2X CIF Value Insurance for Total Losses

2X CIF Value Insurance for Total Losses

A decides to arrange insurance under a special cargo policy for goods she is shipping overseas by freighter: This is within A's rights as it is negotiated separately from shipment and is issued with an insurance certificate. This could also represent a single or infrequently shipped cargo.

She estimates the value of the goods at approximately $X: Value of goods is usually insured to at least 110% of CIF value with excess included as compensation for lost profits.

A is aware of the various transportation risks, and decides to take a policy with coverage of $2X: This may be because the products are extremely valuable and/or difficult to replace through manufacture or lost profits which may not be redeemed under a general open policy. However this may be excessive and may demonstrate overpayment or taking out the wrong insurance.

B, her insurer, accepts the terms, receives A's payment premium, and extends coverage up to that amount: As the insurer has agreed with terms and received payments and while the coverage appears sound it far exceeds generally accepted 110% of CIF value of goods.

The entire shipment is lost at sea: It must be determined whether the policy includes "free of particular average" which limits losses to particular circumstances or "general average" terms where the cargo may have been tossed overboard to save the vessel or whether the cargo is covered under terms of "all risk."

A seeks reimbursement: The total loss at sea may exempt A from any contracts for the sale of goods which include a froce majeure clause of which "lost at sea" would eligible.

How much does her insurer owe her? Her insurer may try to back-peddle to 110% CIF value and offer partial refund of the difference in premiums between goods value x and insured goods value of 2x especially if the insurer covered a large proportion of loss claims on this particular vessel. However it appears the insurer must pay the bill as long as Institute Clauses for Lloyds Ship and Goods policies include terms such as:



Actual Total Loss: "An actual total loss occurs when (1) the insured property is completely destroyed or (2) the Assured is irretrievably deprived of the insured property or (3) cargo changes in character so that it is no longer the thing that was insured or (4) a ship is posted "missing" at Lloyd's, in which case both the ship and its cargo are deemed to be an actual total loss. "(IMIM)

Total Loss: "This can be actual total loss or constructive total loss." (IMIM)

If the insurer refuses to pay the 2x CIF value of the goods lost or negotiated agreement cannot be reached then A should take her resources and case to a reputable marine insurance lawyer to investigate the validity of the insurance contract. Notifying the insurance agency of this choice of action may grease the wheels to a complete settlement of claim.

"International Marine Insurance Glossary," International Marine Insurance Managers: Insurances Effected At Lloyd's of London.

A great slide show on marine insurance losses: "MARINE & CARGO INSURANCE: From an international viewpoint, " by Aldo Salcioli (2003).