Marine

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The cover of property being sacrificed under cargo insurance

When incidents occur during a sea voyage, crew members often have no alternative but to throw some of the cargo overboard to lighten a vessel in order to reduce the potential risk that threatens the safety of the vessel and its crew members. Incidences of shipwreck may also cause cargo to be lost or destroyed. Under cargo insurance policy, this damaged or lost cargo is treated as “Sacrifice”. Is “Sacrifice” cargo covered under cargo insurance?

Take the mega container vessel “MOL Comfort” accident in June 2013 as an example. The hull was broken into 2 parts due to bad weather during her voyage from Singapore to Jeddah. The vessel suffered widespread damage. Although all 26 crew members had been rescued, all cargo was destroyed or lost.

As the hull was broken into 2 parts in this accident and the vessel sank, all property was lost at sea and it was difficult to judge the portion of the lost property each owner was responsible for. According to the Institute Cargo Clauses, under the rules of General Average, insurers had the right to share the loss among including but not limited to the ship owner, other cargo owners and/or their respective insurers involved in the same voyage.

These rules of General Average could also be applied in the situation when crew members need to jettison cargo overboard in order to lighten a vessel during times of potential danger that threaten the safety of the vessel or crew members. Under the rules of General Average, the ship owner, other cargo owners and/or their respective insurers are also required to bear the loss together with the affected property owners.

To conclude, the above incident illustrates the importance of taking out marine cargo insurance. This is because even if your cargo was not damaged or lost in an accident, you still have an obligation to share the loss of other cargo(es) which was/were “sacrificed or lost” in the same voyage under the rules of General Average. Cargo insurance, at least, provides security for you in such circumstances and prevents further financial loss caused to you.

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