Summary of marine cargo insurance in Japan


1.Insurable Interest and International Trade

(1)Insurable Interest and Subject-matter of Insurance
In international trade the presence of insurable interest and the party to whom obligated to arrange Marine Cargo Insurance depend on the international trade terms of the sales contract.

The assured must have or must be promised to have an insurable interest" in the cargo in order to apply for insurance that if the assured does not have an insurable interest at the time of loss, claims will not be payable to him.

To have an insurable interest, it is required that there is a relationship between the assured and the subject matter insured (i.e. cargo) to the extent that the assured will benefit form the cargo's sound arrival and/or the insured will suffer financial loss either by damage and/or non delivery to the cargo or will be liable for any liability arising from it.


(2)International Trade Terms
The responsibility or ownership of goods may be transferred from the seller to the buyer at various stages of the transit depending on the terms of the international trade. The followings are some of commonly used trade terms. (The terms below are based on Incoterms 2010.)

EX WORKS (EXW)
The buyer is responsible for the goods from the time they leave the seller's premises.

FREE ON BOARD (FOB)
The seller is responsible for the goods until they are on board the vessel at the named port of shipment.

COST AND FREIGHT (CFR)
The seller carries the risk of loss of or damage to the goods until they are on board the vessel at the port of shipment but the seller must pay the costs and freight necessary to bring the goods to the named port of destination. Seller is not obliged to provide Marine Cargo Insurance for the ocean transit.

COST, INSURANCE & FREIGHT (CIF)
Same as CFR above but for the fact that it is the seller's obligation to provide Marine Cargo Insurance for the ocean transit.



2.Marine Cargo Insurance Coverage

(1)Types of Policies
Depending on various business needs, various types of insurance policies can be arranged.

Single Policy
A policy for clients with infrequent cargo insurance needs. Based on an Insurance Application from the client, an Insurance Policy or an Insurance Certificate is issued for each transit.

Open Policy
A form of policy for clients with needs of cargo insurance on a regularly basis. Basically, the type, description, value of goods, method of transport, geographic scope, insurance condition, limit of liability per transit and location are specified in the Open Policy (O/P).

All transits within the scope of the O/P wordings are automatically insured. Premiums are usually paid afterwards on monthly basis as agreed and stipulated on the O/P.

A cancellation clause is incorporated in the O/P which allows either party to cancel the open policy or any part thereof on giving 30 days prior notice (7 days for War and S.R.C.C. risks).


(2)Insured Value and Insured Amount
In Marine Cargo Insurance, it is essential that the value of the subject matter insured is assessed and agreed between the insured and the insurer before commencement of insurance period. This agreed value is called the Agreed Insured Value". A Marine Cargo Insurance policy is a Valued Policy" because the insurance policy stipulates the agreed insured value.

Insured Amount" is the limit of the amount of which the insurer is liable. The insured Amount for cargo insurance is normally calculated on the basis of 110% of the C.I.F. contract price.

The relation between the Insured Amount and the Insured Value can be described as follows.

(a)Full Insurance : Insured Amount = Insured Value

(b)Over Insurance : Insured Amount > Insured Value

(c)Under Insurance : Insured Amount < Insured Value

In the case of above (b), the excess amount is invalid. In the case of above (c), the assured has to bear the loss or damage proportionate to the ratio of the insured amount to the insured value.


(3)Duration of Insurance
Transit Clause

8.1 Subject to Clause 11 below, this insurance attaches from the time the subject-matter insured is first moved inthe warehouse or at the place of storage (at the place named in the contract of insurance) for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance for the commencement of transit,

  continues during the ordinary course of transit

  and terminates either

8.1.1 on completion of unloading from the carrying vehicle or other conveyance in or at the final warehouse or place of storage at the destination named in the contract of insurance,

8.1.2 on completion of unloading from the carrying vehicle or other conveyance in or at any other warehouse or place of storage, whether prior to or at the destination named in the contract of insurance, which the Assuredor their employees elect to use either for storage other than in the ordinary course of transit or for allocation or distribution, or

8.1.3 when the Assured or their employees elect to use any carrying vehicle or other conveyance or any container for storage other than in the ordinary course of transit or

8.1.4 on the expiry of 60 days after completion of discharge overside of the subject-matter insured from the oversea vessel at the final port of discharge,whichever shall first occur.

8.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the subject-matter insured is to be forwarded to a destination other than that to which it is insured, this insurance, whilst remaining subject to termination as provided in Clauses 8.1.1 to 8.1.4, shall not extend beyond the time the subject-matter insured is first moved for the purpose of the commencement of transit to such other destination.

8.3 This insurance shall remain in force (subject to termination as provided for in Clauses 8.1.1 to 8.1.4 above and to the provisions of Clause 9 below)during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to carriers under the contract of carriage.


(4)Total Loss and Partial Loss

A loss may be total or partial. Any loss which is not a total loss is a partial loss. A total loss may be an actual total loss or a constructive total loss.

@Actual Total Loss
A loss of the subject matter insured in its totality whether damaged or destroyed.
When a ship is deemed missing after a considerable amount of time, an actual total loss may be presumed.

AConstructive Total Loss
In cases where the expense to prevent a loss is greater than the remained value of the goods, the assured is entitled to abandon the remaining economical value of the goods to the insurer and to claim for a constructive total loss.


(5)Insurance Conditions

The three major conditions commonly used to cover marine perils are as follows.

@INSTITUTE CARGO CLAUSES (A)

This insurance covers all risks of loss of or damage to the subject-matter insured except as excluded by the provisions of Clauses 4, 5, 6 and 7 below※Note@.


※Note@

4. In no case shall this insurance cover

4.1 loss damage or expense attributable to wilful misconduct of the Assured

4.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured

4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured to withstand the ordinary incidents of the insured transit where such packing or preparation is carried out by the Assured or their employees or prior to the attachment of this insurance (for the purpose ofthese Clauses “packing” shall be deemed to include stowage in a container and “employees” shall not include independent contractors)

4.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured

4.5 loss damage or expense caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above)

4.6 loss damage or expense caused by insolvency or financial default of the owners managers charterers or operators of the vessel where, at the time of loading of the subject-matter insured on board the vessel, the Assured are aware, or in the ordinary course of business should be aware, that such insolvency or financial default could prevent the normal prosecution of the voyage.
This exclusion shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or agreed to buy the subject-matter insured in good faith under a binding contract.

4.7 loss damage or expense directly or indirectly caused by or arising from the use of any weapon or deviceemploying atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5.1 In no case shall this insurance cover loss damage or expense arising from

5.1.1 unseaworthiness of vessel or craft or unfitness of vessel or craft for the safe carriage of the subject-matter insured, where the Assured are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

5.1.2 unfitness of container or conveyance for the safe carriage of the subject-matter insured, where loading therein or thereon is carried out prior to attachment of this insurance or by the Assured or their employees and they are privy to such unfitness at the time of loading.

5.2 Exclusion 5.1.1 above shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or agreed to buy the subject-matter insured in good faith under a binding contract.

5.3 The Insurers waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination.

In no case shall this insurance cover loss damage or expense caused by
6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

6.2 capture seizure arrest restraint or detainment (piracy excepted), and the consequences thereof or any attempt thereat

6.3 derelict mines torpedoes bombs or other derelict weapons of war.

In no case shall this insurance cover loss damage or expense
7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions

7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotions

7.3 caused by any act of terrorism being an act of any person acting on behalf of, or in connection with, anyorganisation which carries out activities
directed towards the overthrowing or influencing, by force or violence, of any government whether or not legally constituted.

7.4 caused by any person acting from a political, ideological or religious motive.


AINSTITUTE CARGO CLAUSES (B)

1. This insurance covers, except as excluded by the provisions of Clauses 4, 5, 6 and 7 below※Note@.,

1.1 loss of or damage to the subject-matter insured reasonably attributable to
1.1.1 fire or explosion
1.1.2 vessel or craft being stranded grounded sunk or capsized
1.1.3 overturning or derailment of land conveyance
1.1.4 collision or contact of vessel craft or conveyance with any external object other than water
1.1.5 discharge of cargo at a port of distress
1.1.6 earthquake volcanic eruption or lightning,

1.2 loss of or damage to the subject-matter insured caused by
1.2.1 general average sacrifice
1.2.2 jettison or washing overboard
1.2.3 entry of sea lake or river water into vessel craft hold conveyance container or place of storage,

1.3 total loss of any package lost overboard or dropped whilst loading on to, or unloading from, vessel or craft.

※Note@
4.7 deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any person or persons

4.8 loss damage or expense directly or indirectly caused by or arising from the use of any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5.1 In no case shall this insurance cover loss damage or expense arising from

5.1.1 unseaworthiness of vessel or craft or unfitness of vessel or craft for the safe carriage of the subject-matter insured, where the Assured are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

5.1.2 unfitness of container or conveyance for the safe carriage of the subject-matter insured, where loading therein or thereon is carried out prior to attachment of this insurance or by the Assured or their employees and they are privy to such unfitness at the time of loading.

5.2 Exclusion 5.1.1 above shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or agreed to buy the subject-matter insured in good faith under a binding contract.

5.3 The Insurers waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination.

6. In no case shall this insurance cover loss damage or expense caused by

6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

6.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat

6.3 derelict mines torpedoes bombs or other derelict weapons of war.

In no case shall this insurance cover loss damage or expense
7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions

7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotions

7.3 caused by any act of terrorism being an act of any person acting on behalf of, or in connection with, anyorganisation which carries out activities
directed towards the overthrowing or influencing, by force or violence, of any government whether or not legally constituted.

7.4 caused by any person acting from a political, ideological or religious motive.

B INSTITUTE CARGO CLAUSES (C)

1. This insurance covers, except as excluded by the provisions of Clauses 4, 5, 6 and 7 below※Note@,

1.1 loss of or damage to the subject-matter insured reasonably attributable to

1.1.1 fire or explosion
1.1.2 vessel or craft being stranded grounded sunk or capsized
1.1.3 overturning or derailment of land conveyance
1.1.4 collision or contact of vessel craft or conveyance with any external object other than water
1.1.5 discharge of cargo at a port of distress,

1.2 loss of or damage to the subject-matter insured caused by

1.2.1 general average sacrifice
1.2.2 jettison.

4.7 deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any person or persons

4.8 loss damage or expense directly or indirectly caused by or arising from the use of any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5.1 In no case shall this insurance cover loss damage or expense arising from

5.1.1 unseaworthiness of vessel or craft or unfitness of vessel or craft for the safe carriage of the subject-matter insured, where the Assured are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

5.1.2 unfitness of container or conveyance for the safe carriage of the subject-matter insured, where loading therein or thereon is carried out prior to attachment of this insurance or by the Assured or their employees and they are privy to such unfitness at the time of loading.

5.2 Exclusion 5.1.1 above shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or agreed to buy the subject-matter insured in good faith under a binding contract.

5.3 The Insurers waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination.

6. In no case shall this insurance cover loss damage or expense caused by

6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

6.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat

6.3 derelict mines torpedoes bombs or other derelict weapons of war.

In no case shall this insurance cover loss damage or expense
7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions

7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotions

7.3 caused by any act of terrorism being an act of any person acting on behalf of, or in connection with, anyorganisation which carries out activities
directed towards the overthrowing or influencing, by force or violence, of any government whether or not legally constituted.

7.4 caused by any person acting from a political, ideological or religious motive.

※Note
The following are examples of extraneous risks that can be covered under a INSTITUTE CARGO CLAUSES (B) or (C) policy subject to additional premium and by attaching special clauses.

(Abbreviations)
Rain &/or Fresh Water Damage (R.F.W.D.)
Non-delivery (N.D.)
Theft, Pilferage &/or Non-delivery (T.P.N.D.)
Leakage &/or Shortage (L'kge, S'tge)
Breakage, Bending &/or Denting (B'kge, B.D.)
Hook Damage (HD)

Nail Damage
Chafing or Scratching
Oil &/or Grease
Damage caused by Contact with other Cargo
Damage caused by Contact with Oil &/or Other Cargo

Acid
Rats & Vermin (R.V.)
Mould & Mildew
Rust Damage
Sweat & Heating (S.H.)
Spontaneous Combustion
Contamination
Washing Overboard (W.O.B.)

CINSTITUTE WAR CLAUSES(CARGO)
This insurance covers loss of or damage to the goods, caused by hostilities, warlike operations, civil war, revolution, insurrection, or civil strife arising therefrom, capture, seizure, arrest or detainment and also mines, torpedoes, bombs or other engines of war.


DINSTITUTE STRIKES CLAUSES(CARGO)

Covers loss of or damage to the insured goods directly caused not only by strikers, locked-out workers or any person taking part in labour disturbances, riots or civil commotions, but also by any person acting maliciously.

※Note
The rates of War & S.R.C.C. Risks shall be altered subject to the world affairs.
The rates of War & S.R.C.C. Risks at the date of sailing from the loading port of the vessel shall be applied


(6)Marine Insurance Act, 1906 (M.I.A.)

Because of the long history of maritime affairs and the vast number of precedents in the English courts, it is not unusual for marine insurers to choose English law as the governing law for their insurance policies.

This is not an exception for Japanese Insurance Company. where our insurance policies stipulate that the liability and settlement of claims are subject to English law and usage. Thus it becomes important for us to know about the Marine Insurance Act of 1906 (M.I.A.) as the relative English law of our insurance contracts.

The following sections are some of the fundamental rules listed on the M.I.A.

Section 17
A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contact may be avoided by the other party.

Section 18
Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.
Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.

Section 41
There is an implied warranty that adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.



3.Application and Underwriting

(1)Items to be Declared
(a)Name of Vessel or Aircraft
(b)Loading Port
(c)Discharging Port
(d)Date of Sailing
(e)Interior Transit if any at both ends
(f)Name of Goods
(g)Number of Cases, Cartons etc.

※Note
Information sheet(Application Form) :  For Commercial Goods(PDF) / For Personal Goods(PDF)
Premium Traial calculation Sheet

(2)Major Cargoes and its Ordinary Conditions
It is essential that adequate but proper insurance condition is applied in accordance with the characteristics of the respective cargoes. (Note that insurance conditions are proposed by insurers on a case by case basis. Thus some condition listed below may not be provided depending upon circumstances.)

(a)Logs
in hold ICC(C), on deck ICC(C) J.W.O.B.

(b)Iron Ore
ICC(C)

(c)Oil
Bulk Oil Clauses including Contamination if required. A cleaning certificate is necessary to cover contamination.

(d)Chemical Goods

In Bags
ICC(B), RF, TPND

In Bulk
ICC(B), Contamination & Shortage with excess. Contamination coverage is provided upon scrutiny. A cleaning certificate issued by an independent surveyor is usually necessary.

(e)Grain
ICC(B), RF, SH with Franchise

(f)Machinery
ICC(A) with Replacement Clause

(g)Textile Goods
ICC(A)

(h)Raw Cotton
ICC(A), Country Damage Cl.

(i)Frozen Goods
ICC(A), Refrigerated Cargo Cl.

(j)Steel Products

Bare
ICC(B) or W.A.

Fully Packed
ICC(A) excluding Rust, Oxidization and Discolouration
(3)Insurance Rates

In order to give an insurance quotation insurers will take various factors into consideration. The following points are usually considered.

(a)Adequate packing should be done in accordance with characteristics of cargo.

(b)Details of ocean vessel should be checked, such as age, class, flag, ownership, size etc. The vessels are partly evaluated by insurers as whether they meet the requirements listed on the Institute Classification Clause.In general, if vessels do not meet the standards of this clause, it is customary to apply certain additional premium.

(c)The voyage route including port facilities and method of inland transportation. Especially warehouse facilities and port congestion are important factors when the insurance covers pilferage, rain water damage and cargo damage such as breakage bending and denting.

Rates are periodically reviewed based on the insured's past record. This is so called Result Based Rating. Therefore loss prevention is very important for the assured in order to maintain low insurance costs.

(4)Optional Extensions

It is possible in certain cases to extend the time limit of 60 days stipulated on the transit clause of the Institute Cargo Clauses and the Institute Strikes Riots and Civil Commotions Clause, or to cover intentional storage or distribution, subject to additional information and premium.



4.Claim Procedures

(1)Prompt Claim Notice to Agents

In event of loss of or damage to the cargo, prompt notice should be given to Insurance company’s agent or Insurance comapny where you get cover. A surveyor may be appointed in order to examine the goods and issue survey reports. The claims settling agents are listed on the top left side of the insurance policy.
Delay in claim notice usually makes it difficult to find the cause of the damage or the time it took place. Depending on the circumstances, late notice sometimes create difficulty to indemnify the assured for the loss.

(2)Notice of Claim to Third Parties

When the goods are discharged from the ocean vessel or delivered from the customs or warehouses in a damaged condition, it is necessary to clarify the responsibilities of the parties concerned. For such clarification, it is common to take remarks on the delivery documents such as Outturn Report, Discharge Record, Boat Note, Tally Sheet, Delivery Report and Customs Certificate. (Variety of names peculiar to the place of issuance and practice of the people concerned.) These documents represent important evidence, not only to ascertain whether the damage is payable under the insurance policy, but also to exercise the right of recoveries against the responsible parties.

If the loss of or damage to the goods are discovered certain time after acceptance (e.g. upon unpacking) where the goods were apparently sound upon arrival, the insured must give immediate notice to the ocean carriers or other third parties concerned and ask for confirmation of the damage by their representatives or their surveyors. Afterwards, the assured should claim damages in writing to the ocean carriers or other third parties.

The assured can obtain appropriate and helpful advice from Insurance company’s agent or Insurance comapny about these procedures.

(3)Documentation of Claims

Necessary claim documents varies depending on the nature of the casualty, the extent of the damage and the insurance conditions. We will enumerate the necessary claims documents for both partial loss and total loss to give image of the documentation.

@Necessary claims documents for Partial Loss

(a)Claim Note
(b)Policy (Original)
(c)Commercial Invoice (Signed Copy)
(d)Packing List
(e)Bill of Lading or Air Waybill
(f)Survey Report
(g)Claim Notice to Carriers and their reply
(h)Discharging Report

ANecessary documents for total loss

In addition to the above documents a, b, c, d, e and g, the following documents will be necessary.

Where the goods sustain total damage on board during the ocean transportation (sinking with no possibility of salvage, or burnt etc.) , Notice of Claim, Certificate of Total Loss by the shipping company, survey report on the part of the shipping company and a full set of Bill of Lading should be submitted to the insurer.

The reason why a full set of Bill of Lading is required is that when an insurer pays a total loss, they become entitled to take over the full interest of the assured. This includes subrogation of all the rights and remedies of the assured in respect of the subject-matter to claim against the carriers or other responsible parties. Also, dishonest third parties who wrongly obtain one of the Bills of Lading may file an undue claim against the carriers and so forth. By presentation of the full set of Bill of Lading to the insurer, such situations will be avoided.




Please contact to Interlink Inc. for further details.
Interlink Inc. (as specialty marine cargo insurance agent of Tokio marine & others.)
11-7 1-Chome Toranomon, Minato-ku, Tokyo Japan P.O. 1050001
Tel: +81-3-3591-9616
Mail: info@marineinsurance.jp

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