There are many ways to ship a product, and also many things that can go wrong before the final destination is reached. So a whole vocabulary exists to describe various shipping scenarios. This internationally followed group of terms is called Incoterms. Ever heard the thing where Eskimos have dozens of different words for snow? Kinda like that, there are 11 different ways to ship products that define who takes ownership at any point along the way. Carriage and Insurance Paid To (CIP) is one of them.
There are generally three parties involved in moving goods from one point to another: the buyer, the seller and one or more carriers. Sometimes the seller pays for the freight and assumes liability, and sometimes the buyer does. It's important for them to define at what point they take ownership of the goods...at the shipping dock, when the goods are on the truck, when the truck arrives at the destination or when they are unloaded and in the buyer's warehouse.
With Carriage and Insurance Paid To the seller has agreed to pay for the cost of shipping and also for the cost of insurance up to a particular point. Under CIP, the seller must insure the goods for 110% of their value. If the buyer wants additional insurance coverage they would have to pay for it or negotiate to have the seller pay for it. As soon as the seller delivers the goods to the first carrier (truck, plane, train, etc.), ownership and all risks transfer to the buyer.
So let's say Sam's Soybeans, Inc. of Kansas City, Missouri sold 500 bushels of soybeans to Suki's Restaurant in Tokyo. The terms of sale are CIP Port of Los Angeles to be loaded on the container ship SeaLand. Sam will ship the soybeans via truck and pay the cost of freight and insurance from Kansas City until the soybeans are loaded on the ship.
Unfortunately, the ship hits a big storm at sea and the container of soybeans falls off. The buyer Suki has to file the claim against SeaLand because she was responsible for paying for freight and insurance starting in Los Angeles.
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Finance: What is Directors & Officers In...100 Views
finance a la shmoop what is directors and officers insurance coverage? well if
you ever sit on the board of a public company you'll want this or at least a [People sat at a table in a meeting]
feeling you'll sleep better at night if you have it. D&O insurance is just
insurance like any other kind of insurance only it insurers for board
stupidity or rather legal definitions of dumb things companies do that costs
shareholders money and for which the Board of Directors then gets blamed and
sued in theory if company ever lost a large lawsuit well at worst they would [Man and woman in a court]
just hand over the keys to the company itself to whoever won the lawsuit
famously warren buffett founder and CEO Berkshire Hathaway and the largest
seller of insurance in the world through Geico and other subsidiaries does not
allow his Board of Directors to carry any D&O insurance because he feels that
if the company stumbles so stupidly because of poor governance that he along [Warren Buffet appears]
with all of his boards should suffer the resulting personal bankruptcies that
would follow with all the lawsuits that would be piled on and yes sometimes
companies are so corrupt or stupid or unlucky that the damages in a lost
lawsuit exceed the value of the entire company itself and then the insurance
company has to be called to cover whatever is left in legal bills after
the company has been handed over in practice it's not quite that dramatic
companies carry D&O insurance for smaller things as well like a company
stock goes from $22 to $14 after a bad quarter and some ambulance-chasing [Company stock graph appears]
lawyer from New York is able to convince a judge that proper disclosure wasn't
made about the lack of sales in the Uzbekistan office and to make the
lawsuit go away the company held hostage pays seventeen million dollars in
damages to shareholders making a claim the key thing is the shareholders here
get like pennies a share and the lawyers get millions a typical D&O policy for a
smaller public company might carry a ten million dollar deductible so in this
case the first ten million of that seventeen comes out of the company
coffers and then the money beyond that comes from the insurance company that
wrote the coverage policy well historically the business of writing D&O
policies has been a great business for the insurance industry as tons of
premiums get paid by nervous Nelly directors who in fact never lose [Hammer nails sign to the wall]
lawsuits and well you know the gravy train keeps on graving... [Man riding a gravy train]
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