How to Select the Insurance Coverage
Risk in cargo transportation are of many kinds. Different risks mean different losses and different risks are covered by different insurance clauses and different insurances clauses mean different premiums. So we need to have a good understanding of the different risks and losses before we know how to select insurance coverage.
In marine cargo transportation insurance, risks fall into perils of the sea and extraneous risks. Additionally, Ocean Marine Cargo Insurance is classified into the following three basic conditions——Free from Particular Average (FPA), With Average/with particular average（WA or WPA) and All Risks.
There is a case study as follows helping us to learn the effect of insurance coverage.
In February 1994, a textile import and export company in China signed an agreement with a shipping company in Dalian to transport 1,000 silk shirts to Marseilles. After the contract was signed, the import and export company insured the insurance company with Free from Particular Average (FPA). On February 20, the shipment was set up after the shipment was completed. On February 25, the ship carrying the shipment encountered a rare storm at sea and the hull was seriously damaged. It sank on February 26. On March 20, the textile import and export company filed a claim against the insurance company for the goods. The insurance company refused to compensate the goods for the loss caused by natural disasters. Therefore, the import and export company filed a lawsuit with the court and asked the insurance company to pay the insurance money. Question: In this case, should the insurance company be liable for compensation?
The insurance company shall be liable for compensation. According to Ocean Marine cargo clauses of the people's insurance company of China, FPA is generally not responsible for some of the losses caused by natural disasters, unless there are any accidents such as stranding, reefing, sinking and burning. Although FPA is not liable for some of the losses caused by natural disasters, it is liable for all losses caused by natural disasters. In this case, the import and export company insured FPA, and the insured goods were all lost when the ship sank due to the storm, and the actual total loss occurred, so the insurance company should be liable for compensation.
Beyond these three basic insurances, there can be classified into the following additional insurance——General additional risk and Special additional risk.
There are some case study as follows:
（1）A paper mill in Shanghai exported a batch of paper to Africa under CIF conditions. Because of the different humidity between Shanghai and Africa, the paper could not be used because the water was too evaporated after the goods arrived at the destination. Can the buyer claim from the seller? why?
The buyer cannot claim against us. Because, although the CIF indicates that the seller bears the insurance premium, the risk division is still bounded by the ship's rail, so the risk is borne by the buyer. Furthermore, the seller's insurance premiums are generally only insured at the lowest risk unless the buyer asks for additional insurance, such as damp heat insurance.
（2）A certain export company invoiced the goods according to CIF conditions and insured the Chinese People's Insurance Company with the WPA. The goods encountered heavy rain during the transshipment. After the goods arrived at the port of destination, the consignee found that the goods had obvious rainwater impregnation and the loss was up to 70%, so I filed a claim with us. Question: Can I accept it?
Unacceptable. The cargo is wet by rain and is a range of fresh water and rain, not the sea water. The insurance company and the seller are not responsible for the damage, and the buyer bears the loss.
In conclusion, there are many risks associated with the transportation of goods. Different insurance terms cover different losses, different risks, and different insurance terms cover different insurance premiums. So before we know how to choose insurance coverage, we need to have a good understanding of the different risks and losses.
1. 国际贸易实务（第三版），复旦大学出版社，主编：黄锡光 吴宝康