When A Claims Manager Deals With A Marine Cargo Insurance Claim, He Must Be Satisfied That The Insured Had An Insurable

When a claims manager deals with a Marine Cargo insurance claim, he must be satisfied that the insured had an insurable interest at the time:

Select one:

a.

the insurance was arranged.

b.

the vessel arrives at the first port.

c.

the vessel sailed from the first port of departure.

d.

of the loss.

Expert Answer

This solution was written by a subject matter expert. It’s designed to help students like you learn core concepts.

Step-by-step

The correct answer is

(a) “the insurance was arranged.”

In the context of Marine Cargo insurance, the concept of insurable interest is fundamental. It refers to the policyholder’s financial stake in the insured cargo or shipment. For a Marine Cargo insurance claim to be valid and payable, the insured must demonstrate insurable interest at the time the insurance was arranged.

Choosing option (a), “the insurance was arranged,” is the correct answer because it aligns with the principle that insurable interest must exist when the insurance contract is initiated. This means that at the time the policy was purchased or arranged, the insured must have had a legitimate financial interest in the cargo being insured. Without insurable interest at this critical juncture, the insurance contract may be deemed void, and any claims arising afterward may not be honored.

Explanation:

It’s important to understand that insurable interest should exist at the inception of the insurance policy, providing a clear and indisputable connection between the insured and the cargo. This requirement ensures that insurance is not obtained purely for speculative or fraudulent purposes but serves its intended purpose of providing financial protection in the event of a loss.

Why not other options?

(b) “the vessel arrives at the first port”: This option would imply that insurable interest is necessary only when the vessel reaches its first port of destination. However, insurable interest must exist at the time the insurance contract is arranged, not at some later point during the voyage. Waiting until the arrival at the first port would not align with the fundamental principle of insurance that requires the insured to have a financial stake in the insured cargo from the outset.

(c) “the vessel sailed from the first port of departure”: Similarly, this option suggests that insurable interest becomes relevant when the vessel departs from the first port. However, insurable interest should be present when the insurance policy is initiated, which could be well before the actual departure of the vessel. Waiting until the point of departure does not guarantee that the insured has a genuine financial interest in the cargo.

(d) “of the loss”: This option implies that insurable interest becomes crucial only when a loss occurs. While it is true that insurable interest must exist at the time of the loss for a valid claim, the critical requirement is that it must also exist at the time the insurance policy is arranged. The presence of insurable interest at the time of arranging the insurance ensures the policy’s legitimacy and aligns with insurance industry standards and regulations.

Explanation:

In essence, the requirement for insurable interest at the time the insurance was arranged is foundational in insurance practices, ensuring that policies are not obtained for speculative or fraudulent purposes and that there is a genuine financial connection between the insured and the cargo from the outset of the coverage.

The correct answer is (a) “the insurance was arranged.”

Insurable interest must exist when the insurance policy is arranged to ensure its legitimacy and prevent fraudulent claims. This requirement aligns with insurance industry standards and regulations.

*