Transcript cargo-insurance---avalon-risk

Premier Provider of Innovative Insurance and Surety Solutions
Cargo Insurance
Wanda Sample
ATLANTA | BOSTON | CHARLESTON | CHICAGO | HOUSTON | LOS ANGELES | MIAMI | NEW YORK | SAN FRANCISCO | SEATTLE | TORONTO
Why Insure? Sandy!
• Rigors of shipping
– Loss, damage and theft
– General Average (ocean)
• Carriers’ liability
– Carriers only pay claims
when liable
– Liability is often limited
– Often have improper
insurance or insufficient
funds
• Usually in trucking or
warehousing
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Ocean shipments
Ocean Shipments
• In the United States, the Carriage of Goods by Sea Act (COGSA)
governs liability for ocean cargo.
– Limits recovery to $500 per package or customary freight unit
(CFU) when the carrier/NVOCC is negligent. What is a package?
• The smallest unit of packaging declared on the bill of lading. This could
be a whole container, a pallet, etc. Examples:
– One 40-foot container S.T.C. 100 cartons of shoes. If the carrier is liable,
liability is limited to the lesser of the cargo’s value or 100 x $500.
– One 40-foot container S.T.C. 1000 hanging garments. If the carrier is liable,
liability is limited to the lesser of the cargo’s value or 1 x $500
– A hanging garment is not considered a “package.”
• In Canada, Hague-Visby applies.
– 666.67 SDR per package or 2 SDR per kilo, higher than COGSA.
• Rotterdam Rules signed in 2009 will be the new liability
convention. Needs to be ratified first.
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17 Hague-Visby Defenses
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Neglect of carrier in the navigation or in the management of the ship
Fire (unless by fault of the carrier)
Perils, dangers, and accidents of the sea
Act of God
Act of war
Act of public enemies
Arrest, restraint, or seizure
Quarantine restrictions
Act of omissions of the shipper or owner
Strikes, lockouts, or labor stoppage
Riots and civil commotions
Inherent defect, quality, or vice of the goods
Insufficiency of packing
Insufficiency or inadequacy of marks
Latent defects not discoverable by due diligence
Saving life or property at sea (general average)
Any other cause arising without the actual fault of the carrier
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General Average
General Average
• Ocean loss. A voluntary sacrifice to save cargo/vessel/life.
– Extraordinary expenses are incurred (i.e., jettison, fire).
• All cargo is seized. Amount of GA loss is determined.
– Must post security deposits to release cargo.
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How General Average Works
Vessel and freight value
$100 million
Saved cargo value
$100 million
Contributing value (total)
$200 million
• Assume $40 million in cargo was sacrificed.
• The loss represents 20%of the contributing value.
• Cargo owners must contribute 20% of their respective cargo
values, even if their cargo wasn’t damaged.
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General Average
• A guarantee must be posted to release the freight.
• If the cargo was insured, the insurance company provides the
guarantee.
• Without Cargo Insurance, cash must be posted.
• General Average claims can take years to resolve.
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International Air Shipments
International Air Shipments
• Two liability conventions.
• The Warsaw Convention limits air carrier’s liability to the lesser
of cargo value or $9.07 per pound ($20 per kilogram).
• The Montreal Convention (effective March 1999) changed the
limitation to 19 Special Drawing Rights (SDRs), about $25 per
kilogram.
• Limitation will vary based on country of origin and/or destination.
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Domestic shipments:
Air, Road, Rail, Warehouse
Domestic Shipments
• Domestic air, intrastate road carriers, and warehouse operators
often limit liability to $0.50 per pound or $50 per shipment.
– Based on bill of lading or warehouse receipt.
• Carmack Amendment applies to interstate carriers.
– Dictates full value unless opted out by bill of lading, tariff or contract.
• Some carriers may have inadequate or no liability insurance and
be unable to fund a loss out of pocket.
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Summary of Liability Limits
Statute
Mode
Customary Limit
Carriage of Goods by Sea Act (COGSA)
Ocean
$500 per Customary Freight Unit
Warsaw Convention (International)
Air
$9.07 per pound or $20 per kilo
Montreal Protocol (International)
Air
19 Special Drawing Rights (SDRs)
Domestic Air (based on AWB)
Air
$0.50 per lb. and/or $50 per shipment
Warehouse Operators (based on receipt)
Warehouse $0.50 per lb. and/or $50 per shipment
Local Carriers (based on bill of lading)
Intrastate
$0.50 per lb. and/or $50 per shipment
Carmack Amendment
Interstate
Full value, unless limited by
rate/contract
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Cargo Insurance Basics
• You can insure freight by:
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Vessel
Aircraft
Truck/Rail
Warehouse
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Cargo Insurance Basics
Coverage Type
What’s covered?
“All-Risk”
Everything but what’s excluded
Free of Particular Average (FPA)
Named perils only
With Average (WA)
Adds “heavy weather” peril to FPA
If your policy is with a London Company or a company following the standard London
format, your conditions will be governed by the London Institute Clauses (ICC) “A,” “B”
and “C,” which are similar to American terms “All-Risk,” “FPA” and “WA.”
Please refer to your cargo policy and our manual for a comparison.
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Cargo Insurance Basics
• “All-Risk” coverage
– “All risks” except exclusions
– Typical exclusions: (consult manual/policy)
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Improper packing
Abandonment of cargo
Rejection/delay by Customs
Inherent vice
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Cargo Insurance Basics
• FPA coverage
• Coverage is for named perils only (consult policy/manual)
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Fire or explosion
Sinking and stranding
Grounding
Crash of aircraft
Jettison
– General Average
– Overturn of truck
– Collision/derailment of land
conveyance
– Discharge at port of distress
• WA coverage
– Same as FPA coverage, but adds
perils of heavy weather
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Why buy cargo insurance?
• So you are compensated should a loss occur.
• To protect your interests in the event of a General Average.
• If buying CIF, you won’t need to deal with an overseas insurer.
– They may also have inadequate coverage .
• Claim handling is simplified.
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Claims – What is covered?
– Physical Loss or damage to cargo
– Freight charges (if included within the
insured value)
– Duty paid (if included within the insured
value)
– Debris removal
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Claims – What is not covered
• Freight charges if cargo is deferred to
another port
• Consequential losses arising from Delay
(where no physical loss or damage has
occurred to the freight)
– Including (but not limited to)
• Loss of market
• Loss of use
• Contractual penalties
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Timeframes to File Claims
Air shipments
Ocean Shipments
Domestic
Damage (Hidden/Concealed)
7 (Warsaw) or 14 (Montreal) days from delivery
Delay
14 (Warsaw) or 21 days (Montreal) from delivery
Non-delivery
120 days from date of issuance
Statute of Limitations
Suit filed within 2 years of arrival date
Visible Loss/Damage
Immediately
Non-visible Loss/Damage
3 days from discharge/delivery
Statute of Limitations
Per COGSA, suit filed within 1 year from date of delivery.
Hague-Visby /FIATA bill of lading limit suit to 9 months
Loss/Damage
Immediately or 7 days from delivery
Statute of Limitations
Varies by carrier per bill of lading, freight receipt or tariff.
On interstate trucking, the Carmack Amendment limits
action to 9 months after date of delivery. In Canada,
varies by province. Ontario: 2 years.
Loss/Damage
60 days after delivery of goods or 60 days after the
warehouse receipt holder is notified of the loss,
whichever is shorter
Statue of Limitations
9 months after delivery goods or 9 months after the
warehouse receipt holder is notified of the loss,
whichever is shorter
Loss/Damage/Negligence
Per time frames for ocean or air above on entries, 75
days from liquidation
Statute of Limitations
2 years from date of loss or damage
Loss/Damage
7 days from the completion of transit
Non-delivery/any other event
45 days from when the goods should’ve been delivered
Statute of Limitations
9 months
Warehouse
NCBFAA Terms &
Conditions of Service
CIFFA Trading Conditions
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Questions?
Thank you for this opportunity to present our
services.
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