The Shipping and Admiralty Practice Group participated in IBC Asia's Offshore Heavy Lift and Project Cargo Conference 2013, held at Marina Bay Sands, Singapore. Mr. Gerald Yee, Head of the Shipping and Admiralty Practice Group, presented two topics on 9 April and 10 April 2013, namely: "Managing Claims and Compensation for Offshore Oil & Gas Installations" and "Risk Management and Insurance Claims Handling of Project Cargoes" respectively.

This article provides a brief summary of the second presentation topic.

Risk Management and Insurance Claims Handling of Project Cargoes

Project cargo is typically large and high value cargo. The term is used to broadly describe the national or international transportation of large, heavy, high value or critical (to the project they are intended for) pieces of equipment. Also commonly referred to as heavy lift, project cargo includes shipment of components which require disassembly before shipment and reassembly after delivery.

While project cargo may also be used in the international insurance industry to describe Delay in Start Up Marine Insurance (“DSU Insurance”), which is a specialised form of marine cargo insurance, the presentation focused on project cargo/heavy lift cargo. DSU Insurance provides cover for expenses arising out of delays caused by damage to or loss of project cargo.

To design an effective offshore marine risk management system, risk can be minimised by choosing a reputable carrier which has experience transporting project cargo. The carrier must have the right resources and expertise in order to prevent damage to the project cargo whilst in transit. Also, research must be done on the port of discharge or “disport” to ensure that discharge can be quickly and safely carried out with no financial loss to the shipper. The disport should have the right equipment to handle project cargo, as project cargo can weigh more than 100 tonnes.

In UMCI Ltd v Tokio Marine & Fire Insurance Co (Singapore) Pte Ltd, [2008] SGHC 188, the Singapore High Court found the defendant insurance company liable to the plaintiff semi-conductor foundry for damage to project cargo. The project cargo was insured under an open policy of marine cargo insurance. The plaintiff was well-prepared with witnesses who supervised the transportation of the project cargo from the manufacturer’s premises to the airline carrier. Measures were taken to protect the equipment from shocks, forces and vibrations en-route. Tilt and shock watches were affixed to the crates so that any damage would be immediately noted. The Judge was satisfied on the balance of probabilities that the cargo had been damaged as a result of a tip-over of the crate between the point of handover to the airline carrier and its arrival at Changi Airport. The plaintiff had rightly assessed that ground agents were outside its control or the freight forwarder’s control, and had insured against this risk. No misrepresentations had been made to the defendant. This case is a good example of how difficult it is to transport sensitive project cargo and how insurance can be used to manage the risk of doing so. In this case, the plaintiff had engaged Willis (Singapore) Pte Ltd to look for an insurer and information about the types of shipment was given to various insurers before the defendant’s head office indicated that it was willing to underwrite the risk. The risk was eventually underwritten by the defendant, which was the Singapore subsidiary.

The risk can be managed by carrying out transit preparations and ensuring that the route taken is not dangerous. The loading, stowing and securing of cargo should be done by skilled and experienced persons with the right equipment and resources and the right vehicles and carriers should be used. Extra care should be taken if the equipment to be transported is sensitive. Surveyors can be also employed to take care of the cargo, by taking photographs and writing reports where necessary.

Care must be taken to ensure that the insurance policy covers the risk and these risks must be assessed by the insurer. Information which a prudent insurer would consider to be material must be disclosed by the insured i.e. information which would influence a prudent insurer in fixing the amount of premium or in determining whether he would take the risk. Failure to disclose a material fact would allow the insurer to avoid the policy.

When making a claim under the insurance policy, coloured photographs of the damaged goods will assist as black and white photographs are unlikely to depict the actual damage. One should also comply with the terms of the policy when making a claim. If possible, contemporaneous witnesses’ statements can be taken while the incident is still fresh in the witnesses' memories.

Conclusion

There are a lot of risks involved when transporting project cargo but engaging the right professionals at the appropriate juncture can help you to manage these risks. It is better to be prepared.