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Marine cargo policies require specialized brokers to tackle complex coverage, legal problems

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SAN ANTONIO — Marine cargo insurance is one of the most well-established products in the commercial market, but it still requires specialist expertise to navigate the coverage and claims complexities, a policyholder lawyer said.

Everything from the range of risks that occur when goods are transported via several stopping points to the variety of federal and state laws that apply to marine claims and the antiquity of the language in the policies requires expert knowledge, he said.

“This is an area where a couple of words can mean the difference between protection and an insurance coverage fight,” said Joshua Gold, a shareholder at Anderson Kill P.C. in New York, during a session at the Risk & Insurance Management Society Inc.’s annual convention in San Antonio. “You need to be going to the broker who does this coverage every day.”

Brokers placing coverage need to be aware of the different federal and states statutes that apply to marine coverage, he said.

“You have an overlay of federal insurance on top of state insurance, and that may make things a little more interesting,” he said.

For example, federal laws such as the Carriage of Goods by Sea Act, which governs the rights and responsibilities of shippers and ship owners, and the Jones Act, which applies to worker injuries, will affect how marine policies respond to claims, Mr. Gold said.

In addition, in marine insurance, the coverage can be purchased without completing a traditional insurance application, and underwriters require policyholders to disclose affirmatively everything that the insurer might view as material, he said.

“You’ve got to figure out what the underwriter might view as important,” Mr. Gold said.

The type of coverage needs to be carefully considered, too. For example, courts have held that a vessel that is drained of liquid cargo, such as chemicals, is not covered while it is docked at a port, because it was not in transit at the time of the loss, he said.

To minimize the likelihood of such disputes, policyholders should buy all-risk coverage for marine cargo risk and consider buying stock through put policies, which offer more extensive coverage for shipments that make multiple stops, Mr. Gold said.

Policyholders buying marine cargo coverage also must contend with antiquated language, as the coverage dates back more than 300 years to the origins of modern insurance at Lloyd’s of London, he said.

For example, policies may specify coverage for “barratry of the master,” which is loosely equivalent to embezzlement by a ship’s captain, Mr. Gold said.

Time permitted to file a claim is also significantly shorter for marine cargo claims, he said.

“In most marine cargo policies that I’ve seen, you have one year to file a lawsuit against your insurance company if there’s a dispute over coverage,” which compares with much longer statute of limitations requirements under most insurance contract disputes.

Often policyholders can agree with insurers to file a suit to comply with the statute requirement but agree to keep negotiating the claims, Mr. Gold said.