Benefit Of Insurance Clause

Benefit Of Insurance Clause

Summary of Benefit Of Insurance Clause

A provision contained in some ocean bills of lading providing that the ocean carrier is not liable for cargo losses where the merchandise is covered by insurance. This provision has been upheld by the courts (Phoenix Insurance Company vs. Erie & Western Transport Company, 117 U.S. 312, 6 S.Ct. 750 1886) but has been circumvented by insurance companies; the insurers, having been denied an opportunity to subrogate against the shipowner to recover sums paid on cargo losses, devised the loan receipt. Most marine policies now provide that the insurer does not settle with the insured in the conventional sense, but rather loans the insured the amount of the settlement, pending completion of litigation against the vessel; the amount is advanced by the insurer in the name of the insured. The benefit of insurance clause has been disallowed by the Carriage of Goods by Sea Act on bills of lading subject to that act, although the provision may be used in trade not subject to the act.

(Main Author: William J. Miller)


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