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Are “goods in trust” covered in cargo policy?

The sentence “...... including items held in trust ...... for which the Assured would be responsible.” is commonly seen in a cargo open policy. Are “goods in trust” automatically covered in a cargo policy in the absence of insurable interest?

Let's use a simple example to study the marine cover:

Factory A takes out an Annual cover with Insurer X in its own name. The policy covers the interests of Factory A also “including items held in trust ...... for which the Assured would be responsible”. Insurer X charges an insurance premium based on the estimated annual turnover which Factory A declared to Insurer X.

One day, Factory A receives a request from Factory B who wishes Factory A to help to deliver one lot of cargo. Factory A agrees without obtaining prior agreement from Insurer X. Unfortunately, an accident occurs and the cargo is lost or damaged. Are the goods belonging to Factory B covered under Factory A's policy ?

The answer is “Not Covered”. The reason is that at the beginning of negotiation, Factory A only declared their “OWN turnover” to Insurer X and, in the absence of consideration/cargo premium for this extra risk, there will be no contract between Factory B and Insurer X.

How can we provide comprehensive coverage for you?

  1. Advise us prior to commencement of voyage and obtain acceptance; or 
  2. Declare deliveries of this kind on a monthly basis even if the Declaration Clause is not required. These frequent declarations imply that you have auto cover from the insurer; or 
  3. Estimate a separate turnover of this kind of “goods in trust” to the insurer if you frequently help others or you regularly ship cargoes on behalf of others.

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