- Marine Protect
Why you need to understand time clauses for cargo cover
Ensuring that the commencement date and duration of coverage is correct on a cargo policy may seem obvious however, it can be easily overlooked.
Differing time zones and time changes such as daylight savings can be quite the headache but if not correct on the period of insurance, can mean big trouble.
“In recent times there’s been big losses where it has been discovered that there was not adequate cover in place due to incorrectly specified transit durations, commencements or termination dates,” says Head of Marine, Andrew Kidd.
The Transit Clause in a cargo policy covers the goods from the time they leave the warehouse at the place named in the policy for the commencement of transit then ends upon arrival at the specified destination, however, there are some things to note:
Ordinary Course of Transit Cover
The Institute Cargo Clauses provide cover during the ordinary course of transit. But what does the ordinary course of transit mean?
In a case from the Australian Federal Court the ordinary course of transit was described by the court as:
The notion of “in transit” accepts that movement of the goods may be interrupted by circumstances associated with the requirements of their transportation…… the period of transit may continue during intervals or periods when the goods may be loaded or unloaded and temporarily housed provided that it is reasonably referrable to the furtherance of the carriage of goods to final destination.
It includes cover for:
• Delays during which the goods are held up pending inspection by customs or similar authorities and awaiting arrival of the onward carrying conveyance or vessel
• Any customary form of transport incidental to the overseas shipment of the goods, including land, river and canal conveyances (e.g. rail, road transport, barge, lighter)
• Carriage by air when this is incidental to a shipment by sea
It does not include cover for:
• Any delay initiated by the cargo owner due to their unwillingness to take immediate delivery
• Any period of resultant storage
Sometimes the conveying vehicle or packing requirements for the cargo may not be immediately available when the cargo is ready for transport.
Some choose to apply an extension of cover so that cargo is protected from when it is first moved at the departure location, for the specific purpose of loading onto the conveying vehicle for the transit to a destination outside the premises.
This is known as ‘static cover’ and avoids any dispute as to when any policy covering the goods prior to transit ceased and the transit policy commenced.
Static cover is available to be added onto the policy to cover the period where cargo is stationary for up to 5 days prior to loading or after unloading, but will not apply once cargo is moved from the specified storage area and must be applied before the commencement of transit.
Having the right commencement date for transit can become confusing when time zones are involved. This isn’t exclusive to overseas and can be as minor as the hourly difference between Australian states or taking into account daylight savings.
The loading date of the cargo MUST coincide with the commencement date specified on the policy and must be for the date and time at the place at which the activity occurs.
Even though a policy is made in Australia, if the loading activities are occurring in New York, the policy needs to be aligned with New York time.
For example, New York in the USA is approximately 14 hours behind Australia. This means that if insurance was to commence on January 1st AEST it is technically only the 31st December in America. If cargo is loaded on the 30th December in New York it is not actually covered because that is the 31st December in Australia and prior to the insurance commencing on January 1st AEST. Cover must commence at the correct time according to the specified place of storage/loading and not where you took out cover.
Even if static cover is included in the policy, it will not cover damage or loss if the items have been loaded prior to the Ordinary Course of Transit. Once cargo is loaded onto the transit vehicle this extension no longer applies.
“Having a specified commencement date that is aligned with the time zone of the loading place of the cargo is essential otherwise proof of when damage or loss occurred is nearly impossible to prove and therefore an insurer may not be liable to indemnify.
“Making full and proper enquiries about transport arrangements and having a clear recognition of the local time at the loading place from which the policy cover should attach is essential,” concludes Andrew.
If you have a question or concern about one of your client’s policies, contact our Marine Protect experts on 1800 684 669.