The following is a list of definitions of some common terms used in shipping and insurance

Giving up the proprietary rights in insured property to the Underwriter in exchange for payment of a constructive total loss.

Actual Total Loss
An actual total loss occurs when

(1) the insured property is completely destroyed or

(2) the Assured is irretrievably deprived of the insured property or

(3) cargo changes in character so that it is no longer the thing that was insured or

(4) a ship is posted "missing" at Lloyd's, in which case both the ship and its cargo are deemed to be an actual total loss.

The passing of beneficial rights from one party to another.

A marine partial loss. This can be particular average or general average (which see). 

Average Clause
A clause in a marine insurance policy, whereby partial losses are subject to special conditions (e.g. a franchise or deductible is to be applied to claims).

A person or concern having possession of property committed in trust from the owner.

Benefit of Insurance Clause
A clause by which the bailee of goods claims the benefit of any insurance policy effected by the cargo owner on the goods in care of the bailee. Such a clause in a contract of carriage, issued in accordance with the Carriage of Goods by Sea Act, is void at law.

Bill of Lading
Contract of carriage and receipt for goods, issued by carrier.

Classification Clause (Cargo)
A clause in a cargo insurance open cover which details the minimum classification for an overseas carrying vessel that is acceptable to the insurers for carriage of the insured goods at the premium rate/s agreed in the contract. Goods carried by lower class vessels are accepted under the open cover, subject to payment of an additional premium.

C. and F.
A sale term relating to goods. Cost and Freight. The consignee makes his own insurance arrangements for the goods throughout the period of transit.

The term relates to circumstances where more than one party covers the risk. Each party is deemed to be liable for his proportion of the loss. If the Assured recovers in full from one insurer, that insurer is entitled to recover from the other insurer for that part of the loss which should have been paid by the latter. The term is used in marine insurance, also, in relation to contributions paid by the Assured in connection with salvage and/or general average.

Contributory Value
The value on which a contribution to a general average loss or salvage award is calculated.

Country Damage
Damage to baled or bagged goods (e.g. cotton) caused by excessive moisture from damp ground or exposure to weather, or by grit, dust or sand forced into the insured property by windstorm or inclement weather.

Direct or Held Covered
A condition requiring that the insured voyage be direct from one place to another. If the voyage is delayed en route or there is a deviation from the direct route the insurance cover continues subject to payment of an additional premium, but only if the Assured gives prompt notice of such delay or deviation immediately on receipt of advices, unless the policy provides otherwise.

The duty of the Assured and his broker to tell the Underwriter every material circumstance before acceptance of the risk.

Duty of Assured Clause (Cargo)
This appears in the Institute Cargo Clauses published for use with the MAR form of policy. It directs the attention of the Assured, his agents, etc. to the duty (as required by the MIA, 1906) to take reasonable measures to avert or minimise any loss which is recoverable under the policy; also to ensure that all rights against carriers and others are properly preserved and exercised. Underwriters agree to reimburse the Assured for any reasonable expenditure incurred by his compliance with the clause; in practice, these expenses are termed "sue and labour" charges (which see).

English Jurisdiction Clause
A condition, printed in the MAR form of policy, whereby Underwriters agree to recognise judgements only from courts convened within English jurisdiction. Subscribing Underwriters may agree to replace this clause with a foreign jurisdiction clause. Please note this is not applicable to business emanating from the United States of America which is subject to the Service of Suit Clause (USA) appearing in the Standard Conditions.

English Law and Practice Clause
This clause appears in Institute clauses published for use with the MAR form of policy. It applies where a foreign jurisdiction clause attaches to the policy and requires that the foreign court shall base its decisions on English law and practice.

Incoterm - Free alongside ship. 

Incoterm - Free carrier 

Incoterm - Free On Board 

Free of particular average.

A provision in freight insurance conditions which exempts the insurer from particular average losses, in any one accident, under 3%. The provision is waived if the loss is caused by fire, or by the ship stranding, sinking or being in collision. 

The remuneration earned by a shipowner or manager for the carriage of goods; including the profit derived from carrying his own goods. 

General Average
A deliberate sacrifice or expenditure incurred for the common safety of a maritime adventure. Those interests that benefit from the sacrifice or expenditure contribute rateably to make good the loss.

General Average Contribution
The proportion paid or payable by a saved interest involved in a general average act.

General Average Deposit
Paid by a consignee to obtain release of the cargo from the carrier following a general average act. This may be replaced by an Underwriter's guarantee. 

General Average Guarantee
An undertaking by Underwriters to pay the contribution due from a cargo assured on completion of the general average adjustment.

G.A. in Full
An agreement in a cargo insurance whereby Underwriters do not reduce a claim for general average contribution in event of underinsurance.

General Exclusions Clause
A clause in the Institute Cargo Clauses 1982, which specifies risks that are excluded, irrespective of the risks covered elsewhere in the wording. 

Good Faith
A basic principle of insurance. The Assured and his broker must disclose and truly represent every material circumstance to the Underwriter before acceptance of the risk. A breach of good faith entitles the Underwriter to avoid the contract. (Proposed changes in law may affect this definition.) 

Held Covered
A provisional acceptance of risk, subject to confirmation at a later date that the agreed cover is needed. Where applicable to an existing insurance, cover is conditional, in practice, on prompt advice to the Underwriter as soon as the Assured is aware of the circumstances to be held covered coming into effect, and a reasonable additional premium is payable if the risk held covered comes into effect. 

Institute Cargo Clauses (ICC)
There are three basic sets of these clauses (A, B and C). The A clauses cover "all risks", subject to specified exclusions. The B and C clauses cover the “risks" stated, subject to specified exclusions.

Inherent Vice
A property inherent in cargo which causes, or is liable to cause, loss or damage to the cargo, without any accident occurring (e.g. spontaneous combustion). It is always excluded by the insurers of the cargo because of its inevitable nature.

Insurable Interest
It is illegal for anyone to insure without an insurable interest or, in the case of marine insurance, a reasonable expectation of acquiring such interest. In general one has such interest when his relationship to property at risk may expose him to loss or liability where he stands to gain by the safety of such property.

Known Loss
A loss known to one or both parties when a broker and Underwriter are negotiating a placing.

Location Clause
Used in cargo open covers this limits Underwriters' liability in any one location.

Malicious Damage Clause
A clause published by the Institute of London Underwriters for use in a cargo policy that is subject to the Institute Cargo Clauses (1982) B or C. It adds the risks of malicious acts, vandalism and sabotage to the cargo policy. 

MAR Policy
A market term for the form of marine policy used by Lloyd's and the London company market. It is a basic contract form to which the conditions agreed by the insurers subscribing a marine insurance contract are attached.

Open Cover
An agreement whereby the Assured undertakes to declare every item (e.g. shipment, vessel, etc. as appropriate) that comes within the scope of the cover in the order in which the risk attaches. The insurer agrees, at the time of concluding the contract, to accept all valid declarations up to the agreed limit for each declaration. An open cover may be for a fixed period or always open; subject to a cancellation clause.

Overage Premium
An additional premium charged on a cargo open cover declaration because the carrying vessel is outside the scope of the classification clause.

Particular Average
Accidental partial loss of the subject matter insured proximately caused by an insured peril. In a freight at risk policy the term may be applied to a claim for loss of freight following particular average loss of goods.

A term used in the Marine Insurance Act (1906) to denote a hazard. The principle of proximate cause is applied to an insured peril to determine whether or not a loss is recoverable. In modern practice the term "risk" often replaces "peril".

Proximate Cause
The most direct cause of loss, that is, the most effective and dominant cause in a chain of events which ends in the loss.

Amount recovered from a third party responsible for a loss on which a claim has been paid. 

Replacement Clause
A clause limiting Underwriters' liability for damage to machinery cargo.

A fortuity. It does not embrace inevitable loss. The term is used to define causes of loss covered by a policy. 

Salvage Charges
The award due to a salvor for services rendered in saving the insured property.

Salvage Loss
Occurs when the Underwriter agrees to settle a cargo claim by paying the difference between the insured value and the proceeds realised by selling the damaged goods.

A list attached to a slip, open cover, policy or other document, usually detailing the rates of premium for various voyages, interests and risks.

Seaworthiness Warranty
There is an implied warranty in every voyage policy that the ship must be seaworthy at the commencement of the insured voyage or, if the voyage is carried out in stages, at the commencement of each stage of the voyage. To be seaworthy, the ship must be reasonably fit in all respects to encounter the ordinary perils of the contemplated voyage, property crewed, fuelled and provisioned, and with all her equipment in proper working order. Cargo policies waive breach of the warranty, except where the Assured or their servants are privy to the unseaworthiness. Breach of the warranty is not excused in a hull voyage policy, literal compliance therewith being required. Although there is no warranty of seaworthiness in a hull time policy, claims arising from unseaworthiness may be prejudiced if the ship sails in an unseaworthy condition with the knowledge of the Assured.

The Underwriters subscribing a risk.

The right of the Underwriter to step into the shoes of the Assured following payment of a claim to recover the payment from another party who was responsible for the loss. Limited to the amount paid on the policy.

Sue and Labour (Marine)
Expenses incurred by the Assured or their representatives with the intention of preventing or minimising a loss for which the Underwriter would have been liable. They do not include expenses incurred in general average or salvage acts; these being recoverable under the policy only as part of the Underwriters' liability for contribution to general average or salvage, if any. Sue and labour charges are recoverable under a policy that incorporates a sue and labour clause (SG policy), or in accordance with the wording of the policy (e.g. under the "duty of the Assured" clause attached to a MAR policy).

To Pay as Cargo
Used in an ancillary insurances relating to the cargo (e.g. increased value) when the Assured is not required to show evidence of loss or interest and can claim on the policy if he can show that a corresponding loss has been settled on the main cargo policy.

Total Loss
This can be actual total loss or constructive total loss.

Transit Clause
A clause in the Institute Cargo Clauses, specifying the attachment and termination of cover.

Waiver Clause
A clause which entitles both Underwriter and Assured to take measures to prevent or reduce loss without prejudice to the rights of either party.

An undertaking by the Assured whereby he promises to comply with the terms of the warranty. Non-compliance constitutes breach of warranty and the Underwriter is discharged from liability as from the date of the breach. Breach of warranty may be excused in certain circumstances, or where the breach is held covered under the policy conditions.

Waterborne Agreement
A market understanding whereby Underwriters cover goods against war risks only whilst they are on the overseas vessel. This rule is relaxed only in the case of goods in a transhipping port for a short period awaiting onward carriage.

Without Benefit of Salvage
A term in a marine insurance policy, whereby the Underwriters forgo their subrogation rights. A policy incorporating such a term is deemed to be a gambling policy in law, and is therefore invalid in a court of law.

Without Prejudice
The claim is paid on this occasion, although the Underwriter feels it does not attach to the policy, but this action must not be treated as a precedent for future similar claims.

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