Article 28: Insurance Document and Coverage
Clause a:
Clause:
An insurance document, such as an insurance policy, an insurance certificate, or a declaration under an open cover, must appear to be issued and signed by an insurance company, an underwriter, or their agents or proxies. Any signature by an agent or proxy must indicate whether the agent or proxy has signed for or on behalf of the insurance company or underwriter.
Explanation:
This clause ensures the authenticity of the insurance document by requiring it to be issued and signed by a recognized entity (insurance company, underwriter, or their agents/proxies). If an agent or proxy signs the document, their authority to sign on behalf of the insurance company or underwriter must be clearly stated.
Example:
An insurance certificate is signed by John Doe. The certificate should indicate whether John Doe is signing as an agent of XYZ Insurance Company. It should explicitly state, “John Doe, Agent for XYZ Insurance Company.”
Clause b:
Clause:
When the insurance document indicates that it has been issued in more than one original, all originals must be presented.
Explanation:
If the insurance document mentions multiple originals, all such originals must be presented to ensure that the document is complete and valid.
Example:
If an insurance policy states, “This policy is issued in three originals,” then all three originals must be submitted with the other shipping documents.
Clause c:
Clause:
Cover notes will not be accepted.
Explanation:
Cover notes are temporary documents issued to provide immediate insurance coverage until a formal policy is issued. This clause prohibits the use of cover notes, ensuring only formal insurance documents are accepted.
Example:
If a company presents a cover note instead of an insurance certificate, the cover note will be rejected as per this clause.
Clause d:
Clause:
An insurance policy is acceptable in lieu of an insurance certificate or a declaration under an open cover.
Explanation:
This clause allows flexibility in the type of insurance document submitted, stating that an insurance policy can replace an insurance certificate or a declaration under an open cover.
Example:
If a letter of credit requires an insurance certificate but the applicant provides an insurance policy instead, the policy is acceptable.
Clause e:
Clause:
The date of the insurance document must be no later than the date of shipment, unless it appears from the insurance document that the cover is effective from a date not later than the date of shipment.
Explanation:
The insurance document must be dated on or before the shipment date to ensure coverage from the time of shipment. If the document indicates that coverage starts from the shipment date or earlier, it is acceptable even if the document date is later.
Example:
If goods are shipped on July 1, the insurance document should be dated on or before July 1. If the document is dated July 2 but states that coverage starts from July 1, it is still acceptable.
Clause f:
Clause:
i. The insurance document must indicate the amount of insurance coverage and be in the same currency as the credit.
ii. A requirement in the credit for insurance coverage to be for a percentage of the value of the goods, of the invoice value, or similar is deemed to be the minimum amount of coverage required. If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods. When the CIF or CIP value cannot be determined from the documents, the amount of insurance coverage must be calculated on the basis of the amount for which honor or negotiation is requested or the gross value of the goods as shown on the invoice, whichever is greater.
iii. The insurance document must indicate that risks are covered at least between the place of taking in charge or shipment and the place of discharge or final destination as stated in the credit.
Explanation:
- Clause i: The insurance document must specify the coverage amount and match the currency of the credit.
- Clause ii: If the credit specifies a percentage coverage, it’s the minimum required. If not specified, coverage should be at least 110% of the CIF or CIP value. If CIF or CIP values are unavailable, coverage should be based on the greater of the negotiation amount or the invoice value.
- Clause iii: The insurance must cover risks from the shipment point to the final destination as mentioned in the credit.
Example:
- Clause i: If the credit is in USD, the insurance amount should also be in USD.
- Clause ii: If the credit requires 120% coverage of the invoice value, the insurance must cover at least 120%. If not specified, and the CIF value is $100,000, the insurance should cover at least $110,000.
- Clause iii: If the credit mentions shipment from New York to London, the insurance must cover this entire route.
Clause g:
Clause:
A credit should state the type of insurance required and, if any, the additional risks to be covered. An insurance document will be accepted without regard to any risks that are not covered if the credit uses imprecise terms such as “usual risks” or “customary risks”.
Explanation:
The credit should specify the type of insurance and any additional risks to be covered. If it uses vague terms like “usual risks,” the insurance document is acceptable even if it doesn’t cover unspecified risks.
Example:
If the credit specifies coverage for marine risks but vaguely mentions “usual risks,” the insurance document is acceptable even if it only covers marine risks and not other unspecified risks.
Clause h:
Clause:
When a credit requires insurance against “all risks” and an insurance document is presented containing any “all risks” notation or clause, whether or not bearing the heading “all risks,” the insurance document will be accepted without regard to any risks stated to be excluded.
Explanation:
If the credit demands “all risks” coverage and the insurance document includes an “all risks” clause, the document is accepted regardless of any exclusions mentioned.
Example:
If the credit requires “all risks” insurance and the document states “all risks covered except for war and strike,” the document is still acceptable despite the exclusions.
Clause i:
Clause:
An insurance document may contain reference to any exclusion clause.
Explanation:
This clause allows the insurance document to mention exclusion clauses. Such references do not affect the document’s acceptance.
Example:
An insurance document might state, “Coverage excludes war and nuclear risks,” and still be acceptable.
Clause j:
Clause:
An insurance document may indicate that the cover is subject to a franchise or excess (deductible).
Explanation:
The insurance document can specify that coverage is subject to a deductible or franchise (an amount below which no claims are paid). This does not impact the document’s validity.
Example:
An insurance policy stating, “Subject to a deductible of $1,000,” is still valid and acceptable under this clause.