Article 28 UCP 600 prescribes the requirements an insurance document has to meet if it is to be accepted by a bank under a letter of credit. Previously detailed in Articles 34 to 36 UCP 500 , the revision has not led to substantive changes, except for
- Admissibility of signatures by agents or proxies (Article 28 an UCP 600)
- Prescribed coverage amount is minimum coverage (Article 28 f (ii) UCP 600)
- Admissibility of any exclusions of liability (Article 28 I UCP 600)
Insurance documents include insurance policies, insurance certificates and declarations of insurance. These still need to be signed by underwriters, insurance companies or their agents and proxies. Cover notes, issued by insurance brokers are not acceptable.
When a consortium is the insurer, the signature of only one member of the consortium is acceptable. The other members of the consortium need not be mentioned. This still does apply when the members of the consortium are not jointly and severally liable but only severally or proportionately liable, since the other members of the consortium and their respective quotas of liability can be determined through the consortium leader.
Even though an insurance broker cannot issue cover notes, the insurance broker may act as an agent for an insurance company or an underwriter.
Example:
XXX Ltd, insurance brokers
(authorized by the Underwriters of Lloyds to issue the certificate on their behalf
X, insurance, Inc.
Y broker with special authority
If an insurance certificate is required under the LC, an insurance policy is acceptable. However, if an insurance policy is required, the presentation of an insurance certificate will be rejected.
Article 28 e UCP 600 specifies that the date of the insurance document must be no later than the date of shipment. Hitherto, a coverage “warehouse to warehouse†had been acceptable. Now the ICC Drafting Group believes that the Institute Cargo Clauses containing a “transit clause†is not acceptable since document examiners need not consider facts outside the documents.
Similar to the coverage requirements in the INCOTERMS, the insurance coverage in a letter of credit must be at least 110 % of the CIF value. Unless specifically provided for in the credit, documents evidencing a higher insurance coverage than stipulated in the credit are acceptable.
Even though a credit stipulates an “all risk†insurance, a documents showing that certain risks are excluded is acceptable. The ICC itself noted in this regard (ICC-Publ. No. 511, page 98):â€This Article emphasizes that the traditional ‘all risk’ insurance cover does not cover what some parties may consider to be extension of all types of risk. The ‘all risk’ cover is not what it appears to be since not all risks are covered.â€
The exclusion of risk can occur not only in the “all risk†clause, but also, if the insurance document references other of its provisions.
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