In the previous article we talked about the maritime transportIn the previous article we talked about shipping insurance, its evolution, characteristics and why it is so important for international trade. Already understanding the magnitude of this means of transport and all the possibilities it offers, the next step is to learn about maritime transport insurance, which is defined as a contract that aims to compensate the insured for the damage caused to the goods by the risks occurring during the maritime journey.
All merchandise, in its delivery process, is susceptible to all kinds of risks or accidents. Among the list of possible maritime incidents are: theft, wetting, rust, shipwreck, major damage, explosion, contamination, fire, loading and unloading maneuvers, among others. This can generate large economic losses for all the actors involved in the process.
In 2017 the European Maritime Safety Agency (EMSA) published the Annual Summary of Maritime Accidents and Incidents, which consists of an in-depth analysis of accidents reported by EU Member States. During 2017 there were a total of 3296 maritime incidents, 115 reported fatalities, 976 injuries, 36 ships lost and 125 investigations initiated.
Taking these figures into account, it is essential to go beyond simply choosing the best packaging for the goods and carry out a rigorous study to choose the most appropriate merchandise insurance for the needs of each insured.
In this article you will find information about the world of shipping insurance, from its origins to its different characteristics.
1. The importance of shipping insurance over time.
Man's need to be protected against the multiple risks he faced when navigating the sea and rivers gave rise to marine insurance, also known as the first transport insurance.
In Ancient Greece, the "lend-at-the-bulk exchanges" were set up, a system where ship-owning merchants borrowed money to buy goods and transport them across the sea for sale. In the same region, on the Greek island of Rhodes, The law of Rhodes was createdThe Maritime Code, considered to be the first maritime code in history. This law sought to ensure that the losses caused by the dumping of goods at sea would be borne by all concerned.
In 1687, shipping insurance came to prominence thanks to Lloyd's Coffee House , a tavern on London's waterfront where merchants, shipmasters and anyone knowledgeable in the business gathered to discuss voyage incidents, take out shipping insurance and share business knowledge.
Later in the 20th century, the transport insurance market, which until now was limited to marine insurance, witnessed a drastic change thanks to the technological advances developed. Goods began to be moved by other means of transport such as trains, planes and trucks and it was here that different policies and insurances began to be implemented to cover the risks of each type of transport.
2. What is coarse or common, simple or particular damage?
Within Maritime Law there is a well known and traditional term called damage, which covers all the different risks that have always affected maritime navigation. Damages are classified in two parts, the simple or particular and the common or gross.
- General average or common damage: According to 347 of the Maritime Navigation Law, general average is currently defined as that act in which, intentionally and reasonably, an extraordinary damage or expense is caused for the common salvation of the goods involved in a maritime voyage in case they are all threatened by a danger. It also clarifies that it will only be recognized as general average when the damage or expense is a direct or foreseeable consequence of the act of damage.
When an act of common damage occurs, the master must report it in the official navigation book, indicating the date, time and place of the occurrence, the reasons and motives for his decisions, as well as the measures taken on these facts.
- Simple or particular breakdown: This type of breakdown is characterized because, contrary to the gross or common breakdowns, they have an involuntary origin and their damages or expenses are borne by the person who causes them.
According to the Maritime Navigation Law, the simple damage contemplates three cases; the forced arrival, which is when the vessel arrives at a point other than its destination; the shipwreck, which is when the vessel is lost or sinks at sea; the collision, which is when there is a collision between ships, vessels or naval artifacts, and people or goods are affected.
During a major or simple damage situation, solidarity plays a very important role. For example, during a grounding, a situation where the vessel is immobilized between rocks, sandbanks, coral reefs or ice, the procedure to follow is to release weight by sacrificing the cargo (throwing several containers at random). In these cases all the containers that were on the ship are jointly and severally liable for the losses of the others. For this they appoint a damage commissioner, who looks at all the BL's, the type of merchandise, among other information.
It is worth mentioning that all those who transported goods on the ship must be jointly and severally liable, anyone who does not participate in the losses of the others will not be delivered their respective goods. For this reason it is important to have the merchandise insured, because in these cases, the insured simply sends the necessary documents to his insurer and the insurer is in charge of complying with the guarantee.
3. The role of the Bill of Lading (B/L) in a contract of insurance.
Currently, the Hamburg Rules 1978 regulate the international carriage of goods by sea. According to these rules, the Bill of Lading (B/L) or "Bill ofLading" is a shipping document that informs about the goods on a ship and to prove the existence of a contract of carriage. It also verifies the receipt and condition of the goods on board, as well as the commitment to deliver the goods at the indicated port of destination.
The B/L is very important to verify that the merchandise was indeed insured on time through the insurance certificate. It is common to see cases where the merchandise is insured when a claim has already occurred. This document allows insurers to verify data such as the date the trip began, the container number that was assigned to the merchandise, the origin and destination, the weight of the container, in other words, all the data needed to prove that it was the merchandise and not another.
At the time of a claim, the insured must present the B/L, as well as other documents, to make the insurance certificate effective. Without this document, it is very difficult to be compensated.
The Bill of Lading is issued by the shipping company or its agent and is signed by the ship's captain. There are different types of B/L according to the way the goods are received:
- Shipped on board: Issued when the goods have been loaded on the ship.
- Clean on board: Issued when the goods are in the hold and in good condition.
- Unclean onboard: Issued when there are observations on the goods.
- Direct (straight): Issued when there are no stopovers between port of loading and port of discharge. The goods arrive on the same vessel on which they were loaded.
- Mixed (combined): Issued when transhipments are to be made between port of loading and port of discharge.
As you can see, shipping insurance has evolved over the years and today plays an important role in commercial and economic affairs.
At JAH Insurance Brokers, we offer you our Freight Transport Insurance to insure your assets and investment against any unforeseen event. We want to help you!
