Contingency Insurance — Supplementary Cover for Deficiencies in Counterparty Insurance
Interlink編集部What Is Contingency Insurance?
Contingency Insurance is a provisional and supplementary marine cargo insurance arranged to cover situations where, despite the assumption in the transaction that the counterparty will arrange cargo insurance, such insurance is absent, coverage is insufficient, the insured party cannot exercise their claim rights, or the claim procedures after an incident do not function effectively.
Ordinarily, marine cargo insurance is arranged as the principal insurance by the cargo owner, seller, buyer, trading company, or similar parties based on their own insurable interest.
However, in international sales, the sales terms, risk transfer, title transfer, payment terms, responsibility for arranging insurance, endorsement of insurance policies, and insurance claim rights do not necessarily align at the same point in time.
Therefore, even if the contract stipulates that the counterparty should arrange cargo insurance, situations may arise after an incident where “no insurance was arranged,” “insurance existed but essential risks were not covered,” or “an insurance policy was issued but one’s own company could not make a claim.”
Contingency Insurance is considered as back-up insurance that supplements these gaps between dependence on the counterparty’s insurance and actual loss recovery.
However, Contingency Insurance is not intended to provide double compensation for the same loss. Nor does it generally cover all losses arising solely from the insolvency or credit deterioration of the trading partner causing non-collection of payment.
The specific coverage, Trigger Conditions, sum insured, priority claims over the counterparty’s insurance, deduction of recoveries from other insurance, and product names vary depending on the insurer and the individual policy contract.
Scope Covered in This Article
| Item | Contents Covered in This Article | Contents to Be Confirmed Separately |
|---|---|---|
| Contingency Insurance | The basic positioning as complementary marine cargo insurance in case the counterpart’s insurance does not exist, does not function, or is insufficient | Coverage scope, deductibles, Trigger Conditions, underwriting eligibility, and claims payment decisions for individual products |
| Difference from Regular Marine Cargo Insurance | Differences in purpose between primary and back-up insurance, insurable interest, sum insured, and claim procedures | General cargo insurance terms such as Institute Cargo Clauses |
| CIF, CFR, FOB Transactions | Insurance arrangements under sales terms and the approach when loss recovery after an accident does not align | Details are covered in “CIF, CFR, FOB Transactions and Contingency Insurance.” |
| Insurance Policy and Claim Rights | Verification of the insured party, endorsements, assignment, insurance certificates, and direct claim eligibility | Obligations to provide CIF insurance documents and legal assignment of insurance policies require review of individual contracts and governing laws |
| D/P and D/A Transactions | Residual interest when cargo damage, document refusal, and inability to collect payment occur simultaneously | Collection procedures, debt collection, buyer credit risk, and trade credit insurance |
| L/C Transactions | Practical points when insurance policies or certificates are included as part of letter of credit conditions | Uniform Customs and Practice for Documentary Credits (UCP), bank document scrutiny, and final judgment on discrepancies |
| Boundary with Trade Credit Insurance | Distinction between residual interest resulting from cargo incidents and non-payment due solely to bankruptcy or credit deterioration | Trade credit insurance underwriting criteria, payment conditions, and receivables management |
| Underwriting Timing | Necessity to declare relevant transactions, counterpart insurance, and residual risks before accident occurrence or recognition | Retroactive coverage, known losses, disclosure obligations, and individual underwriting decisions |
| Freight Forwarder Practice | Guidance on confirming insurance arrangement, insurance documents, accident notification contacts, and claimants | Insurance solicitation, guarantee of coverage, legal interpretation of insurance contracts, and claims payment judgment |
| Double Insurance | Basic precautions when both the counterpart’s insurance and Contingency Insurance respond to the same loss | Details are covered in “Double Insurance under the Marine Insurance Act 1906.” |
Why Contingency Insurance Becomes Necessary
In international trade, the party bearing the risk of cargo damage and the party arranging marine cargo insurance may not always be the same.
Under CIF terms, the seller arranges insurance for the buyer’s benefit; however, the buyer may not always be able to claim directly from that insurance after an incident.
In FOB or CFR transactions, although the sales contract generally stipulates the buyer should arrange cargo insurance, the buyer may fail to do so, or there may be gaps in coverage regarding the voyage, cargo details, or insurance period.
In D/P or D/A transactions, damage to the cargo may lead the buyer to refuse to collect the documents and consequently reject payment.
In such situations, the issues extend beyond mere physical damage to the cargo and may include uncollected payment, costs for cargo recovery or disposal, inability to resell, or obligations to resupply.
Contingency Insurance is designed not to respond only after problems with the counterparty’s insurance come to light post-accident, but to assess before the transaction starts what damages may remain with one’s own company if the counterparty’s insurance fails to operate effectively.
Differences from Standard Marine Cargo Insurance
| Item | Standard Marine Cargo Insurance | Contingency Insurance | Main Reference Documents |
|---|---|---|---|
| Main Purpose | Directly compensate damage to the cargo interests owned by own company | Complement residual damages when the counterparty’s insurance does not exist, does not function, or is insufficient | Sales contract, insurance policy, certificate of counterparty insurance |
| Positioning of Insurance | Arranged as the primary cargo insurance | Arranged as a provisional, supplementary back-up insurance | Primary insurance policy, Contingency Insurance clause |
| Expected Insured Parties | Cargo owners, sellers, buyers, trading companies, etc. | Sellers, buyers, trading companies, etc., who retain economic interests while relying on counterparty insurance | Invoice, sales contract, settlement documents |
| Insurable Interest | Cargo ownership interest, risk burden, sales contract profits, etc. | Remaining cargo interest, payment claims, or residual contractual interests retained by own company due to counterparty insurance failure | Terms of risk transfer, ownership relationships, payment status |
| Sum Insured | Set based on cargo value, freight, insurance premium, expected profits, etc. | Considered based on own company’s maximum loss, shortage amount of primary insurance, and residual claims | Invoice, freight details, outstanding claims balance, insurance amount calculation sheet |
| Claim Procedure | Notify incidents and claim directly on own company’s insurance | Prior claim to counterparty insurance may be required, including verification of refusal reasons or shortfall amounts | Incident notification records, counterparty insurance payment responses, collection details |
| Relationship with Other Insurances | Check for overlapping insurance or sharing if other cargo insurance exists | Deduction of recoveries from counterparty insurance, other insurance clauses, subrogation, and sharing to be confirmed | All insurance policies, insurance payment calculation sheets |
| Timing of Arrangement | Usually arranged before the start of risk | Report transaction and counterparty insurance issues before incident occurrence or recognition | Scheduled shipment, insurance application form, notification materials |
Contingency Insurance does not unconditionally replace the cargo insurance that the counterparty should arrange with own company’s insurance.
Likewise, it is not possible to recover the full amount for the same damage from both the counterparty’s insurance and Contingency Insurance.
Boundary Between Contingency Insurance and Trade Credit Insurance
When considering Contingency Insurance, it is important to distinguish between residual interests arising from cargo incidents and simple credit risks.
| Event | Primary Risk | Relationship to Contingency Insurance | Other Insurance to Consider |
|---|---|---|---|
| Buyer refuses to pay due to cargo damage | Residual interest linked to cargo incident and unpaid receivables | May be covered depending on contract terms and insurable interest | Overlap with trade credit insurance should be checked |
| Buyer has no cargo insurance and cargo is a total loss | Unrecoverable cargo damage due to absence of counterparty insurance | Typical situation for consideration | Seller’s Interest Insurance on seller’s side should also be confirmed |
| Buyer becomes insolvent but no cargo incident occurred | Simple credit risk and uncollectible claims | Generally outside the main scope of Contingency Insurance related to cargo incidents | Trade credit insurance, transaction credit insurance |
| Buyer delays payment due to cash flow problems | Deterioration of credit and delayed payment | Likely excluded if no causal link with cargo damage exists | Trade credit insurance, receivables management |
| After cargo damage, buyer refuses to collect documents | Cargo damage, refusal of document collection, unpaid receivables | Confirm remaining interests and Trigger Conditions for your company | Credit insurance, claims under sales contract should also be checked |
| Counterparty’s insurance denies coverage and buyer refuses payment | Combined risk of cargo insurance non-payment and uncollectible payment | Confirm covered risks and Trigger Conditions under Contingency Insurance | Confirm division of liability with trade credit insurance |
It is important not to judge solely by the outcome of “inability to collect payment.”
Verify how the cargo incident, failure of counterparty insurance, and your company’s residual interests are connected, and differentiate these from losses due to simple credit deterioration or insolvency.
Situations Prone to Issues
| Situation | Main Cause | Documents to Check | Key Points for Judgment | Initial Response |
|---|---|---|---|---|
| Buyer has not arranged insurance in FOB or CFR trade | Buyer was unaware of responsibility to arrange insurance | Sales contract, insurance ledger, buyer confirmation letter | Whether a valid primary cargo insurance existed before the incident | Confirm presence of counterparty insurance and check company’s residual interest |
| Coverage of CIF insurance is limited | Seller arranged insurance under limited conditions | Insurance policy, applicable clauses, sales contract | Whether the actual cause of the accident is covered by the counterparty’s insurance | Verify accident cause and presence of additional coverage |
| Claim right under CIF insurance unclear | Endorsement, transfer to buyer, or insured party details insufficient | Insurance policy, endorsements, transfer records | Whether the company can claim directly with the insurer | Inquire with counterparty and insurer about claim rights |
| Documents are not collected in D/P transaction | Buyer refuses payment and document collection due to cargo damage | D/P documents, sales contract, survey report | What economic loss remains with the seller | Separate cargo insurance and payment collection processes for clarity |
| Payment at maturity refused in D/A transaction | Cargo damage combined with buyer’s credit issues | D/A documents, outstanding receivables, accident records | Whether it is possible to distinguish loss due to cargo accident from simple credit risk | Check with both cargo insurance and trade credit insurance |
| Discrepancy in L/C insurance documents | Insurance amount, currency, date, or coverage conditions do not match letter of credit | Letter of Credit, insurance policy, bank notifications | Consider insurance validity and bank’s document examination separately | Confirm correction feasibility with bank, seller, and insurer |
| Counterparty insurance covers different cargo | Mistakes in policy number, cargo details, or voyage declaration | Insurance policy, invoice, B/L, declaration records | Whether the damaged cargo is included in the insurance coverage | Cross-check cargo, voyage, and insurance period |
| Counterparty insurance checked for the first time after accident | No pre-contract or pre-shipment confirmation was done | Sales contract, insurance documents, communication records | Whether new underwriting is possible after accident awareness | Notify existing insurer and review advance arrangement for next transaction |
Timing of Underwriting Contingency Insurance
Contingency Insurance is not a type of insurance where coverage for damages that have already occurred can be added retroactively after an incident.
In principle, the contracting party must report to the insurance company the transaction subject, cargo, transportation segment, the content of counterpart insurance, the insurable interest remaining with the company, and the anticipated shortfall risk before the start of the risk or at least before becoming aware of any incident or damage, so that underwriting conditions can be confirmed.
Retroactive underwriting after the occurrence of an incident, after damage has occurred, or after the specific recognition of potential damage is a special issue that differs from normal insurance underwriting.
Insurance companies do not necessarily underwrite retroactively known incidents or damages, so it is not appropriate to conduct transactions on the assumption of arranging coverage after recognizing an incident.
| Timing of Confirmation | Items to Confirm | Key Points for Judgment | Action |
|---|---|---|---|
| Before Signing the Sales Contract | Sales terms, payment terms, responsibility for insurance arrangement | Is the structure dependent on counterpart insurance? | Clarify the roles of the primary insurance and the supplementary insurance |
| Before Shipment | Counterpart insurance policy, coverage terms, insured amount | Can any shortfalls or uncertainties be identified before the incident? | Consult on underwriting Contingency Insurance if necessary |
| Before Risk Commencement | Target cargo, voyage, insurance period, own insurable interest | Is the insurance subject specifically identified? | Complete application and disclosure, and confirm the start of coverage |
| Before Incident Recognition | Have you already recognized information indicating damage? | Is underwriting possible as an unknown risk? | Disclose incident information honestly to the insurance company |
| After Incident Recognition | Notification of the incident to the existing insurance | Will the existing contract respond rather than new underwriting? | Provide necessary notifications to the existing primary insurance and Contingency Insurance |
Decision Flow for Considering Contingency Insurance
- Check the sales and payment terms
Confirm the sales terms such as CIF, CFR, FOB, and the payment terms such as D/P, D/A, L/C. - Identify the party bearing the risk in case of an incident
Clarify the risk transfer, ownership relationships, and payment status. - Verify the primary cargo insurance
Confirm the existence of seller’s insurance, buyer’s insurance, individual insurance, or blanket cover insurance. - Confirm the insurance policy and the claim rights
Check the insured party, endorsements, assignments, beneficiaries, and the possibility of direct claims. - Check coverage conditions, insured amount, and insurance period
Ensure there are no shortfalls relating to the cause of the incident, cargo value, and transport segment. - Verify whether the counterparty’s insurance can actually function
Confirm the counterparty’s cooperation, notification contacts, survey arrangements, required documentation, and claim deadlines. - Specify the damages remaining with your company
Organize your cargo ownership interests, unpaid amounts, replacement costs, disposal costs, and other expenses. - Distinguish between cargo accident risk and credit risk
Separate simple bankruptcy or credit deterioration of the buyer from residual interests arising from cargo accidents. - Confirm underwriting eligibility before the incident
Declare the target transaction, counterparty insurance, residual interests, and desired coverage to the insurance company. - Check relationships with other insurances
Confirm prior claims, deduction of recovered amounts, double insurance, subrogation, and proration among insurers.
Example 1 | When a CIF Insurance Policy Exists but the Buyer Cannot Make a Claim
A Japanese buyer purchased goods under CIF terms and had received a copy of the insurance policy from the seller.
After the cargo was completely lost, the buyer attempted to claim with the overseas insurer, but the insured party listed on the policy was only the seller, and there was no endorsement or transfer record to the buyer.
Furthermore, the seller refused to cooperate with the insurance claim, citing a dispute over the purchase price.
In this case, merely having the insurance policy does not guarantee the buyer’s recovery of damages.
It is necessary to confirm whether there is a benefit clause allowing the buyer to claim directly with the insurer, whether the insurance policy needs to be transferred, or if the seller’s cooperation is a condition for making the claim.
If the buyer had arranged Contingency Insurance before the incident, it should be confirmed whether the inability to claim on the counterparty’s insurance meets the Trigger Conditions.
Example 2｜When the Buyer Did Not Arrange Insurance Under a CFR Transaction
The seller exported the cargo under CFR terms, with the contract stipulating that the buyer arranges marine cargo insurance.
However, the buyer misunderstood, believing that since the seller arranged the sea transport, insurance was also included, and in fact did not arrange marine cargo insurance.
After the cargo was loaded on board, significant damage occurred, and the buyer refused to accept the cargo and to make payment.
In this situation, although the risk of the cargo had passed to the buyer, the seller may still suffer economic losses such as unpaid receivables, costs for cargo recovery, or disposal expenses.
If the seller considers Contingency Insurance or a Seller’s Interest-type policy, it is necessary to declare before the incident the absence of buyer’s insurance, the seller’s residual interest, and settlement terms such as D/P or D/A.
Example 3｜Only Buyer Insolvency Occurs, Not a Cargo Incident
The seller delivered the cargo in normal condition, but the buyer became insolvent afterward and did not pay.
There was no damage to the cargo, and there was no issue of the counterparty’s insurance failing to operate.
In this case, the primary loss is not damage caused by a cargo incident but the credit risk resulting from the buyer’s insolvency.
Therefore, rather than Contingency Insurance premised on cargo incidents, it is fundamental to confirm trade credit insurance, accounts receivable protection, or collection procedures.
Simply viewing the outcome as non-payment of the price does not qualify as grounds for Contingency Insurance coverage.
Example 4｜Attempting to Add Contingency Insurance After an Incident
The importer had purchased the cargo under CIF terms but had not previously confirmed the details of the seller’s insurance coverage.
After being informed that the cargo was damaged during transportation, the importer learned that the seller’s insurance might have limited coverage and attempted to arrange Contingency Insurance separately.
However, arranging new insurance after recognizing the occurrence of an incident or the possibility of damage differs from underwriting insurance for unknown risks.
It is not automatically allowed to enroll insurance after the incident is known in order to cover damage that has already occurred.
In such cases, rather than arranging new insurance, the importer should review the seller’s insurance existing at the time of the incident, their own blanket or scheduled insurance policies, and other existing coverages, and carry out necessary incident notifications accordingly.
Scope of Freight Forwarder Involvement
The actions a freight forwarder takes regarding Contingency Insurance vary depending on their contractual position, issuance of House B/L, whether there is a Door-to-Door contract, and the specific tasks individually commissioned.
| Standard Classification | Typical Position | Possible Actions Regarding Contingency Insurance | Points to Note |
|---|---|---|---|
| 1. Simple Intermediary 単純取次 |
Acts as a liaison to insurance agents, shipping lines, customs brokers, etc. | Informs the shipper whether cargo insurance exists, and provides guidance on insurance certificates and claim contact points | Does not guarantee coverage details or claims payment |
| 2. Cargo Transportation Service Provider 貨物利用運送事業者 |
Provides cargo transportation services in their own name | Organizes transport segments, accident locations, cargo details, and shipping documents | Does not confuse carrier liability with cargo insurance coverage |
| 3. NVOCC / House B/L Issuer | Issues House B/L and is involved as the Contracting Carrier | Provides information on House B/L, Master B/L, accident segments, and related carriers | Issuing the House B/L does not by itself confer authority to arrange insurance |
| 4. Door-to-Door Single Contractor Door-to-Door一貫契約者 |
Contracts continuously from pickup through final delivery | Encourages confirmation that the actual transport segments and insurance periods align without discrepancy | Door-to-Door contracting and cargo insurance contracting are separate agreements |
| 5. Agent/Coordinator for Specific Operations 特定業務の代理・調整者 |
Coordinates specific tasks such as insurance arrangement, accident notification, and surveys on an individual basis | Within explicitly delegated scope, collects documents, communicates accident information, and verifies progress | Does not make conclusive statements on insurance conditions or claim eligibility beyond the delegation scope |
Terms such as Contracting Carrier or Actual Carrier represent positions under the transport contract or legal liability. They do not replace the Standard Five Classifications used to organize freight forwarder involvement types.
Furthermore, performing or arranging actual tasks such as packing, storage, inspection, vanning, or devanning does not create a sixth independent classification. These operational activities are organized within one of the Standard Five Classifications according to the forwarder's contractual position, for whom, and to what extent they undertake these tasks.
Authority for insurance arrangement, underwriting authority, carrier liability, or claims payment decision cannot be determined solely by these Five Classifications in individual cases.
Common Misunderstandings
| Common Misunderstanding | Actual Consideration | Practical Response |
|---|---|---|
| Because the other party has insurance, our company is always protected | Even if insurance exists, there may be issues with coverage terms, insured amounts, claim rights, or cooperation from the other party. | Verify the insurance policy, applicable clauses, insured amounts, and claim contacts in advance. |
| Contingency Insurance covers everything | The scope of coverage varies depending on the covered transactions, insurable interests, Trigger Conditions, and relationship with the other party's insurance. | Clarify which residual damages the insurance is meant to complement. |
| Contingency Insurance can be added even after an incident | Retroactive acceptance after the incident or damage recognition involves special issues distinct from normal underwriting. | Confirm acceptability before the risk start or before incident recognition. |
| Under CIF, the buyer does not need to verify insurance | The seller's insurance may not provide the coverage, amounts, or claim rights required by the buyer. | Confirm insurance documents and direct claim possibility. |
| Under FOB or CFR, no insurance issues remain with the seller | If the buyer fails to arrange insurance, the seller may face unrecovered receivables or disposal costs. | Check the buyer’s insurance and the seller’s residual interests. |
| Anyone can claim insurance money if there is an insurance policy | Verification of insured party, endorsements, transfers, interest clauses, and required documents is necessary. | Identify the claimant before the incident. |
| If payment cannot be collected, the loss is covered by Contingency Insurance | Simple bankruptcy or credit deterioration may fall under trade credit insurance instead. | Delineate losses due to cargo incidents from credit risks. |
| You can receive full compensation each from the other party’s insurance and Contingency Insurance | Double recovery exceeding actual loss for the same damage is not permitted. | Fully disclose recovery amounts from other insurance. |
| The Contingency Insurance sum insured can be the same as CIF insurance | Consider the company’s insurable interest, shortfall in primary insurance, and maximum loss. | Organize cargo value, outstanding receivables, and incidental expenses. |
| The freight forwarder confirmed insurance, so coverage is guaranteed | Confirming whether insurance is arranged is different from judging coverage content and claim payment. | Make final confirmation with the insurance company or insurance agent. |
Practical Decision-Making Checklist
| Timing of Confirmation | Items to Confirm | Contact Parties | Actions if Issues Arise |
|---|---|---|---|
| Before Concluding Sales Contract | Sales terms, payment terms, responsibility for arranging primary insurance | Seller, buyer, trading company, sales representative | Clarify the insurance arrangement responsibilities and necessary coverage conditions contractually. |
| Before Insurance Underwriting | Own insurable interest, counterparty insurance, maximum loss | Insurance company, insurance agent | Confirm underwriting eligibility for Contingency Insurance and insurance amount. |
| Before Shipment | Counterparty insurance policy, certificate, coverage conditions, insurance amount | Counterparty, insurance company, insurance agent | If coverage is insufficient, consider modifying terms or obtaining supplementary insurance. |
| Upon Receipt of Insurance Documents | Insured party, endorsements, assignments, possibility of direct claims | Counterparty, bank, insurance agent | Review claim rights and document completeness before any incident. |
| When Setting D/P or D/A | Document release, payment of proceeds, residual interest in cargo damage | Bank, trading company, seller, buyer | Distinguish between cargo incident risks and credit risks to decide response. |
| When Setting L/C | Insurance amount, currency, coverage conditions, dates on insurance documents | Bank, seller, buyer, insurance agent | Ensure consistency between letter of credit terms and insurance documents. |
| Upon Incident Occurrence | Notification of incident to counterparty insurance and own insurance | Insurance company, insurance agent, counterparty, freight forwarder | Check notification deadlines and provide required notices to both parties. |
| If Counterparty Insurance Denies Payment | Reason for denial, exclusions, claim rights, document deficiencies | Counterparty’s insurance company, own insurance company | Confirm whether the Trigger Conditions for Contingency Insurance are met. |
| When Buyer’s Credit Concerns Arise | Presence of cargo incident, outstanding receivables, reason for payment delays | Buyer, trading company, bank, insurance company | Distinguish between trade credit insurance issues and residual interest from cargo damage. |
| When Recovering from Other Insurance | Recovery amount, internally paid portion, residual damage | All relevant insurance companies | Avoid double recovery and promptly disclose recovery status. |
Limitations of Contingency Insurance
Contingency Insurance can be an effective measure in transactions that rely on the counterparty's insurance; however, it is not a catch-all solution.
Even when the counterparty's insurance functions effectively, Contingency Insurance cannot always be freely chosen as a substitute for the primary insurance.
Risks not covered by the counterparty’s insurance are not necessarily covered automatically by Contingency Insurance either.
Moreover, simple insolvency, credit deterioration, or payment delays by the counterparty may fall outside the scope of Contingency Insurance—which covers cargo incidents—and instead pertain to trade credit insurance or other forms of coverage.
One should not assume that adding insurance resolves all transaction risks. It is essential to clearly define the specific losses to be supplemented, the insurable interest, Trigger Conditions, and the relationship with other insurance policies.
Summary
Contingency Insurance is a provisional and supplementary marine cargo insurance designed to cover situations where the counterparty is assumed to arrange cargo insurance but such insurance is absent, insufficient, unenforceable, or where claim procedures after an incident fail to function properly.
It is not intended for unconditional use as a substitute for primary cargo insurance, nor is it insurance designed to receive double indemnity for the same loss.
In CIF transactions, even if the seller has arranged cargo insurance, it is necessary to verify the coverage terms, insured amount, insured party, endorsements, transferability, and direct claimability.
In CFR and FOB transactions, if the buyer has not arranged primary cargo insurance, the cargo loss may be uninsured, potentially causing residual losses to the seller such as uncollected payment and disposal costs of the cargo.
In D/P and D/A transactions, cargo damage, refusal to release documents, and payment default could simultaneously become issues. For L/C transactions, it is essential to separately verify the validity of insurance documents and their compliance with letter of credit requirements.
Simple buyer insolvency or credit deterioration resulting in payment default is generally not a Contingency Insurance issue caused by a cargo incident but may fall under trade credit insurance or similar products.
Contingency Insurance should not be added only after an incident occurs or is recognized.
It is important to declare to the insurer the relevant transaction, cargo, transportation, counterparty insurance, your own insurable interest, and the anticipated coverage gaps before the risk commences or the incident is known, to establish underwriting conditions.
At the time of an incident, it is necessary to clarify details regarding both the counterparty’s insurance and your own insurance, including incident notification, insurance claim rights, required documentation, recoveries from other insurance, and residual losses.
The most important matter is not “whether the counterparty is supposed to insure,” but confirming before the incident which losses would remain if the counterparty’s insurance fails and which insurance would cover those losses.
The scope of coverage, insured amounts, timing of underwriting, Trigger Conditions, priority claims against counterparty insurance, and coordination with other insurance policies under Contingency Insurance vary by contract. For actual arrangements, please consult with the respective insurance company or insurance agent.
This article aims to provide general practical guidance and does not provide legal or contractual judgments on individual sales contracts, insurance policies, letters of credit, debt collection, or insurance claim payments.
