There has always been a natural need for Insurance in Business and Society from times immemorial.
The Joint Family System in India was the sure & the best method of self Insurance within the family for ill health and other general risks. Similar examples of Community living are found in many places in the history of mankind.
Insurance Industry has grown to today’s exciting heights due to increasing need for individuals, Businesses & Companies covering risk of loss at the cost of small premium.
This has given rise to a new phenomenon – The Insured wants to buy the best coverage at the cheapest cost. On the other hand the Insurance Company wants to sell maximum policies in a competitive environment with as many exceptions as possible to keep it affordable.
The result is a complex scenario where the Insured feels that he is fully covered but the Insurance Company has no choice but to protect itself by taking exceptions for all normally occurring loss scenarios.
It is prudent to purchase Insurance even if it is only covering 70 or 80%. It is for each one of us to chose the extent to which we need to insure ourselves individually or for business.
The BASIC RULE is that we must read and understand the “fine print”. We may not be able to change the fine print most of the times but it is better to be aware now than to get a surprise when we are hit.
Some of the typical Fine Print Clauses for Cargo Insurance Shipment by Sea are:
A Lawyer in USA was very upset with an Insurance Company & decided to teach them a lesson.
He purchased a Packet of Rare Havana Cigars in an Auction and Insured them for a huge sum.
He came to his own office and smoked them slowly one after the other .
Then he filed a Claim with the Insurance Company saying that “All cigars were lost in a series of small fires”. The Insurance Manager was furious but the Head of Claims Committee approved the claim which was paid to the Lawyer within 2 days.
One day after the cheque was encashed by the Lawyer, the Insurance Company got him arrested under a criminal offence …………. “For willfully destroying the Insured Property”…..
Moral: Insurance Companies always have the final word.
A Dubai based Ship Operator Hired a vessel from a reputed Owner & loaded Containers from Bombay for Umm Quasar from 5 shippers for carrying project cargoes. He got extra set of OBLs made by the Agent. Agent was unaware of the purpose & was conned.
Cargo was discharged in Bandar Abbas & vessel redelivered to Head Owners showing fake cargo discharge documents to Owners.
When the vessel disappeared with the cargo, one of the Shippers approached his Insurance Company to pay the cargo Insured value as it never reached the discharge port. Insurance Company declined simply because the cargo was not lost but mis-delivered, which is a case of dispute between Ship Owner and Shipper.
The Shippers had to pay for Freight again to move the cargo to Umm Quasar as the Ship Operator closed his shop and disappeared.
One Mumbai based very big Shipper sold Steel Coils to the biggest Steel Importer in Saudi Arabia.
A genuine good Ship Operator from Dubai booked the cargo and reached in time to the disport Jubail. Cargo was discharged and the ship sailed out peacefully.
Meantime, there was a dispute between the Shipper and Buyer about the quality of cargo and the Big Importer in Saudi Arabia declared cargo “Damaged & unsuitable for use in Steel Plant” and bullied the Insurance Company to pay the full insured value. The customer was too important for them.
The Insurance Company has made a case of Damage of Cargo in Transit against the Dubai based Ship Operator and claiming USD 1.8 Million from the Small Ship Operator. This case is going on at present and it is difficult to predict the outcome. Moral: In a fight between right and wrong …….the Stronger one wins
All the Cargo Insurance policies mention .. “Including the risk of earthquake & Burglary but excluding Theft & Terrorism”.
Pl see what I found in the Webpage of Royal Sundaram General Insurance last night:
Theft & Burglar Insurance
We offer Burglary Insurance as part of an overall package to cater to your insurance requirements. Burglary Insurance covers burglary or housebreaking accompanied by either forcible or violent entry into/ exit from the premises and hold-up.
The heading says “Theft” but it is missing from the content Just read between the lines….. In case of house breaking & theft in your home/office/warehouse when you have gone out of town, you will almost certainly not get a penny from the Insurance company as I read it.
My friend in London suburbs had a Warehouse for Computer parts & Hard Disk Drives which he used to Insure for years. One fateful night the thieves arrived with a Truck opened the door of the Warehouse with a key and removed HDDs worth about USD 1 Million. Police case was lodged. Police gave a written report that theft had genuinely taken place. When he approached Insurance Company, he was told that “it was not a forcible or violent entry” therefore, not a Burglary. He got nothing from Insurance.
Most of the Insurance Companies exclude Theft in their Policies. Watch out in future!!
Moral: Fully understand your Insurance Policy fully before feeling Secure.
A reputed Company wanted to Insure its Jetty in Tapi River in Surat. The Management forced their Insurance Manager to obtain 50% discount in the policy or quit the job.
The Manager needed his job to feed his family. Finding no legitimate solution to obtain 50% discount, he approached his senior friend & ex colleague in the Insurance Company to find him a solution.
The Insurance Company said that they can give a 50% discount if the Liability of Insurance Company was limited to “Damage to the Jetty by Marine Animals only”. Largest Marine animal in Tapi River is only 150 grams fish which can never damage 5000 tons displacement Jetty.
As the luck would have it, the jetty was hit by a ship and cracked 6 months later. Insurance Company legitimately declined any claim and the Insured had to spend his own money.
Moral of the Story: There is nothing like “Cheap Insurance” in the Commercial World.
Mumbai: A cargo ship grounded at a worrying 25-degree tilt and discharging three to four tonnes of oil by the hour after a collision with another vessel barely five nautical miles off the city’s coast in the morning kept the navy, coast guard and port officials on high alert all of Saturday. Around 9.50 am, Panamanian container vessel MSC Chitra, while leaving JNPT’s Nhava Sheva port, collided with the inbound MV Khalijia-3, which was involved in another mishap off Mumbai on July 18. It had been recently repaired and crew and salvagers were taking it to the port when the collision took place in the vicinity of the Prongs Reef Lighthouse, said coast guard officials, adding that the situation has become very serious.
Five Indian Traders had purchased Steel Coils worth Rs. 100 Crores which were shipped from China to India.
3 Public Sector Indian Insurance Companies had Insured the cargo between them.
The Insurance Policy had Institute Classification Clause introduced therein. The ship was IRS Class which is not ICAS Member. None of the Traders had any Shipping Executive working for them. The Buyers paid the premium and believed that they are insured.
When the Claim was lodged, ALL the insurance companies denied liability claiming violation of ICC.
One of my Clients from Delhi who had cargo worth Rs. 25 Crores on this ship suffered a loss of Rs. 5 Crores and 6 months of repeated visits to Mumbai before he got hold of his cargo.
WHO IS TO BLAME –
Importer/Trader for buying C&F without any control on vessel quality & no Shipping expertise in-house.
Insurance Company for doing no Due Diligence that the vessel is not ICAS Class.