It is with the rise of globalization that trade by sea flourished. Today around 80 percent of global trade by volume and over 70 percent of global trade by value are carried by sea. Maritime trade, as can be imagined, involves more risks than average trading. Thus, carriage of cargo by sea is almost always insured. Institute Cargo Clauses (ICC) is a kind of marine insurance policy that covers cargo in transit. It is released by the Lloyd’s Market Association of London.

The ICCs were initially instituted in 1912, which underwent revisions in 1982 and in 2009. The 2009 ICC is the one currently in use and has three versions, namely – ICC A, ICC B, and ICC C. The major difference between these three versions is the limit of risks covered under each version. In order to incorporate the right version under the policy most effectively, it is essential that consignors and carriers are acquainted with the types of ICCs and their scope. This article aims to give a simple and instructional interpretation of the Institute Cargo Clauses (ICC) and its versions for laymen.

ICC A:

ICC A is the version that covers all risks. Although it is worded as to cover all risks of loss or damage to the subject matter insured, it is followed by certain exceptions given under clauses 4, 5, 6 and 7. Traders opting for the ICC A cover are covered against “all risks” subject to exclusions mentioned in the clause. Though ICC A covers ‘all-risks’, it does not mean all and any loss. The cover is still only against a fortuity or uncertainty. Therefore, damage or loss occurring due to a certain/inevitable/foreseeable event will not be covered by the policy. This was reaffirmed in the case of Feuiltault SolutionSystems Inc. v. Zurich Canada, wherein the question was whether sweating or rust damage to cargo would entitle an indemnity under ICC A cover. The court held that such a damage was foreseeable and hence would not be covered under the ambit of ICC A. It can be seen that courts have repeatedly held that damage due to ordinary wear and tear (for instance, in Berk v Style, (1956) 1 QB 180.) and inherent vice (in Overseas Commodities Ltd v Style, [1958] 1 Lloyd’s Rep 546) are excluded from protection under an all-risk clause.

Generally, the burden to prove a damage or loss to a cargo is on the assured. However, under the provisions of ICC A, the assured need to only prove that his goods have been damaged by a fortuitous event and need not prove the existence of the specific peril that caused such a damage.

ICC B:

Whilst ICC A covers all risks, ICC B is a medium-cover cargo insurance policy. It covers a restricted number of risks. Subject to exclusions, this insurance covers damage to cargo caused by 9 risks namely, fire or explosion, the vessel being stranded grounded sunk, or capsized, overturning or derailment, collision, discharge of cargo at a port of distress, earthquake, volcanic eruption or lightning, loss caused by general average sacrifice, jettison and damage due to entry of water and also loss of any package lost overboard or whilst loading on to, or unloading from the vessel.

ICC C:

ICC C covers the least number of risks. For this reason, it is used to cover cargo that is susceptible to one or two particular types of risks covered. The ICC C insures 7 risks mentioned in ICC B except for loss due to jettison and damage due to entry of water. It is pertinent to note that ICC B and C do not provide any cover for risks of theft.

In both ICC B and C, the burden of proof is on the assured wherein he is bound to prove the peril causing damage on a balance of probabilities. This is usually done by the assured by producing a clean Bill of Lading signed by the master during loading. If the insurer claims any exclusion from liability under the policy, the burden will be on him to prove the existence of the exclusion.

Limitation of Liability by Insurer

The protection provided under all the ICC covers are subject to certain exceptions provided therein. In such cases the insurer may exclude liability by relying on these exclusions. ICCs will not cover loss or damage arising out of –

• Willful misconduct of assured
• Ordinary leakage, loss in weight or volume, ordinary wear and tear of subject matter
• Insufficient packing
• Inherent vice
• Delay
• Insolvency of the shipowner wherein the assured was aware of such insolvency

Further in ICC B and C, exclusion of liability is granted over cargo of weapons employing nuclear fission as well as from deliberate destruction of cargo by the wrongful act of any person.

Duration of Protection

Clause 8 in the ICC governs duration of cover. The previous edition ICC 1982 provided for a ‘warehouse to warehouse’ protection which has been extended in the 2009 ICC to a ‘shelf to shelf’ protection. According to Cl 8.1.1, the indemnity begins from the time the goods are moved in the warehouse for delivery. It is interesting to note that in cases where even though the insured does not have an insurable interest in this part of the voyage, the ICC cover shall apply according to Cl 11.2. It continues during the ordinary course of transit and terminates on the occurrence of the following events, whichever first;

• on unloading from the carrier at the final warehouse; or
• on unloading at a warehouse for storage other than in the ordinary course of transit or for allocation or distribution; or
• when the assured chooses to use any other vehicle for storage other than in the ordinary course of transit; and
• on expiry of 60 days of discharge overside from the vessel at the final port of discharge.

Thus, the ICCs are voyage insurance covers, they only exist for the duration of the voyage.

The ICCs are very popular and used widely by carriers and consignors. Thus, it is important to know the risks associated with each clause so as to ascertain the appropriate clause for each shipment. This must be done by taking into consideration the nature of goods, packaging and the kind of risks likely to affect that particular voyage carrying the insurable cargo. ICC A must not be arbitrarily used simply because it insures against all risks. That might lead to additional expenditure. A judicious study of the nature of the cargo and the voyage is essential in determining the right cover for the right shipment. Further, while adopting the required clause, it is always advisable for the parties to negotiate and customize the clause as per their requirements.

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