Marine cargo insurance coverage is a class of property insurance that insures cargo while in transit against loss or damage arising from perils associated with the navigation of the sea or air and subsequent land and inland waterways. Typical ‘Maritime perils’ are perils of the sea (sinking, stranding, collision etc), fire, war perils, pirates, thieves, capture, jettison and washing overboard and ‘…any other perils either of a like kind or which may be designated by the policy.’ The latter allows insurers to include at their discretion in their policies other risks, for example risks appropriate to other means of transport, like crashing, derailment and overturning.
Everyone who has an insurable interest can insure their interest under a marine policy. A person is ‘interested’ where he stands in any legal or equitable relation to the adventure in consequence of which he may benefit by the safe arrival of the property or be prejudiced by its loss. When an exporter sells goods overseas he has the option of either selling the goods on terms that leave the insurance to be arranged by him or his buyer, or he can arrange an insurance that covers the entire voyage but the benefit of which passes from him to his buyer when the insurable interest passes from one to the other.
Under certain terms of sale like CIF (Cost Insurance Freight), the seller contracts to obtain at his own expense a cargo insurance that the buyer, or any other person having an insurable interest in the goods, shall be entitled to claim directly from the insurer and to provide the buyer with an insurance policy or certificate for that purpose. The marine policy allows for goods to change ownership when the subject matter of the insurance are bought and/or sold. When goods are sold on CFR (Cost and Freight) the buyer obtains a cargo insurance on their own account.
When cargo is sold on CFR terms, the seller of the cargo will charter the vessel to load and transport the goods to buyers discharge port. This can be on a Booking Note, a Voyage Charter or a Time Charter. When the goods are damaged or lost, the marine cargo insurance will indemnify the buyer for their loss. The buyers insurance will be entitled to be subrogated to the rights of the insured against the ship owner, the carrier under the Bill of Lading. Depending on the cause of the damage (e.g. shortage, stowage, etc) the ship owner can turn against the charterer under the terms of the charter party. And the cargo damage, albeit insured, becomes a charterers’ liability.
Even when cargo is sold on CIF terms there is a contingent charterers’ liability exposure. The same procedure applies if the cargo insurance is entitled to be subrogated. The insurance company can claim the loss under the Bill of Lading. Only when the cargo policy includes a waiver of recourse the process will stop after the interested party is indemnified.
However, there may be a scenario whereby the loss is not covered under the cargo policy, either because of the cause or because the terms of restrictions in the marine cargo policy. In that case the claim may also become a charterers liability claim under the charter party.
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