Insurance Law Implications of Delay in Maritime Transport

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Marine delay in start-up insurance


5.1 Many infrastructure and construction projects worldwide require the shipping of specialised material for use on the construction site, the delay of which can cause various types of financial losses to contractors. Delay in start-up (DSU) insurance (also known as ‘advance loss of profits insurance’) is a product offered in the market for the purpose of insuring against the risk of delay to the timely prosecution and completion of projects and is usually taken out separately from the business interruption cover. The subject-matter insured under a marine delay in start-up policy is the financial losses caused by delay to the commencement of a project and not equipment or material carried by sea as marine cargo for the purpose of use on the project site, which are otherwise known as ‘project cargo’. Project cargo carried by sea to the construction site would have to be insured under a marine cargo policy against physical loss of or damage thereto and the insurer of the marine DSU may also be the primary insurer of the marine cargo policy. 5.2 This being the case, the interconnection between the project cargo and delay in start-up lies in that any loss of or damage to the goods or to the conveyance carrying them or any delay during the transit may in turn cause delay to the commencement of the project and result in financial losses to the project owners. For this reason, so as to have a better control over the whole process, insurers provide cover both against the risk of physical damage to the goods or to the carrying conveyance and the risk of delay under the same policy. No standard form wording existed on project cargo and marine delay in start-up until the Joint Cargo Committee of Lloyd’s Market Association released the ‘Project Cargo Insurance and Project Cargo Delay in Start Up Wording’1 (hereinafter referred to as ‘the Wording’) which contains two sections: the first section where the marine cargo policy is to be inserted; and the second section on marine delay

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in start-up.2 This chapter shall analyse the wording released by the Joint Cargo Committee and attempt to raise issues which can turn contentious in the future along with a particular focus on the relevant MIA provisions.

‘Insured’ under the marine DSU cover

5.3 In marine DSU policies, site owners (also known as ‘project owners’ or ‘principals’) can be insured3 along with banks as lenders.4 These parties may have an insurable interest both in the project cargo that is carried in transit to the construction site as well as in the timely arrival of the project cargo to the site. It would therefore not be surprising to see all of these parties to be named as insured both under the marine cargo and marine DSU sections of the policy. For the sake of determining their respective interests, it would be necessary to identify the scope of the ‘project’ which is defined as:

‘the transportation of goods, materials and equipment for the purpose of construction, erection, testing, start-up, commissioning, operation and maintenance of the… project and all ancillary and associated works, in conjunction with the construction project.’5

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