Two weeks ago, South Korean carrier Hanjin Shipping filed for court receivership, creating chaos in the shipping industry and affecting port’s operations, cargo owners, and supply chain companies.
Currently, about 60 of Hanjin Shipping’s cargo vessels are stranded at sea and some ships have been arrested. Cargo owners are at the most risk of suffering losses.
Currently, an estimated of 530,000 containers are caught up in Hanjin’s network with a total value of $14 billion. The biggest risk is that many of these goods might not arrive at its final destinations.
Depending on the delay, there are other consequences for all parties involved. Crawford and Company give some examples: “Non-deliveries, production stops and interruption of wholesale and retail businesses. Temperature sensitive and perishable cargo might also be affected along with additional costs incurred for handling, trans/re-shipping and forwarding to destination”.
Hanjin’s financial difficulties could lead to hundreds of insurance claims that according to insurance law firm Rubin, Fiorella and Friedman (New York) might extend for more than a year.
The cargo owner could claim for damages if the market value of the cargo goes down between the date the cargo should have been delivered and the date it is actually delivered.
International Law Firm Ince&Co indicates that even an “All Risks” coverage for cargo won´t protect the owner suffering loss. “Clause 4.6 of the ICC(A) stipulates that in no case shall the insurance cover “loss damage or expense arising from insolvency or financial default of the owners managers, charterers or operators of the vessel”. Cargo owners may find themselves in a situation where they are unable to make insurance claims on their marine cargo policies should the cargo on board Hanjin vessels be damaged or lost as a result of what could potentially be a protracted delay,” the firm says.
According to a briefing published by insurance broker Marsh, the effects of Hanjin Shipping bankruptcy on marine insurance are uncertain:
“There is now considerable concern throughout the industry as to whether or not companies are insured against this scenario. Marine cargo insurance policies are written on a wide variety of terms and conditions, for which there are going to be very different answers on a ‘case-by-case’ basis,” said Marcus Baker, chairman of Marsh’s global marine practice.