The new (1/1/2009) Institute Cargo Clauses in a nutshell

At the beginning of year 2009, the new ICC Clauses became available to the Market after a two-year consultation process.  The overall result has been to create clearer policies that are more favourable to the Assured than the previous 1/1/82 version. The clauses have been amended in places in an effort to make the meaning and effect more clearer, such as by simplification of the language and addition of paragraph heading. The following is a summary of some of the more noteworthy changes taken from the new ICC (A) (all risks) clauses (all of the amendments have been carried through to the ICC (B) and (C) clauses), but for full details please refer to the full wordings – link@ (ICC (A) , ICC (B) and ICC (C):

Exclusions

 

1. Insufficiency of Packing or Preparation (Clause 4.3) has been widened and made more favourable to the Assured.  Prior to the revisions, loss caused by insufficient packing was not covered.  Now the exclusion only applies when the goods are packed by the assured or their employees. The change to this exclusion will of course be of particular relevance in those cases where cargoes are purchased on CFR or FOB terms with insurance arranged by the buyers rather than the suppliers of the cargo.

2. Insolvency and Financial Default (Clause 4.6) has been amended to the advantage of the Assured. Under the 1982 Clauses, losses caused by financial default of the owners, managers, charterers or operators of the carrying vessel are not covered. Under the new clauses, this exclusion only applies if the Assured was aware, or should have been aware, of such insolvency or financial default.
Further, and in a similar way to the unseaworthiness provision discussed above, the exclusion will not operate if the cargo has been bought and the policy assigned to a buyer acting in good faith.

3. Nuclear Fission and/or Fusion exclusions have been widened in light of the increased use of nuclear material bringing them in line with the opening words of causation in the extended radioactive contamination claus

Clauses 4.5 and 4.7 have been amended to try to clarify their effect and, in respect of the Nuclear provisions in particular, to bring the clauses in line with the more recent Institute Radioactive Contamination Exclusion Clause of 2002. Additionally, the word “proximately” has been removed from clause 4.5. This is to try to avoid legal dispute centred on the meaning of the phrase “proximately caused”.

The Nuclear provisions have also been amended so that the exclusion applies to any weapon or device, rather than just a weapon of war. This, to an extent, reflects the current political climate, particularly with reference to terrorist activity.

4. Unseaworthiness and Unfitness exclusion (Clause 5) has been amended and is more favourable to the Assured as it will no longer apply when the benefit of the insurance has been assigned to a purchaser of the insured cargo acting in good faith. The change to this clause broadens the scope of underwriters’ potential liabilities, although in practice cargo shippers will not often be privy to a vessel’s unseaworthiness, at least not to the degree required in law to trigger the exclusion.

5. Terrorism (Clause 7) has been defined with the intention of clarifying causation.  This clause has been amended to bring it in line with the UK Terrorism Act passed in the wake of the September 11th terrorism attacks. In particular, the clause has expanded the definition of what constitutes a terrorist to “any person acting on behalf of, or in conjunction with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or
violence, of any government whether or not legally constituted” The second part of the new clause remains the same as under the 1982 Clauses and deals with the actions of individuals (rather than organisations), aside from the change of the word “terrorist” to “person”, terrorism having already been addressed by the first part of the clause.

For the exclusion to apply, Clause 7.3 now requires the act of  terrorism to be undertaken by a person acting on behalf of, or in connection with, an organization and does not apply to the actions of a ‘lone terrorist’.  However, Clause 7.4 does include lone operators and increases the scope of terrorist related activities.  These are no longer confined to “political motives” but now also include “ideological” and “religious” motives.


Commencement and Duration

1. The Transit clause (Clause 8) has seen a large revision, again more favourable to the Assured.  The insurance now attaches within the warehouse or place of storage when the goods are “first moved… for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance for the commencement of transit” whereas previously (the 1982 Clauses) the insurance would not attach until the goods left the warehouse.  An Assured will now have coverage for any losses occurring in the warehouse, although only once movement of the cargo with a view to carriage has begun. 😛 coverage will now commence when the cargo is “first moved in the warehouse…for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance…”

The point of termination of cover has also been altered, under certain circumstances, by the 2009 Clauses. Rather than terminating at delivery to the final warehouse, cover will continue until “completion of unloading from the carrying vehicle….” Again, the period of duration of cover is potentially extended by the change to this clause.

2. The Change of Voyage clause (Clause 10) has been amended by the removal of the words “held covered” because it was considered that these could be misunderstood by the Assured as providing cover even where it would not be available.  Clearer words are now used explaining the circumstances in which cover may be available from underwrites.

For example, cover can only be allowed in the event of a change in destination if prompt notice is given to underwriters and premium rates can be agreed (or, if the loss has already occurred, only if coverage on reasonable terms would have been available). In addition, there is now a second part of this clause (Clause 10.2). This sub-clause states that coverage will commence at the beginning of the contemplated transit even if, without the Assured’s knowledge, the carrying vessel sails for a different destination to that agreed in the policy.


Generally

  1. New definition of “Assured” appears and now expressly includes either the person by or on whose behalf the contract of insurance was effected or an assignee.
  2. The word “goods” does not accurately describe the range and type of cargoes now insured under the ICC so it has been replaced with the term “subject-matter insured”.

At the same time, the Institute Strike Clauses have been renamed the Institute Strike and Terrorism Clauses.  This change in name was intended to identify where terrorism cover is found.

It has been over 25 years since the clauses were updated, and in that time the nature of trade has evolved with new realities brought about by modern logistics, the ever-changing threats of terrorism, and maritime fraud.   We therefore see these as necessary, common sense changes, many of which we had previously included as a matter of course in our own wordings.  We are pleased to see these improvements to the basic Institute Cargo Clauses and hope they will be widely accepted worldwide.


Conclusion – be sure of which version of the Institute Cargo Clauses applies

 

Most cargo policies specify which version of the clauses should apply – the 1982 version or the 2009 version (and in some cases the 1963 version). However, it is frequently the case that the date of the applicable clauses is not specified on the policy and simply states for example, “Institute Cargo Clauses (A)” or “Institute Cargo Clauses – All Risks”. In such cases, the Court having jurisdiction over the claim will determine the position.

Under English law, however (and here, note that the clauses are subject to English law and practice), it is likely to be that unless the policy states clearly that an older version is applicable, the version of the ICC clauses current at inception of the policy will be the version that is applied. Therefore, if the policy starts in 2009, it is likely that the 2009 version of the clauses will be deemed to apply.

The effect of the new clauses will no doubt, in time, be tested by the courts and this posting is not intended to be a detailed legal analysis. There have already been some concerns voiced over whether some of the changes will have the desired legal effect and each case must be dealt with on its merits. We hope the above will provide some useful practical guidance for those concerned with the day-to-day handling of cargo claims.


Thanks to FP Marine Risks and Dolphin Maritime for the write-ups.

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4 comments for “The new (1/1/2009) Institute Cargo Clauses in a nutshell

  1. February 5, 2011 at 20:20

    Hi,

    Is it make any difference in Duration Clause if we add in “inclusive loading and unloading clause” in ICC 1.1.82 version?

    Appreciate your kind reply

  2. June 14, 2010 at 10:42

    Pretty nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed browsing your blog posts. In any case I’ll be subscribing to your feed and I hope you write again soon!

  3. May 29, 2010 at 00:39

    [New Post] The new (1/1/2009) Institute Cargo Clauses in a nutshell – via @twitoaster http://www.malaysiainsurance.info/?p=348

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