Clauses Covered in Marine Insurance

Understandably, marine cargo insurance plays a crucial role in protecting the interests of stakeholders involved in international cargo trade. However, the intricate world of marine insurance policies can be overwhelming for the uninitiated.

Understanding the key clauses within a policy is essential to navigating this complex landscape effectively.

Here's a breakdown of some of the most important clauses in marine insurance:

Institute Cargo Clauses

These standard clauses define the scope of coverage for cargo insurance. Different versions offer varying levels of protection:

ICC (A): Covers all risks except those specifically excluded (e.g., war, nuclear peril, inherent vice).

ICC (B): Covers named perils (e.g., fire, stranding, collision, theft).

ICC (C): Covers only a limited number of specific perils (e.g., fire, stranding, collision).

Suppose you are shipping a container of electronics from India to the US. You choose ICC (A) coverage, which protects your cargo from all risks except those explicitly excluded. If a storm damages the container and your electronics are destroyed, you can file a claim under the ICC (A) clause.

Valuation Clause

This marine insurance policy clause establishes the insured property's agreed-upon value, which determines the amount paid in case of marine losses. This value can be based on purchase price, market value, or other agreed-upon criteria.

For instance, based on its market value, you have insured your shipment for ₹50 lakhs. If the shipment is lost at sea, the insurance company will pay you ₹50 lakhs, as per the valuation clause.

'At' and 'From' Clause

This clause specifies the geographical scope of the insurance coverage. It defines the point at which the insurance attaches (e.g. when cargo is loaded onto the ship) and the point at which it terminates (e.g. when cargo is unloaded at the destination).

For example, the 'at and from' clause in your cargo insurance policy might state that coverage starts "at a warehouse, India" and ends "at a warehouse, Shanghai." This means your cargo is protected from the moment it leaves the warehouse in India until it arrives at the warehouse in Shanghai.

Sue and Labour Clause

This clause encourages the insured party to take all reasonable steps to minimise losses and prevent further damage to the insured property. The insurance company will reimburse reasonable expenses incurred in these efforts.

For instance, during a storm at sea, your cargo ship suffers damage. You take immediate steps to secure the cargo and prevent further losses. The sue and labour clause allows you to claim reimbursement from the insurance company for these expenses.

Warehouse to Warehouse Clause

This clause extends coverage beyond the maritime transit, protecting the insured property from the origin warehouse to the destination warehouse. This provides additional protection for the cargo during the pre-shipment and post-discharge stages.

For example, your cargo insurance includes a warehouse-to-warehouse clause. This means your electronics are protected from the moment they are packed at the warehouse in India until they are delivered and safely stored at the warehouse in any other country.

Memorandum Clause

This marine cargo insurance clause excludes certain inherent risks associated with the nature of the insured property. The insurance policy does not cover these risks. Examples include ordinary wear and tear, inherent vice (e.g., spoilage of perishable goods), and ordinary leakage.

For instance, you ship a container of oranges. The memorandum clause in your insurance policy excludes spoilage due to inherent vice. If the oranges spoil during the voyage due to their inherent nature, you cannot claim for the loss under the insurance policy.

Change of Voyage Clause

This clause allows for deviations from the planned voyage within specified limits without invalidating the insurance coverage. This flexibility can be helpful in unforeseen circumstances.

For example, during the voyage, if your cargo ship is diverted to another port due to bad weather, the change of voyage clause allows this deviation without affecting your insurance coverage.

Inchmaree Clause

The Inchmaree Clause, also known as the Negligence Clause, is a common clause found in marine insurance policies, particularly those covering the hull and machinery of vessels. It expands the scope of coverage beyond the traditional perils of the sea, protecting losses and damage caused by:

Negligence of the captain, crew members, or other personnel responsible for the vessel's operation. This includes errors in navigation, maintenance, or handling of cargo.

Defects in the hull, machinery, or equipment of the vessel. This can include latent defects, wear and tear, and design flaws.

Bursting of boilers, breakage of shafts, or other latent defects in machinery or boilers.

Jettison Clause

The Jettison Clause is another important clause found in marine insurance policies, particularly those covering cargo. It provides coverage for the loss of cargo that is deliberately thrown overboard to save the ship and remaining cargo in a maritime emergency.

The loss of jettisoned cargo is considered a general average loss, and the owners of the remaining cargo contribute to compensate the owner of the sacrificed cargo.

Being aware of these important clauses of marine insurance policy is crucial for several reasons:

Choosing the right coverage: By understanding the scope of each clause, you can choose the level of protection that best suits your needs and risk profile.

Avoiding disputes: Knowing your rights and obligations under the policy can help you avoid disputes with your insurance company regarding claims.

Filing claims effectively: Understanding the claims process and the relevant clauses can help you file accurate and complete claims, leading to faster settlements.

Managing risks: By understanding the covered and excluded risks, you can make informed decisions about risk mitigation strategies.

Marine insurance is a complex subject, but understanding the key clauses within your policy can significantly improve your experience. Even understanding cargo insurance policy, which is one of marine insurance’s categories, is crucial for those dealing with international cargo on a regular basis.

Hence, by familiarising yourself with these clauses and consulting with a qualified insurance professional, you can confidently navigate this complex landscape and ensure your valuable assets are adequately protected throughout their journey.

Tata AIG offers customised marine insurance plans at reasonable premium costs.