April 21, 2017 | Cargo Insurance, Industry Insights
Cargo Insurance in Action: Beyond Cargo Theft and Damage
The global insolvency of Hanjin Shipping Co. Ltd. had a tremendous impact on cargo owners, including losses involving the need to move cargo from one carrier to another; making arrangements for additional transportation modes; and taking measures to minimize losses resulting in additional storage fees, charges and fines; among other claims. Hanjin, the largest shipping company in South Korea and the world’s ninth-largest shipping company, operated about 60 regular lines worldwide. In 2016, it faced a severe liquidity crisis, and was unable to negotiate an out-of-court restructuring with its creditor banks and ultimately filed bankruptcy.
Because Hanjin did not have immediate available funding for its worldwide operations, its vessels were seized. To avoid seizure where possible, Hanjin anchored its vessels outside of various ports. Certain vessels that made it to port were made subject to maritime liens. In addition, terminal owners and labor unions refused to service the vessels and unload cargo without first receiving payment. This in turn left thousands of cargo owners stranded and searching the globe for their goods, with many ultimately turning to Cargo insurance to recover some of their unexpected costs.
Cargo Insurance Responds
In the aftermath of Hanjin, Roanoke Trade received nearly 70 claims totaling $400,000 paid and on reserve to date. The claims were not for direct cargo damage, but rather for fees and charges incurred by our clients that are covered under the Sue & Labor and Landing, Warehousing & Forwarding Charges provisions in a Cargo Insurance policy.
These clauses vary by company, but basically under the Sue & Labor provision, payments will be reimbursed for any charges properly and reasonably incurred by the policyholder when taking all reasonable measures to avert or minimize an insured loss. Under the Landing, Warehousing & Forwarding Charges provision, landing, warehousing, forwarding and special charges will be reimbursed among other covered losses.
With Hanjin vessels out of commission or seized, logistics service providers, in order to get client goods to their destination in a timely fashion and protect their cargo, incurred fees and charges covered under either of the above provisions. This included the cost of additional ocean freight charges, custom clearance fees, container checking fees, container demurrage charges, storage charges, trucking fees, highway fees, storage charges, documentation fees, terminal fees and chassis charges.
The broad scope of coverage made available with Cargo Insurance to importers and exporters is key and goes beyond cargo theft or damage. Cargo policies can be designed with multiple provisions that respond to various types of claims. This surely was the case for many who were impacted by the Hanjin debacle.
Roanoke Trade is committed to serving our clients and helping to ensure they are properly covered. For more information about our insurance solutions, including Marine Cargo coverage, please contact one of our professionals at 1-800-ROANOKE (800-762-6653).