Plant insurance covers material loss only

Importers advised to factor in the inconvenience of delays and potential loss of profit ALAN PEAT DO NOT assume that a marine insurance policy is the beginning and or the end of your risk management programme when bringing plant and equipment (especially equipment that is time-sensitive) into the country, says Hugh Reimers of Eikos Risk Applications. Management of risk is somewhat more complex and onerous than merely buying “off the shelf” insurance protection, he told FTW. “It necessarily involves a deeper awareness of the risks faced by the importer in the first instance. “It then requires the “wrapping” of the correct attitude, the necessary expertise and the correct insurance solution around the circumstances inherent in the movement and handling of that specific piece of cargo through the supply chain.” Summarising what is a complex subject, Reimers pointed to what he described as “all too regular problems” Eikos had experienced - which are the result of the conditions of the standard marine insurance policy. “It is of paramount importance that delivery times are planned taking into account the distance of South Africa from suppliers,” he said, “from the point of view of the time required to obtain replacements or to ship a damaged machine back to suppliers for repairs. Replacement cost “It is a regular feature of claims related to plant and machinery imports that the cost of such a claim is considerably more than the replacement or repair costs to the machine itself.” Reimers also reminds readers that the policy covers only the material loss or damage to the machine. “The actual loss suffered,” he added, “will inevitably include, at best, the inconvenience of delays, potential loss of profit, and in some instances penalties related to delayed production which should have resulted from the efficiencies intended when the machinery was ordered in the first place.” And yet in most instances where quotes are provided for “loss of profits” cover, Eikos has found that the importer shies away from paying the extra premium. “All too frequently the importer, having been given the option of buying the correct cover and decided against it, penalises the innocent freight agent for the loss over which he had absolutely no control by (generally in conflict with the contract in force) deducting his perceived cost of the loss from the freight account.” Unless the importer has purchased advanced loss of profits cover in addition to the standard marine insurance cover the insurer is not responsible for loss of revenue, loss of market, opportunity cost or for any fines or penalties incurred as a result of failure to install plant or equipment timeously. This even where repairs which the insurer insists on effecting (rather than buying a new machine) result in the delay.