What are the Institute Cargo Clauses in marine insurance?

Institute Cargo Clauses are part of marine cargo insurance that protects the cargo in transit. They specify what kind of items in the cargo are covered in case of any loss or damage to the shipment. It is vital to note that the coverage can extend to several elements, from the cargo and the container holding it to the mode of transport used to ship the items.

The clauses were introduced in 1982 by the Institute of London Underwriters and have undergone various alterations based on the changes in global business, risk, and threat levels.

The three main categories of Institute Cargo Clauses are A, B, and C. Each category outlines the extent of coverage provided, with Clause A providing the most comprehensive coverage and Clause C being the most restricted.

Institute Cargo Clauses - A (ICC-A)

Institute Cargo Clauses - B (ICC-B)

Institute Cargo Clauses - C (ICC-C)

The premium for marine insurance is also determined by the ICC included in the policy. You will be paying a higher marine insurance premium if you are availing of the wider coverage and vice versa. For instance, Clause C in marine insurance comes with basic coverage and thus is cost-effective.

You must assess the risk exposure of your business and trade along with your affordability before deciding on marine cargo insurance. An analysis of the price of Institute Cargo Clauses - A, B, and C is vital for determining the suitable level of coverage for a cargo insurance policy. The analysis enables businesses to evaluate the financial implications and advantages of different insurance provisions and coverages.

ICC in a marine insurance policy conveys the following:

• The risks covered by the insurer

• The risks excluded by the insurer

• The commencement date of the marine insurance

• The duration of the marine cover

• The expiry of the policy

• Other standard conditions

ICC-A in marine insurance provides the widest coverage compared to the other clauses. It is also referred to as the “all risks” cargo insurance policy and covers you against the physical damage or loss of cargo due to any external cause.

ICC-A covers all named and unnamed perils, enabling you to avail of extensive, all-risk marine insurance coverage. As a result, its premium is relatively higher. However, the clause does not cover the damages and losses mentioned in the exclusions.

Compared to ICC-A, ICC-B’s cover in marine insurance is restricted. However, it covers more perils than ICC-C. There is coverage for accidental damages, and thus, you will need to pay a moderate premium. Besides, you can request additional coverage to protect valuable items.

The perils included under Institute Cargo Clause - B are as follows:

• Damage or loss caused to the insured subject matter due to any of the reasons listed below:

• Fire or explosion

• Derailment or overturning of land conveyance.

• Vessel or craft being capsized, sunk, grounded, or stranded.

• Collision of vessel, craft, or conveyance with an external object apart from water.

• Discharge of cargo at a port of distress.

• Lightning, volcanic eruption, or earthquake.

• Loss or damage to the insured subject matter due to:

• General Average Sacrifice - any extraordinary sacrifice or expenditure incurred voluntarily or reasonably during a maritime adventure to save the subject matter from perils.

Jettison - purposefully throwing overboard a part of the ship or cargo to rescue the ship or its cargo. It is also known as washing overboard.

• Entry of river or sea lake water into the place of storage, container, hold conveyance, van, lift, or vessel craft.

• Total loss of any package dropped while loading or unloading to or from the vessel or lost overboard.

• The additional coverages offered by ICC-B Clauses (2009) compared to ICC-C Clauses (2009) are:

• Damages or loss of subject matter due to lightning, volcanic eruption, or earthquake.

• Damages or loss of subject matter due to the entry of river or sea lake water into the place of storage, container, hold conveyance, van, lift, or vessel craft.

• Total loss of any package dropped while loading or unloading to or from the vessel or lost overboard.

Clause C in marine insurance has very limited coverage. It mostly includes the perils expected during carriage in the form of accidents.

• The perils eligible for a claim under ICC-C (2009) are listed below:

• Damage or loss suffered by the insured subject matter due to any of the following reasons:

• Fire or explosion

• Derailment or overturning of land conveyance.

• Vessel or craft being capsized, grounded, sunk, or stranded.

• Collision of vessel, craft, or conveyance with an external object apart from water.

• Discharge of cargo at a port of distress.

• Damage or loss of the insured subject matter due to the following reasons:

Jettison - purposefully throwing overboard a part of the ship or cargo to rescue the ship or its cargo. It is also known as washing overboard.

General Average Sacrifice - any extraordinary sacrifice or expenditure incurred voluntarily or reasonably during a maritime adventure to save the subject matter from perils.

• The premium for ICC-C is low because the coverage is also less.

The primary difference between the three Institute Cargo Clauses lies in the degree of coverage they offer and the circumstances in which the items are covered.

Each clause specifies detailed parameters for what it covers and what it does not. Due to the difference in cover, the premium payable for each also differs.

There are four categories of exclusions under Institute Cargo Clauses in marine insurance:

• General exclusions

• Vessel seaworthiness exclusions

• War exclusions

• Strikes exclusions

Institute Cargo Clauses - General Exclusions

• Loss, damage or expense caused due to any of these reasons:

• wilful misconduct of the assured

• ordinary wear and tear, ordinary loss in volume or weight, or ordinary leakage of the property insured

• unsuitable packing or insufficient preparation done before the attachment of this insurance or by the assured or their employees, making the insured subject matter incapable of withstanding the regular incidents of the insured transit

• nature or inherent vice of the property insured

• delay; despite its cause being a peril the property is insured against

• financial default or insolvency of the vessel’s operators, owners, managers, or charterers, where, during loading of the property insured on board the vessel, the assured are informed, or in the regular practice of business should know, that such financial default or insolvency can restrict the usual prosecution of the voyage

• use of any device or weapon employing nuclear or atomic fusion and/or fission or radioactive force of matter or other similar reaction

*In clause c, “packing” also comprises stowage in a container, while “employees” excludes independent contractors.

*Clause f becomes invalid if the insurance contract has been assigned to the party claiming further on in this document after buying or agreeing to buy the property insured in good faith under a binding contract.

Institute Cargo Clauses - Vessel Seaworthiness Exclusions

• The second category of exclusions under the Institute Cargo Clauses is associated with the seaworthiness or fitness of vessels.

• According to the exclusion, the insurance shall not cover loss or damage caused by the following:

• unfitness or unworthiness of the vessel for the safe transportation of the property insured, where the assured is aware of this unfitness or unseaworthiness since the time of the loading of the property insured

• unfitness of conveyance or container for the safe transfer of the property insured, where loading is performed before the attachment of this insurance or by the assured and their employees who are aware of such unfitness since the time of loading

• In simple words, your marine insurance claim will be rejected if you knew at the time of loading that the vessel, craft, container, or conveyance used for transporting the property insured is unfit or unseaworthy.

Institute Cargo Clauses - War Exclusions

• Institute Cargo Clauses do not provide coverage for losses or damages arising from war-related events. These exclusions include events like:

• war

• civil war

• rebellion

• revolution

• insurrection

• civil strife

• any hostile act against or by a belligerent power

• While all three forms of ICC exclude the cover for war, there is a minor difference between ICC-A and ICC-B & ICC-C. ICC-A still offers coverage for piracy, while there is no such inclusion in ICC-B and ICC-C.

• A policyholder can eliminate the exclusions for war coverage by adding the Institute War Clauses (Cargo) to all three ICCs. If you do so, you are also covered for war-related events in your marine insurance policy.

Institute Cargo Clauses - Strikes Exclusions

• The last section of exclusions under Institute Cargo Clauses relates to strikes. These include events such as:

• Strikes - The clause does not cover losses or damages arising from strikes, lockouts, labour disturbances, or other labour-related events.

• Riots and civil commotions - There is no coverage for riots and civil commotions that can be associated with strikes.

• Consequences of a political nature - The clause does not provide coverage for loss or damages caused by a person acting from a religious, political, or ideological motive.

• Acts of terrorism - Any loss or damages caused due to terrorist activities or a person in connection with or acting on behalf of any organisation which aims to influence or overthrow, by violence or force, any government, whether or not legally constituted

• It is essential to be aware of the fact that terrorism risk is not included in Strikes Exclusions. This implies that terrorism or terrorist activities are not covered by default under marine cargo insurance.

• A policyholder can delete the exclusions for strike coverage by adding the Institute Strikes Clauses (Cargo) to all three ICCs. Doing so helps you get covered for strike risks as well in your marine insurance. Moreover, when you attach the Institute Strikes Clauses, you are also covered for terrorism risks.

Suppose you buy ten supplies of engineering tools from a company halfway around the world. For the tools to get delivered to you, they have to go through different forms of conveyance. It starts with land conveyance (truck or train) to reach an international seaport from the factory. Next, it gets loaded onto a cargo ship to sail to a port close to you. It gets unloaded at the port and finally reaches your location by land (truck or train).

On the date of delivery, you realise there are only eight boxes instead of ten. The remaining two are late by two months and their condition has deteriorated due to waterlogged packaging. The incident will lead to losses, and you might cancel your supply contract with the client.

But how do you overcome the financial losses?

This is where marine cargo insurance, with its defined provisions and exclusions, known as the Institute Cargo Clauses, comes into play. The insurance policy covers you for the financial losses you suffered on those two boxes of engineering tools.

It is essential to understand here that damages and losses of cargo during transit can arise due to several reasons. Many shipping containers fall off ships. Fires or explosions also damage cargo aboard. There are also additional risks like natural calamities that damage vessels or cargo during transit.

If you purchase Institute Cargo Clause A, you are covered for all risks, but you have to pay a higher premium. If you purchase Institute Cargo Clause B, you will have limited coverage, and the premium will also be relatively lower. For example, ICC-B will not cover you for losses arising from fire or explosion. Institute Cargo Clause C has the least coverage and the lowest premium.

You must review the terms and conditions specified in the marine insurance policy carefully to understand what’s included and what’s not.

There are four categories of exclusions under Institute Cargo Clauses in marine insurance:

• General exclusions

• Vessel seaworthiness exclusions

• War exclusions

• Strikes exclusions

Institute Cargo Clauses - General Exclusions

• Loss, damage or expense caused due to any of these reasons:

• wilful misconduct of the assured

• ordinary wear and tear, ordinary loss in volume or weight, or ordinary leakage of the property insured

• unsuitable packing or insufficient preparation done before the attachment of this insurance or by the assured or their employees, making the insured subject matter incapable of withstanding the regular incidents of the insured transit

• nature or inherent vice of the property insured

• delay; despite its cause being a peril the property is insured against

• financial default or insolvency of the vessel’s operators, owners, managers, or charterers, where, during loading of the property insured on board the vessel, the assured are informed, or in the regular practice of business should know, that such financial default or insolvency can restrict the usual prosecution of the voyage

• use of any device or weapon employing nuclear or atomic fusion and/or fission or radioactive force of matter or other similar reaction

*In clause c, “packing” also comprises stowage in a container, while “employees” excludes independent contractors.

*Clause f becomes invalid if the insurance contract has been assigned to the party claiming further on in this document after buying or agreeing to buy the property insured in good faith under a binding contract.

Institute Cargo Clauses - Vessel Seaworthiness Exclusions

• The second category of exclusions under the Institute Cargo Clauses is associated with the seaworthiness or fitness of vessels.

• According to the exclusion, the insurance shall not cover loss or damage caused by the following:

• unfitness or unworthiness of the vessel for the safe transportation of the property insured, where the assured is aware of this unfitness or unseaworthiness since the time of the loading of the property insured

• unfitness of conveyance or container for the safe transfer of the property insured, where loading is performed before the attachment of this insurance or by the assured and their employees who are aware of such unfitness since the time of loading

• In simple words, your marine insurance claim will be rejected if you knew at the time of loading that the vessel, craft, container, or conveyance used for transporting the property insured is unfit or unseaworthy.

Institute Cargo Clauses - War Exclusions

• Institute Cargo Clauses do not provide coverage for losses or damages arising from war-related events. These exclusions include events like:

• war

• civil war

• rebellion

• revolution

• insurrection

• civil strife

• any hostile act against or by a belligerent power

• While all three forms of ICC exclude the cover for war, there is a minor difference between ICC-A and ICC-B & ICC-C. ICC-A still offers coverage for piracy, while there is no such inclusion in ICC-B and ICC-C.

• A policyholder can eliminate the exclusions for war coverage by adding the Institute War Clauses (Cargo) to all three ICCs. If you do so, you are also covered for war-related events in your marine insurance policy.

Institute Cargo Clauses - Strikes Exclusions

• The last section of exclusions under Institute Cargo Clauses relates to strikes. These include events such as:

• Strikes - The clause does not cover losses or damages arising from strikes, lockouts, labour disturbances, or other labour-related events.

• Riots and civil commotions - There is no coverage for riots and civil commotions that can be associated with strikes.

• Consequences of a political nature - The clause does not provide coverage for loss or damages caused by a person acting from a religious, political, or ideological motive.

• Acts of terrorism - Any loss or damages caused due to terrorist activities or a person in connection with or acting on behalf of any organisation which aims to influence or overthrow, by violence or force, any government, whether or not legally constituted

• It is essential to be aware of the fact that terrorism risk is not included in Strikes Exclusions. This implies that terrorism or terrorist activities are not covered by default under marine cargo insurance.

• A policyholder can delete the exclusions for strike coverage by adding the Institute Strikes Clauses (Cargo) to all three ICCs. Doing so helps you get covered for strike risks as well in your marine insurance. Moreover, when you attach the Institute Strikes Clauses, you are also covered for terrorism risks.

Suppose you buy ten supplies of engineering tools from a company halfway around the world. For the tools to get delivered to you, they have to go through different forms of conveyance. It starts with land conveyance (truck or train) to reach an international seaport from the factory. Next, it gets loaded onto a cargo ship to sail to a port close to you. It gets unloaded at the port and finally reaches your location by land (truck or train).

On the date of delivery, you realise there are only eight boxes instead of ten. The remaining two are late by two months and their condition has deteriorated due to waterlogged packaging. The incident will lead to losses, and you might cancel your supply contract with the client.

But how do you overcome the financial losses?

This is where marine cargo insurance, with its defined provisions and exclusions, known as the Institute Cargo Clauses, comes into play. The insurance policy covers you for the financial losses you suffered on those two boxes of engineering tools.

It is essential to understand here that damages and losses of cargo during transit can arise due to several reasons. Many shipping containers fall off ships. Fires or explosions also damage cargo aboard. There are also additional risks like natural calamities that damage vessels or cargo during transit.

If you purchase Institute Cargo Clause A, you are covered for all risks, but you have to pay a higher premium. If you purchase Institute Cargo Clause B, you will have limited coverage, and the premium will also be relatively lower. For example, ICC-B will not cover you for losses arising from fire or explosion. Institute Cargo Clause C has the least coverage and the lowest premium.

You must review the terms and conditions specified in the marine insurance policy carefully to understand what’s included and what’s not.

Insurance works as an umbrella by providing the financial protection you need during an emergency. However, most insurance policyholders dread the insurance claim process, considering it to be a stressful and time-consuming activity. Here’s a step-by-step guide to help you understand how you can easily file a marine insurance claim.

Evaluate the damage or loss

Before anything else, thoroughly assess the loss or damage suffered during transit. Preparing a list of lost or missing items can be beneficial.

Moreover, identify and evaluate the reason behind the loss, such as theft, accident, or natural calamities. This information can help you to proceed with the claim process smoothly.

Intimate the insurer

The next step of the claim process is to approach the insurer and inform them about the event. Your policy document will mention the deadline for making a claim, and any delay in claim intimation can make the process more complex.

Share details about the loss or damage of goods, the location, vessel information, etc. The insurer will verify all the safety measures to transport the goods.

Inform the shipping company

Another party you must immediately inform about the mishap is the shipping company.

Provide all complete and accurate information to avoid getting misled. You must file a legal complaint in case of theft or no delivery of goods.

Detailed survey

When an insurance company receives your claim request, it sends a surveyor to assess the loss and damages. The surveyor performs an onsite investigation to analyse the degree of damage and its causes.

He prepares an assessment report to submit to the insurance company that will use it to understand if the kind of damage is included in the policy’s coverage.

If the surveyor asks you any questions regarding the event, remember to provide all accurate information. The next steps of the claim process will depend on the surveyor’s findings.

Final report and document submission

In case you informed the insurance company of the incident via a broker, email, or phone call, you must fill out the claim form. This form is available on the insurer’s website. Fill out the required information with accuracy and attach the necessary documents.

Below is a list of documents you may need for filing the claim.

Claim form with policy number, policy start date, date of loss, etc.

Original marine insurance policy

A copy of the Bill of Lading, mentioning details of the shipment like quantity, type, destination, etc.

Survey report

Packing list and commercial invoice with weight notes and shipping specifications

Copies of all the communication between the insurance company and the shipping company

Claim bill

You may need to submit an FIR copy in case of theft or a non-delivery certificate if items are damaged, partially lost, or missing.

Claim settlement

If the information provided by you and the surveyor fulfils the policy’s terms and conditions, the insurance company will accept the claim. The payment will be made via a bank transfer or cheque. You can visit the insurer’s website to track your insurance claim status online.

It is wise to have a cargo insurance policy before shipping goods by any mode of transportation. It offers comprehensive protection against unforeseen events causing damage to the cargo transported by sea, road, railroad, or air transport. Before buying cargo insurance, one must understand the insurance coverage and its clauses.

The Institute Cargo Clauses in a marine insurance policy provide the policyholder with different extents of coverage. The widest coverage comes with Clause A, followed by Clause B. The coverage under Clause C is restricted. You must choose a clause in marine insurance policy based on your requirements.

Tata AIG offers marine cargo insurance to protect policyholders financially in case of any damage or loss that may arise to the vessel or shipment during transit. It is beneficial for ship owners, freight forwarders, marine contractors, shipbuilders and repairers, port authorities and terminal operators, and charterers.

What is the Institute Cargo Clause in marine insurance?

The Institute Cargo Clause serves to clarify what is and is not covered in case your shipment is damaged or suffers a loss.

Who wrote the Institute Cargo Clauses?

The Institute of London Underwriters issued the clauses in the early 1980s. These are incorporated into standard marine insurance policies for cargo to increase or decrease the coverage.

Which Institute Cargo Clause offers the maximum coverage?

ICC A clause in marine insurance offers the maximum coverage required by an importer or exporter sending or receiving a shipment.