Glos­sary of Ocean Cargo Insur­ance Terms

Glos­sary of Ocean Cargo Insur­ance Terms

A

ALL OTHER PER­ILS & MIS­FOR­TUNES:
A phrase in a cargo pol­icy refer­ring to per­ils of the same nature as those explic­itly described in the Per­ils Clause.

ASSAIL­ING THIEVES:
The forcible tak­ing of prop­erty, exclud­ing acts of sneak thievery.

AVER­AGE:
Par­tial loss or dam­age due to insured perils.

AVER­AGE AGREE­MENT:
A doc­u­ment signed by cargo own­ers agree­ing to pay their share of any Gen­eral Aver­age con­tri­bu­tion so cargo may be released after a Gen­eral Aver­age loss.

AVER­AGE CLAUSES:
Pol­icy clauses deter­min­ing the amount recov­er­able for Par­tic­u­lar Aver­age losses.

AVER­AGE IRRE­SPEC­TIVE OF PER­CENT­AGE:
The broad­est “with aver­age” clause; losses caused by insured per­ils are recov­er­able with­out regard to a min­i­mum per­cent­age of damage.

ASSURED:
The indi­vid­ual or entity cov­ered under the insur­ance policy.

AUTO­MATIC COV­ER­AGE CLAUSE:
A pro­vi­sion extend­ing insur­ance cov­er­age auto­mat­i­cally to new ship­ments that meet spec­i­fied conditions.

B

BAR­RA­TRY:
A fraud­u­lent, crim­i­nal, or wrong­ful act by the ship’s cap­tain or crew that causes loss or dam­age to the ship or cargo.

BILL OF LAD­ING:
A legal con­tract between the ship­per and the car­rier that serves as a receipt for goods, a doc­u­ment of title, and evi­dence of the terms of carriage.

C

CARGO WAR RISK POL­ICY:
A sep­a­rate cargo pol­icy cov­er­ing goods against war-​related per­ils while water­borne, except dur­ing trans­ship­ment on land.

CER­TIFI­CATE OF INSUR­ANCE OR SPE­CIAL POL­ICY:
A doc­u­ment issued to pro­vide evi­dence of insur­ance for a spe­cific ship­ment, often required for finan­cial transactions.

CON­SIGNEE:
The indi­vid­ual or entity to whom the cargo is shipped or consigned.

CON­STRUC­TIVE TOTAL LOSS (CTL):
Occurs when the cost of recov­er­ing or repair­ing dam­aged goods exceeds their insured value.

D

DEC­LA­RA­TION:
A report sub­mit­ted by the assured to the insurer, detail­ing ship­ments cov­ered under an open policy.

DEVI­A­TION:
The act of a ves­sel stray­ing from its planned route or des­ti­na­tion, which may impact insur­ance coverage.

F

FPAAC (Free of Par­tic­u­lar Aver­age, Amer­i­can Con­di­tions):
A clause lim­it­ing recov­ery of par­tial losses to those caused directly by spe­cific major events like fire, strand­ing, or collision.

FPAEC (Free of Par­tic­u­lar Aver­age, Eng­lish Con­di­tions):
Sim­i­lar to FPAAC but allows recov­ery of all par­tial losses if the ves­sel has under­gone events like strand­ing or sink­ing, regard­less of the actual cause of damage.

G

GEN­ERAL AVER­AGE:
A shared loss incurred from a vol­un­tary sac­ri­fice made to pro­tect a ves­sel or cargo from a com­mon peril. All par­ties con­tribute pro-​rata to the loss.

I

INCH­MA­REE CLAUSE:
Cov­ers losses caused by latent defects in the ves­sel, as well as errors in nav­i­ga­tion or management.

INVOICE:
A doc­u­ment pro­vid­ing a detailed descrip­tion of goods, their sale price, and asso­ci­ated charges.

INSURED VALUE:
Typ­i­cally cal­cu­lated by adding the invoice cost, freight, insur­ance pre­mium, and an addi­tional per­cent­age (often 10%).

J

JET­TI­SON:
The delib­er­ate act of dis­card­ing cargo or ship mate­ri­als to pre­vent a larger loss.

L

LANDED VALUE:
The whole­sale mar­ket value of goods at their des­ti­na­tion on the day they are unloaded.

LOST OR NOT LOST:
A clause cov­er­ing cargo regard­less of whether the loss occurred before or after the insur­ance was placed, pro­vided the assured was unaware of the loss at the time of insurance.

M

MARINE EXTEN­SION CLAUSE:
Extends cov­er­age for devi­a­tions, delays, and other tran­sit vari­a­tions beyond the con­trol of the assured.

MARINE SUR­VEYOR:
An expert who eval­u­ates and doc­u­ments the nature, extent, and cause of dam­age to goods.

MASTER’S PROTEST:
A sworn state­ment by the ship’s cap­tain regard­ing extra­or­di­nary events dur­ing the voyage.

P

PAR­TIC­U­LAR AVER­AGE:
Par­tial loss or dam­age to cargo that is not shared pro-​rata among cargo owners.

PER­ILS OF THE SEA:
Haz­ards aris­ing from nat­ural forces such as rough seas and storms, exclud­ing per­ils like fire and explosion.

T

TERMS OF SALE:
Con­di­tions defin­ing the trans­fer of respon­si­bil­ity and risk between buyer and seller. Exam­ples include:

• FOB (Free on Board): Seller’s respon­si­bil­ity ends once goods are loaded onto the carrier.
• FAS (Free Along­side): Seller’s respon­si­bil­ity ends when goods are deliv­ered along­side the vessel.
• C&F (Cost and Freight): Seller cov­ers costs up to load­ing; buyer assumes risk after.
• CIF (Cost, Insur­ance, and Freight): Seller cov­ers goods, insur­ance, and freight to the destination.

TERMS OR METH­ODS OF PAYMENT:

• Col­lec­tion by Draft: The seller retains risk until pay­ment is received.
• Open Account: Seller extends credit, bear­ing the finan­cial risk until paid.
• Let­ter of Credit: Buyer’s bank guar­an­tees pay­ment upon meet­ing stip­u­lated conditions.

V

VAL­U­A­TION CLAUSE:
Defines the insured value of a ship­ment under an open cargo policy.

W

WAR RISK:
Cov­er­age against losses aris­ing from acts of war, includ­ing inva­sions and mil­i­tary actions.

WARE­HOUSE TO WARE­HOUSE (DOOR TO DOOR):
Insur­ance cov­er­age span­ning the entire tran­sit, from the seller’s ware­house to the buyer’s warehouse.

WITH­OUT PREJ­U­DICE:
A phrase used in claims cor­re­spon­dence to clar­ify that a par­tic­u­lar com­mu­ni­ca­tion does not affect the rights of either party.