International Standard Banking Practice

Insurance Document and Coverage

Paragraph K1 to K23


Application of UCP 600 article 28

K1) A requirement in a credit for the presentation of an insurance document, such as an insurance policy, insurance certificate or declaration under an open cover, means that UCP 600 article 28 is to be applied in the examination of that document.

Issuer, signing and original of an insurance document

K2) a. An insurance document is to appear to have been issued and signed by an insurance company or underwriter or their agent or proxy. For example, an insurance document issued and signed by "AA Insurance Ltd" appears to have been issued by an insurance company.

b. When an issuer is identified as "insurer", the insurance document need not indicate that it is an insurance company or underwriter.

K3) An insurance document may also be issued on an insurance broker's stationery, provided the insurance document has been signed by an insurance company or underwriter or their agent or proxy. An insurance broker may sign an insurance document as agent or proxy for [or on behalf of] a named insurance company or named underwriter.

K4) An insurance document signed by an agent or proxy is to indicate the name of the insurance company or underwriter for [or on behalf of] which the agent or proxy is signing, unless the insurance company or underwriter name has been identified elsewhere in the document. For example, when "AA Insurance Ltd" has been identified as the insurer, the document may be signed "John Doe (by proxy) on behalf of the insurer" or "John Doe (by proxy) on behalf of AA Insurance Ltd".

K5) When an insurance document requires a countersignature by the issuer, the assured or a named entity, it must be countersigned.

K6) An insurance document may show only the trading name of the insurance company in the signing field, provided it is identified as the insurance company elsewhere on the document, for example, when an insurance document is issued and signed "AA" in the signing field but shows "AA Insurance Ltd" and its address and contact information elsewhere in the document.

K7) a. An insurance document that indicates that cover is provided by more than one insurer may be signed by a single agent or proxy on behalf of all insurers or be signed by an insurer for [or on behalf of] all co-insurers. An example of the latter will be when an insurance document is issued and signed "AA Insurance Ltd, leading insurer for [or on behalf of] the co-insurers".

b. Notwithstanding the provisions in paragraphs K2), K3) and K4), an insurance document which indicates that cover is provided by more than one insurer need not show the names of each insurer or the percentage of cover of each insurer.

K8) When a credit requires the insurance document to be issued in more than one original, or when the insurance document indicates that it has been issued in more than one original, all originals are to be presented and are to appear to have been signed.

Dates

K9) An insurance document is not to indicate an expiry date for the presentation of any claims thereunder.

K10) a. An insurance document is not to indicate that cover is effective from a date later than the date of shipment.

b. When an insurance document indicates a date of issuance later than the date of shipment (as defined in UCP 600 articles 19-25), it is to clearly indicate by addition or note that coverage is effective from a date not later than the date of shipment.

c. An insurance document that indicates coverage has been effected from "warehouse-to-warehouse" or words of similar effect, and is dated after the date of shipment, does not indicate that coverage was effective from a date not later than the date of shipment.

K11) In the absence of any other date stated to be the issuance date or effective date of insurance coverage, a countersignature date will be deemed to be evidence of the effective date of the insurance coverage.

Amount of cover and percentage

K12) When a credit does not indicate an amount to be insured, an insurance document is to be issued in the currency of the credit and, as a minimum, for the amount indicated under UCP 600 sub-article 28 (f) (ii). There is no maximum percentage of insurance coverage.

K13) There is no requirement for insurance coverage to be calculated to more than two decimal places.

K14) An insurance document may indicate that cover is subject to a franchise or excess (deductible). However, when a credit requires the insurance cover to be irrespective of percentage, the insurance document is not to contain a clause stating that the insurance cover is subject to a franchise or an excess (deductible). An insurance document need not state "irrespective of percentage".

K15) When it is apparent from the credit or from the presentation that the amount demanded only represents a certain part of the gross value of the goods (for example, due to discounts, pre-payments or the like, or because part of the value of the goods is to be paid at a later date), the calculation of insurance cover is to be based on the full gross value of the goods as shown on the invoice or the credit and subject to the requirements of UCP 600 sub-article 28 (f) (ii).

K16) Insurance covering the same risk for the same shipment is to be covered under one document unless more than one insurance document is presented indicating partial cover, and each document clearly reflects, by percentage or otherwise:

a. the value of each insurer's cover;

b. that each insurer will bear its share of the liability severally and without pre-conditions relating to any other insurance cover that may have been effected for that shipment; and

c. the respective coverage of the documents, when totalled, equals at least the insured amount required by the credit or UCP 600 sub-article 28 (f) (ii).

Risks to be covered

K17) a. An insurance document is to cover the risks required by the credit.

b. Even though a credit may be explicit with regard to risks to be covered, there may be a reference to exclusion clauses in the insurance document.

K18) When a credit requires "all risks" coverage, this is satisfied by the presentation of an insurance document evidencing any "all risks" clause or notation, whether or not it bears the heading "all risks", even when it is indicated that certain risks are excluded. An insurance document indicating that it covers Institute Cargo Clauses (A) or Institute Cargo Clauses (Air), when dispatch is effected by air satisfies a condition in a credit calling for an "all risks" clause or notation.

Insured party and endorsement

K19) An insurance document is to be in the form required by the credit and, where necessary, be endorsed by the entity to whose order or in whose favour claims are payable.

K20) a. A credit should not require an insurance document to be issued "to bearer", or "to order". A credit should indicate the name of an insured party.

b. When a credit requires an insurance document to be issued "to order of (named entity)" the document need not indicate "to order" provided that the named entity is shown as the insured party or claims are payable to it, and assignment by endorsement is not expressly prohibited.

K21) a. When a credit is silent as to the insured party, an insurance document is not to evidence that claims are payable to the order of, or in favour of, the beneficiary or any entity other than the issuing bank or applicant, unless it is endorsed by the beneficiary or that entity in blank or in favour of the issuing bank or applicant.

b. An insurance document is to be issued or endorsed so that the right to receive payment under it passes upon, or prior to, the release of the documents.

General Terms and Conditions of an Insurance Document

K22) Banks do not examine general terms and conditions in an insurance document.

Insurance Premium

K23) Any indication on an insurance document regarding payment of an insurance premium is to be disregarded unless the insurance document indicates that it is not valid unless the premium has been paid and there is an indication that the premium has not been paid.