In marine insurance, as with all types of insurance, the presence of an insurable interest is essential. Identifying the holder of the insurable interest is crucial, particularly given the nature of cargo, which often transfers between multiple parties.
Understanding Insurable Interest:
Insurable interest refers to the stake an individual or entity has in a property they own or possess, where they would incur a financial loss if the property were damaged or lost due to an insured peril. The primary principle is that the owner of the goods possesses the insurable interest. Best practice dictates that the owner should maintain insurance coverage throughout the entire journey of the cargo.
The determination of the owner, and thus the holder of the insurable interest, can be guided by IncoTerms and the Bill of Lading (BOL). These documents can indicate whether the buyer or the seller is considered the owner at different stages of the shipment process.
Carriers’ Insurable Interest:
Carriers may also secure insurance for the cargo under their terms of carriage. They can have two main types of insurable interest:
1. Property Loss: For goods under their care, custody, and control.
2. Contractual Liability: For their liability under the service contract they provide.
As carriers physically handle the cargo, they can insure it against insured perils. Additionally, due to their contractual obligations, carriers may also insure for liability.
Best Practices for Insurance Coverage
It is crucial to recognize that even if a carrier confirms insurance coverage, it does not remove the need for the owner to obtain their own insurance. Best practice advises that each party involved in the cargo’s journey should maintain their own insurance coverage for the duration of their involvement. This ensures comprehensive protection and mitigates potential financial losses for all parties.
