WHETHER AN INSURANCE DOCUMENT CAN INDICATE THAT COVER IS SUBJECT TO A DEDUCTIBLE CLAUSE

QUESTION

Dear Mr. Old Man,

LC requires:

FULL SET OF ORIGINAL INSURANCE POLICY/CERTIFICATE IN ASSIGNABLE FORM AND ENDORSED IN BLANK FOR 110PCT SHIPMENT VALUE, COVERING ALL RISKS, SHOWING CLAIM PAYABLE IN VIETNAM IN INVOICE CURRENCY AND SHOWING TOTAL NUMBER OF ORIGINALS ISSUED.

The presented insurance policy shows: DEDUCTIBLE: 0.3% OF THE SUM INSURED OF THE WHOLE CONSIGNMENT.

Can we raise the discrepancy “Insurance certificate showing deductible clause not required by the LC”?

Thank you and best regards,

TT

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ANSWER

A deductible clause is a provision in an insurance document requiring the insured to pay a specified amount of loss and the insurance company will be liable for any additional costs up to the insured amount.

According to ISBP 821 K14, an insurance document may indicate that cover is subject to a franchise or deductible (excess). However, when an LC requires the insurance cover to be irrespective of percentage, the insurance document is not to contain a clause stating that the insurance cover is subject to a franchise or deductible (excess).

The insurance policy in question does not state “irrespective of percentage”, hence, it may include a franchise or a deductible clause. No discrepancy.

For further information, please refer to the following Q&A:

WHETHER AN INSURANCE DOCUMENT CAN INDICATE THAT COVER IS SUBJECT TO A DEDUCTIBLE CLAUSE – Mr. Old Man

Best regards,

Mr. Old Man