Inherent Vice: The Ultimate FAQ Guide

If you have any question about inherent vice, your answer is right here.

This is because this guide covers everything you need to know about inherent vice.

Keep reading to learn.

What Is Inherent Vice In Cargo Insurance Terms?

Inherent vice is a charge that is set aside for cargo insurance policies.

 It acts as compensation for damages that might occur due to the instability nature of the products.

Inherent vice mostly occurs during the shipping of the product.

Normally, it is hard to ensure the inherent vice from damages and loss since these defects are not physical.

As a result, the aspect of visibility to the carrier or the insuring company is unachievable.

How Can Inherent Vice Damage Cargo?

The unpredictability of the nature of the products will result in an inherent vice.

This normally causes damages to the cargo due to the nature of the product.

For instance, grains that are not properly dried will absorb moisture from the package which will result in fermentation.

These damages are mostly internal unlike inflicting physical damages as a result of the carrier’s negligence to the products.

When Does The Inherent Vice Exclusion Apply?

Below are some of the incidences under which an inherent vice exclusion will apply;

• Deterioration of the food value due to improper storage measures.
• Films that deteriorate over time as a result of chemical instability.
  This occurs if there is no equal proportionate mixture of the chemicals.
• Deterioration of quality of books as a result of the acids on the papers which is a result of the manufacturing process.
• Rapid fermentation or combustion of improperly dried grains.
  The grains will absorb moisture in the package which will result in fermentation.

What Are Examples Under Which Inherent Vice Exclusion Would Apply?

Different products have an operation timeframe or the duration in which we consider them better quality.

Over the years the timeframe reduces leading to an increase in vulnerability of these products.

In our case, inherent vice falls under the following classification and a list of examples where inherent vice exclusion would apply.

They include;

Short-lived, Temporary, Or Impermanent Materials

Examples under which inherent vice under this category include;

• The acidity in papers leads to deterioration over a while.This is notable especially when you leave used or unused papers over a while they will start to fade off.
• Fundamental chemical instability in cellulose acetate film as a result of slow degradation of chemicals resulting in vinegar syndrome.You can easily detect it due to the production of the vinegar smell.
• Natural degradation of the magnetic tapes.This occurs mostly in cassettes and videotapes; they tend to have scratches over time thus hindering continuous filming.
• Poor leather fades over a while as a result of exposure to the light.

Structural Nature

Examples include;

• Leather: levels of acidic chemicals result in corrosion.These acid levels cause a reaction with metals surrounding the leather materials.
• Paints that are not properly mixed will result in peeling or even fading over time.

History Function

These products have a history of corrosion due to humidity exposure.

Examples;

• Ceramic bowl
• Stained window glass
• Stamps

What Other Common Cargo Insurance Exclusions Should I Be Aware Of?

Insuring the cargo during shipping into the destination is very important.

It allows compensation in case of damages or losses while under shipping.

Note, as much as insuring the cargo save you from losses, there are common cargo insurance exclusions you should be aware of.

Most insurers will not account for some of these cargo insurance exclusions thus planning well will allow you to avoid them.

Some of these cargo insurance exclusions include;

• The inherent vice of the product.
• Latent defect.
• Loss as a result of poor/improper packaging.
• Loss as a result of delay or loss of market.
• Willful misconduct by the assured.

What Does Cargo Insurance Generally Cover?

Cargo insurance covers you and the business from encountering losses as a result of damages or losses during the shipping.

You will receive a compensation amount which you are insured for in case of the following incidents;

• Piracy
• Abandonment of the cargo
• Vehicle accidents or accidents as a result of different modes of shipping
• Customs rejection
• Unavoidable natural disasters
• Acts of war

Why Am I Not Eligible For A Claim In Inherent Vice?

Eligibility of the claim for inherent vice depends on the type of insurance policy you have for the cargo.

Mostly, this insurance policy will cover certain incidents with an exemption of damages as a result of inherent vice.

This will result in a lot of questions regarding eligibility.

Here are some of the reasons why you may not be eligible for a claim in inherent vice;

Contract Terms:

It’s important to read through the terms of the contract before signing to get the assurance of the claim for inherent vice.

Lack Of Causation:

Lack of the relationship/connection between the damages and a specific carrier will reduce the eligibility.

Example, we know that iron boxes are prone to rusting due to moisture in the shipment this is an interior element.

In cases where the shipment drowns in water, the carrier will be responsible for the damages.

Therefore, you need to insurer the cargo for such incidents.

How Do I Validate Cargo That Is Damaged Due To Inherent Vice?

To validate a cargo with damages as a result of inherent vice, you should first evaluate the following incidences;

1. You should evaluate if the damage was a result of the nature of the product. For instance, spoiled food or fermentation and combustion of grains.
2. Evaluate if the carrier is at fault for improper handling of the products.

For instance, forgetting to put water inside the container in a refrigerator.

If indeed the damages are a result of inherent vice, look for insurance policies that cover part if not all the damages.

What Should I Do In Case Of Loss Or Damage Due To Inherent Causes?

If there is loss or damage on the product as a result of inherent vice, provide a burden of proof to state otherwise.

This burden of proof will justify that the carrier is liable for the damages during shipping.

For instance, if the product absorbs moisture as a result of a moist container this will fall on the carrier.

If you prove the carrier is responsible for these damages, the burden shifts to the insurer.

The insurer will try and prove that the damages fall under the exclusion.

If the insurer’s proof is not evident enough, they will compensate you for the damages.

Am I Eligible For A Concurrent Causation Claim If One Of The Risks Is Inherent Vice?

We can look at the eligibility of a concurrent causation claim in two ways;

If one of the concurrent causations has coverage and the other one is not and there is no exclusion, the insurer will be liable.

Meaning, the insurer will be liable for the losses and damages of the goods even when the other risk is an inherent vice.

In this case, the insurer will pay for the losses and damages in regards to proportions of the insured concurrent causation.

The other scenario

When one of the concurrent causations is an insured peril and the other one is not yet excluded, insurers will not be liable.

What Is The Difference Between Inherent Vice And Latent Defect?

They are distinct differences between these two common types of cargo insurance exclusion.

Inherent vice is loss or damage of goods during shipping and this damage is visible during inspection.

Inherent vice occurs as a result of the underlying conditions and the physical nature of the goods.

Losses and damages in inherent vice are a result of internal causes rather than external causes.

For instance, an iron box tends to rust when it meets moisture.

With latent defects it’s hardly to note the defects during the inspection of the product.

Normally, we consider these damages as a result of poor quality of labor or poor manufacturing of the goods.

For instance, unnoticeable cracks on the products which majorly affect its performance.

Does An All-risk Policy Cover Against Inherent Vice?

An all-risk policy is an insurance policy that covers all risks that the agreement does not explicitly exclude.

If the contract /agreement does not have exemptions, then the insurer will account for every risk.

The all-risk policy covers fortuity incidences that occur as a result of external factors.

This means that all the risks should be a result of unpreventable accidents such as earthquakes or storms in the oceans.

The all-risk policy also covers peril policies that occur as a result of external factors such as fire.

There is an exemption of damages as a result of inherent vice.

Inherent vice is not a fortuity accident but rather an accident as a result of the nature of the product.

As result, the all-risk policy does not cover the inherent vice.

Is The Named-peril Policy Any Better?

Named peril policy is mostly applicable at homes or in businesses.

This insurance policy covers losses you incur on the property from different dangers or hazards.

Some of the dangers you will find coverage under the named-peril policy include;

• Floods
• Fire
• Earthquake
• Theft
• Hailstorms
• Explosion and lightening

Purchasing/acquiring a peril policy does not provide a possible solution.

This is because there are exemptions too.

Peril policy is much cheaper if you compare it to comprehensive coverage which provides coverage for all peril policies.

Note, a peril policy will work well with an all-risk policy because it covers all damages as a result of external factors.

From the above description peril policy is no better while the damages of the products are a result of inherent vice.

This means the peril policy cannot provide coverage of the inherent vice thus the insured will receive no compensations.

Are There Exceptions To The Inherent Vice Exclusion?

No, there are no exceptions to the inherent vice exclusion.

The inherent vice exclusion does not receive an interpretation that broadly sidelines the insurer.

This means will be liable for cargo that can withstand external factors.

As an insurer, you should be careful while relying on the inherent vice.

This means ensuring there is no fortuity causing loss or deterioration of products completely.

Additionally, you should ensure you have complete proof of the inherent vice that leads to the deterioration of the product’s value.

Is There A Cargo Insurance Policy That Covers Inherent Vice?

No, cargo insurance does not account for inherent vice.

The insurance policy will cover all other cases leaving out the inherent vice cases. This means there is no compensation for damages to the products.

Inherent vice is a result of interior cause due to the nature of products.

As stated earlier the insurance company covers external damages soaking products as a result of rain.

Before shipping, it is important you first evaluate what the insurer insures and what is not insured.

What Is The Difference Between The FC&S (Free Of Capture Seizure) Clause And Inherent Vice In Cargo Insurance?

The free of capture and seizure clause is a result of loss of goods due to;

• War
• Capture from unknown people
• Seizure from relevant authority or government.

The insurer is not liable for this loss and the insured should seek assistance from the war insurance policy.

With inherent vice in cargo insurance, the insurer is not liable for inherent vice which is a result of internal factors of the products.

The cargo insurance policy does not provide the inclusion of the inherent vice.

If the insured can provide sufficient evidence of the damage as a result of external factors during shipping, there is a guarantee of compensation

How Much Is Cargo Insurance?

The insurance will account for the total value of the shipment including the limits coverage when there is loss or damage to the shipment.

You should include the price rate of every insured item on the shipment.

This price rate reflects the replacement cost in case of damages or loss of the shipment during shipping.

Research on the best-selling online website will also help in case you are unsure of the price rates.

To calculate the total cost of the insurance, use the following formula;

The total cost of the shipment*insurance rates= Total cost of the insurance

How Much Cargo Insurance Do I Need For My International Shipments?

While analyzing how much cargo insurance you need for international shipment, you need to understand the term under-insuring.

This commonly applies to the importation of second-hand items.

If you are importing second-hand items, it’s important to disclose them to the insurer.

This allows the inclusion of landing charges, duty charges, and freight charges to the replacement amount.

Failure to do this and the market value of the goods is below the replacement amount results in average.

This mostly occurs as a result of depreciating the market value of the goods.

You should not over quote the gross value of the goods before checking how much the insurer is offering to reduce under-insuring.

This will reflect your side as a loss since you will have to account for the difference.

For instance, if you ship a table that costs $90 to replace and your quote reads $50, you will be liable for margins.

What Are Some Tips For Getting The Right Marine Cargo Insurance Policy?

Having a marine cargo insurance policy is of great importance. Ensure you buy the best quality insurance policy.

Below are a few tips that will enable you to determine/choose the best marine cargo insurance;

Evaluate The Different Types Of Losses And Damages They Cover

You should always choose an insurance policy that covers all risks.

This means the insurer will account for all losses and damages if there is no exemption made.

Some of these losses include rain, lightning, and natural calamities which are unpreventable.

It is important to make a comparison of the different marine insurers since there are great variations.

Note, there is an exemption of the wear and tear from the marine cargo insurance policy.

Evaluate Claim Settlement

It is important to be able to determine on what basis is the coverage given.

That is whether it is agreed on value or actual cash value.

For agreed value, the marine insurer will account for the total amount indicated on the policy document in case there is a loss

With actual cash value, the coverage is low in comparison to the agreed policy. Normally, the present market value determines the coverage of the products.

Determine The Tenure Of The Policy

This means you should evaluate the frequency at which you transport goods.

You can opt for the apt policy tenure if you conduct frequent transportation of goods.

This apt policy tenure provides you with variations such as;

• Annual turnover policy
• Annual policy to specific voyage policy
• Open policy

We recommend that you choose the annual or the turnover policy as it provides full coverage throughout the year.

How Do I Avoid Coverage Gaps When Getting Marine Cargo Insurance?

If you are unfamiliar with how an insurance policy works, you can hire an expert with this knowledge.

They will ask questions on your behalf to avoid coverage gaps.

These questions include;

• Who is responsible/liable for insuring the goods, is it the buyer or the seller?
• When does the title of goods change from the seller to the buyer?
• What are the insuring terms?
• Where is the location of the insurance company?

For instance, if the location of the insurance company is in the US it makes it hard for the claiming process due to the timeframes.

If you ask questions, there is a probability of getting accurate information of the coverage.

Is It Wise To Get Cargo Insurance Through My Freight Forwarder?

Yes, there are no doubts as to whether you can involve a freight forwarder in the cargo insurance process.

If you are an occasional shipper or shipping a low quantity of products, freight forwaders are the best deal.

• Freight forwaders will get the best deals for you.
• Secondly, they have more experience and good relations with some of the insurance companies thus fastening the whole process.

At Tj chinafreight, we will help you in all your freight forwarding needs from China.

Contact us today when shipping from China.