Ocean Sea Freight Marine Cargo Insurance and Risk Management 2 — Questions and Answers
Question 1: What is 'particular average' in marine cargo insurance?
- A loss shared equally among all cargo owners on the vessel
- A partial loss that affects only one cargo interest and is borne solely by that owner (Correct answer)
- A type of freight surcharge applied to high-value goods
- The average insured value across multiple shipments
Correct answer: A partial loss that affects only one cargo interest and is borne solely by that owner
Particular average is a partial loss affecting only the owner of the damaged goods and is not shared among other parties to the voyage, unlike general average.
Question 2: Which Institute Cargo Clause provides the LEAST coverage for cargo?
- ICC (A)
- ICC (B)
- ICC (C) (Correct answer)
- ICC (War)
Correct answer: ICC (C)
ICC (C) is the most restrictive clause, covering only major casualties such as fire, explosion, stranding, sinking, collision, and jettison of cargo.
Question 3: What is a 'deductible' in a marine cargo insurance policy?
- The maximum amount the insurer will pay for any single claim
- A predetermined amount that is subtracted from every claim payment, borne by the insured (Correct answer)
- A monthly premium payment made to maintain coverage
- A discount offered for insuring multiple shipments under one policy
Correct answer: A predetermined amount that is subtracted from every claim payment, borne by the insured
A deductible is the portion of any loss the insured must absorb before the insurer covers the remaining amount of the claim.
Question 4: What does 'war risk' coverage in a marine cargo policy protect against?
- Piracy attacks exclusively in international waters
- Losses caused by acts of war, mines, torpedoes, and other hostile acts that are excluded from standard policies (Correct answer)
- Weather-related damage occurring during active wartime
- Damage caused by military equipment stored aboard the same vessel
Correct answer: Losses caused by acts of war, mines, torpedoes, and other hostile acts that are excluded from standard policies
War risk is a separate endorsement or policy that reinstates coverage for losses from hostile acts — such as war, mines, and torpedoes — that are standard exclusions in basic cargo policies.
Question 5: What is a 'constructive total loss' in marine cargo insurance?
- The cargo is completely destroyed with zero salvage value remaining
- The cost to recover or repair the cargo exceeds its insured value, making recovery uneconomical (Correct answer)
- The vessel is declared unseaworthy at the time of departure
- Cargo is lost at sea with no witnesses or documented evidence
Correct answer: The cost to recover or repair the cargo exceeds its insured value, making recovery uneconomical
A constructive total loss occurs when the cost of salvage, repair, or forwarding the cargo to its destination would exceed its insured value, so the insured can claim a total loss.
Question 6: What is an 'open cover' marine insurance policy?
- A policy with no coverage limits on individual shipments
- A blanket policy that automatically covers all shipments made by the insured within agreed terms without needing separate arrangements per shipment (Correct answer)
- A policy specifically covering cargo stored in open-air or uncovered warehouses
- An insurance certificate issued at the port of loading for a single voyage
Correct answer: A blanket policy that automatically covers all shipments made by the insured within agreed terms without needing separate arrangements per shipment
An open cover policy provides continuous automatic insurance for all qualifying shipments within the agreed parameters, making it efficient for businesses that ship regularly.
Question 7: Who typically issues a certificate of insurance for an ocean cargo shipment?
- The customs authority at the destination port
- The insurance company or its authorized agent, such as the freight forwarder (Correct answer)
- The vessel captain at the time of loading
- The International Maritime Organization (IMO)
Correct answer: The insurance company or its authorized agent, such as the freight forwarder
A certificate of insurance is issued by the insurer or its authorized agent — often the freight forwarder — as evidence that the cargo is covered by a marine insurance policy.
Ocean Sea Freight Marine Cargo Insurance and Risk Management 2
What is 'particular average' in marine cargo insurance?