Marine cargo and contractors all risk: cover beyond your premises

Marine cargo is not only for ships

The name is historical. Marine cargo insurance covers goods in transit by any mode — sea, air, rail and road — including purely domestic movement between two Indian cities. Any business that despatches or receives goods has this exposure whether or not it has thought about it.

The critical question is not whether the goods are insured but when your risk starts and ends, and that is determined by the sale terms. Under an ex-works sale your risk may end at your gate; under a delivered term it may run to the buyer's premises. Businesses regularly insure a leg of the journey they do not bear the risk on, and leave uninsured the leg they do.

Read the incoterm on the contract, then match the cover to it. That single check resolves most marine gaps.

Single transit, open cover, or turnover

• Single transit policy. One consignment, declared and insured individually. Appropriate for occasional or unusually valuable shipments.
• Open cover. A standing arrangement under which all shipments within agreed parameters are covered, declared periodically rather than individually. Suits regular despatch.
• Sales turnover policy. Premium calculated on turnover, covering the movements the business makes in the ordinary course. Removes the declaration burden almost entirely.

The failure mode for the first is administrative — the shipment that went out while nobody raised the declaration. For a business despatching regularly, an open or turnover arrangement is usually worth the marginally higher cost simply because it cannot be forgotten.

What contractors all risk actually bundles

A CAR policy covers a project under construction, and it has two distinct halves.

The material damage section covers the works themselves, plus materials on site and often plant and equipment, against physical loss or damage during the construction period. The third-party liability section covers legal liability for injury to people or damage to property arising out of the works — the neighbouring building, the passer-by.

The second half is the one underestimated. On a congested urban site, liability to adjoining property can be the larger exposure, and it is not covered by the contractor's general liability policy in the way people assume.

Note also what sits outside: injury to your own workers falls under workmen compensation, not the liability section of CAR. Lenders funding a project will usually require both to be in place and current as a condition of each drawdown.

The handover gap

A CAR policy runs for the construction period, sometimes with a maintenance or defects liability extension afterwards. An operational property policy covers a completed, occupied building.

The gap between them is where disputes live. A project practically complete but not formally handed over, partially occupied, or sitting finished and empty while documentation is completed, can fall between the two definitions — the CAR insurer arguing construction has ended, the property insurer arguing occupation has not begun.

The fix is not complicated and is rarely done: agree the trigger for the switch explicitly with both insurers before you approach it, in writing, rather than establishing it after a loss.

Two practical checks

Sum insured on a CAR policy should be the completed contract value, including materials supplied free by the principal, not the contractor's own cost. Under-insurance invites proportionate settlement on every claim, not just large ones.

Extensions are where the cover is won. Cover for debris removal, for design defect consequences, for escalation, and for testing and commissioning are commonly needed and not always included as standard. So is an extended maintenance period where the contract obliges one. Check the schedule against what the contract actually requires you to carry, since the contract usually specifies it precisely and a mismatch is a breach as well as a gap.