What is a Pre-Existing Loss?
A pre-existing loss encompasses any form of loss, damage or defect that an item possesses prior to the insurance policy's effective date. It's a condition that exists before the coverage starts but is not necessarily known to the shipper or the insurer at that time.
Examples of a Pre-Existing Loss:
- Missing Documentation or Accessories: Imagine an electronic device is sold with supposed complete accessories and documentation. However, the manual and some accessories were missing from the start – a fact not realized until after the customer receives the device and reports the issue.
- Internal Electronics Damage: Imagine a company ships out consumer electronics like computers. Unbeknownst to them, a manufacturing defect causes some units to have faulty motherboards, leading to mechanical failure. Since the defect is internal and not immediately apparent, it qualifies as pre-existing damage that was not known about.
The Difference Between Known Loss and Pre-existing Loss
While a known loss is similar to pre-existing loss in timing, they differ in awareness. A known loss is damage or loss that is already known to the insured before obtaining the insurance policy. On the other hand, pre-existing loss refers to damage or loss that exists prior to coverage but is not known until after the policy is in effect.
Understanding Pre-existing Damage
Pre-existing damage is a subset of pre-existing loss that specifically pertains to the physical damage to an item that is present but not known before it is under the care of the carrier. This type of damage is particularly insidious because it may not be detected during initial inspections and can come to light only later, potentially leading to misunderstandings about when and how the damage occurred.
Identifying Pre-existing Conditions
- Visual Inspection: Thoroughly inspect for any signs of wear or damage that could indicate a pre-existing condition.
- Functionality Tests: Conduct detailed tests to rule out any internal issues that are not immediately visible.
- Documentation Review: Examine past records or assessments for any mention of defects or repairs.
Why Pre-existing Conditions are Not Covered
- Insurance Principle: Insurance is intended to guard against unforeseen future risks, not pre-existing ones.
- Moral Hazard: Covering pre-existing conditions could promote improper disclosure of an item’s state.
- Assessment Challenges: It's difficult for insurance providers to accurately evaluate and price policies if pre-existing damages are included.
U-PIC Shipping Insurance’s Policy
U-PIC Shipping Insurance’s policies are crafted to cover incidents that occur during the carrier’s custody. We do not provide coverage for pre-existing loss or damage because these conditions occur outside the transit period insured by our policies. We emphasize the importance of a thorough inspection and accurate reporting to ensure clarity and uphold the integrity of the insurance process.
Conclusion
A pre-existing loss is when something is unknowingly lost or damaged prior to shipping. While the shipper may not know about the pre-existing loss or damage, coverage is only available for loss or damage that occurs to a shipment while in possession of the carrier. Coverage is not available for items lost or damaged prior to shipping. It is imperative for insurers and insured parties to understand this distinction.
