A brief analysis and comparision of the London ICC cargo clauses aimed at West African importers / traders / charterers of bagged rice

Introduction

The following is a general overview of the Transport Insurance Covers as available on the London Market, namely the Institute Cargo Clauses (ICC): (A) & (B) & (C).

The distinction between these Insurance Covers, is the Perils insured against, and before we detail the three (3) possible ICC Covers, we need to briefly discuss in general, the nature of Insurance Covers.

A Contract of Insurance is in fact a Contract of Chance. What is insured against is namely the occurrence of a possible, uncertain and future event of harm, read in casu: damages and / or losses of Cargo due to an external cause.

Thus, if a future occurring damage and / or loss is a certainty and inevitable, no Insurance Claim for said damages and / or losses can be entered rightfully.

For example: Cargo shipped of which its properties and / or nature do not allow a voyage and / or manipulation, i.e. lashing and / or stowing.

An in casu important nuance can be made with regards to bags used for shipping rice, and tearing of the same.

At first such a tearing can be viewed as an uncertain, future event, but when later on the used bags are examined, it may become apparent that such a tearing of used bags was an inevitable event due to inferior quality of said bags. In such a case, no Insurance Claim can be entered on the Insurance Cover, and no Recovery Claim can be entered with the Carrier, as improper packing is also an exclusion ground under the Hague- Visby Rules (Art. 4, 2, n)

Institute Cargo Clauses (A):

The ICC (A), formerly known as the “ALL RISKS” Cover, offers the most broad Insurance Cover, both for Particular Average (PA) as for General Average (GA). (See ICC (A) arts.1 & 2)

Particular Average: Under the ICC (A) Cover, all Damages and /or Losses incurred due an external cause during the period of Insurance Cover (as per ICC (A) art. 8), and which are not excluded by (ICC (A) arts.4 & 5 & 6 & 7), are namely covered.

Therefore, when entering an Insurance Claim under ICC (A), the Claimant (Assured or Rightful Third Party Claimant under a CIF Contract of Sale), only needs to proof suffered Damages and / or Losses which were incurred during the Insured Transit Period.

The Insurance Claim needs to be entered with a London Insurance Broker and they will investigate and negotiate the Insurance Cover conditions with the Lead London Underwriter.

Under ICC (A), the investigation will focus on the Exclusions Grounds under arts. 4 & 5 & 6 & 7 and the Covered Insurance Period under art 8.

General Average Charges: Under ICC (A), due General Average Contributions are covered under art. 2, and we hereby set out the general principals of General Average (GA).

Under Rule A of the York- Antwerp Rules (YAR), there is a General Average Act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the Properties involved in a Common Maritime Adventure.

The GA Act is to be distinguished from the GA incident.

For example: Grounding of Vessel upon Reef (GA Incident) / Vessel’s Hull punctured / Ingress of Sea Water into Hold(s) / Salvors engaged who take measures to preserve the Common Adventure from Peril: placing pumping equipment and Towage of Vessel to Port of Distress (GA Act).

General Average sacrifices and Expenditures (the GA Act) shall be borne by the different Contributing Interests on the basis as set out in the YAR, meaning that all costs and / or sacrifices made on behalf of the Common Adventure are borne proportionally by all the Properties On Board and the Vessel. Thus, in principal, they ALL will Contribute in GA.

GA will usually be declared by the Party operating the Vessel, usually Vessel’s Owners, and seeing that under GA, all properties On Board during the GA incident have to Contribute in GA, Vessel’s Owners will have a Lien on Cargo.

This Lien exists in order to obtain from the other Properties On Board, proper Security which ensures that they will honor their obligation to Contribute in GA.

The proper required Security takes the form of:

GA Bond to be signed by Consignee or Shipper (depending on the Ownership status over respective Cargo and Contract of Sale). By signing the GA Bond, the Signing Party recognizes the GA matter and that his GA Contribution is principally due;

GA Guarantee to be signed by the proper Cargo Underwriter, depending again on the Ownership over Cargo and the Contract of Sale);
Cash Deposit if the Cargo is not Insured.

Do note that the Vessel’s Owners will only release the respective Cargo to Cargo Interested Party upon providing the above mentioned Securities.

The Vessel’s Owners will appoint a GA Adjuster who will collect all GA Securities and will calculate the respective GA Contributions of all involved Common Adventure Parties.

Note, Cargo Interested Parties can dispute and reject GA Contributions in case a relevant case of Unseaworthiness of the Vessel can be evidenced and / or the Intention to cause harm to the Common Adventure and / or Willful Misconduct.

Unlike ICC (A), ICC (B) & ICC (C) clearly set out which Perils are Covered in a limitative fashion. A Claim thus entered outside one of these summed- up Perils, is in principal not Covered.

These limitative summed- up Covered Perils under ICC (B) & ICC (C) are incidents which can be categorized as GA Incidents, with exception of art. 1.3 ICC (B).

Institute Cargo Clauses (C):

Particular Average: The ICC (C) Cover provides the most minimal Cover.

Only Damages and /or Losses reasonably attributable to:

Fire or Explosion;
Vessel or 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;

Loss of or damage to the subject- matter insured caused by: GA sacrifice or jettison

during the period of Insurance Cover (as per ICC (C) art. 8), and which are not excluded by (ICC (C) arts.4 & 5 & 6 & 7), are covered.

General Average Charges: Under ICC (C), due General Average Contributions are covered under art. 2.

Note: The General Exclusion Grounds as set out in ICC (C) arts; 4 & 5 & 6 & 7 are applicable, as the Standard Period of Insurance Cover as under ICC (C), art. 8.

Note: When a Contract of Sale stipulates CIF- conditions, the Seller is only contractually obliged to minimally provide a ICC (C) Cover.

Institute Cargo Clauses (B):

Particular Average: The ICC (B) Cover provides an In- between Cover, namely the ICC (B) Cover:

Only Damages and /or Losses reasonably attributable to:

Fire or Explosion;
Vessel or 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;

Loss of or damage to the subject- matter insured caused by: GA sacrifice, jettison

AND only Damages and /or Losses reasonably attributable to:

Washing overboard (for example: On Deck Cargo);
Entry of sea, lake or river water into Vessel, Craft, Hold, Conveyance, Container, Liftvan (Heavy Weather Conditions and Ingress of Sea / Fresh Water) or into place of Storage;
Total Loss of any package Lost Over Board or dropped whilst loading on to, or unloading from, Vessel or Craft.

during the period of Insurance Cover (as per ICC (B) art. 8), and which are not excluded by (ICC (B) arts.4 & 5 & 6 & 7), are covered.

General Average Charges: Under ICC (B), due General Average Contributions are covered under art. 2.

Note: The General Exclusion Grounds as set out in ICC (B) arts; 4 & 5 & 6 & 7 are applicable, as the Standard Period of Insurance Cover as under ICC (B), art. 8.

Marseille, France, the 23rd day of November 2012

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