Insurance Against Breakage 破碎险
S: Good afternoon, Mr. Li. I was to come at 4 o’clock, wasn’t I?
Li: Yes, Mr. Smith, we have been expecting you. Mr. Smith, this is Mr. Bai of the People’s Insurance Company of China. He has come to explain that unfortunate affair about the insurance.
S: Thank you for coming. Mr. Li, as you may recall, the February consignment arrived at Manila seriously damaged. The loss through breakage was over 30% of the consignment. We’ve presented a claim to the underwriters through your firm, but the insurance company refused to admit liability, as there was no insurance against breakage. We naturally were not satisfied with such a reply.
L: I should like to hear what Mr. Bai has to say about it. You know of course that we, the sellers, are merely acting as mediators in this matter. The underwriters are responsible for the claim, as far as it is within the scope of cover.
B: That’s just the point, gentlemen. The loss in question was beyond the coverage granted by us. According to your instructions, we made out an insurance certificate covering W.P., and the risk of breakage wasn’t mentioned in it. We rang up the Ceramics Section of the Light Industrial Products Corporation but were told that their customer had not asked for a cover of the risk of breakage.
L: In the letter of credit only a cover for "all marine risks" was requested. I should like to point out that our prices were calculated without insurance of any special risk. So we applied for the usual W.P.A. cover, and let our customers deal with the matter of breakage. Since the validity of the letter of credit was to expire in two days, there was no time to write for more detailed instructions. If the letter of credit had been valid for a longer period, we should have had time to make the matter thoroughly clear.
S: Mr. Li, our import license was only running up to the middle of February, consequently we were not able to extend the validity of the letter of credit. But we presume that the wording of our L/C implies covering the risk of breakage. Besides, when I take a W.P.A. insurance, that is, with particular average, I should think the risk of breakage is included. Breakage is particular average, isn’t it?
史：李先生，我们进口许可证的有效期到二月中截止，因此，我们无法延长信用证有效期。但是，我方认为信用证的措词包含了要投保破碎险。此外，当我投保水渍险时，那就是with Particular Average,认为是包括破碎险。破损，对吗?
B: Not every breakage is a particular average. It is a particular average when the breakage is resultant from natural calamities and maritime accidents, such as stranding and sinking of the carrying vessel, or is attributable to fire, explosion or collision. Without the occurrence of any such fortuities, breakage is often considered as an ordinary loss and represents what we call "inherent vice or nature of the subject matter insured", which is outside the scope of the cover.
S: But the risk of breakage is covered by marine insurance, isn’t it?
B: Certainly, but it is a usual practice to make specific mention in the insurance policy or certificate that the risk of breakage is included. The inclusion of this special risk will be subject to an additional premium, which will normally be higher than the basic insurance for the ordinary marine risks. The rate for such kind of risk will vary according to the kind, or, as in ceramics, according to the fragility of the goods. I think you know all about it.
S: Well, I have heard something about it, but I can’t say that it is very clear to me.
B: Then let me explain this insurance.……
L: Mr Smith, would you care for a cup of tea? Or a cigarette?
S: A cup of tea, thank you. Let me hear more about it.
B: you see, Mr Smith, the situation would be somewhat different if you had put in your letter of credit the words "all risks" instead of "all marine risks". Under an "all risks" cover, loss by breakage would have been recoverable, because, though by the word"risks"is meant that any loss occurring must be due to some fortuitous happening and through external cause, when a loss does arise in transit it will be often rather difficult to distinguish between accidental and ordinary loss, especially as far as breakage or leakage is concerned, In such cases, ordinary loss will quite possibly be included in a claim and met by the insurer.
S: Then "all marine risks"means less than "all risks"?
B: The English understand by "Marine risks"only risks incident to transport by sea, such as collision, standing, fire, penetration of sea water into the holds of the ships, etc. In other words, under the "all marine risks",losses recoverable will only be confined to those arising from perils of the sea and maritime accidents, whereas the "all risks"cover will admit all losses occurring at any time throughout the whole currency of the cover, irrespective of whether they are caused by accidents at sea or on land. In this sense,"all marine risks"provides a more limited cover than "all risks". In insurance parlance, the term"all marine risks"is liable to be misinterpreted and its use should be avoided in letters of credit. Now let us turn to loses through "inherent vice or nature of the subject matter insured",such as deterioration of food, leakage of liquid and breakage of glass or ceramics. These are not considered marine risks. Risks of this kind must be specifically applied for and explicitly accepted by the insurer.
S: That seems clear enough, now that you have explained it. but what I don’t understand at this moment is the advantage of W.P.A.cover. I thought that the W.P.A. insurance should cover all principal risks whilst, according to what you say, this W.P.A. cover means very little. It seems to be a phrase without much substance. Just what is the difference between W.P.A. and F.P.A.?
B: Your question is very much to the point, Mr Smith. It is a very common but mistaken idea that a merchant has done every common but mistaken idea that a merchant has hone everything that is required to protect himself against losses when he has taken out a W.P.A. insurance. There is, perhaps, no mistake more detrimental to his interests.
S: That interests me very much. I must confess that I was under the impression that a W.P.A. insurance was quite sufficient and that losses due to breakage were covered. I know that F.P.A. insurance dose not cover losses on consumer goods, but I did think that the W.P.A. insurance covered more risks than the F.P.A.
B: Actually it is like this. There is some difference between WPA and FPA. The FPA clause does not cover partial loss of the nature of particular average, whereas the WPA clause over such losses when they exceed a prearranged prearranged percentage. For instance, when WPA3% cover is taken out, a particular average loss under 3% of the insured amount will not be recoverable but one amounting to or exceeding 3% of the insured amount will be paid. This is the only difference between WPA and FPA. Otherwise, the protection under the FPA clause will be almost identical with that offered by the WPA clause, because in the event of maritime accidents being encountered in transit, such as stranding ,fire, explosion or collision, both clauses will cover particular average losses in full. In present day particular, a WPAIOP cover, that is,"With Particular Average Irrespective of percentage"is not infrequently granted, in which case all particular average losses of an accidental nature will be recoverable and the protection will be much wider than the FPA clause.
S: I don’t mean to annoy you, Mr Bai, I don’t quite grasp this, Couldn’t you say it in more understandable terms?
B: I’ll try. Neither the WPA nor the FPA mentions the risks covered or the risks excluded. The extent of insurance is stipulated in the basic policy form and in the various risks excluded. The extent of insurance is stipulated in the basic policy form and in the various risk clauses. Look at the insurance certificates and you will find that the risks of theft and you will find that the risks of theft and pilferage, freshwater, oil, grease, hooks, breakage, leakage, contamination, deterioration, etc. are specifically mentioned, and must be specifically applied for. These are special risks. FPA stands for "Free from Particular Average"while WPA or WA stands for "With Particular Average."
Particular Average"(平安险)而WPA或WA是代表"With ParticularAverage"
S: Mr Bai, I must say that you have corrected my ideas about the insurance. I see now that this is far more complicated than I ever imagined.
L: Now I know why you often point out to us the wording of some letter of credit which you don’t feel happy about. But what are we to do about it? We must keep to the stipulations of the contract and the letter of credit.
S: the blame rests not alone with the letter of credit. I think the Light industrial Products Corporation should have understood from our letter of credit that we wanted the cover of all risks, including the risk of breakage. So the error was on both sides. I think the loss ought to be shared by both parties. I think the loss ought to be shared by both parties - let us say half and half.
L: Our price calculation could hardly admit that, Besides, we acted upon your instructions so this is not our fault.
B: I sincerely hope that you gentlemen will settle the to our mutual satisfaction.
S: It goes without saying that both parties must abide by the contract terms which we have agreed upon and signed. This blunder, which is due to my ignorance, costs me a pretty penny.
L: We also have learned a lesson from this.
S: To compensate a part of the loss, may I ask you to make us a firm offer for 50000pieces glazed wall tile CIF Manila including the risk of breakage, November shipment?
史：为了补偿部分损失，可否请你们报给我们一个实盘，50000块釉瓷砖， CIF马尼拉， 包括破碎险，十一月装船?
L: We’ll make you an offer tomorrow. Come and see us at 9a.m.
S: Thank you. Then tomorrow at 9.