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The Gulf of Mexico oil spill shows just how important marine cargo insurance is to protecting against commercial export losses.

Marine cargo insurance is a form of export insurance that covers goods during their shipment to a foreign country overseas.

Marine cargo insurance companies provide financial reimbursement for financial losses if exported goods are damaged or destroyed before delivery to the importer.

Marine cargo insurance is also called freight insurance, maritime insurance, ocean marine insurance or simply marine insurance.

The most comprehensive type of marine cargo insurance is called All Risks coverage.

Marine Insurance Exclusions

Most marine cargo insurance policies do not reimburse for losses caused by improper packing or when customs officials reject the delivered goods.

Other freight insurance policies exclude claims for:

• Abandoned cargo
• Importers failing to pay
• Spoilage or other damages due to the product’s nature
• Losses caused by shipping delays
• Employee dishonesty
• Damages at port cities more than 15 days after cargo was unloaded.

For example, improperly packed rice can expand and spoil while in-transit. This would not be covered under standard maritime insurance contracts.

Covered Risks under a Marine Insurance Policy

All Risks marine insurance would cover the non-delivery of an entire shipping package, including where theft was involved.

Total loss of the entire shipment would also be covered if due to a collision, explosion or burning involving the ocean vessel.

Other eligible risks to cargo include:

• Damages from bad weather
• Seawater or freshwater flooding
• Improper stowage by the shipping company
• Mud and grease damage
• Fumigation services.

Would losses caused by the Gulf of Mexico oil spill¹ be covered under a Maritime Cargo Insurance policy?

For All Risks coverage, the answer depends on whether the entire cargo is lost as a result of the oil slick. Claims adjudicators will also carefully assess the exact reason why the shipment was damaged.

Losses caused by stranded sea vessels are typically covered under marine cargo insurance policies.

Why is Marine Cargo Insurance Important?

Some financial institutions will only grant pre-financing for an export shipment after the exporter buys freight insurance.

Also, marine insurance companies have a wealth of experience and established procedures to assess which parties are liable for damages and losses to insured cargo.

Once an exporter or importer has a history of successful shipments with a reputable freight insurance company, those trade parties enjoy the security of continued coverage on future export orders.

With the business relationship established with the marine insurer, exporters can then negotiate for better insurance premium rates.

Marine Cargo Insurance Companies and Oil Spill Protection

Marine cargo insurance is a very economical way to protect against the perils of sea delivery. These include the risk of refrigeration system breakdowns in summer months while transporting perishable goods – or the blockage of the Port of New Orleans due to an uncontained oil spill disaster.

If exporters are unsure about whether their cargo is covered in case of delivery problems during oil slick cleanup, then they should contact their marine cargo insurance companies or freight forwarder to verify coverage.

Examples of established marine cargo insurance companies include Aetna Casualty and Surety Company, P.A.F. Shipping Insurance, Insureyourfreight.com, China Pacific Property Insurance and Zurich American Insurance Company.

Copyright Daniel Workman². Contact the author to obtain permission for republication.

References

1. ^{^} Gulf of Mexico oil spill (suite101.com)
2. ^{^} Daniel Workman (suite101.com)