Contractual Term
Maritime transport insurance provisions specify percentage loss thresholds that must be exceeded before underwriters assume liability for cargo damage. A franchise threshold clause establishes that cargo loss claims below a specified percentage, commonly three to five percent of insured cargo value, remain the sole responsibility of the cargo owner. Once verifiable damage exceeds this agreed percentage threshold, the insurer indemnifies the entire loss amount rather than merely the excess above the threshold.
This mechanism distinguishes franchise conditions from standard deductible clauses that deduct the base threshold sum from every paid settlement.
Claim Mechanism
Ocean shipments of cotton bales, yarn containers or finished apparel consignments subject to moisture ingress undergo joint marine surveys upon port arrival. Surveyors determine whether water damage or salt contamination crosses the percentage trigger point relative to sound arrived values.
Commercial Trade-off
Buyers and freight forwarders negotiate franchise percentages to lower marine cargo insurance premiums on high-volume shipping routes. Lower franchise levels raise policy costs but improve loss recovery on fragile or high-value fashion merchandise.
Applicable Boundary
Threshold provisions operate exclusively within standard cargo and marine transit policies, terminating once goods reach final distribution centre destinations. Direct carrier liability governed by Hague-Visby rules follows separate statutory limits that override private insurance franchise terms.
