In various past issues, the subject of prompt notification was raised for the better understanding of complying policy condition as well as knowing the early intervention of insurer would safeguard the interests of the Insured. A wrongful response may prejudice the liability position of the Insured and where a claim for policy indemnity is intended, the response of an Insured is generally determined in conjunction with the insurer's position. An insurer usually needs to determine various aspects of an incident such as Insured's liability to the third party, policy liability in accordance with terms therein, ways to minimize the likely loss or damage and the prospect of recovery against any party as fault. We present an incident below to give an example of the various aspects which insurer upon receiving early notification will explore. Naturally if the incident has passed insurer without such early notice, the status of a claim under the policy will be extremely affected. A container of heavy steel coils (amongst various containers in the same consignment) gave way at its base while being lifted onboard the carrying vessel. The collapsed container and the content that fell hit the vessel causing extensive damage to hull apart from the coils sustaining their own damage. The NVOCC that issued the bill of lading reported the incident to its insurer. At the same time, the carrier filed a claim against the NVOCC and retained the cargo in security of its claim for damage and demurrage. When the incident was reported to the NVOCC's insurer, the following details need to be determined urgently (where late notification would likely affect the insurer vis-à-vis the insured NVOCC).
- Is there a defect in the container such as deteriorating wear and tear affecting its sound condition to remain in service? The liability position would be different for FCL and LCL shipments. The cover for the NVOCC's liability under its bill of lading insurance could be affected by its other liability if it is a party who leased the container and shipped the cargo under a SOC arrangement.
- Is there an over loading of container. Did the load port weigh the container before loading onboard vessel? Certain port may not have this weighing arrangement?
- Who supplied and loaded the container?
- What were the extent of damage sustained by the vessel, the repair cost as well as duration of repair?
- What steps need to be taken for recovery against the defaulting party should there be over loading of container?
- How to secure the release of the cargoes retained by carrier and reship these to destination?
The above are some of the issues, which can only be adequately addressed during urgent attendance at scene of damage. An incident of this nature would be considered with recovery against the defaulting party if the container was found to be defective due to its deteriorating wear and tear, or there has been overloading beyond its authorized limit.Similarly, other incidents such as General Average declaration would also demand prompt advice to insurer. In a GA situation, one common problem was the inability of all cargoes interests to furnish General Average bond and security. This would always lead to delay in the release of all cargoes followed by threats of claims from those having furnished such security. Early intervention by the bill of lading insurer can help in resolving either by providing insurer's GA security or seeking partial release of cargoes that have met the GA security requirements. Early notification to insurer allows prompt investigation to determine whether there are any unusual circumstances requiring special attention. The interest of the NVOCC could be protected in as much as the insurer protecting its own interest in the claim.
Disclaimer: Individual practice of insurers differs. No professional advice is intended in this note.
