**MARINE CARGO INSURANCE ABCS:**

**MAKE SURE YOUR GLOBAL SHIPMENTS ARE FULLY COVERED^©^**

**By Frank Reynolds**

**Reprinted with Permission from Dec. 2007 issue of "Managing Imports
and Exports"**

**Frank Reynolds is president, International Projects Inc. an export
trading company.**

**He is a licensed U.S. Customs broker and has been appointed to 15
terms**

**on the Commerce Department's District Export Council**

Welcome to the "Alice-in-Wonderland" world of marine cargo insurance.
Things are strange here for the uninitiated. "All risk" coverage doesn't
cover all risk.

Insurance policies sometimes refer to voyages as "adventures." Contrary
to what one would normally suppose, "warranteed-free-of" means whatever
follows is not covered. "Fortuitous" doesn't mean lucky but accidental,
used in connection with a loss and therefore unlucky. "Average" has
nothing to do with arithmetic but means a loss, so fortuitous average
equals accidental loss.

There are two kinds of fortuitous average, particular and general.
Particular means something bad happened to an insured's shipment, while
general means that something bad happened to the carrier. We'll cover
general average below, but first we need to get some basic terms out of
the way. Casualty insurance covers goods. There are two types with
deceptively similar names but different uses.

Inland marine insurance is the term used for insurance that covers
domestic shipments. Premiums are typically paid periodically (quarterly,
annually), and all domestic shipments made within the covered time frame
are normally covered. The only reporting is in the form of eligible
claims.

**Marine Cargo Insurance**

Marine cargo insurance, the type we are covering in this column, is the
term used for insurance that covers international shipments (or those to
offshore destinations). Generally, premiums are paid according to usage
rather than a predetermined onetime basis, so usage is usually reported
on a shipment-by-shipment basis. Premiums and the level of coverage may
vary by destination or type of cargo covered. There are various levels
of coverage ranging anywhere between the following two extremes:

Minimum cover is what we in the United States call "free of particular
average" and most other people call "London Underwriter Institute
Clauses C." (See how the U.S. name plays to the difference between
particular and general average?) This coverage is normally inadequate
for shipments of any real value.

Maximum cover is what we call "all risk" and others call "London
Underwriter Institute Clauses A." Coverage levels differ from policy to
policy and insurer to insurer, but typically "all risk" covers every
cause that is not specifically excluded (or "warranteed free of"). As
mentioned above, "all risk" doesn't typically cover all risks and should
be enhanced by coverage for war as well as strike, riot, and civil
commotion (SRC), usually at modest additional premiums.

Companies frequently purchase single policies, covering both inland
marine and marine cargo, or separate policies structured to dovetail the
risks. Obviously, companies that purchase marine cargo coverage against
policies owned by others (such as from freight forwarders) look to it in
addition to whatever inland marine coverage they may have for their
domestic business. A t this point, I apologize for my many
generalizations. Insurance coverage is often customized with special
conditions, inclusions, exclusions, deductibles, and franchises
(disappearing deductibles).

**What Is 'General Average'?**

Let's get back to general average. I'll quote from a book appropriately
titled Managing Exports:

General average is "a legal requirement that all parties in a voyage
contribute proportionately to cover expenses incurred as a result of
damage to a ship and/or its cargo, as well as those expenses incurred in
taking direct action to prevent damage or additional damage to a ship
and/or its cargo. All conventional marine cargo insurance coverage
levels cover this peril, but it has major consequences for uninsured
shippers.

Lacking coverage, they will likely be forced to place a cash deposit or
surety bond to release their cargo. These are often tied up for years as
general average proceedings are both lengthy and involved. Many general
average situations are covered by the York-Antwerp Rules (YAR).
(Managing Exports, Frank Reynolds and the Institute of Management and
Administration, John Wiley & Sons, Inc., 2003)

So if a ship is damaged, all parties must participate in the loss
regardless of whether their cargoes had anything to do with the problem.
This sounds goofy but is grounded in custom. Ship lines as we know them
are a fairly recent phenomenon in the long history of trade. Formerly, a
ship owner would form a sort of partnership with merchants having cargo
for trade in distant places. Off went the ship to the "New World" or
some other remote location. If it arrived and returned safely, there
were likely huge profits. If it sunk, everyone lost. The idea of cargo
owners and ship owners being in it together continues as general
average. Maybe that's how voyages came to be called "adventures."

In case you're wondering, we described the two types of casualty
insurance because some companies believe that their international
shipments are automatically covered by their inland marine policy. This
makes them vulnerable for not only the value of the goods but the
general average peril as well.

**Marine Cargo Insurance Providers**

[Allianz](http://www.allianz.ie/Business-Insurance/Specialised-Niche/Marine/Cargo-Insurance/index.html)

[American International Group](http://www.aigmarine.com/)

[Chubb Group Marine
Cargo](http://www.chubb.com/businesses/cci/chubb2612.html)

[CM&F Group, Inc.](http://www.cmfgroup.com/com/marine_cargo.html)

[CNA](http://www.ommni.com/index.asp)

[Eastern Marine
Underwriters](http://www.sireh.com/can/e/10/eastern_marine_underwriters)

[Export Insurance Services](http://www.exportinsurance.com/)

[Great American Insurance
Group](http://www.greatamericaninsurance.com/oceanMarine.html)

[INAMAR](http://www.inamarmarine.com/ocean_cargo.htm)

[Lloyds](http://www.lloyds.com/)

[Oceanwide, Inc.](http://www.oceanwide.com/Goverview.html)

[Roanoke Trade](http://www.roanoketrade.com/productservices/cargo.htm)

[Rogers & Brown](http://www.rogers-brown.com/services/insurance.html)

[Worldwide Ocean Cargo Insurance
Services](http://www.tsbic.com/cargo/index.html)

[Zurich North American Marine
Cargo](http://www.zurichna.com/marine_insurance.htm)