4-2. Institute Cargo Clauses and the specifics of Insurance Terms
Overview
What You Can Gain from This Topic
- Institute Cargo Clauses
- ICC(A)、ICC(B)、ICC(C)
- War risk insurance and Strike Insurance
- Disclaimers
Institute Cargo Clauses
When discussing marine cargo insurance, it is important to remember the Institute Cargo Clauses.
Historical Background
The following two have been in use for many years, but the new clauses were further revised in 2009:
- 1963 version of Institute Cargo Clauses
- 1982 version of Institute Cargo Clauses
These two have been in use for many years, but the latter one was further revised in 2009.
Insurance Terms
The following are the terms used in marine cargo insurance.
- Insurance terms based on 1963 version: A/R, WA, FPA
- Insurance terms based on 1982 version: ICC (A), (B), (C)
The old ones and new ones have not changed significantly. However, tracking which of the new terms corresponds to the old ones is crucial.
- ICC(A) ≒ A/R (All Risks)
- ICC(B) ≒ WA (With Average)
- ICC(C) ≒ FPA (Free from Particular Average)
ICC(A) ≒ A/R(All Risks)
ICC (A) is the terms with the broadest coverage.
It covers:
- Marine perils
- All risks during transportation, including accidents during loading and unloading
However, there are disclaimer clauses. You have to note it doesn’t mean ICC (A) covers all types of issues completely.
ICC(B) ≒ WA(With Average)
ICC (B) is the term that cover damage to cargo, including
- Total loss
- Partial loss
Because ICC (B) also covers water damage caused by storm surges and tsunami, it is used for bulk cargoes such as:
- Wheat
- Beans
- Feed, etc.
It’s better to check whether both total loss and partial losses are covered.
ICC(C) ≒ FPA(Free from Particular Average)
- Ship grounding
- Overturning.
It is commonly used for cargoes with low risk of damage, such as:
- Minerals
- Timber
- Scrap iron, etc.,
Special Contracts
Specific risks, such as below, are not covered in the insurance terms mentioned earlier.
- War
- Strike
This type of risk is not covered by even ICC (A) and needs to be insured separately, like a special contract.
War Risks Insurance and Strike Insurance
War Risk Insurance: It covers damage caused by unpredictable military action or explosives during transportation.
Strike Insurance: It covers diminution or damage due to unexpected strikes by the contractors involved in the transportation.
Disclaimers
Marine cargo insurance covers damages incurred during the transportation of goods. However, some cases are exempted from this coverage to prevent the insurance company from suffering significant losses.
If the following reasons cause the damage, the insurance will not compensate the policyholder and insured.
1) Losses due to intentional acts
Damage intentionally caused by the insured to the cargo to obtain insurance compensation is illegal, and marine cargo insurance does not cover such intentional acts.
2) Normal leakage, decrease in weight/volume, or damage due to natural wear and tear
For items packed in bags, such as coffee beans, changes in volume due to oxidation or atmospheric pressure may occur. In the case of liquid cargo, there may be a reduction in quantity due to evaporation.
These natural losses are exempted from coverage under marine cargo insurance.
3) Damage due to inadequate or improper packing of the cargo
Damages resulting from insufficient or inappropriate cargo packaging are exempted under marine cargo insurance. This also includes loading deficiencies in containers within the scope of packaging inadequacy.
4) Damage due to inherent defects or the nature of the cargo
Marine cargo insurance does not cover inherent defects in the cargo itself or those resulting from its natural characteristics, such as:
- Natural rusting of metals
- Ripening and decay of agricultural products
5) Losses due to delay
Damages incurred due to delays in the loading vessel that result in missed business opportunities are not covered under marine cargo insurance.
6) Damage due to radiation contamination, chemical weapons, biological weapons, and electromagnetic weapons
Damages caused by the following are not covered.
- Hazardous substances of nuclear fuel, nuclear waste, nuclear equipment, nuclear weapons, and radioactive materials
- Chemical weapons
- Biological weapons
- Electromagnetic weapons
7) Losses due to the bankruptcy of shipping companies, etc.
Damages resulting from the insolvency of shipping companies, financial default, and non-performance of monetary obligations are exempt from insurance coverage only when the insured knowingly shipped the cargo despite being aware of the bankruptcy of the shipping company.
Summary
The most important aspect of marine cargo insurance is to select insurance conditions that match the nature of each cargo after confirming the scope of coverage and the disclaimers.
The information provided in this article represents basic terms, and specific details may vary depending on the insurance company. Confirming the specifics with the insurance provider on a case-by-case basis is recommended.
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