PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-4 | Cargo Insurance Coverage

PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-4 | Cargo Insurance Coverage

Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 67, Maine Insurance Chapter 4 “cargo Insurance Coverage” for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.

IC 67, Maine Insurance is a very important topic in insurance promotional exam. This IC 67, Maine Insurance paper comes in all GIPSA exams which makes it very important.

CHAPTER 4 Cargo Insurance Coverage – PART 1

  1. If there is any ambiguity, then the policy is construed against the insurers and in favour of the assured, because the insurers are the drafters of the contract. This rule is called Contra Proferentem Rule.
  2. Printed wording is over-ridden by typewritten wording or wording impressed by an inked rubber stamp. E.g. inclusion of an Add-on Cover.
  3. Handwriting takes precedence over typed or impressed wording. E.g. Correction of spelling mistake, addition of BL No. etc.
  4. Clauses printed or typed in the margin of the policy are to be given more importance than the wording within the body of the policy. E.g. Institute Cargo Clauses 1982. However in the 2009 Clauses, this is done away with. Now there are no clauses in the margin.
  5. Clauses attached or gummed to the policy override both marginal clauses and the clauses in the body of the policy. E.g. Add-on Cover of Strikes, Riots and Civil Commotions (SRCC)
  6. An express term in a policy overrides an implied term, except when there is an inconsistency by so doing. E.g. relaxation of warranty of seaworthiness.
  7. It is usual to consider that clauses in italics override the ordinary printed wording where they are inconsistent
  8. A “Clause Paramount” can only be removed from the policy by physical deletion; otherwise it overrides all other wording, notwithstanding the rules of interpretation.
  9. There are no grounds for believing that clauses printed in red override those printed in black. Printing in red colour is aimed at emphasis only. E.g. Important Notice.
  10. Whenever in marine insurance there is an agreement to “hold covered”, mutual obligation is implied. The assured is obliged to give notice to insurers promptly on receipt of advices and the insurer then is bound to give insurance protection at a “reasonable” rate of premium, and, when clearly indicated in the policy, subject to revised terms and conditions, if required.
  1. Change of Voyage Clause: If it is not subject to Held Covered provision, cover will cease on ship changing the voyage. Subject to notice, premium etc., cover continues because of the “Held Covered” provision.
  2. A marine cargo policy should be stamped as per the Indian Stamp Act, 1899
  3. Stamp duty is recoverable from the assured
  4. For sea voyage and transit by country craft, 10 paise for every Rs. 3,000/- or part thereof, subject to the following
  5. When the rate charged is 1/8th percent (i.e. 0.125%) or less, the stamp duty is only 05 paise regardless of the sum insured.
  6. Total premium charged under the policy, inclusive of premium for war and strikes risks, is taken into account when determining whether the rate is 1/8th percent or less.
  1. When Inland Transit (Rail of Road) is covered in conjunction with a sea voyage, the policy must be stamped according to the scale for sea voyages.
  2. For other than sea voyage (i.e. transit purely by rail, road or air):
  • 25 paise when the sum insured is Rs. 5,000 or less.
  • 50 paise when the sum insured is over Rs. 5,000.
  1. For postal sendings:
  • Scale as per (a) above, if involving sea voyage
  • Scale as per (b) above for transits by rail, road or air
  1. Institute Clauses drafted by International Underwriting Association of London (IUA)
  2. American Clauses drafted by the American Underwriters; and
  3. German Clauses drafted by German Underwriters
  4. The last set of clauses was introduced in 1982 (in India 1983) and the same was revised in the year 2009 (“Institute” Clauses)
  5. the Institute of London Underwriters (ILU) merged with the London International Insurance and Reinsurance Market Association (LIRMA) in 1998 to form the International Underwriting Association (IUA).
  1. where pure inland transit is concerned i.e. transit within the country by rail or road (not in conjunction with overseas voyage), Inland Transit Risks Clauses drafted by the Tariff Advisory Committee (TAC) are used.
  2. ICC (C) provides a basic standard cargo cover against major casualties; whilst ICC (B) provides a wider intermediate form of cover and ICC (A) provides the broadest cover on an “all risks with exceptions” basis
  3. ICC (C) and ICC (B) are named perils clauses i.e. with the perils being listed therein
  4. ICC (A) are on “All Risks with exceptions” basis, with no list of perils but covering all accidental losses in transit other than those caused by exclusions.
  1. ICC ( C) Coverages
  • fire & explosion
  • Vessel or craft being  stranded, grounded, sunk or  capsized
  • overturning or derailment of  land conveyance
  • collision or contract of  vessel, craft or conveyance with  any external object other than  water
  • discharge of cargo at a port  of distress
  • general average sacrifice
  • jettison
  1. ICC ( B) Coverages
  • fire & explosion
  • Vessel or craft being  stranded, grounded, sunk or  capsized
  • overturning or derailment of  land conveyance
  • collision or contract of  vessel, craft or conveyance with  any external object other than  water
  • discharge of cargo at a port  of distress
  • general average sacrifice
  • jettison
  • earthquake, volcanic
  • eruption or lightning
  • washing overboard
  • entry of sea, lake or river  water into vessel, craft, hold,  conveyance, container, lift van  or place of storage

i) total loss of any package lost  overboard or dropped whilst  loading on to, or unloading  from vessel or craft Add on cover on payment of  extra premium in ICC(B):

  • theft, pilferage and/or non- delivery ( TPND )
  • fresh water and rainwater  damage
  • hook and/or oil damage
  • heating and sweating
  • damage by mud, acid and  other extraneous substances
  • breakage
  • leakage
  • country damage
  • bursting/tearing of bags
  1. ICC ( A) coverages: These clauses provide cover for  all risks of loss or damage, to the  subject matter of insured. The  terms all risks means losses  which are caused by accidental  circumstances only. Under  ICC(C) & ICC(B) the risks  covered are specified under ‘A’  clauses the risks covered are not  specified and all risks are  covered.
  2. General Exclusions (applicable to ICC (A), (B) and (C))
  • Loss, damage or expense attributable to willful misconduct of the assured
  • Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear of the subject-matter insured
  • Loss, damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (“packing” shall be deemed to include stowage in a container or lift van but only when such stowage is carried out prior to attachment of this insurance or by the assured or their servants). In the 2009 version, this has been changed to exclude only when the packing etc. is done by the insured. If it is done by outside agency there is no exclusion.
  • Loss, damage or expense caused by inherent vice or nature of the subject-matter insured
  • Loss, damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable in respect of GA or Salvage Charges)
  • Loss, damage or expense arising from insolvency or financial default of the owners, managers, charterers or operators of the vessel.
  • Loss, damage or expense arising from the use of any weapon of war employing like reaction or radioactive force or matter.
  1. In no case shall this insurance cover loss, damage or expense arising from:
  • Unseaworthiness of vessel or craft
  • Unfitness of vessel, craft, conveyance, container or lift van for the safe carriage of the subject-matter insured. ( In 2009 Clauses the word lift van has been removed)
  1. In 2009 Clauses this relaxation is given to the assignee of the policy who is not aware about the un seaworthiness etc.
  2. in 1982 Clauses if seller is aware about un sea worthiness and the buyer is not, the seller’s knowledge is transferred to buyer on assignment even though he is innocent. In 2009 Clauses innocent buyer gets protection
  3. The insurance shall not cover loss, damage or expense caused by:
  • War, civil war, revolution, insurrection or civil strife arising therefrom or any hostile act by or against a belligerent power;
  • Capture, seizure, arrest, restraint or detainment and the consequences thereof or any attempt thereat;
  • Derelict mines, torpedoes, bombs or other derelict weapons of war
  1. This insurance shall not cover loss, damage or expense:
  • caused by strikers, locked-out workmen or persons taking part in labour disturbances, riots or civil commotions;
  • resulting from strikes, lock-outs, labour disturbances, riots or civil commotions;
  • caused by any terrorist or any person acting from a political motive
  1. Deliberate damage or destruction by the wrongful act of any person(s): This exclusion appears in ICC (B) and ICC (C).
  2. Deliberate damage or destruction : This exclusion under ICC (B) and ICC (C) can then be deleted by inserting the “Malicious Damage Clause” whereby the cover will also include the additional risks of “Malicious Acts”, “Vandalism” and “Sabotage” subject to additional premium.
  3. Risk of piracy: Whilst pirates are generally included in the risks covered by ICC (A), a pirate who is a rioter and who attacks the ship from the shore, is covered by the Strikes Clauses but not by ICC (A). There is no cover at all in ICC (B) and ICC (C) for piracy
  4. Transit Clause of ICC (A), ICC (B) and ICC (C) defines the duration of the risk as attaching from the time the goods leave the warehouse or other place of storage at the place named in the policy to commence transit
  5. The risk then continues during the ordinary course of transit to terminate on delivery
  • To consignee’s or other final warehouse or place of storage at the destination named in the policy; or
  • To any other warehouse or place of storage (either at or prior to reaching the policy destination) which the assured may use for:

i)Storage other than in the ordinary course of transit;

  1. ii) Allocation or distribution; or
  • Upon expiry of 60 days of completion of discharge over-side of the insured goods from the oversea vessel at the final port of discharge, whichever shall first occur
  1. If, before the expiry of the policy, but after discharge at destination, it is decided to forward the goods to another destination, the policy shall not extend beyond the commencement of transit to the other destination
  2. 44. The insurance remains in force during:
  • Delay beyond the control of the assured
  • Any deviation
  • Forced discharge
  • Reshipment
  • Transhipment, or
  • Any variation of adventure arising from the exercise of liberty granted to the shipowner or charterers under the contract of affreighment
  1. Termination of Contract of Carriage Clause: If, owing to circumstances beyond the control of the assured, either the contract of carriage is terminated at a port or place other than the policy destination, or the transit is otherwise terminated before delivery of the goods, then the insurance terminates automatically, unless the assured takes positive action to continue the insurance by giving prompt notice to the insurers and requesting continuation of the cover.
  2. after attachment of the insurance, the destination is changed by the assured, the insurance is held covered at a premium and on conditions to be arranged, subject to prompt notice being given to underwriters. This is part of Held Covered provisions
  3. Institute War Clauses (Cargo)
  4. a) Risks / Contingencies covered by the Cargo War Clauses

The insurance covers loss or damage to the subject-matter insured caused by:

  • War, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power;
  • Capture, seizure, arrest, restraint or detainment arising from risks covered under point mentioned above i.e. warlike only;
  • Derelict (meaning abandoned or drifting) mines, torpedoes, bombs or other derelict weapons of war
  • General Average and Salvage Charges incurred to avoid a loss from a risk covered.
  • Under Duty of the Assured Clause, charges reasonably and properly incurred to avert or minimise an insured loss and to preserve and pursue recovery rights, are also covered
  1. The period of the cover afforded by the Institute War Clauses (Cargo) is considerably more restricted than the period of the cover provided by the Institute Cargo Clauses (A), (B) and (C).
  2. If the vessel arrives at destination, but unloading is delayed, war cover is limited upto 15 days, counting from the mid-night of the day of arrival
  3. If the goods are transhipped, cover continues during the transhipment but subject to a limit of 15 days counting from the date of arrival of the vessel at the transhipment port
  4. If the 15 days limit expires before the goods are loaded onto the on-carrying vessel, the war cover is suspended until the goods are loaded onto the on carrying vessel, when the cover re-attaches (This extension during transhipment applies only whilst the goods remain within the port area of the transhipment port.)
  5. The contract of carriage may be terminated and goods are discharged short of destination. In these circumstances, the goods may be sold locally or forwarded by some other means to the destination named in the policy or to some alternative destination
  6. If the goods are disposed of locally, the port of discharge is treated as the destination port and the war cover ceases on discharge or 15 days after arrival of the ship, as the case may be
  7. If the goods are forwarded to the original destination by another ship, war cover will continue and/or is suspended and re-attaches as for transshipment.
  8. The cover ceases on discharge at the destination or alternative destination or 15 days after arrival of the ship, it the goods are not discharged. ( Institute War Clauses)
  9. “Excluding shortage from sound bags / packages unless such shortage is cause by an insured peril.” This clause is generally used with bagged cargo in order to eliminate ordinary or inevitable loss.
  10. “Warranted excluding the blowing of tins.” This clause is generally used with insurance of tinned foodstuffs
  11. “Warranted excluding natural loss in weight and / or trade shortage.”
  12. “Warranted excluding the risks of rejection by Government authorities.”
  13. “Warranted excluding the risks of pitting and oxidisation.” This clause is used when corrugated / galvanised iron sheets or tin plates are insured, if the intention is to exclude rust damage.
  14. “Warranted shipped under deck and under a clean bill of lading.”
  15. If the intention is to limit the scope of ICC (A), following warranties, as applicable, may be used:
  • “Warranted excluding breakage, chipping, denting and scratching.”
  • “Warranted excluding mould and mildew.”
  • “Warranted excluding sweating, heating and fresh water damage.”
  1. Institute Cargo Clauses do not cover loading / unloading on to the truck or railway wagon.
  2. Cargo ISM Endorsement is about safety aspect to be compulsorily complied with, among others, by cargo ships of 500 Gross Tonne (GT) or more (with effect from 1st July 2002)
  3. The vessel should comply with ISM Code and have the papers thereof on board the vessel
  4. If consignor and / or his agents are aware about non-compliance then loss, damage, expenses not covered
  5. The exclusion does not apply to buyer of cargo in good faith if he was not aware of non-compliance.
  6. A National Flag Society is a Classification Society which is domiciled in the same country as the owner of the vessel in question which must also operate under the flag of that country.
  7. Craft Clause do not apply to any craft used to load or unload the vessel within the port area.
  8. Cargoes and/or interests carried by Qualifying Vessels which exceed the following age limits will be insured on the policy or open cover conditions subject to an additional premium to be agreed.
  • Bulk or combination carriers over 10 years of age; or
  • other vessels over 15 years of age unless they
  1. Institute Classification Clause (1/1/2001) is to be applied where the name of the cargo carrying vessel is not known- namely in cover notes and open covers/policies.
  2. “Garble” means to sift, to cleanse, to separate sound from the whole, which may have got mixed up with some other material.
  3. Garbling Clause : this term is applied to insurance of tobacco, but it could be applied to most cargoes, like coffee beans or grain.
  4. The “Garbling Clause” provides that the insurer will pay the cost of garbling, as such an exercise prevents further damage and reduces the claim.
  5. Cotton, wool and similar fibrous commodities are shipped in bales
  6. The “Picking Clause” provides that the insurer will pay the cost of picking and the cost of re-baling both sound and damaged material, because the damaged material does have salvage value.
  1. Debris Removal Clause :The policy is extended to cover cost of removal of debris. Sometimes the limit of expenses is put as percentage of sum insured
  2. Concealed Damage Clause :Many times after delivery, long time is taken to open the goods for inspection/ use and that time the loss is noticed.
  3. Concealed Damage Clause :The clause allows certain number of days say 45 for delayed opening and notifying the loss to insurers
  4. Brand and Trade Marks Clause: The aim of this clause is to prevent inferior quality or damaged goods being sold as salvage in the market to the detriment of the insured’s reputation and to avoid potential product liability claims
  1. Brand and Trade Marks Clause: If the damaged goods are to be sold as salvage the brand or trade mark is to be removed from the goods alternatively the insured may offer some reasonable salvage value and destroy the damaged goods.
  2. Cutting Clause: “Warranted that the damaged portion should be cut off and the balance utilised.”
  1. Cutting Clause: This is used in policies covering pipes or similar items of length
  2. Label Clause: The most commonly used form of Label Clause limits the insurer’s liability to the cost of re-labelling and re-packing the affected goods
  1. Label Clause: “Excluding damage to the labels on tinned or bottled goods unless the goods themselves are damaged at the same time
  2. Pair and Set Clause: Company’s liability shall not exceed the value of any particular part or parts which may be lost or damaged, without reference to any special value which such article(s) may have as part(s) of such pair or set, nor more than a proportionate part of the insured value of the pair or set
  1. Pair and Set Clause: the underwriter limits his liability to the insured value of the lost or damaged part.
  2. Comprehensive Clause: This clause includes the risks of theft, pilferage and non-delivery, fresh water and rain water damage, hooks, oils, mud, acid and other extraneous substances or heating and sweating and damage by other cargo
  1. Institute Replacement Clause: In the event of loss / damage to any part(s) of an insured machine caused by a peril covered by the policy, the sum recoverable shall not exceed cost of replacement are repair of such part(s) plus charges for forwarding and refitting, if incurred, but excluding duty unless the full duty is included in the amount insured, in which case loss, if any, sustained by payment of additional duty shall also be recoverable.
  2. Second hand Replacement Clause: Institute Replacement Clause is to be applied for new machinery whereas second hand replacement clause is to be applied to second hand machinery
  3. Second hand Replacement Clause : The depreciation is not applied on period basis but if the sum insured is less than new replacement value it is applied in the proportion of insured value / sum insured X loss

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