What it means
Goods that travel internationally pass through many hands, from a factory floor to a truck, then a port, a ship, another port and a final delivery. Without a clause that links these stages, the cover might protect the goods only at sea, leaving gaps on land.
The warehouse-to-warehouse clause closes those gaps. Cover starts when the goods leave the warehouse named in the policy for the purpose of loading, and it continues in the ordinary course of transit until delivery at the destination warehouse.
Short, ordinary stops on the way, such as a transfer between vehicles at a port, normally stay within the cover. There are limits.
Cover typically ends if the goods are stored for long periods at the destination, if they are delivered to a warehouse other than the one named, or after a fixed number of days following discharge from the ship, so the exact wording matters. The clause is important for trade finance, because banks that finance shipments usually insist on insurance for the whole journey.
A buyer who pays for goods under a letter of credit wants to know that a loss on a truck near the port will be covered. Buyers and sellers should check which party is responsible for arranging the cover under the agreed trading terms.
In some arrangements the seller insures the goods up to a point, and in others the buyer takes responsibility earlier, so the insurance must match the transfer of risk. Premiums depend on the goods, the route, the packaging and the value insured.
Fragile or high-value cargo, such as electronics or pharmaceuticals, usually costs more to insure than bulk materials, and a claims record can lower the price. Brokers often advise insuring for the invoice value plus a margin, commonly around 10%, to cover freight and expected profit.
In practice
Real-world examples.
Example
A furniture exporter ships containers from a factory in one country to a retailer in another. The insurance policy includes a warehouse-to-warehouse clause, so a lorry accident on the way to the port is covered as well as damage during the sea voyage. The premium is a small fraction of the cargo value, and the exporter treats it as a routine cost of shipping.
Example
A pharmaceutical distributor imports temperature-sensitive goods and asks its broker to confirm that the clause covers delays at the port. The broker explains that cover continues in the ordinary course of transit, but that spoilage cover depends on additional wording.
Example
A small business imports machinery and finds that the supplier's insurance ends at the departure port. Its adviser arranges its own cover with a warehouse-to-warehouse clause so that the goods are protected from the buyer's side until delivery at its factory. The buyer also keeps the policy documents with the shipping papers in case a claim is needed.
Case study
Seen in the real world.
Tidewater Components is an illustrative, fictional importer of electronic parts. It bought a policy that covered only the sea voyage, because the premium was lower, and assumed that its supplier's trucking company carried its own insurance.
A container was damaged when a lorry overturned on the way from the supplier's factory to the loading port. The sea policy did not apply because the goods had not yet been loaded, and the trucking company's liability was capped at a small sum.
Tidewater lost $140,000 of stock and afterwards moved to a policy with a warehouse-to-warehouse clause at a slightly higher premium. The illustrative lesson is that the cheapest policy can leave gaps exactly where goods are most exposed. Tidewater now compares policies by reading the start and end points of cover first and the premium second, and it records both points in its shipping checklist.
Watch out
Common mistakes.
- Assuming the clause covers every risk at every stage, when the policy still has its own exclusions and conditions.
- Believing that cover continues indefinitely after the goods arrive, when it normally ends at delivery or after a fixed period.
- Failing to match the insurance to the trading terms, so that neither party insures a stage of the journey.
Questions
People also ask.
Does the clause cover goods stored for a long time?
Usually not, because cover ends when the goods reach the final warehouse or after a stated number of days, and storage is dealt with separately.
Is the clause automatic in a marine cargo policy?
It is a standard feature of many cargo policies, but wording differs, so the policy should be read.
Who should buy the insurance?
That depends on the sales terms agreed between buyer and seller, which decide who bears the risk at each stage. A broker can check the match between the trading terms and the insurance wording.
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