A marine transit insurance policy doesn’t offer any coverage if the insurer defaults on his duty of disclosure. Disclosures need to be made whenever the policy is renewed. If it is found that the insurer has defaulted on the terms and conditions stipulated under this policy, the insurance company will roll back the insurance, so effectively it is like the cargo wasn’t insured at all.
The necessary disclosures are:
- Any known risk for a claim to increase
- Prior convictions or criminal offence
- Previous insurance claims made
- If other insurance companies or companies have refused to provide cover under standard terms or ceased to provide coverage.
Other reasons when the marine transit insurance coverage will be terminated include the following:
- Unreasonable packaging, preparation, or protection of the goods.
- Non-conforming containers, conveyance or lift van.
- Manhandling the goods while in transit
- Wear and tear of the goods
- Goods confiscated by figures of authority
- Hostile act by a third party or insurer causing the goods to be seized, damaged or lost. (Except in piracy cases)
- Weapons of war affecting the goods while on land
- Direct or indirect loss to goods caused by:
- Act of foreign enemy, invasion, war, hostilities whether declared or not.
- An act of governmental authorities such as destruction of the goods
- Generation of nuclear power
- Materials from nuclear weapons
- Radiations, radioactivity contamination, nuclear fuel contamination or any other nuclear waste
- Terrorism act regardless whether before or after the goods have been shipped before or after
- Any action taken to prevent, suppress or anything relating to an act of terrorism.
Additional Read: What are the marine insurance exclusions?
Case Study: 1
A leading engineering company in Pune, T.J Engineering, is a reputed name in the industry. Last year, the company bagged a contract for exporting engineering parts to a company situated in Malaysia. As the consignment order had to be completed in a very short time of one week, the company employed some temporary workforce who worked in double shifts as well.
As the company was in a hurry to complete the order, it did not pay enough attention to the packaging of the containers and also selected low-quality containers as they were immediately available. Due to the poor condition of the containers, some items were damaged. When the buyer received the consignment, it found that a major part of the consignment was wet and damaged. The buyer refused to accept the consignment and filed a case against T.J Engineering.
In this case, T.J Engineering had marine transit insurance policy, and the company approached its marine insurer to compensate the buyer. However, the insurer refused to settle the claim as the goods were not packed properly. The loss occurred due to improper packaging of the consignment which was done by T.J Engineering to complete the order before time.
The marine insurance company refused to settle the claim, and T.J Engineering had to bear all the expenses on its own.
Case Study: 2
R.S Fashion House was ready to send its consignment to a company situated in the Middle East when its in-charge found some damage in the transit boxes, which was due to manhandling. As the consignment was getting late, the in-charge affixed a tape around the damaged boxes and sent them along with the intact boxes.
However, when the buyer received the consignment, he found these boxes to have suffered severe damage during the transit. There were some boxes which were wet due to improper packaging, and the moisture had caused damage to their contents as well.
The buyer refused to take the delivery of goods and filed a case against R.S Fashion House. As R.S Fashion House had purchased a marine transit insurance policy, the company approached the insurer for the claim settlement.
Additional Read: How to file a claim under Marine Insurance?
Through the initial investigation, the insurer found out that the boxes were damaged even when the consignment was not shipped and R.S Fashion House had intentionally exported damaged boxes which further spoiled the contents.
R.S Fashion House could have easily avoided the losses which were due to manhandling and therefore, the insurer refused to settle the claim.