilful misconduct of the insured person is excluded.
2. Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear are excluded. This covers the situation where a smaller amount is pumped out of a tank than was pumped in, the difference constituting the "ordinary" loss in volume.
3. Loss, damage or expense caused by insufficiency or unsuitability of packing or stowage is excluded. Underwriters regard such losses as certainties and not risks and therefore refuse to cover them, as insurance is intended to cover only risks. It should be noted that insufficient packing is also an excepted peril under all carriers' conditions of carriage so that the shipper can recover neither from carrier nor underwriter. Where the insufficiency of packing is the result of the work of a person to whom the shipper has subcontracted the work, a specialist packer or forwarder perhaps, underwriters would not normally use the clause against the shipper but would exercise subrogation rights against the defaulting contractor. Also, there must be proof that the packing was insufficient and a history of previously trouble-free transits may be invoked by the shipper as evidence that the packing was satisfactory and the damage was in fact the result of some other mischief.
4. Loss, damage or expense caused by inherent vice or nature of the subject matter insured is excluded. As with packing, this is also an exclusion under carriers' conditions. The onus would, however, be on the underwriter to prove that the cause of loss was inherent vice.
5. Loss, damage or expense approximately caused by delay is excluded. This means that goods such as perishables which are unable to resist abnormally extended transit would be unprotected. It is sometimes possible to obtain special cover against these risks.
6. Loss, damage or expense arising from insolvency or financial default of the owners, managers, charterers or operators of any vessel used in the transit is excluded. This clause, which caused considerable controversy when it was introduced for the first time in 1982, could be invoked against the shipper if a ship owner abandoned a voyage upon becoming insolvent, the goods were offloaded and subsequently stolen from the quayside. Underwriters claimed that they had suffered too many losses through shippers using "fly-by-night" operators and the new clause might at last concentrate minds on the need for quality control. To date, there have been surprisingly few problems with the clause.
7. Loss, damage or expense arising from use of nuclear weapons is excluded.
8. Loss, damage or expense arising from unseaworthiness of a vessel or craft, or unfitness of a vessel, craft, conveyance, container or lift van is excluded, where the insured person or his employees knew or ought reasonably to have known of the unseaworthiness or unfitness. If the insured person uses a cut-price and unreliable shipping line whose vessel sinks, he could find that the underwriter turns down a claim, though the onus of proving knowledge will rest with the underwriter. Similarly, the use of decrepit and unserviceable containers or trucks could lead to a claim being turned down. Shippers should reject such unsatisfactory equipment and request the repositioning of serviceable equipment.
9. Loss, damage or expense arising from war risks is excluded. It is possible to buy additional war risk cover, but only while the goods are on board a vessel. It is not possible to cover war risks on land.
10. Loss, damage or expense arising from strikes, riots, civil commotions and terrorist action is excluded, but it is possible to reinstate cover by additional strikes clauses cover.

DURATION OF COVER

Cover under the "A" clauses commences when the goods leave the warehouse of origin and continues until the goods are received at the warehouse of final destination. However, cover will only extend for 60 days after the goods are unloaded from the vessel at the destination port, unless the delay is due to circumstances outside the control of the insured. Cover will also terminate if the final land destination is altered after the goods are unloaded from the vessel at the destination port, unless the underwriters are informed and an additional premium is paid. Also, if carriage is prematurely terminated, cover will cease unless prompt notice is given to the underwriter, but if this is due to a peril insured against, such as collision, the underwriter will reimburse the costs of unloading, reloading and forwarding goods to destination. Underwriters will only regard cargo as a constructive total loss if it is beyond reasonable cost of recovery and reconditioning.

Duties of the insured person

As mentioned earlier, the insured has a duty to prevent and minimise losses and to act as though uninsured. These duties are specifically spelt out in clauses 16 and 18 of the Institute of Underwriters and in the case of a blatant breach by the insured, underwriters would decline to pay the claim. The Institute "B" and "C" clauses

SCOPE OF COVER

The "B" and "C" clauses offer only restricted cover for events spelt out in clause 1. Thus "B" clauses include loss of, or damage to, goods reasonably attributable to (or in the case of 7-9 caused by):

1. fire or explosion;
2. vessel or craft being stranded, grounded, sunk or capsized;
3. overturning or derailment;
4. collision or contact of vessel craft or conveyance with any external object other than water;
5. discharge of cargo at a port of distress;
6. earthquake, volcanic eruption or lightning;
7. general average sacrifice;
8. jettison or washing overboard;
9. entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift van or place of storage.

They also cover:

1. total loss of any package lost overboard or dropped whilst loading on to or unloading from vessel or craft;
2. general average and salvage charges;
3. liability under "both to blame" collision clauses.

It should be noted that the "B" clauses do not cover:

1. theft;
2. pilferage;
3. non-delivery;
4. deliberate damage by third parties;
5. heavy weather damage;
6. rainwater damage.

In addition, all the exclusions mentioned in relation to the "A" clauses apply. The "C" clauses provide broadly similar cover to the "B" clauses, but they are even more restricted and additionally do not include cover specifically against:

1. earthquake, volcanic eruption or lightning;
2. washing overboard;
3. entry of sea, lake or river water into vessel, craft, holds, conveyance, container, lift van or place of storage;
4. total loss of any package lost overboard or dropped while oading on to or unloading from vessel or craft.

Neither "B" or "C" clauses are suitable for high value manufactured goods which are liable to pilferage or easy damage. It should, however, be noted that under CIF Incoterms it is acceptable for the seller to provide minimum cover (roughly equivalent to present "C" clauses) to satisfy his contractual obligation for insurance. Buyers on a CIF basis would be well advised to check the insurance they are being offered and in many cases should request an "all risk" type insurance such as the "A" clauses even if the cost is higher. Accepting inadequate insurance could be an even costlier mistake.

Duration of cover and duties of the insured

The provisions in the "B" and "C" clauses broadly follow those set out in the "A" clauses.

Liability insurance for exporters and importers of goods

Reference to the section on international Conventions reveals that the exporter and importer as well as the carrier have liabilities under the law in respect of their actions (or inaction). Conditions of carriage and forwarders' conditions of trading also place contractual liabilities on shippers. Thus, under the 2000 BIFA Conditions there are indemnities or warranties from the shipper in respect of.

1. his ownership of the goods or authority to move them;
2. duties, taxes, etc. levied by the authorities;
3. claims made in tort against the forwarder in excess of the liabilities provided for in the trading conditions;
4. the accuracy of the description and particulars of any goods furnished by the shipper;
5. any failure to warn of goods which may taint other goods;
6. the proper loading of any goods which may taint other goods;
7. general average liabilities of the goods concerned;
8. any undeclared goods of a dangerous or damaging nature.