CARGO TRANSPORTATION INSURANCE

Cargo Transportation Insurance covers the transport of all types of commercial goods via road, sea, air, and rail against potential risks during the journey.

Under Cargo Transportation Insurance, various coverage types can be obtained, including Total Loss, Limited Coverage, Truck Clause, and All Risks coverage. Depending on the selected coverage type, the transported goods are insured against the following primary risks:

• Sinking, derailment, collision, overturning, and burning of the transport vehicle
• Fire, explosion
• Earthquake and volcanic risks
• Wetting by sea or rainwater
• Theft, robbery, shortage, non-delivery
• Breakage
• Storm
• Jettison
• General average - being swept away by waves

 

Exclusions of Cargo Transportation Insurance:

• Deliberate acts, fraud, or bad faith of the insured
• Leakage, volume, and weight losses due to the nature of the insured goods
• Inadequate and improper packaging, incorrect stowage
• Damages resulting from the inherent defects of the goods
• All types of delay damages
• Nuclear and atomic risks
• Unsuitability of the transport vehicle for the load and route
• War, strike, lockout, riot, and civil commotion (can be included with an additional premium)

 

CARGO INSURANCE: DETAILED INFORMATION

Prepared by: Muttalip KERPİÇ - Deputy Manager of Cargo Service, İsviçre Sigorta A.Ş.

CARGO INSURANCES

1. Goods

2. Valuables Insurance

 

1. GOODS INSURANCE

Cargo goods insurance is a type of insurance that covers the financial interests of the insured over commercial goods against damages that may occur during import, export, or domestic transportation, within the written terms and special conditions of the policy.

Before delving into goods insurance, it is useful to explain some terms we may encounter:

**Average (Avarya):**

The term "average" refers to extraordinary damage and expenses incurred by a ship and its cargo during a voyage.

There are two types of average:

General Average: Reasonable and intentional extraordinary sacrifices and expenses made to protect a ship and its cargo from a common peril during a joint sea voyage constitute a general average, provided the ship or cargo is wholly or partially saved. Examples include throwing cargo overboard from a waterlogged ship or intentionally grounding a ship caught in a storm to prevent sinking.

Particular Average: Partial damage and expenses resulting from an accident, excluding general average. In this case, each party (ship owner, cargo owner, etc.) bears their own losses, with no sharing involved. Key differences from general average include its non-intentional nature and the lack of shared responsibility.

 

**Deductible (Tenzili Muafiyet):**

The portion of a covered loss that remains the responsibility of the insured. Under the deductible application, the amount exceeding the deductible is paid, while damages below the deductible are not. Deductibles can be expressed as a percentage of the insured value or a numerical amount, and in cargo insurance, they are always applied to the insured value.

 

**Port of Distress:**

A port where the cargo cannot be transported further due to an encountered issue before reaching the final destination.

 

**Jettison:**

The deliberate act of throwing cargo overboard in an emergency.

 

Cargo insurance can be classified based on the mode of transport: ship, train-truck, and aircraft. Here we discuss maritime transport insurance in detail:

 

**Maritime Transport Insurance:**

Three types of coverage can be provided for maritime transport, listed from the narrowest to the broadest:

A. Total Loss (Tam Zıya)

B. Institute Cargo Clauses "C" or "F.P.A" (Free of Particular Average)

C. Institute Cargo Clauses "A" or All Risks

 

**a) Total Loss (Tam Zıya):**

Total loss coverage insures only against the complete sinking and loss of the transporting ship, resulting in the total loss of the cargo. General and particular average damages are not included in this coverage.

 **b) Institute Cargo Clauses "C" or Institute Cargo Clauses "F.P.A" (Free of Particular Average)**

This coverage includes the following risks:

- Fire or explosion

- Vessel sinking, grounding, stranding, capsizing

- Vessel collision or contact with any external object other than water

- Discharge of cargo at a port of distress

- General average sacrifice

- Jettison

This type of coverage excludes particular average damages. Additionally, a report (e.g., accident report) is necessary to claim damages under this coverage. The insured bears the burden of proving that the damage falls within the coverage.

The "C" clause excludes loading, unloading, and transshipment risks.

 

**c) Institute Cargo Clauses "A" or Institute Cargo Clauses All Risks**

The term "All Risks" implies coverage for "All Risks." However, "risks" here are defined as "external, sudden, and unexpected events," excluding inevitable occurrences like wear and tear, inherent vice, or natural characteristics of the goods.

In summary, the "All Risks Clause" includes all the risks covered by Total Loss and Institute Cargo Clauses "C" or "F.P.A" (Free of Particular Average), as well as the following:

- Crushing, scratching, breaking, leakage

- Wetting by rain or sea water

- Short delivery, non-delivery

- Theft, pilferage

- Sweat in holds

- Contact with other cargo

- Loading, unloading, transshipment damages, hook damages

- Washing overboard

- Earthquake and volcanic risks

- Shortage

- Burst or torn sacks

 

In Institute Cargo Clauses "A" coverage, the insured is not required to know how the damage occurred or prove that the damage falls within the coverage. The insured only needs to report the claim; proving the exclusion of the damage falls on the insurer.

All Risks coverage, unless otherwise agreed in the policy, begins when the insured goods are loaded onto the conveyance at the seller's warehouse and ends when they are unloaded at the buyer's warehouse. Coverage continues for 60 days in customs warehouses for truck, ship, and train transport, and for 30 days for air transport. If the goods are cleared from customs before these periods expire, coverage continues until they are unloaded at the buyer's warehouse. Coverage terminates for goods not cleared from customs within these periods.

 

EXCLUSIONS:

The following risks are excluded from All Risks coverage:

- Costs arising from the insured's willful misconduct or bad faith

- Loss, damage, or expenses due to insufficient or improper packaging or stowage (e.g., re-packaging costs for soil cargo that spread during loading and unloading due to insufficient adhesive).

- Normal leakage, ordinary loss of volume or weight, or ordinary wear and tear (e.g., for liquid cargo or commodities like rice or wheat)

- Loss, damage, or expenses due to inherent vice, hidden defect, or nature of the insured goods (e.g., heating damage to moist linen cargo loaded onto a ship)

- Insolvency or financial default of the shipowner (e.g., loss, damage, or expenses due to abandonment of the voyage at an intermediate port without physical loss or damage to the cargo).

This exclusion encourages the insured to act prudently, avoiding carriers or shipowners nearing insolvency.

- Loss, damage, or expenses caused by delay, even if the delay results from an insured risk (e.g., Christmas trees arriving late due to a storm, seasonal clothing found after being lost)

- Loss, damage, or expenses resulting from nuclear fission and/or fusion, or the use of nuclear war weapons and all types of radioactive contamination

- Unseaworthiness and unfitness of the vessel or conveyance known to the insured

- War, strikes, lockouts, riots, and civil commotions

 

Road Transport:

For road transport, there are three types of insurance coverage available. These can be ranked from the narrowest to the broadest coverage as follows:

 

a) **Total Loss**

b) **Truck Clause and Railway Clause**

c) **Institute Cargo Clauses “A” or Institute Cargo Clauses All Risks**

 

Among these coverages, **Total Loss** and **Institute Cargo Clauses “A” or Institute Cargo Clauses All Risks** are applicable to road transport in the same manner as they are for sea transport. **All Risks** coverage is not provided for open trucks; instead, these types of transport are insured with the **Truck Clause**, excluding loading, unloading, and transfer risks.

For road transport, the insured goods are covered under the provided insurance terms for 60 days from the date of customs entry in customs warehouses.

Here, it will be sufficient to explain only the coverage provided by the **Truck Clause** and the **Railway Clause**.

 

**Truck Clause:**

This narrow coverage for road transport only covers damage, loss, and expenses resulting from an accident involving the transporting vehicle, such as fire, overturning, or collision. Loading, unloading, and transfer risks are excluded from this coverage. To claim under the Truck Clause, the insured must have a report indicating that the damage resulted from an accident.

 

**Railway Clause:**

This is the applicable form of the Truck Clause for railway transport.

 

### Air Transport:

 

For air transport, two types of coverage are available. It is not possible to have a narrow coverage in this case. The available coverages are:

a) **Total Loss**

b) **Institute Cargo Clauses “A” or Institute Cargo Clauses All Risks**

 

In air transport, the insured goods are covered under the provided insurance terms for 30 days from the date of customs entry in customs warehouses.

 

### Additional Coverages in Cargo Insurance:

**For sea and air transport, the additional coverages are:**

- **War**

- **Strikes, riots, civil commotions (SRCC)**

**For road and railway transport, the additional coverage is:**

- **Strikes, riots, civil commotions**

 

It is noted that war coverage is not provided for road and railway transport due to the "waterborne agreement" in the London market, which foresees that war coverage should not be provided for land transport.

 

### Pricing of Cargo Insurance

Factors affecting the pricing of cargo insurance are crucial and include the following information provided by the insured on the cargo insurance proposal:

- The name of the insured, and if applicable, their business title

- The detailed name and description of the goods to be insured

- The insurance amount

- The weight, number of packages, packaging type (bulk, pallet, container, etc.), and if metal, the number of bundles, or if sheet metal, the number of rolls or plates

- The route (starting and ending locations of the shipment)

- Type of vehicle (truck license number, ship name, train wagon number, flight number)

- Whether the goods are transported in the hold or on deck in sea transport

- Loading date

- Type of coverage requested (terms)

- If applicable, the letter of credit number

- Name of the proposer

- Date of the proposal