A common impact of the Covid-19 pandemic on marine insurers is likely to be when there is delay or disruption, with cargoes or vessels not being shipped, sailing empty, being delayed or refused entry at discharge port, reports the International Union of Marine Insurance (IUMI). Another, although less common claim, would be around physical damage issues arising for example, from perishable cargoes being physically impacted by delay or cargoes more generally subject to an extension of the insured transit.
IUMI observed that the insurance industry was already affected by cruise line passengers, crew P&I and event cancellation claims; generally there had been an invocation of force majeure/delay clauses in relation to charterparties and newbuilding/scrubber refit contracts with Chinese yards.
A key issue was the extent to which policies responded where there was no physical damage. With soft market conditions in recent times, policy extensions affording non-physical loss cover had crept into policy wordings. Some examples are:
- extra expense, forwarding charges or access to property clauses in a cargo policy might trigger coverage;
- hull loss-of-hire policies might respond where a vessel was quarantined or denied port entry;
- cruise line policies might respond where a cruise vessel’s scheduled itinerary is directly impacted (but query whether quarantine restrictions, as opposed to an actual port closure, is sufficient for this purpose).
None of these necessarily depended on any physical loss occurring.
In assessing how such policy extensions responded, it would remain important to consider whether, in causation terms, the Coronavirus outbreak was the true cause of the loss, rather than having an indirect effect. Also to be considered would be whether insurers could establish that other policy exclusions applied.
IUMI concluded that “whilst initial impressions are that the impact of the outbreak on marine insurance may be limited, careful consideration of policy wordings will still be required in the event of a claim”.