The early ramifications of the insolvency of Hanjin Shipping, which entered Korean administration on 31 August, have been swift and staggering. The International Union of Marine Insurance held a webinar where Mike Roderick, Partner at Clyde & Co. LLP spoke to attendees about the situation and its resulting effects on cargo insurance. The recording and the slides from the webinar are publically available here.
Cargo interests face numerous issues including; securing the release of cargo-with terminal operators or port authorities, Hanjin seeking release payments directly from cargo, the risk of cargo deterioration or theft during delay, extra cost in shipping cargo to destination and claiming forwarding charges and the need to file claims by the date fixed by the Court -25 October 2016. Roderick said “We are looking at a rapidly changing factual position and claims are only just starting to come through to insurers.”
Policy coverage will be affected by delay and insolvency exclusions, continuation of cover, forwarding charges, sue & labour and extra expense cover and policy limits and deductibles.
The cargo supply chain has been hard pressed to contemplate exposures and remedies opposite other parties in the logistics chain, or via insurance. Under many standard cargo policy wordings rights to indemnity will usually only arise where goods have been either lost or physically damaged, but not where they have been merely delayed, causing a purely financial loss of market, or if there is simply fear of loss. There is also the confounding details of exclusions, such as delay, insolvency or financial default exclusion.
Owners of perishable cargoes that stand to be affected by longer transit times loss of market for non-perishable goods that “miss” the Christmas and thanksgiving peak and price sensitive cargoes that suffer a drop in market value during a period of delay are the ones that will have to worry about how the delay exclusions apply to them. They will be expected to give prompt notification to insurers to be “held covered” in circumstances where the carriage has been interrupted due to circumstances beyond their control.
The Hanjin insolvency situation is a rapidly evolving with an uncertain outcome. Insureds should ensure compliance with the Korean Court claims deadline. The application of Policy terms may involve complex legal and factual questions.