Institute Cargo Clauses A, B & C - What they cover.

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Institute Cargo Clauses A, B & C - What they cover.


Following is a summary of the risks covered under the three main sets of clauses. Each is subject to listed exclusions.

Institute Cargo Clauses "C"

Cover loss of or damage to the subject matter insured, "reasonably attributable to:"

Fire or explosion.
Vessel of craft being stranded, grounded, sunk or capsized.
Overturning or derailment of land conveyance.
Collision or contact of vessel, craft or conveyance with any external object other than water.
Discharge of cargo at a port of distress.
The insurance also covers loss or of damage to the subject matter insured caused by:

General average sacrifice.
Jettison.
To sum up, the "C" clauses provide major casualty coverage during the land, air or sea transit.

Institute Cargo Clauses "B"

Provide all the cover that is available under the "C" clauses, but in addition cover is given for loss or of damage to the subject matter insured "reasonably attributable to":

Earthquake, volcanic eruption or lightening.
The insurance also covers loss of or damage to the subject matter caused by:

Washing overboard.
Entry of sea, lake or river water into the vessel, craft, hold, conveyance, container, liftvan or place of storage.
Total loss of any package lost overboard or dripped while loading on to or unloading from vessel or craft.
The "B" clauses provide significant additional coverage; wet damage from sea, lake or river water and accidents in loading and discharging, but there is no coverage for theft, shortage and non-delivery.

Institute Cargo Clauses "A"

Provide coverage for all risks of loss or damage to the subject matter insured. The words "all risks" should be understood in the context of the "A" clause to cover "fortuitous loss", but not "loss that occurs inevitably."

General exclusions:

Willful misconduct of the assured.
Ordinary leakage, ordinary losses in weight or volume or ordinary wear and tear.
Insufficient or unsuitability of packing or preparation of the subject matter insured.
Inherent vice or nature of the subject matter insured.
Delay.
Insolvency or financial default of carrier.
Deliberate damage to or deliberate destruction of the subject matter insured.
Loss arising from nuclear weapons.
The general exclusions are supplemented by the 'Unseaworthiness and unfitness Exclusion Clause" and the "War & Strikes Exclusion Clause."

Summary - Notes - Cargo insurance and routes to indemnification

The taking of a cargo insurance policy, besides the security provided under a carrier's contract of carriage, allows a party to turn directly to the insurance company, rather than the carrier.

The insurance company will then pay the claimant the damage covered by the insurance policy - usually the full loss value (sometimes 10 percent is added). By contract, the indemnity payable by the carrier - if the carrier is liable - is restricted to his legal maximum liability amount. And the carrier may not even be liable at all if protected by one or more of his legal exoneration or exceptions.

Generally, as per the bill of lading, If the indemnity paid by the insurance company is important enough, then the insurance may wish to subrogate in the rights of the cargo interest and claim from the carrier and so recoup at least some of the indemnity paid to the cargo interested party.