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Impact of Victoria’s stage 4 restrictions on cargo insurance

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Written by Andrew Kidd, NTI’s Head of Marine

On the 2nd August, the Victorian Government declared a State of Disaster and implemented six weeks of stage 4 restrictions in Melbourne in response to increasing COVID-19 infection rates.

The stage 4 restrictions limit the movement of people within Melbourne, require some businesses to close, and put limits on the operation and numbers of staff allowed in workplaces for business that are able to continue to operate.

While the transport and logistics sector is still operating, the restrictions placed on workplace staff numbers could slow down movement of goods into and out of Victoria, and limit the sector’s ability to move goods efficiently around the state.

There has also been an instance of a major airfreight operator suspending operations into Melbourne and diverting goods to Tasmania, requiring delivery by sea into Victoria.

The impact of these restrictions on cargo owners has not been fully realised but it could include:
• Overall delays in the transportation of goods, which could have a significant impact on shipments of perishable or refrigerated goods;
• Limited storage capacity being available as goods take longer to move;
• Manufacturers experiencing difficulty in getting their goods to final destination;
• Shipments diverted to alternate sea or air ports, requiring additional transportation for delivery to final destination and incurring additional costs;
• Increased accumulations of goods at locations such as ports and warehouses awaiting delivery; and
• Potential for delivered goods to remain unpacked at final destination for longer than usual.

Cargo insurance policies typically limit cover to physical loss of, or damage to, the insured goods, and certain risks are specifically excluded or do not fall within the cover parameters. These can include:

Delay
Delay is specifically excluded from virtually all cargo insurance wordings. Some temperature controlled clauses may include a delay provision.

Most cargo insurance policies will provide some form of continuity of cover in the current chaotic trade and shipment circumstances. During any period of delay the cargo continues to be covered as per normal.

Surcharges and Additional Shipping Costs
Additional charges applied to shipments due to Covid-19 diversions or delays are not covered by cargo insurance policies. Examples of this may be costs for container demurrage or port storage.

However, where those costs are associated with a claim for loss/damage to the cargo from a peril already insured by the policy, they are covered.

Termination of Contract of Carriage
It is important to note that insurers require notice to continue cover in circumstances (termination of the shipping contract beyond assured control) where cargo is delivered at a port/place other than the intended destination because the carrier or shipping line have decided not to deliver to Victoria.

NTI Cargo Protect will accept “notice” as having been given for all non-temperature controlled shipments directly impacted by Covid-19 where Termination of Contract of Carriage has been activated and cover will automatically continue until delivered to the intended destination.

In addition, the time limits provided in the policy provide for sale of goods (at intermediate port/place) or on-forwarding to another destination are increased for non-temperature controlled goods from 60 to 120 days without additional premium. Further extensions of time may be provided at additional cost.

Change of Voyage
Similar to Termination of Contract matters, notice must be given to insurers to allow a review of the new exposure contemplated by a different voyage. NTI will again accept “notice” as having been given for all shipments directly impacted by Covid-19 where the Change of Voyage is activated.

Accumulation in Transit
Cargo insurance policies typically have a specific clause that provides coverage for up to twice the policy sum insured for accumulation of insured goods due to events outside the insured’s control.

If the insured is expecting to receive multiple shipments during the COVID-19 lockdown period and is concerned that these may be held up together at the one place/ port, it’s important that the insured reviews the policy limits considering the current situation and contact their insurance broker should an increase in the policy sum insured be needed.

Delayed Unpacking
A standard extension in many cargo insurance policies provides that packages can be opened up to 90 days after arrival at the final destination, and any loss or damage discovered on opening will be covered by the policy.

This is provided the packages show no outward sign of loss or damage on delivery and that it is reasonable to expect that the damage happened during transit.

The above detail has a general application to many cargo insurance contracts and insured party circumstances. We strongly recommend that specific inquiry and review is undertaken to ensure that a complete picture of insured party circumstances and requirements are identified and acted upon accordingly.

NTI’s team of Marine Claims specialists will be operating as normal during lockdown, but taking into account some of the restrictions that are now in place for the Insured.

There may be circumstances where there is no access to cargo with reported damages. For example, cargo may be delivered to a location that has been shutdown.

It is important that any possible marine claims be reported to NTI as soon as they are known. Our team, including our Marine Surveyors, can talk you through the options of what can be done or not, for each circumstance.

For more information, or to speak to a Marine Protect expert, contact your local NTI Office.