Inland Marine Insurance

What it is

Inland transit insurance, informally called inland marine, covers goods while they are being moved within India by road, rail, inland waterway or domestic air. It insures the cargo, not the truck or wagon that carries it, and it does not cover international shipments.

The cover is written in an insurer's marine department. The Marine Insurance Act, 1963, which is modelled on the UK Marine Insurance Act, 1906, is the statute governing marine insurance contracts in India; it governs marine adventures and the inland legs of a sea voyage. Cover for a purely domestic journey rests on the policy wording, the Insurance Act and IRDAI's regulations.

The three clauses

The scope of cover for rail and road movements is set by the Inland Transit (Rail or Road) Clauses; for other modes the policy wording has to be checked. Clause A is all-risks cover. Clause B covers a named list of perils such as fire, lightning, and collision, overturning or derailment of the carrying vehicle. Clause C covers little more than fire and lightning.

The difference shows most clearly with theft. Theft, pilferage and non-delivery are covered under Clause A only. Clauses B and C pay only for the perils they name, and theft is not among them, so the clause printed in the policy decides whether a stolen consignment is a claim at all.

When cover runs, and which policy form

The warehouse-to-warehouse clause gives continuous cover from the time the goods leave the sender's warehouse until they are delivered to the receiver's warehouse, including loading, unloading and the ordinary stages in between. Cover ends at the termination events listed in the transit clause. Storage outside the ordinary course of transit is not covered.

A specific policy covers one consignment and suits single or occasional dispatches. An open policy is designed for a business making frequent, regular shipments: it covers all shipments during the policy period, and the insured declares them periodically.

Value, documents and exclusions

Transit policies commonly value goods at invoice value plus freight and other charges plus 10%. A different basis can be agreed with the insurer and stated in the policy.

The lorry receipt for road transport, or the railway receipt for rail, is the primary proof that the goods were handed over to the carrier, and it is essential when a claim is filed.

Two exclusions catch people out. Loss caused by insufficient or unsuitable packing is a standard exclusion, though it is for the insurer to show that the packing was the cause. Loss caused by delay is also excluded, even where perishable goods spoil because the vehicle was late, unless specific delay cover has been added.

The carrier's own policy

A Carrier's Legal Liability policy is taken by the transport company. It covers the transporter's legal liability for goods entrusted to it and pays only up to that liability, which can be well below the value of the goods. That is why cargo owners usually arrange their own transit cover instead of relying on the carrier's policy.

Rules at a glance

Key points

• Inland transit insurance covers goods moving within India by road, rail, inland waterway or domestic air.
• Clause A is all risks, Clause B is a named list of perils, and Clause C is little more than fire and lightning.
• Theft, pilferage and non-delivery are covered under Clause A only.
• Warehouse-to-warehouse cover runs through the ordinary course of transit and stops at the termination events in the clause.
• Goods are commonly valued at invoice value plus freight and other charges plus 10%, unless another basis is agreed.
• Loss caused by insufficient packing or by delay is a standard exclusion.

Common misunderstandings

• Transit insurance does not automatically cover theft: only Clause A does, and Clauses B and C leave it out.
• Warehouse-to-warehouse does not mean cover wherever the goods lie: storage outside the ordinary course of transit is not covered.
• The transporter's Carrier's Legal Liability policy is not cover for the cargo owner: it pays only the carrier's legal liability, which can be well below the value of the goods.

Questions people ask