Ask a broker for cargo insurance and the quote will name one of three clause sets: Institute Cargo Clauses (A), (B) or (C). They are published by the Joint Cargo Committee of the Lloyd's Market Association and the International Underwriting Association, they are dated 1 January 2009, and they are written into cargo policies worldwide by reference rather than reproduced in full.
The common mistake is to read them as basic, better and best, the way you would read economy, standard and premium. They are not tiers of the same product. (C) and (B) are named perils covers: if what happened to your cargo is not on the list, there is no claim, however genuine the loss. (A) works the opposite way round: everything is covered unless something excludes it.
That difference matters most in the ordinary cases. A pallet dropped by a forklift, a carton stolen out of a groupage warehouse, condensation ruining a load of textiles: none of these are on the (B) or (C) lists.
ICC (C): major casualty only
The narrowest cover. It responds when something happens to the ship or the vehicle, not to your cargo in isolation:
- Fire or explosion
- Vessel or craft stranded, grounded, sunk or capsized
- Overturning or derailment of a land conveyance
- Collision of the vessel or vehicle with anything other than water
- Discharge of cargo at a port of distress
- General average sacrifice, and jettison
Read that list again and notice what is missing: water. Under (C) there is no cover for seawater entering the hold, none for a container going overboard, none for theft, none for handling damage. (C) is bought for bulk commodities of low unit value where the only loss worth insuring against is the loss of the whole ship.
ICC (B): (C) plus water and earthquake
(B) takes the whole (C) list and adds:
- Earthquake, volcanic eruption or lightning
- Washing overboard
- Entry of sea, lake or river water into the vessel, craft, hold, container or place of storage
- Total loss of any package lost overboard, or dropped while loading onto or unloading from a vessel
Note how tightly the package clause is drawn. It is total loss of a whole package, and only during loading or unloading from the vessel. A crate dropped in the inland depot is not covered. A crate dropped on the quay and dented rather than destroyed is not covered.
ICC (A): all risks, subject to exclusions
(A) covers all risks of loss of or damage to the subject matter insured, except as excluded. It is the only one of the three that picks up the everyday causes of claims: theft, pilferage, non-delivery, handling damage, contamination, breakage, and malicious damage by a third party.
For manufactured goods, finished products and anything with real value per cubic metre, (A) is normally the only sensible answer, and the price difference over (C) is usually smaller than shippers expect. Get a feel for the numbers with the cargo insurance calculator.
What all three exclude
This is the part that catches people, because it applies to (A) as much as to (C). The general exclusions in Clause 4 include:
- Insufficient or unsuitable packing, where the packing was done by you or your staff before the cover attached. Weak packing is not an insured peril, it is your responsibility. See export packaging and palletisation.
- Inherent vice, meaning the goods damaging themselves: fruit ripening, metal oxidising, chemicals separating.
- Delay, even where the delay is caused by an insured peril. A missed season is not a cargo claim.
- Ordinary leakage, ordinary loss in weight or volume, and ordinary wear and tear.
- Wilful misconduct of the assured.
- Insolvency or financial default of the carrier, where you knew or should have known about it at the time of loading.
Clause 5 excludes unseaworthiness and unfitness of the vessel or container where you were aware of it. Clause 6 excludes war. Clause 7 excludes strikes, riots and civil commotions, and terrorism.
War and strikes are bought back separately, through the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo). On most trades this is routine and cheap. On specific routes it is neither, and the underwriter may quote per voyage rather than under the open cover.
When cover starts and when it stops
Clause 8, the transit clause, attaches cover when the goods are first moved in the warehouse for immediate loading, and it runs warehouse to warehouse. It ends at the earliest of delivery to the final warehouse, delivery to any other warehouse you elect to use for storage or allocation, or 60 days after discharge from the vessel at the final port.
That 60 day limit is the one to diarise. Cargo sitting in a bonded warehouse through a customs dispute can quietly fall out of cover while everybody is arguing about classification.
Choosing
Work from the cargo, not from the price:
- Low value per tonne, bulk or homogeneous: (C) is defensible.
- Mid value, robust, containerised: (B) is rarely the right answer. The gap between (B) and (A) is where most real claims live.
- Anything manufactured, fragile, branded or high value: (A), and read the exclusions before you assume you are covered.
Then check the sum insured and the basis of valuation, which is a separate question from which clause set applies, and one your forwarder's trading conditions will not answer for you. If a loss has already happened, start with how to file a cargo claim.
General guidance, not insurance advice. The policy wording your insurer issues is what governs your cover, and clause sets are sometimes amended by endorsement.
