Understanding the Differences Between Institute Cargo Clauses A, B and C

Shipping goods across vast seas and oceans is always brimming with dangers; the biggest is the unpredictable nature of large water bodies. Given how much loss unforeseen accidents can cause, marine cargo insurance becomes absolutely essential. However, it’s important to know that not all marine insurance have the same coverage. Depending on the level of coverage, marine insurance is mainly categorised as Institute Cargo Clauses A, B and C.

In this blog, let us discuss these three cargo clauses and explore their differences.

Institute Cargo Clause A

Institute Cargo Clause A provides the most comprehensive coverage among the other clauses. It provides protection against maximum potential risks to cargo. Due to its extensive coverage, Clause A is the most expensive. It is also known as an “All Risks” cargo insurance policy.

What is covered?

Cargo Clause A covers almost everything except those specified under general exclusions.

Institute Cargo Clause B

Institute Cargo Clause B offers restricted coverage as compared to Clause A. The coverage is for accidental damages only. But you can ask for additional coverage to protect valuable items. Premiums are moderate because of the limited coverage. 

What is covered?

Some of the perils covered are:

• Fire or explosion
• Volcanic eruptions, lightning or earthquake
• Vessel sinking, grounding or capsizing
• Collision of vessel with external objects
• Entry of sea or river water into the container, vessel, place of storage, van, etc
• Discharge of cargo at a port of distress
• Jettison
• General average sacrifice

Institute Cargo Clause C 

Institute Cargo Clause C offers the most limited coverage. It covers very limited risks, so the premium is low. Also, most of the perils covered must occur during carriage.

What is covered?

Clause C covers any loss or damage due to:

• Fire or explosion
• Derailment or overturning of land conveyance
• Vessel or craft being capsized, grounded, sunk or stranded
• Collision of vessel, craft, or conveyance with an external object
• Discharge of cargo at a port of distress
• Jettison
• General Average Sacrifice

Differences between Institute Cargo Clauses A, B, and C

The main points of difference between the Cargo Clauses A, B, and C:

Exclusions under Institute Cargo Clauses

The exclusions under Cargo Clauses fall under four categories:

1. General exclusions

• Loss or damage due to wear and tear of the goods, or loss due to natural loss in volume, weight or leakage of the property insured
• Loss due to wilful misconduct of the insured
• Loss caused by the natural properties or defects of the goods themselves
• Damage arising from unsuitable packing or preparation of the goods, provided the packing was done by the insured or their employees
• Loss due to financial failure, or insolvency of the vessel's owners, managers, charterers or operators
• Damage caused by the use of nuclear or radioactive weapons or materials

2. Vessel Seaworthiness or Fitness exclusions

• If the vessel is unfit for safe carriage of the goods and the insured was aware of this condition at the time of loading, insurance will not cover any loss incurred
• Loss due to the unfitness of containers or transport vehicles, and if the insured was aware of such unfitness during loading

3. War exclusions

• Any loss or damage to cargo caused by war-related events such as war, civil war, rebellion, revolution, civil strife, insurrection or any hostile acts by or against belligerent powers

4. Strikes exclusions

• Damage due to riots, strikes, protests, civil commotions, acts of terrorism, etc

How to file a marine insurance claim

Here’s a step-by-step guide on how to file a marine insurance claim:

Step 1: The first step is to thoroughly assess the damage caused and identify the cause of damage – whether it is due to theft, accident, or natural calamity. Also, make a list of the lost or missing items.

Step 2: Notify the insurer about the event. Usually, there is a timeline for filing a claim, and any delay can lead to claim rejection.

Step 3: After you file the claim, the insurer will send a surveyor to assess the loss, prepare an assessment report, and submit it to the insurance company.

Step 4: Once the report is approved, the claim amount will be disbursed.

Conclusion

Unforeseen events can cause huge losses or damage to cargo transported by air, sea, rail or road. Before shipping any goods, make sure you have a cargo insurance policy for financial security against such losses. Understanding the cargo clauses and coverage will help you buy the plan based on your requirements.