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.