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Cargo Cover – Value Protect & Serenity


Jagan - April 29, 2019 - 1 comment

  1. It is always good practice to ensure that cargo is insured prior to inception of voyage, particularly when the costs for such covers are only a fraction of the value of the cargo. We however come across many shipments wherein cargo interests believe that they would be able to  recover from the Carriers for any and all damages and therefore choose to retain the risks. The fact is that even if the loss is due to the Carrier’s fault, they (Carriers) may still be entitled to either exclude and / or limit liability such that any recovery would be much lesser than the actual losses suffered. Additionally, the recovery process would take timesuch that this would lead to additional pressures on the cargo interests. Our earlier articles on General Average & Salvage did touch on these issues 2 & 3. Accordingly, cargo interests should consider appropriate cargo insurancecover to deal with the attendant risks.
  2. We now see the entry of Maersk Line and CMA CGM providing coverage for Cargo. This article will compare the coverage provided by Maersk Value Protect and CMA CGM Serenity.
    1. Maersk: Maersk launched Value Protect and which provides for cover for loss or damage to the cargo whilst under their (Maersk’s) responsibility.
      1. The quantum of coverage is on the basis of tiers and their tariff charges for coverage is as follows:
        – Coverage upto USD 15,000 (Dry Starter)– USD 29
        –  Upto 30,000 (Dry Base) – USD 59
        –  Upto USD 60,000 (Dry Plus) – USD 118
        –  Upto USD 120,000 (Dry Extended) – USD 235
        –  Coverage upto USD 12,000 (Cool Standard) – USD 39
        –   Upto USD 36,000 (Cool Advanced) – USD 117
      2. The maximum amount recoverable will be restricted to the lower of the commercial value or the Value Protect tier amount.
      3. With respect to coverage, it is provided by overriding the exclusions and limitation of liability provided in Art IV R 2(a),(b),(c),(h),(l),(o) and 5 of the Hague Rulesi.e. the exclusions for Navigation faults, Fire, Perils of the Sea, Quarantine restrictions, Saving life or property at sea, Insufficiency or inadequacy of marks and the Limitation of liability. 
      4. The coverage includes General Average and/or Salvage liabilities provided it falls within the Value Protect terms.
      5. Some fresh food such as chilled avocados, berries, bananas, pineapples, papayas, non-citrus fruits and frozen food such as fish and seafood are excluded.
      6. The law and jurisdiction for claims is as provided in the terms for carriage and which provides for US law and exclusive jurisdiction for the New York courts for shipments to and from USA. In all other shipments, the contract provides for English Law with the jurisdiction of English High Court in London.
      7. With respect to the cover, the Maersk Value Protect provides restricted coverage. In addition, the way it has been structured is that coverage goes to remove some of the exclusions available to Maersk under the contract of carriage. The coverage is not akin to a traditional cargo insurance. We believe that this product should appeal more to the uninsured cargo interests seeking to manage their exposures for General Average and Salvage (given the increasing regularity in the container industry) in addition to the other write backs of the exclusions and limitation. It is submitted that the Value Protect will not satisfy the insurance requirements of a CIF contract.
    2. CMA CGM: CMA CGM launched a cargo insurance product, Serenity, by teaming with Generali Group, an Insurer involved in providing such covers.
      1. The cover is on the basis of All Risks Insurance on ICC A (1/1/2009 wordings).
      2. The cover incepts prior to and after the responsibility of CMA CGM i.e. warehouse to warehouse basis (as is the case in an ICC A cover).
      3. The cover is for the full insured value without any application of deductible. The tariff premiums are on the basis of tiers i.e.
        –  Insured value up to USD 25,000 – USD 49
        –  USD 25,001 – USD 50,000 – USD 99
      4. While it is generally necessary for shipments to be effected by CMA CGM, we understand that CMA CGM are willing to make exceptions and also quote for shipments effected by other Carriers.
      5. The CMA CGM Serenity is an insurance product. Given that the cover is on ICC (A) 1/1/09, the cover is much wider than that provided by Maersk Value Product. It is submitted that Serenity will satisfy the insurance requirements of a CIF contract. Accordingly, it appears to us that the product is targeted not only at the uninsured but also insured cargo interests presently insuring either directly with cargo insurers or through their insurance brokers / forwarders.
  3. Cargo interests who are insured,have been insuring the cargo by themselves directly with cargo insurers or through insurance brokers /  forwarders, who in turn, have an open cover with cargo insurers. It appears to us that the present intention of both Maersk and CMA-CGM of offering these products is to get more embedded with their customers by providing additional / one stop service so that they remain the first choice for all shipments. Whether this will result in a disruption and cause changes in the industry is something which only time will tell. We however believe that launch of these products will ensure that other parties involved in international trade i.e. other shipping lines, forwarders and marine cargo insurers will react to avoid losing out not only their market share but also their competitive advantage. It may spur other Carriers to consider providing other coverages / write backs of the carriage exclusions with or without requirement of any costs/charges to be paid.
  4. Purchase of cargo insurance from Carriers may also spur the development of Co-operative Claims Handling. What we mean by this by this is that given the Carrier is an interested party in both the liability (P&I) and cargo covers, an investigation of a loss to ascertain the cause and extent could become much more simplified by the engagement of a single surveyor / adjuster for the joint accounts of both the Carrier and Cargo interests (with the costs to be borne either on a common user basis or borne by the party at fault). In effect, what we suggest is something what a GA Surveyor and Adjuster does during a General Average on behalf of all parties involved in the adventure. We believe that co-operative processes will lead to reduction of costs for all parties although this may lead to more small claims to be dealt by the Carrier and their liability insurers (claims of these nature may not be pursued in the traditional process given that the costs of pursuit may exceed the claimed amounts). 
  5. To conclude,
    1. Maersk Value Protect and CMA CGM Serenity has simplified the process for cargo interests to manage their risks. 
    2. These innovations may lead to disruptions and which will spur the market to react either by providing similar or better products to manage cargo risks.
    3. Further cost reductions could be achieved by co-operative claims resolution processes which may be established between the Carriers Liability and Cargo Insurers.

 

1. Delay by Carriers in dealing with cargo claims may be deliberate to see whether cargo interests are indeed serious in pursuing the Carrier and / or allow the cargo claim to be time barred given that the cargo conventions provide for a limited period and after which the claims become extinguished.

2. See Salvage & General Average -Uninsured Cargo Interests

3. See Partial & Total Loss – Uninsured Cargo Interests

4.  The Institute Cargo Clauses 1/1/82 and 1/1/09 are the most commonly used forms for cargo insurance. ICC Clause A provides for All Risks cover whereas Clause B & C provide cover for named perils. Please see an article on Understanding Cargo Insurance which can be viewed by clicking the hyperlink.

5The Hague Rules

 

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1 comment

  1. Hariesh

    Dear Muthu, thanks for a useful article.. I have in fact just written this morning about the disruptions in the market by “digital freight forwarders” and the emergence of “digital shipping lines”.. I have added above point also as a differentiator in the shipping line’s service offering.. https://shippingandfreightresource.com/digital-freight-forwarders-vs-digital-shipping-lines/

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