Conditions of Marine Insurance

The conditions of insurance, which dictate the level of cover, are of vital importance and merit special consideration. A Marine Insurance policy is not like a Household Comprehensive policy or a Motor policy where one can presume with some safety that the basic protection is the same with only minor variations. The vast majority of marine policies are specifically drafted for the individual risk. Rather than providing a brief summary of all the various types of policies available it would be preferable to examine, in some detail, the three most popular. The old fashioned Institute Cargo Clauses (All Risks, With Average and Free of Particular Average) have been redundant since the 1st January 1982 and have been superseded by three new clauses, namely, Institute Cargo Clauses (A), (B) and (C). The fundamental change is that, whereas under the old system the S.G. policy form (which was first adopted in 1779) and the clauses had to be read as one, the new clauses are designed to stand on their own and to be read and interpreted as such. Incidentally, the exact meaning of the letters ‘S.G.’ seems to have been lost in the annals of time but the most popular theory is that they simply refer to ‘ship and goods’. Institute Cargo Clauses (C) :  These clauses cover only fire, explosion; vessels or craft being stranded, grounded, sunk or capsized; overturning or derailment of land conveyances; collision or contact; discharge of cargo at a port of distress; general average sacrifice and jettison. They exclude deliberate damage by the wrongful act of any person or persons i.e. malicious damage, but this cover can be included by the addition of the new Malicious Damage Clause if the appropriate additional premium is paid. This clause, as will be clearly seen, protects against the major casualties only. Institute Cargo Clauses (B) : This set of clauses offers, in addition to the cover given by the “C” clauses, the following additional perils: Earthquake, volcanic eruption or lightening, washing overboard, entry of sea, lake or river water into a vessel, craft, hold conveyance, lift van or place of storage, plus total loss of packages lost overboard or dropped overboard during loading or unloading. It should be noted that the “B” Clause also carries the Deliberate Damage Exclusion and that the additional cover in the terms of new Malicious Damage Clause should be sought. Important. Neither “B” nor “C” Clauses cover theft. Institute Cargo Clauses (A) : These clauses are without doubt the most widely used clauses on the market today when dealing with dry cargoes. The cover afforded is well defined by the paramount clause, which reads: – “Against All Risks of loss of or damage to the subject matter insured.” Ordinary leakage, ordinary losses in weight or volume, ordinary wear and tear are excluded, as are the risks of inherent vice and delay. Conditions Common to Institute Cargo Clauses (A), (B) & (C) :       i) Clause 4.3 Packing: This clause excludes claims “resulting from insufficiency or unsuitability of the packing or preparation of the subject matter….” ii) Clause 4.6 Insolvency : This clause excludes loss or damage arising from insolvency or financial default of the owners, managers, charterers, or operators of a vessel being used. Again this is something, which is not new – it has never been the intention for a Marine Cargo policy to guarantee the performance of third parties and to meet their liabilities. This clause should encourage the Insured to use only credit worthy and reputable sea carriers. iii) Clause 4.7 and Clause 4.8 Atomic Weapons : In common with the radioactive contamination exclusion clause, which is used in other branches of insurance, this clause, for clarity, excludes the result of a non- warlike use of an atomic weapon. This obviously relates to misuse or accidental misuse. iv) Clause 7.3 Terrorists : This clause excludes damage caused by any terrorist or person acting from a political motive. Unfortunately, it is a clause, which has particular relevance to some countries and is a point of particular importance in inland transit cases in those countries. To obtain such cover the Institute Strikes Clauses must be incorporated. Irrespective of the basic conditions of insurance you select, you will normally opt for the inclusion of cover against the risk of War & Strikes. There are a number of popular misconceptions, even among people employed in the Insurance Industry, as to what is and what is not covered under these clauses.