Insuring shipping containers

Talk to any Marine practitioner or anyone even remotely connected with Marine cargo insurance about ‘containers’ and they will explain their advantages in terms of safety, door-to-door transportation, easy handling and storage as dimensions are standardized, etc. Some can even explain the different types of containers and the types of cargo for which they are best suited.  The moment you ask ” Who owns the containers?”, often there is considerable doubt, certain round-about answers and at times quizzical looks.

So who owns the containers?  Typically there could be three types of container owners.

1. The shipping lines like Maersk, Hapag-Lloyd, MSC, etc
2. Container leasing companies like Triton, Seaco, Textainer, etc
3. Some product manufacturers, especially chemicals have their own dedicated containers, typically refrigerated containers or tank containers. Box containers are rare.

The overall fleet of containers owned by these entities, especially the first two classes of owners, could run into thousands and the total value could be billions of dollars.These containers move allover the world  on vessels and also to distant locations inland on trailers.They also lie stationary at different locations for considerable periods of time. They could be empty or stuffed with cargo. While the container owners may not have insurable interest in the cargo inside, the container is their asset and there is the need to have them insured.

Although cover is offered under Marine, the Institute Cargo clauses do not come into play, simply because the container cannot be considered as cargo for which a document of affreightment is issued– it is a mere box, cannot even be considered as machinery (though in refrigerated containers, there is a cooling machinery). Further, unlike in case of the Institute Cargo clauses, there cannot be a Duration clause for covering containers because the cover required is 24 x 7 x 365, be it loaded, empty, in transit or stored at some location. The only limitation/extension which can be put in is an ‘On hire’, ‘Off Hire’ or both.

The clauses which need to be used for covering containers on an annual basis are either the Institute Container clauses- Time- CL 338,which is wider or Institute Container clauses -Time Total loss, General Average, Salvage , Salvage charges, Sue and Labour- CL 339, which is a limited cover.

CL 338 includes a Machinery clause i.e. loss or damage to the container machinery is held covered PROVIDED it is an Actual or Constructive Total Loss & the same is caused by perils named herein i.e. the perils covered under Institute cargo clauses-C.  The Machinery clause does not figure in CL 339, wherein cover is given against Total Loss only. It stands to reason therefore that if a refrigerated container while handling falls down from a height and the container including the machinery becomes an actual Total Loss, the loss will be payable if CL 339 was used but not if CL 338 was used , which has the Machinery clause. Strange. Container machinery is not an exclusion under CL 339.

The general exclusions, war group exclusions, Strikes exclusions and nuclear exclusions are by and large in line with the Institute Cargo clauses, except for a couple of deviations. “Mysterious disappearance, unexplained loss and loss discovered upon taking inventory” are specifically excluded under both CL 338 & 339. Under the war group of exclusions “capture seizure arrest restraint or detainment”, which is similar to Institute Cargo clauses-A ………… the one difference being that while piracy is covered under ICC-A, under CL 338 & 339,not only is piracy covered but also barratry( fraud by the Master or crew against the vessel owners or gross negligence) stands covered.

In India, there is a huge demand among importers and exporters for insuring the containers they take on hire apart from their cargo. The typical coverage sought by importers is during the transit from the discharge port in India to their premises and after de-stuffing back to the container yard. Exporters seek cover for transits from the container yard to their premises and thence to the CFS/port. Indian insurers grant cover on Inland Transit clauses-B basis i.e. on named perils basis.

One may wonder, why the Indian importer/exporter has to insure the containers when they do not belong to him & secondly the container owners would any which ways would have insured their containers on a 24 x 7 x 365 basis. First, the shipping lines insist on the importer/exporter taking responsibility for safe-keeping of the container when in their charge. This is documented and the importer or exporter if he has to hire the container give a bond/deposit or produce an insurance policy (as he is contractually bound to insure) or both. Secondly, the policies purchased by container owners either with CL 338 or CL 339 terms has an important clause  styled Sale or Hire clause which reads as ” If a container insured hereunder is sold leased or hired to a party not named as an Assured, the insurance of that container shall terminate automatically unless the Underwriters agree in writing to continue the cover.”

The scope for insuring containers under Institute Container clauses- Time in India seem limited at the moment — not many major shipping line or container leasing companies. Future could be different. Wonder how many insurers have filed these clauses with the regulator?