With goods being shipped all over the world every day, it’s important to define at what point a buyer takes ownership of the goods along the journey. This is in case there's loss or damage...so a whole new vocabulary was invented called "Incoterms," which is followed internationally.
There are 11 different ways to ship products that define who pays for the freight costs and assumes liability at any point on the journey, and Carriage 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...sometimes the buyer does it...and sometimes they split the cost. They might take ownership of the goods at the shipping dock, when the goods are on the truck, when the truck delivers to an airport, when the goods arrive at the destination, or when they are unloaded and in the buyer’s warehouse.
With Carriage Paid To, the seller has agreed to pay for the cost of shipping up to a certain destination, when the seller’s carrier will take over. As soon as the seller delivers the goods to the first carrier (truck, plane, train, etc.), ownership and all risks transfer to the buyer.
Roses for Love Inc. in Nigeria is ready to ship 50 boxes of roses to arrive at Vince’s Flower Shop in New York City the day before Valentine’s Day. The shipping terms are CPT Abuja airport, meaning Roses for Love will ship the cargo by truck at their expense to the airport at the capital city of Abuja.
Once the roses are loaded on the truck going to the airport, Vince will take possession, as Roses for Love is only paying the trucking cost. However, the truck breaks down on the way to the airport and all the roses die due to lack of refrigeration.
Roses for Love was not required to pay for insurance, only freight, so hopefully Vince had insurance...and he will be the one to file a claim against the trucker. Next time, Vince may want to negotiate Carriage and Insurance Paid To terms so that Roses will also pay for insurance.
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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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