A dizzying array of goods, from electronics to live animals, is transported every day as ocean marine cargo. Sometimes during those journeys, unfortunate things happen, not limited to water damage. As a result, ocean cargo claims adjusters see a lot of unusual stuff. Here are just a few of the many cargo claims that Tokio Marine America adjusters have experienced:

Animal mortality. A zoo in Japan was importing live sea lions from the United States and had purchased an ocean marine cargo policy to insure the animals’ mortality. Stress is one of the greatest risks to animals’ health, especially during transport, so the shipper took extra care to create a safe environment. This included a range of things to ensure the sea lions’ comfort, from temperature control and lighting, to pools of water and beds for the animals to sleep on. With this form of special coverage, all sorts of warranties applied, and underwriting staff personally confirmed the sea lions were alive when they arrived at the zoo.

Stress can take a toll on such animals for up to a month and threaten their health. The zoo had requested a transit clause to provide coverage for the sea lions during that month. Unfortunately, the sea lions did not survive, which resulted in a large loss for the zoo. A lesson learned was to require additional precautions to reduce the risk of stress, even after the cargo reached its destination.

Theft and/or shortage. Despite efforts to keep cargo secure, sometimes claims arise for shorted goods, which may occur due to theft. One recent claim was for shortage of cell phones sent to Hong Kong. On the surface, it was difficult to determine how and when the theft of several cartons took place. To assist the insured, Tokio Marine America hired a surveyor to review the packing and operations at the point of origin. The surveyor discovered there was likely a gap between the wrap around the pallet and the pallet base. This allowed a clever thief to reach in and remove cartons from the center so it would not be apparent when delivered to the customer.

TMA presented a number of recommendations, which the customer instituted, and has experienced no cargo thefts since. Looking closer at a claim can provide insights that improve cargo packaging and security, which was good news for the customer as well as its brokers.

Occasionally, cargo theft occurs on a grander scale. Several years ago, TMA received a report of a container of electronics delivered to a consignee Mexico that was empty on delivery. An investigation determined none of the container doors or panels had been tampered with or removed during transit. Retracing the journey, TMA found the container had passed through four international borders, was loaded on two separate vessels and then transported by rail to the Mexican border, where it was picked up by truck for final delivery. At each point, the shipment should have been weighed, but official records were unavailable. It’s still unclear what happened, but the transportation companies agreed to pay the loss in full. Quick action to investigate the circumstances of a claim can aid in prompt resolution.

Breakage and/or rough handling. Despite containerization and innovation in packaging materials, human error still can lead to cargo damage. Water damage is a fairly common type of claim, which shippers can mitigate through proper packing. Good packing is also important to protect fragile items. A policyholder relocating to Mexico from Japan arranged for the shipment of a personal Buddhist altar. During transit, the altar broke. Normally, the cargo policy would give the insurer discretion to repair or replace the damaged item. In this case, repair was impractical due to the scarcity of shops in Mexico able to fix such an object. Instead, a claim for replacement was paid.

Natural catastrophe. Ports and oceangoing vessels not infrequently experience bad weather. Even though most shippers will avoid storms whenever possible, they cannot always avoid high winds and heavy seas, and ports are at the mercy of Mother Nature. Such was the case for a shipment of frozen squid and cuttlefish from India. A cyclone hit when the perishable cargo was being loaded for shipment to the United States, causing a loss of power at the port. Containers lost refrigeration for six days. When power was restored, the squid and cuttlefish had thawed and refroze, sticking together. The consignee had learned about the power outage and refused to accept the shipment. A surveyor was promptly dispatched to the port of origin, and thanks to timely communication directly with the policyholder, the claim was quickly resolved.

Constructive total loss. Damage that makes it impossible or impractical for a consignee to use or sell the cargo can result in a declaration of constructive total loss (CTL). That can be quite costly as, depending on the type of cargo, seemingly minor damage can destroy its value. A shipment of automobile parts survived its voyage from Tokyo to Los Angeles, but its inland transit via rail did not go well. En route to Indiana, the train carrying 40-foot equivalent containers collided head-on with another train in Texas. Four of the containers of auto parts were deemed uncoverable, while other intact containers were delivered to the consignee. After a lengthy inspection, the consignee rejected some of the parts for safety reasons, declaring them a constructive total loss. Adjusting this claim required coordination of teams in two different locations.

Infestation. Insects and other kinds of creatures are known to eat and make homes in different types of cargo. When that occurs in products destined for human consumption, a total loss is possible. A shipment of nutritional products from a warehouse in Florida to customers in Texas and Mexico was found to contain dead red flour beetles. Per regulatory requirements, all of the products were destroyed. An investigation determined that the warehouse had found insect activity in a single package, from which the beetles spread throughout the warehouse in search of other food to consume.

Beetles are not the only critters that may wind up in cargo. A few years ago, warehouse personnel in California discovered a shipping container of organic coffee liquor from Costa Rica was infested by live scorpions. They quickly closed up the container and refused to open it until an investigator could determine what to do next. Chemical fumigation could kill the scorpions, but that would also remove the product’s organic nature. Another proposed method of extermination was to pump carbon dioxide into the container, but an entomologist and scorpion expert said that approach might not work at all. The shipper from Costa Rica agreed to manually seek, destroy and remove the scorpions. A surveyor determined that the scorpions entered the container during loading, creating a pre-existing condition for which the shipper was ultimately liable.

Tokio Marine is one of the largest cargo underwriters in the world, with vast expertise and resources available to serve cargo customers. As these claim examples show, prompt response and attention to even small details can make a big difference.

In upcoming articles, we’ll explore many more facets of ocean cargo risk. Climb aboard for a voyage of discovery.

Please visit our product page or contact me at julie.vogele@tmamerica.com.

About Author

Julie Vogele, AMIM
Senior Marine Underwriter at Tokio Marine America
Julie Vogele, a senior marine underwriter with Tokio Marine America, has been underwriting all lines of ocean marine insurance in California for more than 30 years, with a specialty in ocean cargo insurance. She was among the first to earn the Associate in Marine Insurance Management (AMIM) designation from The Institutes in December 1998. Active in the marine insurance industry, Julie has served as past president of the Board of Marine Underwriters of San Francisco and still serves as a member of the BMUSF Board of Directors. She is currently on the Executive Committee of the Association of Marine Underwriters of San Francisco, where she has been president four times. She has also served on the Pacific Coast Advisory Committee for the Inland Marine Underwriters Association. Julie has guest lectured at the California Maritime Academy several times, been an instructor for the AMIM program and presented for the Inland Marine Underwriters Association and the Association of Marine Underwriters of San Francisco.

About Tokio Marine America

As part of our commercial ocean marine product offering, cargo owners and shippers are well served by unmatched financial strength, dedicated underwriting experts, and a suite of flexible and proprietary insurance products that can be tailored to fit your needs.

With over a 100-year history in the U.S., Tokio Marine America (TMA) offers tailored products to a diverse range of customers – from small to large-sized global businesses seeking traditional multi-line coverage, to larger private and public companies requiring full risk management solutions. Our commitment to providing the highest level of service is paramount. More than 93% of our customers recommend TMA based on our superior claims service. TMA is one of only three insurers with an A++ (Superior) XV rating from A.M. Best. With a solid foundation of financial stability, our strength lies in understanding your business and working in partnership to exceed your expectations.

By offering fully integrated solutions to meet our customer’s needs, we endeavor to deliver ANSHIN – safety, security and peace of mind to all our customers.

Tokio Marine America (TMA) is the marketing name for Tokio Marine America Insurance Company (TMAIC).