Recently I received a query in relating to a claim in Marine Insurance and I am putting it up here for your reading as well:
Dear Sir,
The marine insurance is a very interesting subject and full of technicalities. However terms have been invariably interpreted by insurers only and claims are denied.
A consignment is billed on FOB basis, but on credit and consignor has its insurable interest till his payment is received. Consignor buys an insurance for FOB value +10% for a journey upto destination port. Is the claim payable or not. Since most of the clients lack the knowledge of the terms, insurers invariably fool them on terms
A consignment is billed on FOB basis, but on credit and consignor has its insurable interest till his payment is received. Consignor buys an insurance for FOB value +10% for a journey upto destination port. Is the claim payable or not. Since most of the clients lack the knowledge of the terms, insurers invariably fool them on terms
My Answer to the same:
Dear Sir,
Terms of payment need to be differently looked upon from terms of sale actually. Terms of sale, i.e. FOB / CIF / DDU / CIP / Ex-works actually suggests where the title of the goods are changing and how seller actually is intending to deliver the goods to the buyer and where buyer will take over the risk of loss or damage.
Deferring payment terms can not entitle the consignor to claim for damages from Insurance company under the policy copy where coverage is FOB +10% as this amounts to fraud (on consignee's account) actually considering there was no intention to contract in the first place, of course, if seller has the ECGC (Export Credit Guarantee Corporation of India Ltd.) insurance etc, he may claim the same under that. Seller can further claim for damages (monetary / sue buyer) through legal channels in the goods imported country.
Furthermore, your mail is unclear as to where the loss has taken place? At destination port? If so, it is the role of the consignees to claim under the contract of Insurance as title of goods have changed when the vessel was loaded at port of loading itself.
Further, when Consignor buys insurance on FOB +10% (I assume here coverage terms are FOB +10% as well), then the contract of insurance ends when the vessel is loaded itself. The question now is, where did the loss occur actually? Therefore, the consignees need to have taken care of Insurance of the cargo from the point vessel was loaded up to final destination of the cargo, whatever that was.
The incoterms / ICC clauses have been prepared to rule out ambiguities in global trade actually and lack of knowledge on account of consumers and their actions / in actions based on such information amounts to issues relating to diligence and negligence actually and blaming the underwriters for the same would be inaccurate, to be honest.
That is where brokers and consultants come in to picture. But, competition and trade in itself acts as a hindrance for consumers to seek specialized opinions prior to ensuring that their cargo worth lakhs / crores reaches safely to destination for they intend to save every penny and maximize profit, the very basis of trading.
Terms of payment need to be differently looked upon from terms of sale actually. Terms of sale, i.e. FOB / CIF / DDU / CIP / Ex-works actually suggests where the title of the goods are changing and how seller actually is intending to deliver the goods to the buyer and where buyer will take over the risk of loss or damage.
Deferring payment terms can not entitle the consignor to claim for damages from Insurance company under the policy copy where coverage is FOB +10% as this amounts to fraud (on consignee's account) actually considering there was no intention to contract in the first place, of course, if seller has the ECGC (Export Credit Guarantee Corporation of India Ltd.) insurance etc, he may claim the same under that. Seller can further claim for damages (monetary / sue buyer) through legal channels in the goods imported country.
Furthermore, your mail is unclear as to where the loss has taken place? At destination port? If so, it is the role of the consignees to claim under the contract of Insurance as title of goods have changed when the vessel was loaded at port of loading itself.
Further, when Consignor buys insurance on FOB +10% (I assume here coverage terms are FOB +10% as well), then the contract of insurance ends when the vessel is loaded itself. The question now is, where did the loss occur actually? Therefore, the consignees need to have taken care of Insurance of the cargo from the point vessel was loaded up to final destination of the cargo, whatever that was.
The incoterms / ICC clauses have been prepared to rule out ambiguities in global trade actually and lack of knowledge on account of consumers and their actions / in actions based on such information amounts to issues relating to diligence and negligence actually and blaming the underwriters for the same would be inaccurate, to be honest.
That is where brokers and consultants come in to picture. But, competition and trade in itself acts as a hindrance for consumers to seek specialized opinions prior to ensuring that their cargo worth lakhs / crores reaches safely to destination for they intend to save every penny and maximize profit, the very basis of trading.
Thanks and Regards,
Varun Gawarikar.
Some useful web resources for the same:
INCO Terms
Indian Contract Law
Posts
Is it not case where say the loss is at the load port and the brc is clear and the money has been received at the consignor end then the liability can also shift to the oversea insurer if he has covered the shipment from the indian port? please confirm
ReplyDeleteDear Satish,
ReplyDeleteSorry for replying late. Although the insurable interest is there, I doubt if foreign underwriters will respond considering the title of goods still haven't being changed. Unless, of course, terms of sale being FAS.