Extra Expense clauses Mike Roderick, Partner 24 November 2010
The starting point A typical marine cargo policy, underwritten on the terms of the Institute Cargo Clauses, is primarily concerned with physical loss or damage to the cargo, not financial losses or expenses What of financial loss or expense incurred in forwarding insured cargo to destination?
Clause 12 ICC(A) Forwarding Charges Where, as a result of the operation of a risk covered by this insurance, the insured transit is terminated at a port or place other than that to which the subject-matter insured is covered under this insurance, the Insurers will reimburse the Assured for any extra expenses properly and reasonably incurred in unloading storing and forwarding the subject-matter insured to the destination to which it is insured. This Clause 12, which does not apply to general average or salvage charges, shall be subject to the exclusions contained in Clauses 4,5,6 and 7 above, and shall not include charges arising from the fault negligence insolvency or financial default of the Assured or their employees
Extra expense wordings No standard wording No settled intent No case precedent Application of foreign law and jurisdiction
Extra expense wording Notwithstanding anything herein to the contrary.. To take effect as a paramount clause? To override Policy exclusions To override Policy limits of liability
Extra expense wording..this insurance is also to indemnify Additional head of engagement What financial limit? - Sub limit each and every loss - Annual aggregate limit - Insured value limit - Deductible - No limit and no deductible
Extra expense wording..in respect of all additional expenses directly or indirectly incurred by the Assured.. No limitation that properly or reasonably incurred - e.g. chartering an Antonov! No restriction to Policy period Meaning of indirectly?
Extra expense wording incurred as a result of an insured peril and/or due to any circumstances beyond the control of the Assured.. Link to insured peril removed Range of circumstances can be very wide
Extra expense wording in attempting to prosecute an intended voyage covered hereunder whether such attempt may ultimately prove successful or otherwise No requirement that insured voyage ever started or completed? - inability to reach loadport - inability to leave loadport
Extra expense wording..the vessel and/or conveyance being detained and/or otherwise delayed for any period and as a result of any reason whatsoever.. Link to insured peril removed Open ended delay Not limited to termination
Extra expense wording..arising from the Assured being unable to take delivery of or to deliver the subject matter insured in accordance with the terms and conditions of the Assured s sales and purchase contracts to include.loss of the Assured s market or sales price due to late arrival of the carrying conveyance.. Seasonal goods Buyer walks away Contractual penalties for late delivery
Reasons for delay (1) Port closures Terrorism 9/11 Port of New York Dirty bomb Political violence Strikes Marseille Obstructions Mumbai post MSC Chitra Congestion
Reasons for delay (2) Closure of canal or port approaches Other waterways - Draught restrictions - Mississippi flooding Airspace - Post 9/11 - Chernobyl - Ash clouds Road/rail - Floods/earthquake/landslide - Bridge or tunnel collapse
Reasons for delay (3) Rejection risks Salmonella Avian flu Vessel arrest By bunker supplier/mortgagee Customs arrest -drugs smuggling Insolvency of carrier
Conclusions An Extra Expense clause May operate even though no insured peril has occurred May not be limited to termination but may extend to cover interruption or delay May operate even if an excluded peril has occurred and caused delay May not be limited to expenses properly and reasonably incurred May not be subject to Policy limits of liability May cover loss of market/assured s sales price
Other issues Aggregation Other coverages Reinsurance
Extra Expense clauses Mike Roderick, Partner 24 November 2010