Lessons · Lesson 3 of 7
- 01 · Two instruments, and the gap between them
- 02 · Who was supposed to insure
- 03 · What the policy actually says, and what it will not say
- 04 · Insufficiency of packing: the exclusion written for apparel
- 05 · The claim file, and the ninety minutes at the door
- 06 · General average: a bill for somebody else's emergency
- 07 · Whether to insure this shipment at all
What the policy actually says, and what it will not say
Read a cargo certificate line by line, and separate the losses a policy pays from the much larger losses it was never built to touch.
Lesson 3 of 7 · 15 min
The certificate is one page, and every line on it decides something
Thistlewood's certificate for PO TW-8807 is one side of paper. Merchandisers file it and never read it. That is a pity, because every line on it is a decision somebody made.
| Field | What it says | What it decides |
|---|---|---|
| Assured | Thistlewood Retail | Who may claim, and who must have had an interest at the moment of loss |
| Subject matter | 900 cartons, 7,200 parkas, style PK-540 | Whether the goods damaged are the goods insured |
| Insured value | USD 172,457.28 | The ceiling, and the basis every partial loss is scaled against |
| Conveyance and voyage | MV Nordvahl Sirius, Alexandria to Antwerp, then Willebroek | Whether the journey that went wrong is the journey insured |
| Conditions | The market's widest standard clause set, plus war and strikes | Which events are covered at all |
| Excess | USD 1,500.00 each and every claim | What you carry yourself, every time |
| Claims payable at | Antwerp, by the underwriter's named agent | Who you telephone at 17:00 on a Friday |
Two of those lines carry nearly all the argument: conditions and insured value. Take them in turn. Then take the more important list: what is not on the page at all.
"All risks" is a name, not a promise
The market's standard cargo clauses come in three sets. The widest is written as an all-risks cover. The two narrower ones are lists of named perils — that is, named dangers. Course 8.3 explains which Incoterms rule requires which level, and why a seller on CIF may lawfully buy the narrowest one. What matters here is what the widest set does not do, because the name misleads people every season.
An all-risks cargo policy covers accidental loss or damage to the subject matter. Three parts of that sentence do real work.
- Accidental. From outside, and uncertain when the cover started. Something that was always going to happen to these goods on this voyage is not accidental, and it is not insured. A garment that arrives creased was always going to arrive creased.
- Loss or damage. Physical. The policy pays for harm to the goods, not harm to your business. The rest of this lesson is about that difference.
- To the subject matter. The goods described on the certificate. Not the container, not the freight, not the buyer's shelf plan.
If you are on one of the narrower named-peril sets, the position is sharper. Your loss must appear on the list. A completely accidental, completely innocent wetting is not covered by a set that names fire, stranding, collision, jettison and a handful of other disasters, and then stops. Accidental is not the test. Listed is the test.
The insured value, and the two ways to get it wrong
The convention is 110% of the CIF value, and 8.3 shows why the sum is circular and has to be solved rather than added. The extra tenth exists because a buyer who loses a cargo has lost more than the invoice. They have lost the freight already paid, the duty they will still owe, and the margin they would have made.
Two mistakes are common, and they run in opposite directions.
Declaring at FOB when your exposure is landed. If your customs value includes freight, insurance and duty — course 8.5 builds one — then insuring on the factory's FOB invoice leaves the duty and the freight uninsured. On this container that is roughly the difference between USD 154,800.00 and USD 172,457.28. You find it out on the day the whole thing is a total loss.
Declaring a value you cannot support. A cargo policy is an indemnity contract with an agreed value. Underwriters do not ask for proof when the certificate is issued. They ask on the claim, and then the invoice, the packing list and the customs entry all have to say the same thing. Track 12.1 owns keeping that set consistent. A declared value no document supports is a slow argument at the worst possible time.
The transit clause: cover has a start and an end
A cargo policy is not a policy on your goods for a period of time. It is a policy on a journey, and the transit clause says when that journey begins and ends.
Vasteral's wording on this open cover starts when the goods first move inside the warehouse of origin in order to load them for the start of the journey. It ends at whichever of these comes first: delivery to the consignee's warehouse named in the certificate; delivery to any other warehouse the assured chooses to use for storage, sorting or distribution; or 60 days after the goods are discharged from the vessel at the port of discharge.
Read the middle one twice. If Thistlewood had discharged the container into a third-party consolidation shed to break it down for their shops, the cover would have ended at the shed door, not at the shop. And if they had left it in the port for a quarter, the cover would have ended on its own.
Excess and franchise are not the same word
An excess — also called a deductible — is taken off every claim. Thistlewood's is USD 1,500.00 each and every claim. So a USD 4,000.00 loss produces a USD 2,500.00 payment, and a USD 1,400.00 loss produces nothing.
A franchise is a threshold, not a deduction. Once the loss passes it, the claim is paid in full. A USD 1,500.00 franchise on those same two losses pays USD 4,000.00, and nothing.
They sit one word apart in a schedule, and they differ by the whole deductible on every claim you ever make. Lesson 7 prices what moving the excess is worth.
The exclusion nobody argues about, and it is the biggest number here
Now the part of this lesson a merchandiser should carry away above everything else.
Cargo policies exclude loss, damage or expense caused by delay, even when an insured peril caused the delay. There is no negotiating around it, and no clause set adds it back.
Look at what that means on TW-8807. The stack collapsed, the vessel put into Vigo, and the sound cargo — 724 cartons, 5,792 parkas the seawater never touched — reached Willebroek on 27 November. That was 12 days after the date Thistlewood had planned for, and past their own drop date for the season.
| Amount | Insured | |
|---|---|---|
| Physical damage claim, net of the excess (built in lesson 5) | 24,329.39 | Yes |
| Season markdown taken on 2,140 late parkas at USD 9.00 | 19,260.00 | No |
| Extra handling, sorting and re-ticketing at the distribution centre | 2,880.00 | No |
| Two shop windows re-planned around cargo that was not there | not quantified | No |
The uninsured cost of the same accident is USD 19,260.00 on the markdown alone. That is 79.2% of the claim that was paid, and it never appears in any insurance conversation, because nobody submits it. This is why a cargo policy is a floor under a disaster, not a substitute for a critical path. Track 7 owns the clocks that stop a twelve-day delay from landing on a drop date. A policy will not.
The other exclusions are shorter to state and worth knowing by name: insufficiency of packing (the whole of lesson 4), inherent vice or the ordinary nature of the goods, ordinary leakage and ordinary wear and tear, insolvency or financial default of the carrier where the assured knew or should have known, wilful misconduct of the assured, and — unless bought back separately, which Thistlewood have done — war and strikes.
Check yourselfA container of knitwear arrives four weeks late because the vessel was arrested in a dispute between the carrier and a fuel supplier. The goods are perfect. Your buyer cancels and you sell the stock at half price. What does the cargo policy pay?Show the answer
Nothing. There is no physical loss or damage to the subject matter, and the loss you actually suffered was caused by delay, which every cargo policy excludes in plain words. The carrier may owe you something under the contract of carriage, and there are marine legal expenses and trade disruption products for exactly this, but the cargo certificate in your file says nothing. It is the clearest illustration that a cargo policy insures the goods, not the season.