Unlike other insurance policies, a marine cargo insurance policy is also known as a "voyage policy". It does not have a fixed start and end date for the coverage period. The following example comes under the trade term CPT (Carriage Paid To…named place of destination). The seller requires to insure his cargo from the time the goods leave the warehouse or place of storage named in the policy for commencement of transit until the goods are delivered to the consignees' warehouse or place of storage at the destination named in the policy or the maximum number of days specified in different clauses (whichever shall first occur). The table below shows the maximum number of days of insurance coverage for clauses that are commonly used:

These specified number of days start to be counted after the date of arrival of the oversea vessel at the named destination, with the expectation that the cargo will be delivered to the consignee's warehouse within the time frame.

If the party concerned knows that there may be a delay in the voyage which could lead to the period of transit exceeding the maximum number of days of insurance coverage, he/she should inform the insurance company immediately and negotiate an extension of the insurance coverage period in order to minimise losses and avoid unnecessary disputes. 

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Mr. Wong suffered from acute appendicitis one morning last week when he was traveling on the MTR to his office. He was sent to the nearest public hospital by ambulance to have an operation and was hospitalised for 3 days.

Mr. Wong had taken out a medical insurance policy with coverage high enough to cover the cost of his appendicitis operation and accommodation in a semi-private ward of a private hospital.

Mr. Wong considered this situation to be wasteful of his medical insurance policy as he had sufficient cover to receive treatment in a more comfortable environment despite the fact that his condition required him to be taken quickly to the nearest public hospital for immediate treatment.

Under these circumstances, is Mr. Wong still entitled to enjoy the benefits of his medical insurance cover?

Customers are comprehensively covered irrespective of whether they are confined in a public or private hospital.

In Mr. Wong’s case in particular, even though he was confined in a public hospital, he was still covered by his medical insurance. Some medical insurance policies in the market, such as MSIG’s Medisure Plus, even have a “Public Hospital Cash Benefit” sub category for those who are confined in a general ward of a public hospital. A cash benefit will be given to the insured on a daily basis according to the plan that they have taken out.

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With the implementation of open economic policy, the amount of foreign investment in northwestern China has increased in recent years. As more and more factories are set up, it is common for investors to move their production line to China. In order to save cost, many of them will import re-conditioned or used machines.

When investors take out cargo insurance for machinery, most insurers would expect that these machines are newly manufactured. If the machines have been re-conditioned or previously used, investors need to declare this to the insurer in advance. This is because if there is any damage, it is difficult to access whether that damage is pre-existing or whether it occurred accidentally during transit.

To minimise any ambiguity, investors should employ a professional surveyor to prepare a pre-shipment report, including photographs, that details the condition of the machines. In the event that no such report is provided, the responsibility of proving the cause of damage to the machines would rest with the insured whenever a claim arises. 

Notwithstanding, when taking out cargo insurance for these machines, the sum insured should be the new replacement value instead of the current market value of the machines. If the sum insured is underestimated, the insurance company shall reserve the right to take an average in case of a partial loss.

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Mr. Chan was admitted to hospital with abdominal pain and blood in his stool 10 days after he took out a hospitalisation policy. A histopathology report confirmed a colon tumour measuring about 5cm and the diagnosis was carcinoma of the colon.

Mr. Chan filed his insurance claim for his medical expenses, but it was rejected by his insurer. Why did Mr. Chan’s insurer reject his claim?

Based on the size of the tumour, the insurer was of the view that the tumour could not have developed within 10 days. As such, the insurer rejected his hospitalisation claim on the grounds that the tumour was a pre-existing condition.

Mr. Chan believed that the insurer was unreasonable to decline his hospitalisation claim as the diagnosis of carcinoma of the colon was made 10 days after the policy effective date.

Although the available information failed to indicate the exact onset date of Mr. Chan’s colon cancer, given that the diagnosis of carcinoma of the colon was made only 10 days after the policy was effected, the Insurance Claims Complaints Panel was of the view that a tumour of that size could not have developed within 10 days after the commencement date of the policy. As the policy excludes any illness or injury that started or presented signs and symptoms prior to the policy commencement date, the Complaints Panel endorsed the insurer's decision in rejecting the hospitalisation claim.

Pre-existing conditions are generally excluded by most medical insurance policies. Insurance companies will judge each individual case carefully based on the relevant medical report to determine whether there is sufficient evidence to rule that a condition is pre-existing. In the next issue, we will discuss some basic areas for consideration in determining a pre-existing condition.

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In general, an insurance company is liable for losses proximately caused by an insured peril. “Fear of Loss/Peril” does not constitute a peril in itself, so an insurance company is not liable for a loss proximately caused by an uninsured peril, even though the loss would not have arisen other than through fear of an insured peril. This principle does not, however, absolve an insurance company of its liability for litigation and labour charges, salvage charges or general average contributions when properly incurred to prevent loss from a factual peril.

For example, Mr. Chan has taken out a marine cargo policy for transporting preserved food packed in PVC vacuum bags. When he opened the container, he noticed a bad smell coming from the container. Being afraid that the contents had been damaged, he refused to receive the goods and asked for compensation from his insurance company. There was no evidence showing that the goods were actually damaged as Mr. Chan was reluctant to open the carton or employ a loss adjuster to conduct a survey. In order to facilitate a claim, we suggest that Mr. Chan should open the carton or employ a loss adjuster to investigate if the goods were really damaged.

To enjoy better protection, customers should:

• Declare the characteristics and features of the insured cargo to their insurance company when making a marine cargo insurance application.
• Pack the cargo in a proper and sufficient manner, e.g. wooden boxes, which provide better protection than paper boxes or waterproof packing.
• Declare the nature of the goods to the carrier so that they can handle the cargo with care.
• Carefully check the container's past history before loading cargo to ensure that it will not be contaminated.

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Health care policy reform has become a hot topic in recent years, and now many people are more likely to buy their own medical insurance. By purchasing medical insurance, one hopes that they are fully protected whenever medical treatment is necessary and that they receive the best care possible. However, as is usually the case when an accident occurs, the ambulance will transport the injured parties to the nearest public hospital. In such a case, will the insured be wasting their higher premium medical insurance plan when they are admitted to a lower-cost public hospital for treatment?

Policyholders should not worry about this issue. Even if he/she is rushed to a public hospital for immediate care, they have every right to transfer to a better ward or private hospital once their condition has stabilised, allowing them to receive the entitled medical services that their policy has to offer. What’s more, for those who receive minor injuries, transferring to another hospital may even slow down the rehabilitation process. There are health insurance policies that specially provide the insured with ‘Public Hospital Cash Benefits’. In the aforementioned case, the insured will receive compensation in addition to selected public hospitals medical costs. Insurance companies may also provide additional hospital cash to compensate for any gap in the quality of medical services. For example, if one holds MSIG’s “MediSure Plus” policy, he/she may receive an additional daily hospital cash compensation during hospitalisation in addition to coverage for public hospital basic costs.

MSIG, therefore, reassures policyholders that they should not be troubled about wasting their premium protection or impulsively request hospital transfers to take full advantage of their policy cover. The most important thing is to rest and recover.

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All kinds of insurances deal with pre-existing conditions - not just health and personal accident insurance - and the definition of pre-existing conditions varies from company to company.

Generally speaking, for medical insurance, any condition for which a person is receiving treatment, has been advised to receive treatment, or for which a prudent person would seek treatment, be it congenital or acquired and regardless of whether the condition is diagnosed or not before the policy becomes effective, is a pre-existing condition.

A reasonable interpretation of pre-existing conditions is any injury, illness, disease, sickness, medical condition or symptom:

1. that has been diagnosed prior to commencement of the policy
2. that has been treated or advised to be treated prior to commencement of the policy
3. that has been investigated or advised to be investigated prior to commencement of the policy
4. for which a patient has been given medication or advised to have medication prior to commencement of the policy
5. for which a patient has symptoms that manifested prior to commencement of policy
6. for which a patient has been hospitalised or advised to be hospitalised prior to commencement of the policy
7. that has been known to exist prior to commencement of the policy
8. that has a strong medical indication that it originated prior to the commencement of the policy, e.g. size of a tumour or stage of cancer

In addition to these factors, what else does an insurance company consider?

Is the condition acute or chronic?

An insurance company will not judge whether a condition is pre-existing solely by its name, as some conditions might be acute or chronic.

For example, some people might have gastroenteritis occasionally which is acute in nature. We cannot say that a person's gastroenteritis is pre-existing even if that person has had gastroenteritis before the policy became effective. The same interpretation is applied to chest infections, acute bronchitis, etc. However, if a person appears to have been suffering from chronic diarrhoea for a year - resulting in him/her having to rush to the bathroom every time he/she becomes nervous or is placed under pressure - then he/she is suffering from irritable bowel syndrome. If this has been happening regularly before the policy became effective, this will be regarded as a pre-existing condition.

In the next issue, we will discuss two more basic areas for consideration in determining a pre-existing condition.

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Unless specified in the policy conditions, a marine cargo policy is freely assignable to any person who has an insurable interest in the property at risk by endorsement on the reverse of a cargo policy. The policy may be assigned either at the time the interest passes or before. However, it cannot be assigned after the interest has passed as there is no insurable interest. Usually, an agreement or sales contract with Incoterms is made to identify when the insurance policy's interest passes.

The following real-life example illustrates how an "improper" method of taking out cargo insurance can affect a claim.

In order to fulfil the bank's LC requirement, Company B (the buyer) requests Company A (the seller) to take out a marine cargo insurance with Company B as the policyholder under Incoterms CIF port. Under such circumstances, there is no need to assign the cargo policy, but Company B has no insurable interest during the journey under CIF.

When a claim arises, as the policyholder is Company B, it does not have an insurable interest at the time of taking out the marine cargo policy. The insurance company will challenge the application and it may affect the consideration of the claim.

With the above example, the proper method of taking out cargo insurance so as to fulfil the bank's LC requirements is that the seller should present the sales invoice upon cargo insurance application and declare to the insurance company their insurable interest. Although the buyer will still be the policyholder in order to fulfil the bank's LC requirements, Company A is protected by their declaration of insurable interest to the insurer. As a result, Company A is not required to endorse/assign the policy.

To ensure a marine cargo policy can be properly assigned so as to enjoy better protection, customers are advised to familiarise themselves with the rules of Incoterms so they can avoid improper insurance situations. Please visit https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/ for common definitions.

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"Important" Clause is also known as "Red Line" Clause as it was printed in red in the policy in the past. As its name suggests, it is very important and is printed on every marine cargo policy to provide guidelines to the insured on the procedure to be adopted in the event of loss or damage. 
 
Apart from the guidelines, the "Important" Clause also states the liability of carriers or other third parties and requires the insured has to ensure that all rights against carriers or other third parties are properly preserved and exercised. For example, the insured is required to claim immediately on carriers for any missing packages, or not to give clean receipts where goods are in doubtful condition.
 
In reality, many insureds overlook the "Important" Clause. Failure to comply with the instructions stated in the "Important" Clause may prejudice any claim under the marine cargo policy. If the insured follows the guidelines stated in the clause, not only can it streamline the claims procedures, but also protect the insured's interest to claim payment from insurance company provided the claim is eligible under cargo policy coverage.

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Under normal circumstances, the insured would take out marine cargo insurance with Institute Cargo Clause A. When transporting leisure craft, however, all movable machinery and valuable equipment, such as propellers, radar equipment and GPS systems should be carefully packed in strong packaging and shipped by container. The hull of the leisure craft should be securely fixed on a wooden or aluminium cradle and shipped below decks on an ocean-going vessel. To ensure the leisure craft will be loaded/unloaded properly, insurance companies usually require the insured to conduct a supervised loading and discharging survey. In addition, professionals should be employed to oversee the correct loading and unloading of the leisure craft.

If you want to learn more about marine cargo insurance for delivery of luxury goods, you're welcome to contact us with any enquiries.

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