THE TOP INSURANCE TERMS: MARINE CARGO INDUSTRY
By Falvey Cargo Underwriting, a subsidiary of Falvey Insurance Group:
Whether you’re just starting a marketing career in the insurance industry or have been in the same role for years, it never hurts to familiarize yourself with the top terms that you may not know. Which is why, today, we’re launching a new series of articles that feature different terms within the insurance industry.
To kick things off we’ll be focusing on a very niche industry, the marine cargo insurance industry, where most of the relevant terms may not be familiar. There are many terms associated, particularly with cargo insurance policies, but to help make it easier, we’ve defined some of the most common cargo terms you’ll come across.
Bill of Lading: A legal contract between transporter and shipper outlining the transporters liability for the goods being shipped and the terms of their transport, while providing proof of the apparent condition of the cargo when the carrier receives it and also serving as a receipt for the goods upon tender to the carrier. Any damage the cargo has received should be noted on the bill of lading by the consignee.
Cargo vs. STP (Stock Throughput) Policy: Both cargo and STP policies provide coverage on a worldwide basis for goods in transit. However, a stock throughput policy covers goods while at agreed locations for the purpose of assembly, manufacturing, storage and distribution.
Container: A steel rectangular box used to transport bulk goods and packaged cargo intermodally between various methods of transport. Vessels, trucks, and trains can all transport containers.
Consignee: The company or person that receives the delivery, usually the buyer of the goods.
Contingent Insurance: “Backup insurance that protects a party’s interest if certain events occur, e.g. if the assured buys or sells cargo on terms under which the insurance is arranged by the other party, and that insurance fails to respond to a covered loss, the contingency insurance protects the Assured’s interest in the shipment.”
Constructive Total Loss: When the cost of fixing or repairing damaged goods exceeds the cost of the insured value.
Conveyance: Modes of transportation, including aircraft, barges, vessels, trucks, railcars, and owned vehicles.
COPE: The four property risks taken into account when evaluating a submission for property insurance: Construction, Occupancy, Protection, and Exposure risks of loss.
Free of Particular Average (FPA) Coverage: Similar to a deductible clause, this policy provision eliminates the insurer’s liability for any partial loss of cargo, except if the damage was caused by a peril of the sea, such as sinking or a collision.
Free on Board (FOB): A term of sale that determines responsibility for damage to goods during each stage of the shipment. The seller's responsibility ends when a carrier takes possession of goods, when the goods are aboard the vessel. Under domestic terms it simply means that the seller will deliver the subject matter contracted for, on certain conveyances, without expense to the buyer, usually by truck or rail.
General Average: General Average is a contribution by all parties to a marine adventure – cargo and hull interests – for extraordinary and unexpected expenses necessary to complete the intended voyage arising from some unanticipated casualty or event.
Incoterms: International terms of sale that govern the costs, risks, and responsibilities between buyers and sellers. They define which party is responsible for each aspect during each stage of the delivery.
Jettison: The purposeful dumping of materials, which could include cargo, overboard to protect the ship, crew, or rest of cargo from damage or danger.
Paramount Warranties: Exception warranties in a policy that cannot be overridden by any other clause or amendments to the policy, unless the clause or amendment specifically addresses the perils or types of losses excluded by the exception warranty. Examples include FC&S (Free of Capture and Seizure), SR&CC (Strikes, Riots, and Civil Commotions), Delay Clause, and Nuclear Exclusion Clause.
Shore Perils: Refers to dangers, accidents, or casualties associated with sailing, including running into a storm or colliding with another ship. This also applies while goods are on land or shore, typically named perils.
Shipment: The transit of goods from origin to destination via a third party logistics provider or otherwise traveling under a bill of lading, an air freight bill, or other contract.
Strikes, Riots, and Civil Commotions (SR&CC) Warranty: This type of coverage excludes losses from the types of damage described in the title. This includes sabotage and damage from rioters, as well as terrorist acts.
About Falvey Cargo Underwriting & Falvey Insurance Group
Falvey Insurance Group began as a single division, Falvey Cargo Underwriting, opening its first office in 1995 in Wakefield, RI. After 25 years, the company has evolved into Falvey Insurance Group, comprised of three divisions: Falvey Cargo Underwriting, Falvey Shippers Insurance and Safe Harbor Pollution Insurance becoming, “The Specialized Insurance Experts” in maritime coverage. Falvey Cargo underwrites marine cargo coverage in three cargo industry segments: General Cargo, Life Sciences, and Technology. Falvey Cargo Underwriting has evolved into the largest cargo covernote holder at Lloyd’s of London, offering the highest capacity in the marine cargo market. Falvey Cargo has over 150 years of combined marine cargo underwriting experience, global reach with local expertise servicing clients around the world from offices in Rhode Island, California, Washington, Toronto, and London, and dedicated loss prevention, claims processing, and recovery services in-house.