Seller’s Interest clause in a marine cargo policy is assumed by many to be a saviour in all cases of short-payment by buyers. Under an INCOTERM where seller is not responsible for arranging insurance, buyer takes delivery, opens the container, notices some damages/ shortages and deducts an amount for these from the seller’s invoice. Seller lodges a claim for the deducted amount citing that he is an unpaid seller. Such claims are not tenable.
The primary requirement for this clause to trigger is that there should be a loss/ damage in transit and the buyer should have refused the entire cargo by physically not taking delivery or not accepting the documents and consequently not paying the seller.
Another important aspect which many miss is that, even in cases where claims are paid under this clause, the insurer is subrogated the right to proceed against the buyer for non-payment. Most insured are unaware of this and when this is pointed out, they say no to subrogation as they do not want their relationship with the buyer to be soured should the insurer proceed against him ( buyer)
If the buyer for such partial losses, instead of claiming under his insurance, deliberately deducts money from seller’s due, Seller’s Interest clause will not respond
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Sir, There was one more condition as far as I remember that buyer should not be aware that seller has this clause in his policy. Plz confirm.
Yes, the seller should not divulge the existence of this cover to the buyer
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