A marine business can insure its goods with multiple marine insurers. However, the law dictates that you inform the second and consequent insurers about the previously taken insurance(s).
Steps to take when insuring goods with multiple insurers
A marine insurance buyer should inform secondary and consequent buyers about his earlier taken insurance policies. Even if the insurance covers different sets of risks, if there are any overlapping risk covers, one should immediately inform the second insurer. However, if the risks covered are exclusive, this is not applicable.
Read More: Why do You Need Marine Insurance?
While settling the claim, the second insurer would pay over and above the limit payable by the primary insurer. The third insurer would pay over and above the second insurer and so on.
Examples for cases of goods insured by multiple Marine Insurers
Let’s understand this better with the help of the below example:
A marine insurance company insures goods with three insurance companies for the sum assured of Rs 10 lakh, 12 lakh, and 15 lakh respectively.
All three insurance companies would cover the losses if at all it occurs. The first insurer will pay 10 lakh, the second insurer would pay 12-10= 2 lakh, and the third insurer would pay 15-12=3 lakh.
The client would also need to inform the second insurer about the first insurance policy. Consequently, he would also have to notify the third insurer about the first and second insurer. Concealing these details would make the insurances void.
The Claim amount is within the sum insured by the policies:
In 2001, T.J Engineering exported a consignment of industrial equipment to a company situated in Sri Lanka. However, upon receiving the cargo, the buyer refused to accept the delivery. He claimed that the industrial equipment got damaged and did not meet the contractual requirements.
T.J Engineering had purchased marine cargo insurance policies. The policies offered coverage of Rs 50 lakh and Rs 20 lakh each from two insurance companies—Insurer X and Insurer Y respectively.
As the total loss was Rs 10 lakh, T.J Engineering decided to approach only a single insurer. In this case, the company approached Marine insurer Y, who appointed a surveyor to inspect the goods.
After two days of inspection, the surveyor saw the shipment of industrial equipment damaged. Despite good packaging, the shipment of the industrial equipment came into the exposure to seawater and got damaged.
The insurer Y asked for the damaged certificate, and KYC document along with papers to prove the dispatch. Once the insurer received all the documents, their claim team reviewed and approved the claim accordingly.
When the claim amount is more than the sum insured of one marine insurance policy
One of the leading textile mills in Surat, J.N Clothing enjoys its presence in different parts of India. Recently, the company has also started exporting its products to Middle East nations.
International business brings with it lots of opportunities but it also entails some risks..
Read More: How to file a claim under Marine Insurance?
To ensure smooth global business operations, J.N Clothing has bought a marine insurance policy. However, instead of purchasing one single insurance policy, J.N Clothing bought the marine insurance plans from two different insurers—Insurer A (Rs 50 lakh coverage) and Insurer B (Rs 20 lakh coverage). At the time of buying the second policy, J.N Clothing informed the first insurer.
Last month, the company bagged a big order from one of the companies situated in the Middle East. J.N Clothing did the proper inspection of goods before sending consignment. Unfortunately, some boxes got wet when the consignment reached the buyer’s point.. Heavy rainwater damaged the goods when the consignment was still underway. The total loss was Rs 60 lakh.
Thankfully, J.N Clothing had marine insurance policies, and therefore, the company approached the insurers for the claim settlement.
As the claim amount was Rs 60 lakh, J.N Clothing divided the loss among both insurers. Insurer A settled Rs 50 lakh and Insurer B settled the remaining Rs 10 lakh. . However, at the time of a claim settlement, J.N Clothing informed both the insurers that he will use two marine insurance policies for the claim settlement.