Ocean Marine Insurance Cargo Insurance

Ocean ​Marine Insurance is the oldest form of insurance, probably dating to the Middle Ages. The organization of Marine Insurance took great steps forward with the formation and development of an insurance market on Lombard Street in London, England and subsequently– since 1769–Lloyds of London. Today, Lloyds still plays a prominent role in Marine Insurance. The first American insurer was Insurance Company of North America formed in 1794 and is currently known as CNA.

Because of their long tradition, marine policies tend to be the most traditionally worded policies in the insurance industry, and to have the longest tradition of case law legal decisions covering the various terms and clauses of the policies. While care should be taken with any insurance to clarify any definitions provided in the policies, this is especially true in marine coverages, where the defined terms may have long histories.

The Marine Cargo Policy

Ocean marine insurance is designed to cover various hazards related to the movement of goods. The first and obvious protection that can be provided is for the cargoes themselves. This protection can be provided to the seller/shipper or to the buyer. Where ownership of and responsibility for the cargo are assumed is crucial in determining what coverage is needed. This used to be a simpler exercise than at present–as a limited number of shipping terms existed, eg. FOB, CIF etc.

In 1990 the international shipping agency agreed on an expanded set of terms, which allow transfer of ownership and responsibility at various points along the transit route, including at customs borders. We have set the various terms out in graphical format in Incoterms.

Risks are unavoidable in the shipment of goods. Goods are loaded and transhipped. Travel on the ocean provides its own set of perils. These risks require that the shipper take reasonable steps to ensure the safety of his goods while in transit, for instance with proper packaging and/or containerizing, and shipping on a vessel appropriate for the goods in question.

Goods are generally handled many times during shipment, and marine insurance is designed to provide coverage throughout this process. They are first loaded at the origination point onto a land vehicle (truck or train, for instance). They are held in a port prior to loading onto a ship. They may be unloaded at an intermediate port, and held for transhipment on a second vessel. Upon arrival in the destination country, they must be cleared through customs, then loaded onto land carriers for transfer to the buyer’s premises. (There may also be transfers between land transports on either the buyer’s or the seller’s end–during which time the goods are under the control of warehouse depot operators, and additional trucking or rail companies).

The marine policy may be scripted to meet a variety of situations and desired coverages. Generally, the policy covers perils of the sea, fire, assailing thieves, jettison, barratry of the master, explosion, defects in the ship that cause damage, and other perils.

Exclusions in the policy are important, and should be reviewed with a qualified risk manager, such as your insurance agent. These typically include damage due to dampness, breakage, delay or loss of market, acts of war, confiscation etc., strikes, riots or civil commotions.