Hi
UCP says that insurance policy may show exclusion of certain risks and that will be acceptable. isnt it possible that all the risks will be excluded and bank has nothing to do but to accept?
Jim
Can Insurance Document Show All Risk Excluded?
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iLC
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Re: exclusion of insurance clauses
not really Jim. UCP is always concerned about the very purpose of a document. if a insurance document does shows that it is coving no risks :!: i think it will not be serving your purpose. besides the ISBP has set some rules about insurance requirement even when LC is silent about it.
it reads
iLC
it reads
its never wise to keep an open ended option in the letter of credit on these issues and such has been recommended in the UCPs.Risks to Be Covered
173. An insurance document must cover the risks defined in the credit. Even though a credit may be explicit with regard to risks to be covered, there may be reference to exclusion clauses in the document. If a credit requires "all risks" coverage, this is satisfied by the presentation of an insurance document evidencing any "all risks" clause or notation, even if it is stated that certain risks are excluded. An insurance document indicating that it covers Institute Cargo Clauses (A) satisfies a condition in a credit calling for an "all risks" clause or notation.
iLC
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nesarul
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Re: exclusion of insurance clauses
Dear jim,
Here i try to analysis your very good analytical posting from my own perspective:
there are at least two references from where we can analyze your posting: one is sub article 28(i) of UCP 600 and the another is ISBP paragraph 173:
one is: article 28(i) of UCP 600:
"an insurance document may contain reference to ANY EXCLUSION CLAUSE[EMPHASIS ADDED]
EXPLANATION:
In order to proper understand the reason for incorporation this sub article in UCP 600 which was not found in UCP 500, we must go for background of it.
Background:
During the lifetime of UCP 500, the above topic were highly discussed not only among the l/c expert but also in the banking commission followed by an ICC official opinion R-532 in 2004.
the summary of fact that: a credit requires an insurance policy covering ICC A, Institute war clause(cargo) and institute strike clause (cargo) but document presented covering all above insurance followed by exclusion of certain clause which is not linked to above credit stipulated clause.
Conclusion:
Issuing bank is not justified for raising this discrepancy.
.
Taken consideration of above opinion, drafting group has NEWLY BEEN incorporated this provision in UCP 600 with wider scope.
Consequently the real essence of this background is that 'AN INSURANCE DOCUMENT MAY EXCLUDE CERTAIN RISK FROM ANY RISK COVERAGE STIPULATED IN THE CREDIT" [EMPHASIS ADDED]
MOREOVER IF ONE LOOK INTO THE SUB ARTICLE KEENLY, THEN ONE FOUND THAT THE INDICATIVE WORD "ANY" [EMPHASIS ADDED] THE WORD “ANY” CAN NEVER EQUAL TO ALL.
Analysis from ISBP:
FROM ISBP 173 OF PUBLICATION NO.681
"An insurance document must cover the risks defined in the credit. Even though a credit may be explicit with regard to risks to be covered, THERE MAY BE REFEREANCE TO EXCLUSION CLAUSES IN THE DOCUMENT............" [EMPHASIS ADDED]
the above caps lock line was in ISBP 645 as follows:
"THERE MUST BE NO EXCLUSION REFERENCED IN THE DOCUMENT WITH RESPECT TO THOSE RISK"
This above line of ISBP 645 causes confusion during UCP 500, because it is not at all responsibility of a document examiner to check whether any exclusion mentioned in insurance document are RESPECT TO THOSE RISK OR NOT [EMPHASIS ADDED].
THIS IS THE REASON WHICH IS WHY ISBP 681 MAKE IT SIMPLE IN LINE WITH SUB ARTICLE 28(I) OF UCP 600.
From the above analysis we can derived that exclusion of any does not mean all.
SORRY FOR LONG POSTING.
WAITING FOR COMMENTS.
REGARDS
NESAR
Here i try to analysis your very good analytical posting from my own perspective:
there are at least two references from where we can analyze your posting: one is sub article 28(i) of UCP 600 and the another is ISBP paragraph 173:
one is: article 28(i) of UCP 600:
"an insurance document may contain reference to ANY EXCLUSION CLAUSE[EMPHASIS ADDED]
EXPLANATION:
In order to proper understand the reason for incorporation this sub article in UCP 600 which was not found in UCP 500, we must go for background of it.
Background:
During the lifetime of UCP 500, the above topic were highly discussed not only among the l/c expert but also in the banking commission followed by an ICC official opinion R-532 in 2004.
the summary of fact that: a credit requires an insurance policy covering ICC A, Institute war clause(cargo) and institute strike clause (cargo) but document presented covering all above insurance followed by exclusion of certain clause which is not linked to above credit stipulated clause.
Conclusion:
Issuing bank is not justified for raising this discrepancy.
.
Taken consideration of above opinion, drafting group has NEWLY BEEN incorporated this provision in UCP 600 with wider scope.
Consequently the real essence of this background is that 'AN INSURANCE DOCUMENT MAY EXCLUDE CERTAIN RISK FROM ANY RISK COVERAGE STIPULATED IN THE CREDIT" [EMPHASIS ADDED]
MOREOVER IF ONE LOOK INTO THE SUB ARTICLE KEENLY, THEN ONE FOUND THAT THE INDICATIVE WORD "ANY" [EMPHASIS ADDED] THE WORD “ANY” CAN NEVER EQUAL TO ALL.
Analysis from ISBP:
FROM ISBP 173 OF PUBLICATION NO.681
"An insurance document must cover the risks defined in the credit. Even though a credit may be explicit with regard to risks to be covered, THERE MAY BE REFEREANCE TO EXCLUSION CLAUSES IN THE DOCUMENT............" [EMPHASIS ADDED]
the above caps lock line was in ISBP 645 as follows:
"THERE MUST BE NO EXCLUSION REFERENCED IN THE DOCUMENT WITH RESPECT TO THOSE RISK"
This above line of ISBP 645 causes confusion during UCP 500, because it is not at all responsibility of a document examiner to check whether any exclusion mentioned in insurance document are RESPECT TO THOSE RISK OR NOT [EMPHASIS ADDED].
THIS IS THE REASON WHICH IS WHY ISBP 681 MAKE IT SIMPLE IN LINE WITH SUB ARTICLE 28(I) OF UCP 600.
From the above analysis we can derived that exclusion of any does not mean all.
SORRY FOR LONG POSTING.
WAITING FOR COMMENTS.
REGARDS
NESAR