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South Korea: Not clear if insurance covers Hanjin Shipping's failure - Marsh

Source: Asia Insurance Review | Oct 2016

Shipping company Hanjin recently announced it was entering administration, following financial difficulties. Within a day of the announcement, ports began to refuse to allow Hanjin vessels entry into their ports, for fear of not being paid port fees. The 3,700-TEU containership, Hanjin Rome, has become the first Hanjin vessel to be arrested by creditors, while it was in the port of Singapore, according to reports. 
   Marsh said in a report on Hanjin that due to the increasingly interdependency of the industry, the shipping sector is deemed to be vulnerable following this development. It also noted that it is not clear if companies affected by Hanjin’s failure such as cargo owners, ports and terminals, freight forwarders, charterparties etc are insured against this scenario or not and has to be analysed on a “case-by-case” basis. 
Institute sets of clauses
Many policies have additional conditions imposed by insurers beyond those laid down in the standard market “Institute” sets of clauses, said Marsh in the report. 
   Attention has been drawn to one particular exclusion commonly found in marine cargo insurance policies, namely the “Insolvency of Carrier exclusion” (Clause 4.6 of the Institute Cargo Clauses A, B, and C).
   Despite that exclusion, for cover to continue against the perils otherwise covered under the insurance, the shipper must not have been aware, at the time of loading the goods on the vessel, that the carrier was in such a parlous financial state that could prevent the voyage from taking place.
   However, one further concession under the Institute Cargo Clauses in 2009 was for the buyers of goods (presumably under a cost, insurance, and freight (CIF) type of contract of sale, and where the goods have already been loaded on the vessel at the time of purchase) to be exempt from this exclusion. 
   In order to have a valid claim, any loss or damage would need to have been proximately caused by a peril otherwise covered under the terms of the policy. The Institute Cargo Clauses go into further detail in Clause 9, titled Termination of Contract of Carriage, on what happens if, during the period covered by the contract of carriage (normally from when the goods have been loaded on the vessel), the carrier becomes insolvent.
   Clause 12, titled Forwarding Charges, explains how expenses incurred should be handled.
   However, Marsh emphasised that the standard Institute clauses are often just the initial basis of insurance cover provided, and numerous amendments, additions, and alterations to the terms and conditions will apply on a case-by-case basis.
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