Duties of the Assured: (1) The assured must make every reasonable effort to minimize the loss. Reasonable charges incurred for this purposes are collectible under the policy, (2) He must immediately notify the nearest agent or his underwriters arrange for a survey of the damage and supply the necessary commercial documents, (3) He must make timely written claim upon the carrier. The documents usually need are:
1. Original and duplicate copies of the marine insurance policy or the certificate
2. Ocean bill of lading. Also, transshipment bill of lading and railway freight note where applicable.
3. Original shipper’s invoice
4. Packing list, weight certificates or other evidence of the nature and conditions of goods at the time of shipment
5. Survey report of the underwriter’s representative
6. Copy of he claim on ocean carrier and (if available) the reply thereto.
7. Special documents that may be asked for.
A actual total loss occurs when the goods are destroyed when the assured is irretrievably deprived of their possession, or when they arrive so damaged so as to cease to be thing of the kind insured (cement arrived as rock or textiles as rags). Disasters likely to give rise to total loss include fire, sinking or stranding of the vessel collision and loss overboard in the course of loading or discharge.
A constructive total loss occurs whether expense of receiving or repairing the goods would exceed their value after this expenditure has been incurred.
There are two kind of particular average losses: the total loss of a part of the goods, and the arrival of goods at destination in damaged condition.
In the first situation, it is necessary to determine how much of the total amount insured is applicable to the missing item. In homogeneous or fungible cargo – that is cargo which is capable of mutual substitution, like oil or coal – it is frequently a matter of simpler arithmetic. The value of the unit of measurement of the cargo is found by dividing the amount of insurance by the total number of units in the shipment. This value multiplied by the number of missing its gives value of the loss.
In the case of general cargo with the policy covering diverse articles as invoiced to the purchaser and insured in a lump sum. It will be necessary to apportion the total insurance cover the specific item for which claim is being made. The following example shows he usual method of doing this:
Invoice value of items lost
Insured in proportional (110%)
Adjustment of claims on goods arriving in damaged condition requires a different method of approach. Here the consignee and the surveyor attempt to reach an agreed percentage of depreciation, and this is applied to the insured value of the damaged articles.
When the percentage of depreciation cannot be mutually agreed upon the damaged goods must be sold in order to arrive at the extent of loss. When this method is used, the calculation is a comparison of the wholesaler value of the sound goods with the values of damaged goods at the time and place of sale. This percentage is then applied to the insured value of the damage articles. Auction charges and other costs of sale are added to determine he total amount recoverable.
If damaged goods can be advantageously repaired at the destination, the underwriter will pay actual costs of such repairs not exceeding the insured value of the article.
A general average loss may occur whether goods are insured or not. It is one that results from an international sacrifice (or expenditure) incurred by the master of a vessel in time of danger for the benefit of both ship and cargo.
A vessel owner may and does declare his vessel under general average whenever for the common good in time of danger an intentional sacrifice of ship or cargo has been made, or extraordinary expenditure has been incurred.
The documents which have to be produced to support a claim are:
1. The Policy or Certificate of Insurance
2. The invoice and the packing list
3. The bill of Lading, Airway bill or Consignment Note
4. A Survey Report indicating the loss or damage incurred
5. A copy of any claim made against a carrier of the cargo if it has been made.
Subrogation: Recoveries from Carriers
It is basic in the law of insurance that the insurer, upon payment of a loss is entitled to the benefit of any rights against third parties that may be held by the assured himself.
Recoveries from vessel owners and others play an important part in reducing the loss experienced under an open policy.
The subrogation efforts of insurance companies benefit the individual account by keeping down the insurance cost. They are also an important factor in securing improved cargo handling by ocean carriers.