Declaration on the Last Day, Shipment After Expiry

The scenario

The policy runs for twelve months. The declaration invoice is given on the last day of the policy. The consignment moves the next day, after the policy period has ended. Meanwhile the assured has moved from Insurer ABC to Insurer XYZ. A loss occurs. Should ABC pay, XYZ pay, or both contribute?

The question turns on the difference between the term of the policy and the term of the coverage, and on what the law says about declarations.

Section 64VB, Insurance Act 1938

Section 64VB provides that no risk is assumed unless the premium is received in advance. If ABC took the premium on the last day, the argument that the twelve months had lapsed before the cargo moved is difficult to sustain against the declaration that attached the shipment to the policy.

Floating policies and the Marine Insurance Act

• Section 6 (insurable interest) allows recovery on a ‘lost or not lost’ basis even where the assured acquired the interest after the loss, so long as the assured was not aware of the loss while the insurer was unaware.
• Section 21 (conclusion of contract): a contract is concluded when the proposal is accepted by the insurer.
• Section 29 (floating policies): a floating policy describes the insurance in general terms and leaves the ship and other particulars to subsequent declaration. Declarations are made in the order of dispatch or shipment, must comprise all consignments within the terms of the policy and must state values honestly. An omission or erroneous declaration may be rectified even after loss or arrival, if made in good faith.

In India these are typically sold as turnover or sales-turnover policies. The Marine Insurance Act 1963 applies the same principles.

The Institute Cargo Clauses

Clause 11 of the Institute Cargo Clauses (insurable interest) contains the lost-or-not-lost rule at 11.2: the assured can recover for insured loss during the covered period even if it occurred before the contract was concluded, unless the assured knew of the loss and the insurer did not. The point is that the clauses, like the Act, favour giving effect to the commercial intention.

The good-faith problem for underwriters

Insurers differ. The tension arises where the underwriting team asks for declarations by sales and purchase invoice, while the claims team later tests cover against e-way bills, consignment notes or bills of lading. That mismatch is a serious breach of good faith by the insurer. Where invoices drive the declaration, cover cannot be measured by e-way bills alone: the transit has to be examined as a whole.

The true test is the ordinary course of transit, and delay beyond the control of the assured, within the liberty granted to the carrier.

What to do about it

1. Declare early. Never leave declarations to the last day of a policy.
2. Put the basis of declaration (invoice, dispatch or bill of lading) in writing at inception.
3. On a change of insurer, agree the cut-off in writing for shipments declared but not yet moved.
4. Obtain a legal opinion on the exact wording of your policy before relying on any reading, including this one.

This is educational commentary on statutory provisions, not legal advice. Where the unpublished source referred to an unnamed court decision, it is omitted here because it could not be verified.