QUESTIONS REGARDING INSURANCE DOCUMENTS

(Excerpt from TRADE SERVICES UPDATE Volume 12, Issue 3, May – June 2010)

QUESTIONS REGARDING INSURANCE DOCUMENTS
Question 1:
LC required Insurance Certificate in full set.
Insurance Certificate presented in two folds including 01 ORIGINAL and 01 COPY (both manually signed) contains on its face the statement ‘Covering all risks … in full set insurance issued in DUPLICATE.’
Some say that DUPLICATE in this case means two original copies. So, it is a discrepancy based on ISBP para. 29, which says ‘The number of originals to be presented must be at least the number required by the credit, the UCP 600, or, where the document itself states how many originals have been issued, the number stated on the document.’
Others say ‘No.’ They argue that DUPLICATE means two copies, so the document presented in one original and one copy is acceptable.
Please elaborate on the issue.

Question 2:
‘LC required Insurance Certificate showing claim payable at Haiphong, Vietnam.’
The document presented contains on its face the statement, ‘Claim payable at Haiphong, Vietnam’ as required by the LC. However, the document also has a pre-printed box ‘Claim, if any, payable at/in: _____________ ;’ the blank is filled with ‘ABC Co, Ltd 123 Le Loi St., Ho Chi Minh City, Vietnam.’

With regard to the ‘claim payable statement,’ can I raise the discrepancy ‘data conflict?’
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COMMENTS

From Switzerland
Question 1
See 470/TA.725 not published (to be discussed in Beijing but actually not discussed due to Eyjafjallajökull): Analysis B

Question 2
Yes, it is discrepant.
Daniel Devahive
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From USA
Great question
I asked a former colleague who lead an Export Examination Team and he suggested this: Insurance in Duplicate: ‘Duplicate’ for most documents means original and copy, but for an insurance document, the duplicate is actually considered a duplicate original, so we would expect an original and a duplicate original, which are both signed. The duplicate is there in case something happens to the original.
Any comments? Confirm.
Danielle Austin
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From Canada
My short responses to the two queries are:

Q1
The word duplicate has many meanings. The word duplicate has different meanings in different languages. In French it may mean a second original, but in English it may mean a copy. So for an LC from a French bank, such as BNP, and an LC from an English bank, such as Barclays, the answer may be different. The best thing is to define unclear words such as duplicate in the LC to avoid disputes.

Q2
In insurance practice, in a policy, the handwritten words override the words in stamp, which override words printed in margin that override preprinted words in the body of the policy.
So there is no conflict or inconsistency for a statement written by a typewriter or a stamp or by hand (unfortunately the enquirer has not specified this clearly in his query) that is different from the preprinted
wordings in the body of the policy.
There should be no discrepancy.
T. O. Lee
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From India
Question 1
I agree with T.O. Lee that ‘the word duplicate has different meanings in different languages.’ I might add that the interpretation of ‘in duplicate’ is also dependent on (specific) industry practice. Having said that, since the certificate was issued in duplicate (the question states, ‘contains on its face the statement “Covering all risks … in full set insurance issued in DUPLICATE”’), all the copies that were originally issued (original and second copy, both manually signed) were submitted, and the presentation satisfies the ISBP, I must say that, irrespective of what ‘in duplicate’ may mean, there is no discrepancy at all.

Question 2
‘LC required Insurance Certificate showing claim payable at Haiphong, Vietnam.’
Whereas, ‘the blank is filled with “ABC Co, Ltd 123 Le Loi St., Ho Chi Minh City, Vietnam.’ Haiphong is NOT in Ho Chi Minh City, nor is it the other way round!
I agree with Nguyen that a discrepancy on the ground of ‘data conflict’ can definitely be raised.
Best Rgds.
Rupnarayan Bose
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From Spain
Please find enclosed my opinions:
QUESTION 1.
NO. In addition, ISBP cannot be used to claim discrepancies.

QUESTION 2.
NO. The credit asks for claims payable at Haiphong, and the document presented states this condition.
Xavier Fornt
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From Singapore
The insurance document is acceptable. If issuing bank requires two originals, it should indicate in its LC that a full set of two original insurance documents is required. If it indicates insurance documents in duplicate, the beneficiary may present either one original and one copy or two originals.
As for the claim payable in Haiphong, it is also acceptable.
Soh Chee Seng
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From USA
In response to question 1, I note that:
From ICC Opinion R225 – 1995/96:
‘Insurance certificate in 2 originals. If the credit calls for 2 originals of the certificate, then both must be presented. One may be labelled ‘original’ and the other ‘duplicate’ (not copy). When more than one original is issued, one must be classified as the ‘original and the other as the ‘duplicate’ of the original. That is, both originals constitute the full set issued, and should be accepted as such.’
From ISBP 29: ’29. The number of originals to be presented must be at least the number required by the credit, the UCP 600, or, where the document itself states how many originals have been issued, the number stated on the document.’

Question 2:
In addition to T O Lee's comment, I would say there is no conflict because claims can be payable at more than one location. ABC Co. may have multiple locations to receive and pay the claims and the required statement from the LC is included.
Best Regards,
Glenn Ransier
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From Canada
Dear Glenn,
Thanks for your valuable input.
Documents checkers in banks have to step out of their work stations and play golf or mahjong with the traders to get themselves familiarized with current trade practices. Otherwise they cannot perform their job well. Insurers like carriers, usually have their terms and conditions of services, preprinted. If the insured needs special coverage or the insurer wishes to exclude some risks, a rider or endorsement will be attached to the policy. Most often the insurer will not check each and every term in the policy to see if there is any inconsistency or conflict with the addition of the rider. Competition is keen and an insurer cannot afford such a meticulous procedure. That is life. We have to face it. So the court would consider this insurance practice and adjudicate that in case of conflicts or inconsistency, the handwritten words in a policy will override the riders or endorsements, which will override typewritten words, which will override words written in margin, which will override words preprinted in body of the policy.
To save time in checking for inconsistencies, which can be very tedious, and to avoid future disputes, in some contracts, we see terms such as: ‘This term shall override any other conflicting terms, if any, in this contract or other contracts.’
This is also common sense. Document checking cannot be as robotic as regarded by Bernard Wheble and
Reinhardt Langerich. That is also why we cannot enforce the so called ‘best practices’ promoted by scholars livin
g in ivory towers, who don’t need to consider the costs. Consultants are like tight rope walkers, they have to find a balance between theory and practice.
T. O. Lee
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From India
Dear Glenn,
I have absolutely no problem with the statement that, ‘claims can be payable at more than one location,’ or that ‘ABC Co. may have multiple locations to receive and pay the claims.’ Sure, why not? This is, as one might say, the reality, the real world, the facts of life, or the world outside of the ‘ivory tower.’ But one cannot ignore the fact that, in credit operations, one also must contend with issues of compliance with
LC terms, compliance with the stipulations of the UCP, data conflict, data inconsistency, complying presentations, discrepancies, and the like. A document examiner must do his job, too.
The cited case, the LC clearly requires ‘Insurance Certificate showing claim payable at Haiphong, Vietnam.’ Pending a final call on which overrides which (viz., ‘handwritten words in a policy will override the endorsement, which will override typewritten words, which will override words written in margin, which will override words preprinted in body of the policy’), the document presented shows that claims are payable at two places, one of them NOT being Haiphong.
If the applicant and the issuing bank wanted claims to be paid at more than one place, for example, not only at Haiphong, but also in Ho Chi Minh City, or anywhere in Vietnam, for that matter,’ then why not? In that case, the credit ought to have so stated! (The mere omission of the name Haiphong from the LC would have served the purpose.) But, was that the original intention/purpose? Are we to go by speculation, or only by available facts? Facts (the terms in the LC ) clearly indicate otherwise.
Rupnarayan Bose
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From South Korea
Question 1
This is not a discrepancy.

Question 2
This is not a discrepancy.
Chang-Soon Thomas Song
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From Switzerland
Another typical issue where everybody is right and nobody is wrong.
This issue goes far beyond the specific case.
A French authority in documentary credit matters once wrote that ‘le banquier est écartelé entre son devoir de mandataire et son rôle d'auxiliaire du commerce international,’ i.e., (approximately) ‘quartered? Between his duty as agent and his duty as an auxiliary of international trade.’
We all know circumstances where we are reluctant to raise a discrepancy because our experience tells us that the discrepancy is purely formal and will have no impact on the commercial transaction. Still … The issue is how should a document examiner conduct his checking in 2010, i.e., through strict compliance or substantial compliance?

Should the examiner go beyond the UCP, ISBP, Opinions, Decisions, Statements, Recommendations, Queries, Docdexes, Papers, and also take into account (by learning them extensively ‘out of the work stations’), insurance practices, transport practices, inspection practices, origin rules, political or legal aspects such as sanction clauses, and so on? Why not, but to what extent and where are the limits?
Will the banking commission issue (another) statement telling us to do so and how?
Will the examiner in the near future be allowed to handle a documentary credit according to what he knows of the real world and not only according to the material provided by the banking commission? Will the difference between a good examiner and a top examiner be the extent of their knowledge of the ‘real world’ and their use of common sense? (I don’t have much faith in relying on common sense for, if people used common sense well, the world would be a different and better place)
Will all these considerations soon be obsolete due to the arrival and presentation of edocuments?
Daniel Devahive
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From India
Dear Daniel,
Very well said, indeed. We do read occasional comments about the document examiner being advised to learn about best practices, go out into the real world, and get out of the ivory tower, etc. Your thoughts, in that context, (especially, ‘but to what extent and where are the limits?’) is very relevant. To me, such (mostly, uncalled for) advices on the examination of documents are similar to a judge in a court of law being advised not to stick to the letter or the spirit of the law, but to look beyond the law. Should he then
not apply the law as it stands there and then and not go by only the facts or evidence placed in front of him to arrive at a judgement? Should he, instead, go into the circumstances, for example, that forced (?) a man to violate the law, the problems he faced, his family circumstances, his psychological profile, the value systems of the accused, his constraints and needs … as you said, where is the limit? Is this his job!
The UCP was developed after a lengthy process, after detailed discussions with a wide range of stakeholders, taking into account as many practical issues as possible based on feedback from the national committees, members of the industry, and the users. It was not created by people sitting in their ivory towers, nor by people far removed from the real world.
Once finalized and approved, we have to accept the rules and work on the basis of the laws/rules as they stand. The UCP is not perfect. It can never be. But the way forward, I believe, is to offer constructive criticism to the ICC, and work towards formally changing the law to remove the glitches, to improve it further. No purpose will be served by being critical of (the judge or) the document checker whose job it is to apply the law as it stands at that point in time. He did not make the law!
Just my thoughts.
Rupnarayan Bose
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From Ukraine
We should not rule int'l trade and decide what is and is not important. We are responsible to the beneficiary and to the applicant for carrying out the LC conditions under the rules that they are subject to. We should not be guessing what was intended by this or that condition put forward by the applicant. (ISBP ART.2).
If we start to examine the documents based on our own experience (in trade, legal issues etc.) we should then handle the LC, contract, and legal proceedings, if any, for our customer to the end to prove that our opinion was correct. So the UCP and the LC itself are the law for examination. The problem actually occurs when the checker cannot apply the UCP correctly. Then the first proceeding may be initiated by the customer against the bank :)). The bank would probably win but would lose much time and effort.
Now as for the insurance document
1) Place for payment claims: to avoid any ambiguity any preprinted and/or overprinted text should have been deleted and approved as a correction, otherwise following art.14d of the UCP I'd raise a discrepancy.
2) First of all it is the requirement of the LC to present a ‘full set,’ i.e., all issued originals must be presented.
The document shows as issued ‘in duplicate’ what is normally understood to be two equal in force documents, i.e., two originals. The second, fold though manually signed, is marked as 'copy,' which according to art.17b of UCP cannot be treated as an original.
Lyudmila Yeremenko
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From Canada
Dear Rupnarayan,
I would be pleased to respond to your comments below, which represent the thinking of a lot of LC practitioners: ‘Very well said, indeed. We do read occasional comments about the document examiner being advised to learn about best practices, go out into the real world, and get out of the ivory tower, etc. Your thoughts, in that context, (especially, ‘but to what extent and where is the border?’) are very relevant."
FYI, upon public demand and req
uest, I have prepared workshops on ‘What bankers should know about nonbank trade practices?’ (such as cargo insurance, transport by air, sea, road, and multimodal, including charter party carriage). After completing these workshops, bankers should have no difficulty determining compliance on documents about cargo insurance, all modes of transport, and the charter party bill of lading. The workshops provide the limits. What bankers need not know will not be included in the workshops. Periodical refresher courses provide updates on the trade practices of non-bank trades, such as cargo insurance and transport. So bankers now cannot rely on the excuse: ‘Where are the limits?’The real issue before us is therefore:
Whether your bank has the budget for it? Or whether you are willing to learn new things (not tricks of course :-), just for laughs to ease the worries, anxiety, and tightened nerves built up by watching the exciting World Cup matches when your favourite team is one goal behind.) As a Brazil fan, I always hope that this team loses one goal first so that we can see them working harder for our enjoyment.
T. O. Lee
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From Canada
Dear Daniel,
I would like to share my views on your statements quoted here below:
‘Will the examiner in the near future be allowed to handle a documentary credit according to what he knows of the real world and not only according to the material provided by the banking commission? Will the difference between a good examiner and a top examiner be the extent of their knowledge of the ‘real world’ and their use of common sense? (I do not have faith in common sense, for if people were good at using common sense the world would be a different and better world)
Will all these considerations soon be obsolete due to the arrival and presentation of documents?’
1. It is unreasonable, if not also ridiculous, that compliance of a cargo insurance policy be determined by a person who does not know cargo insurance basics. It is like putting a gun into the hands of a baby, as is well said by a Chinese proverb. ‘If you cannot stand the heat, you better stay away from the kitchen’ is the another comment from the English world.
2. FYI, to fill market needs I have prepared workshops to show document checkers what they need to know about cargo insurance and transport. So they do not have to worry about ‘where are the limits?’ ‘Out of bounds’ knowledge will not be included in the workshops.
3. Common sense is promoted by Bernard Wheble, the father of the LC, and Reinhardt Langerich. Whether all people have common sense or not is not an issue. We are all different. Some are winners and some are losers, the same as in World Cup. Can a banker tell his clients that he has no common sense?
T. O. Lee
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From Canada
Dear All,
If the LC asks for claims payable in A and the policy states claims payable in A but also includes a second place B for payment of claims, there is nothing wrong with this. It is in fact more favourable to the holder of the policy. He will have more choice.
Let us consider a real life case.
A husband is busy watching the World Cup and asks his wife to buy him Colgate tooth paste. When his wife goes to the supermarket, she notices that there is a bundle offer at Wal-Mart ‘Buy one Colgate tooth paste and get one free Dove soap.’ Can her husband blame her for ‘non-compliance’ to his request? If he did, I bet that he would not watch the World Cup at home any more because he should be in a hospital. However, I can think of one possible benefit for him. His tooth paste may last longer because he has lost some teeth due to his ‘refusal notice.’ So what is wrong when the LC requirement is filled and an additional benefit is offered? I would say this is ‘double compliance.’
T. O. Lee
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From Denmark
I have following comments:
Question 1:
The presented insurance document is discrepant.
The L/C requires full set and the document itself states issued in two originals.
Therefore two originals are required, and the document marked copy is not an original.

Question 2:
The presented insurance document is not discrepant.
The requirement stated in the L/C is also stated on the document. This statement is not in conflict with the other statement concerning claims payable.
Jakob Ingerslev
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From Ukraine
I agree that it's not enough to use the UCP only to check the documents and I know that a knowledge of the common practice is a valuable thing.
In this respect, if the insurance company would like to provide several places for payment then the document should state ‘Claims payable at Haiphong, Vietnam, and/or ABC Co., Ho Chi Minh’ or something similar.
The document presented leaves place for doubt and appears as if someone forgot to delete the incorrect data.
The document presented contains on its face the statement ‘Claim payable at Haiphong, Vietnam’ as required by the LC. However, the document also has a preprinted box ‘Claim, if any, payable at/in: _____________’ ; and the blank is filled with ‘ABC Co, Ltd 123 Le Loi St., Ho Chi Minh City, Vietnam.’ The blank was intentionally filled with ABC Co Ltd. And after that perhaps overridden with the required text.
In the real world we may find out that the company ABC Co. won’t accept the claim because they had received other instructions from the insurance company (in particular that payment under this certificate would be made in Haiphong).
Certainly I don't know how insurance companies used to work but I know how many of local companies now work. They can refuse to accept the document because of the slightest deviation and that is very often not because they don't want to fulfil their obligations but because of the imperfection of local law.
Lyudmila Yeremenko
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From Switzerland
Dear T.O.,
I fully agree, as Lyudmilla puts it, that ‘knowledge of the common practice,’ that is, some knowledge in transport, insurance, contracts, Incoterms, etc., is a valuable thing and, for that matter, a necessary thing. It helps the banker in various circumstances. I have no doubt that the workshops you have prepared are very valuable too. But in documentary credit matters the trade practices cannot prevail over the rules and other texts of the Banking Commission.
As regards the problem concerned, i.e., Haiphong v. Ho Chi Minh City, if I take the trade practices (insurance practice) and common sense into account, I could accept the document as a complying document. But so far and unless the Banking Commission tells me that trade practices must be fully considered (again: why not?) the document for me is discrepant.
Daniel Devahive
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From Vietnam
I am of the following opinions:
Question 1:
I tend to think that it is not a discrepancy. In reply to a similar query, Thierry Senechal, Policy Manager of Banking Commission, wrote in Document 470/TA.725 (ED) as follows: ‘If an insurance document states “issued in duplicate” it could mean an original and a copy, as issued by the insurance company, as opposed to an original and a photocopy.’
The copy in this case is understood as the copy of the original, not an original or a photocopy. I believe Senechal’s view is correct.
A full set does not always mean more than one original. Therefore, if the applicant expects to receive a full set of more than one original, he should state the number of originals required, e.g., Insurance certificate in two originals.

Question 2:
I must say that it is not a discrepancy (because, just a joke, I don’t want to lose any teeth as warned by T.O Lee).
From the described scenario, I see that the statement ‘Claim payable at Haiphong’ ap
pears in the document without indicating the agent’s name and address, whereas the blank of the preprinted box is filled in with the claim settling agent’s full name and address. This may reveal the truth that the insurance company has no agent in Haiphong, and that the statement ‘claim payable at Haiphong’ is indicated in order to comply with the LC requirement, whereas the claim if any is to be submitted to its nominated agent in Ho Chi Minh City for settlement.
Anyway, the statement ‘Claim payable at Haiphong’ is stated in the document as required by the LC, hence, the document is deemed to be complying. No matter where the claim settling agent is, the claim can be payable at Haiphong.
Nguyen Huu Duc
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From Switzerland
T.O.,
Somehow, your real life case conflicts with ISBP 64 b.
Daniel Devahive
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From Canada
Thanks for reminding me of ISBP paragraph 64 (b) which is however, highly controversial.
In trade practice, manufacturers normally will ship 10 per cent free spare parts with household appliances. This trade practice should be respected by UCP 600 and ISBP.
Having said that, I would like to share with you one of my past cases where consumer goods were shipped from the United States to a Muslim country. To maintain privacy I will not disclose other details here.
Along with the goods, posters were shipped as free promotion materials but were not called for in LC. The problem was that those American posters featured a very sexy scantily clad model, which resulted in the posters, as well as the consumer goods, being confiscated and destroyed by the customs authority.
Under such unusual situation, ISBP paragraph 64 (b) should apply, although not necessarily in other more usual circumstances.
Hence I do not support this paragraph whole heartedly. That is why I cited the Colgate tooth paste bundled with Dove soap example. I think ISBP 64 (b) should not apply to this bundle sale.
T. O. Lee