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Open cover policy – Importance of written clauses

Mr. Wong is a mobile phone wholesaler who has an open cover policy with an insurance company described as “Transit Insurance”. One Friday evening, Mr. Wong instructed Warehouse H to receive and dispatch goods. However, the goods from the supplier arrived near day-end and, because they could not be dispatched to Mr. Wong's customers immediately, they were stored in Warehouse H over the weekend (public holidays). Unluckily, some of the goods were discovered stolen the following Monday.

Were the stolen goods covered in Mr. Wong's open cover policy?

The answer is “Yes”. As Mr. Wong had added a written clause to the open cover policy, stating “ VOYAGES:… (2) Place A to Place B. Cover attaches from the time the Assured accepts delivery of the insured goods and continues during the ordinary course of transit and terminates upon transfer of title as per invoice or instructions...” the written clause would override the printed clause because it was specifically added and was agreed to by the insurance company.

Although it was argued that the goods were stolen in the warehouse, while the policy was intended only to cover losses in the course of transit, it was Mr. Wong's usual practice to instruct the supplier to deliver goods to Warehouse H for dispatch to Mr. Wong's customers within a short period of time.

Moreover, the storing of the goods over the weekend (public holidays), which was longer than normal, made no difference to the cover, since the delay was readily understandable in the view of the public holidays and did not change the essential nature of the arrangement. The goods had been delivered to Warehouse H for the purpose of their onward transportation in circumstances covered by the express Voyages clause of the transit cover.

You should remind your customers to check if they have any special or additional needs to be covered in an open cover policy. If yes, you could remind them to add a written clause to the policy to ensure better protection. In Mr. Wong's case, if he had not added a written clause, it would probably be the case that he could not enjoy the insurance company's cover. By understanding your customer's business practices better, you can provide more professional advice and forge a closer relationship with them!

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