Irrespective Of Percentage, Franchise Or Excess
  • Mon, 18 Jan 2021

by Sherri Lane, Director of Consulting and Cargo Insurance at Trade Technologies, Inc.

What does this mean? Any partial or total loss incurred while goods are in transit will be reimbursed 100% to the insured or buyer.

Buyers are frequently imposing one or all of these insurance conditions when opening a letter of credit. But if you are in the unfortunate position of having any deductibles written in your insurance policy, compliance may be difficult. If you are purchasing insurance from a 3rd party (not your company policy), you need to ascertain the deductible conditions in that policy.

It is not enough to merely have a bank compliant insurance certificate if the true conditions cannot be met. So, what are your options if deductibles exist on your insured shipment?

Option 1:  Negotiate with the insurance provider for the possibility of getting a zero deductible for the shipment.

Option 2: Be prepared to pay the buyer out of pocket any applied deductibles. You will need to notify the insurance provider in order to eliminate contradictory verbiage on the printed certificate and discrepancy calls from a bank examiner.

Option 3: Compliance is not possible. Notify the buyer and have the conditions deleted from the letter of credit. 

ISBP 2007: Art: (177): If a credit requires the insurance cover to be irrespective of percentage, the insurance must not contain a clause stating that the insurance cover is subject to a franchise or an excess deductible.

If the insurance policy coverage incorporates a standard deductible, franchise or excess deductible, you cannot comply with the insurance conditions stated in the LC without initiating a change or a compromise.   



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