First Party Marine Cargo Insurance Policies An Overview

Author:  Daniel W. Raab, Esq.
This article deals with the importance of having a cargo policy on international shipments at least in part by water and an overview of how to go about making a claim under such a policy. Your actual policy will have to be reviewed as they are not all the same.

International shipments could be exposed to all kinds of danger. Furthermore, many bills of lading have various limitations of liability under the Carriage of Goods by Sea Act such as the $500.00 per package limitation and a defense excusing improper navigation of the ship under many circumstances.  An ocean carrier and its coverage provider, either a P & I Club or a domestic insurer are in more of an adversarial position to the shipper than is its own insurance company. In many states, an insurance company’ failure to pay a claim that should be paid can result in an assessment of attorneys’ fees if there is litigation. This is typically not true with cases against ocean carriers.

The most common type of policy that is purchased is an all risk policy, however such a policy typically has exclusions including for improper packing and intentional acts. These policies are often written as open cargo policies. Open cargo policies can be purchased by shippers, ocean freight forwarders, and other third party intermediaries and allow for shipments to be covered on an ongoing basis. Shipments must be reported to the insurer. These types of policies will typically cover cargo from one warehouse to another and include shipments that go not only by ocean but also for the inland portion of the shipments by truck or rail. There are also special cargo policies which often deal with an expensive piece of cargo such as a stage or luxury car.

When you purchase a cargo policy or any policy, it is important that you request a copy of the policy so you are aware of the terms and conditions of the policy. I have been in cases where a loss occurred and my client had not received a copy of the policy.  The laws in the State of Florida except for possibly on some surplus lines policies do not have a time frame within which an insurance company must provide a copy of the policy to its insured.

If there is a loss, it is important that you give notice to the insurance company or its designated representative as quickly as possible. Do not assume that the insurance agent is the representative of the insurance company. You want proof that the insurance company is on notice of the claim. The insurance agent is not the same thing as the insurance company. Review the policy to see where you should give notice. Certificates on an open cargo policy can give the name of a contact person and/or company in another country in the event of a loss. It is also a good practice to notify the ocean carrier of the loss immediately and certainly within 3 days. The failure to do so will place a heavier burden on the shipper in terms of proving a loss.

The insurance company will typically send a marine surveyor out to look at the cargo. If you find that the surveyor appointed by the insurer is questioning the claim, then you might want to get your own surveyor. You can check the listings with the Society of American Marine Surveyors, Inc. and the National Association of Marine Surveyors, Inc. to find a cargo surveyor in your area.  You will have to provide various documents to the insurance company including a bill of lading, packing list, invoice, consular documents, and delivery receipts. If the claim is paid, then the insurance company will have the right to sue the ocean carrier or any other party that it feels caused the loss. You will have to cooperate with the insurer. This could involve giving a statement, providing documents, and appearing at a deposition and at trial. You will most likely have to sign a subrogation or a loan receipt if the payment was labeled as a loan. The insurance company controls this litigation and any lawsuit will most likely be brought in the name of the insurance company.

This should give you an overview of what is a first party cargo policy and some basics of initiating a claim. A shipper should not depend strictly on an ocean carrier paying its claim. 

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