CARGO insurance loss

Adjustment of a loss of a foreign counterparty of a Polish company based on INCOTERMS

The prolonged torrential rainfalls that hit southern India at the end of 2015, which has not been encountered for more than 100 years, caused rivers to burst their banks and cause floods. About 200 thousand people needed to be evacuated, and about 200 casualties have been reported. Roads were flooded, trains have been cancelled and telephones were not working in the flooded area.

The Port Town, which is an important centre of Indian industry where Client’s cargo was directed, was practically under water. The city has become an island cut off from the rest of the world. Schools, companies and the international airport were all closed. Caught in the middle of the destructive forces of nature was a transport of 20 (500 tonnes – 360 pallets) containers sent from Poland to a Client in India with goods susceptible to water damage, priced at around USD 700,000.

In accordance with the contract concluded between the Supplier and the Recipient, the insurance management arrangement indicated the obligation to insure the goods along the entire transport route “to the port in India” by our Client (CIF delivery base according to INCOTERMS 2010). The insurance was arranged through us and the Certificate confirming the insurance was provided to the Indian Client.

The unloading of containers at the port of destination took place at the end of November 2015 and the goods were then directed to the port terminal. At the beginning of December 2015, the stored cargo was damaged – all areas of the terminal were affected by the flood.

At the beginning of the claim settlement phase, the Emergency Commissioner operating at the port (Lloyd’s Agent) and indicated in the CARGO policy had to perform an inspection.

As a result, it was initially estimated that approx. 180 pallets had visible damage caused by flooding – a partial loss of their contents was visible as a result of the flood water dissolving the contents of the bags. At the same time, in order to minimise damage, the bags were sorted and a part of the goods was used for further processing – the recipient preferred the maximum use of the delivered goods for production. A qualitative check has been carried out on each bag to qualify or reject them for use in production. In the end, out of 180 pallets with 250 tonnes of cargo, 146 tonnes were accepted for production. For the remaining 104 tonnes, a total loss was reported and 62.5 tonnes of cargo were physically rejected at the consignee’s site, and the difference of 41.5 tonnes, was missing. In the opinion of the appraiser, such quantity could have been lost at the place of damage due to the dissolution of the goods in result of flooding. During the inspection, the appraiser found pallets with reduced volume.

For the rejected 62.5 tonnes, an emergency buyer was found, offering 25% of the value of the goods.

Based on the assessor’s report, the above calculations and other documentation gathered during the inspection of the goods, the Insurer in Poland could, without difficulty, complete the loss adjustment and pay compensation from the insurance we arranged for the benefit of the Indian Counterparty of our Client.

Ultimately the Counterparty in India was paid a compensation of around USD 130,000.