Insurance Documents Under LC – Clarifications on Endorsement, Issuance, and Coverage

Dear Mr. Old Man,

Greetings of the day. Hope this email finds you well.

I would like to seek your opinion/clarification for the below scenario. All these doubts pertain to the insurance document presented under a Letter of Credit (LC).

Query 1

LC Requirement: Insurance in negotiable form and blank endorsed.

Scenario:

• The insurance document shows the assured as the beneficiary and mentions the applicant as the loss payee.
• The insurance document is not blank endorsed by the assured.

Question:

Is endorsement by the assured required in this scenario?

Query 2

LC Requirement: Insurance certificate/policy to be signed and issued by an insurance company.

Scenario:

• A certificate was presented on the letterhead of “ABC Marine Pty Ltd, a division of Underwriters Managers Pvt Ltd,” authorized by XYZ Insurance Company to issue and sign the certificate on their behalf.

Question:

Is this acceptable under the LC which specifically requires the insurance to be signed and issued by the insurance company?

Query 3

LC Requirement: Insurance to cover War Risks and Marine Risks.

Scenario:

• The insurance document shows Marine Risk with a premium of USD 4.87.
• It shows War Risk with a premium of USD 0.00.
• Net premium: USD 4.87.

Question:

Does this mean War Risk is not covered, or does the mention of War Risk satisfy the LC requirement even with zero premium?

Thanks and awaiting your opinion.

Regards,

Priya

________

ANSWER

Dear Priya,

Thank you for your email and well-presented queries. Below are my comments on each point.

1. Insurance document in assignable form and blank endorsed

The LC calls for the insurance document to be in assignable form and blank endorsed. In the presented document:

• The assured is the beneficiary, and
• The applicant is named as the loss payee.
• There is no endorsement by the assured (beneficiary).

According to ISBP 821 paragraph K19:

“An insurance document is to be in the form required by the credit and, where necessary, be endorsed by the entity to whose order or in whose favour claims are payable.”

Also, paragraph K21(b) states:

“An insurance document is to be issued or endorsed so that the right to receive payment under it passes upon, or prior to, the release of the documents.”

Conclusion:

Since the LC requires a document in assignable form and blank endorsed, the insurance document must be endorsed in blank by the assured (beneficiary). The absence of endorsement makes it non-compliant.

2. Certificate Issued and Signed by Insurance Company

The LC requires the insurance certificate to be signed and issued by an insurance company. In this case:

• The certificate is issued on the letterhead of ABC Marine Pty Ltd, acting as agent.
• It clearly states it is authorized by XYZ Insurance Company.

Under ISBP 821 paragraph K2(a):

“An insurance document is to appear to have been issued and signed by an insurance company or underwriter or their agent or proxy.”

And further:

If signed by an agent or proxy, the insurance company or underwriter’s name must be indicated.

Conclusion:

This certificate complies with the LC requirement because it identifies XYZ Insurance Company and confirms ABC Marine is authorized to act on its behalf. Therefore, it is acceptable.

3. War Risk Coverage with Zero Premium Listed

The LC requires coverage for both Marine and War Risks. The certificate indicates:

• Marine Risk premium: USD 4.87
• War Risk premium: USD 0.00
• Net premium: USD 4.87

The mere mention of “War Risk” is not enough to confirm coverage. A zero premium typically means no coverage is provided unless explicitly stated otherwise by the insurer.

Conclusion:

The document does not confirm War Risk coverage as required by the LC, so it is not compliant with this condition.

I trust this helps clarify the issues. Please let me know if you’d like to discuss further.

Best regards,

Mr. Old Man