A marine transit insurance policy doesn’t offer any coverage if the insurer defaults on his duty of disclosure. The policy buyer has to make disclosures after renewing the policy. The insurance company can roll back the insurance if the insurer defaults on the policy terms and conditions. Effectively, the cargo remains uninsured. So When Does Marine Transit Insurance Stop Covering the Goods in Transit?
The necessary disclosures are:
- Any known risk for a claim to increase
- Prior convictions or criminal offense
- 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 for goods in transit 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 seizure of goods, 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 of occurring before or after the goods have been shipped
- Any action is 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. The consignment order completion deadline was very tight. Hence, 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. The poor condition of the containers caused damaged to some items. On receiving the consignments, 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 a marine transit insurance policy, and the company approached its marine insurer to compensate the buyer. However, the insurer refused to settle the claim. It cited improper goods packing as the main reason for denying the insurance policy benefits. The loss occurred due to improper packaging of the consignment done by T.J Engineering to complete the order on 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 it in charge found some damage in the transit boxes, which was due to manhandling. As the consignment was getting late, the in-charge affixed 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. Due to improper packaging, rainwater and moisture damaged the content of some boxes.
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 for goods that was in transit.
Additional Read: How to file a claim under Marine Insurance?
The initial investigation suggested the boxes got damaged even when the consignment was not shipped. 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.