When in the shipping business, there is a high chance that you may need to ship antiques, such as a pair of jewellery or a pair of furniture. These antiques, when in a pair, often have a much higher value than when separate.
But have you ever wondered what happens if, from the set, one item is damaged during shipment? Does the insurer compensate only for the damaged item or consider the whole value? To find the answer, you need to understand the pair and set clause in marine insurance.
Understanding pair and set clause
The pair and set clause explains how the insurer settles claims when insured items belong to a pair or a set, and only one or some of them are lost or damaged.
Insurers include this clause to avoid unfair compensation, as it is often seen that a pair has a higher value compared to a single item from that set. If one item from the pair is damaged, the insured cannot claim the full value of the pair; instead, they will be compensated based on the loss in value of the entire set.
Usually, the insurer pays the cost of repair or the reduction in market value.
How does the pair and set clause work?
Let’s take an example to understand this.
Suppose your cargo shipment has a pair of antique vases with a total worth of ₹10 lakh. But individually, each vase is valued at ₹2.5 lakh. If one vase breaks during transit, the remaining vase loses its matching value and becomes less desirable.
In this case, the insurer will neither compensate for the whole pair costing ₹10 lakh nor will they compensate just ₹2.5 lakh for the single broken vase. Instead, the insurer will calculate how much the pair’s overall market value has dropped.
If the remaining vase is now worth ₹1 lakh, the total loss in value will be considered ₹9 lakh, and the insurer will compensate accordingly.
Which items are covered under the pair and set clause
Pair and set clause applies to the following items:
- Jewellery sets: Rings, earrings, bracelets, or necklaces sold or insured as pairs or sets.
- Silverware and cutlery: Antique spoons, forks, knives, or tea sets that form a matching collection.
- Art pieces: Paintings, sculptures, or collectables that form a themed collection
- Navigation equipment: Paired or grouped instruments, such as compasses or sextants.
- Furniture sets: Antique chairs, tables, or bedroom furniture that are part of a matching collection.
What are the other important clauses in marine insurance?
Here are some other clauses in marine insurance that you should be aware of:
Valuation clause
The valuation clause in marine insurance specifies the method for determining the value of insured goods in case of loss or damage. For example, if a shipment of electronics worth ₹10 lakh is insured, the valuation clause may state that compensation will be based on the invoice value plus freight and insurance charges. If one box is damaged during transit, the insurer pays according to the agreed valuation, not a subjective market price.
Jettison clause
The Jettison Clause covers the intentional throwing overboard of cargo or goods from a ship to save the vessel and remaining cargo during an emergency at sea. For example, suppose you are transporting a shipment of electronics and furniture. A severe storm threatens to sink your ship. To prevent total loss, you decide to throw part of the cargo overboard. Under the jettison clause, the insurer will cover the value of the goods you sacrificed.
Sue and the labour clause
The sue and labour clause requires the insured to take necessary steps to prevent or minimise loss or damage to the insured goods or ship after an incident occurs. Suppose your cargo ship suffers minor damage during a storm. You hire divers and repair crews immediately to prevent further water damage to the goods. The insurer will reimburse you for the costs you incur for these preventive measures.
Memorandum clause
A memorandum clause records additional information or changes related to the policy without altering its main terms. For example, if a shipper temporarily increases the value of goods being transported, this clause records the change in the policy, and in the event of loss or damage, the insurer refers to the memorandum to settle claims based on the updated value.
Inchmaree clause
The inchmaree clause covers loss or damage to a ship caused by the negligence of the crew. This includes accidents in navigation or management, or the breakdown of the engine, boilers, or machinery.
Conclusion
The pair and set clause ensures fair compensation when only part of a paired or grouped item is damaged during shipment. Instead of paying the full value of the set or just the damaged piece, insurers calculate the actual loss in overall value.
This clause, along with other important clauses like valuation, jettison, and sue and labour, helps businesses protect their valuable cargo effectively.
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