MARINE INSURANCE

General Insurance Business has been classified into 3 categories:

A. Fire Insurance
B. Miscellaneous Insurance
C. Marine Insurance

Marine insurance is the oldest form of insurance and plays a very important role
both in internal and international market. It is closely connected with important commercial
institutions like banking and shipping. Marine insurance can be traced to London market
which is actual place of origin of Marine Insurance. The policies were simplified and
streamlined in the London market and all the marine policies not only in India but anywhere
in the world have been adopted from London market.

What is Marine Insurance:

Marine insurance is concerned with insurance of properties in transit. E.g. goods

can be sent from one place to other place by Rail, Road, Air, Sea, Courier, Regd post parcel
etc. When goods are in transit by any one of these modes, then goods are exposed to various
risks e.g. Theft, Burglary, Non-delivery, Partial-delivery, Damage, Accident, Earthquake,
Terrorism, Attack, Fire etc.
In the event of operation of any of these peril, there can be financial loss of the
owner of goods. So Marine Insurance can be defined as “It is a contract under which the
insurer underestimates to indemnify the insured against financial losses incidental to
Marine adventure.

TYPES OF MARINE INSURANCE:

Broadly it is of two types:

A. Cargo Insurance: It deals with insurance of goods whilst in transit by Rail,

Road, Air, Ship, or Regd post parcel.
B. Hull Insurance: It deals with insurance of ocean going vessels, river going
vessels, tugs, barges etc. It may be noted that when goods are exposed to
various risks, similarly the vessels are also exposed to similar risks.

SALIENT FEATURES OF MARINE INSURANCE:

Like other insurance contracts, Marine Insurance contract is also governed by

following fundamental principles:

1) Insurable Interest: In any insurance contract the insured must have some legal
relationship with the property insured in such a way that he benefits by the safety
of the property and suffers financial loss in the event of damage to property.

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 Ordinarily in any insurance the insured should have insurable interest at the time of
commencement of insurance as well as at the time of loss. However in Marine
insurance the insurable interest need not be there at the time the policy is taken but
it is necessary that insurable interest should be there at the time of loss.Any person
who has an expectation of acquiring ownership of goods can have Marine Policy.

2) Assignment: Motor Insurance Policies, Fire Insurance Policy or any other

Miscellaneous Insurance Policy cannot be assigned without insurer’s consent or
approval. Marine Cargo Policies are an exception because there policy can be freely
assigned without consent of the insurer. This is in time with international practice
because of frequent sale of goods from one person to another.

3) Indemnity: When a loss takes place, the amount which the insured can recover is
called the indemnity. The insurer cannot replace the property/ goods but can always
compensate the insured by making good the financial loss. According to common
law the insurance contract is required to be designed with a promise to compensate
the insured should neither be better off nor worse after the happening of the insured
event. Fire insurance and Motor insurance contracts are contracts of strict
indemnity. Whereas the principle of indemnity has been modified in the Marine
Cargo Insurance here the policy is issued on “Agreed value basis” that means the
value of subject matter is fixed or agreed in advance at the time of insurance of
policy and claims are settled on the basis of “Agreed Value”. So, it is commonly
said that principle of indemnity is modified in Marine Insurance and it is called as
“Commercial Indemnity”. It implies that instead of market value the insurer pay
out commercial value of the goods in the event of loss. In view of this Marine cargo
policies are also known as Agreed Value Policies.

MARINE INSURANCE – SALIENT FEATURES

Marine Insurance is the oldest branch of insurance and it is distinct from other classes
of insurance in the following respects:

1) Insurable Interest: Unlike other classes of insurance in Marine Cargo insurance, the
insurable interest need not be there at the time of taking insurance policy but
claimant is required to establish insurable interest in the goods at the time of loss.

2) Commercial Indemnity: The principal of insurable interest is modified in marine

cargo and the value of the goods is fixed at the time of granting insurance. The
value so fixed or so agreed is the basis of settlement of claim.

3) Assignment of policy: Unlike other policies Marine Cargo Policy is freely

assignable i.e insured is free to assign the policy without consent of underwriters.

4) Recover of Stamp Duty: In Marine Cargo Policies the stamp duty is recovered from
the insured along with premiums.

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5) Coverage of War Risks: Any loss or damage to goods by war risks is not covered
in Marine insurance just like other insurance the risk of war can be covered on
payment of additional premium.

6) Applicability of various Acts: Marine insurance is complex as compared to other

classes of insurance because it is governed by various Acts, Rules, Regulations
throughout the world.

7) Survey fee payment: In marine cargo insurance, the survey fee is first paid by
insured/ claimant and this amount is reimbursed along with claim amount if the
claim is found to be admissible/ payable.

8) Proposal Form: In general it is not required but it is mandatory for custom duty
insurance, special declaration policy etc.

9) Detariff: In Marine Cargo insurance, there is no tariff and underwriters can grant
coverage after assessment of the risk.

10) One policy form: In Marine Cargo there is only one policy form and any type of
policy can be issued by attaching relevant clauses.

11) Types of Policy: There are 2 types of policies:

a) Voyage Policy: It is issued for a specific voyage/ transit and in known as

specific policy/ voyage policy.
b) Time Policy: This is issued for a particular time e.g. open policy, special
declaration policy.

TYPES OF MARINE CARGO POLICY

2) Specific Policy
3) Open Policy/ open cover
4) Special declaration Policy
5) Annual Policy
6) Custom Duty insurance policy
7) Increased value policy
8) Special storage risk insurance policy

1. SPECIAL POLICY
Marine policies are basically transit policies. A marine policy covers the
physical loss/ damage to goods during transit. A specific policy covers the specific
transit e.g. goods in transit from Delhi to Mumbai – this is one transit and a policy
covering transit risks from Delhi to Mumbai will be a specific policy. Once the

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 goods arrive at destination, the policy ceases and the insured has no further rights
under this policy.

2. OPEN POLICY/ OPEN COVER

The Marine Insurance Act refers to such policies as floling policies. When a regular
trader is sending the goods from one place to other places within India, the turnover is quite
high, the dispatches are frequent in such cases it is quite cumbersome to the trader to
approach the insurer every time for taking specific policies. Salient features of open policy
are as under:

1) Open policies are issued for a maximum period of one year.

2) Open policies are issued only for inland transit.
3) It is a stamped document.
4) Sum insured is fixed but can be increased during the currency of the policy.
5) The insured furnish the declarations, which are accounted for by the insurer.
6) The policy will expire after 12 months of insurance on an exhausting of sum insured
whichever shall occur first.
7) It is a legal document, which can be enforced in the court of law.
8) If the policy has run 12 months and unutilized sum insured is available, balance
prorate premium is refunded.
9) This policy offers automatic and continuous insurance protection.
10) There is a considerable saving of stamp duty because stamp duty of Re1 is affixed
in the policy, which is valid for 12 months.

OPEN COVER

This is also a document of insurance issued in care of export/ import where a trader
is regularly exporting/ importing goods. Like open policy, here also insured need not
approach insurer every time for each dispatch separately.
The salient features of open cover are as under:

1) It is issued for export / import only.

2) It is not a stamped document.
3) It is not a legal document.
4) Specific policies/ certificate of insurance are issued for each dispatch.
5) An open cover describes the cargo, the voyage and cover in general terms.
6) Like open policies it also offers automatic and continuous protection.

IMPORTANT CLAUSES OF OPEN POLICY/ OPEN COVER:

1) Limit per bottom or per conveyance: It indicates the value of one shipment (single
shipment) e.g. value of goods at any place/ time which may become liability of the
insurer in the event of loss.
e.g. S.I = 10 crore

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 Limit per bottom = 10 lacs
Insured is not expected to exceed the limit per bottom, unless agreed to specifically
by the insurer.

2) Basis of Valuation: Basis of valuation is indicated to ascertain the components of

sum insured. Normally the value of the cargo includes prime cort of goods + freight
+ other charges incidental to shipment + cost of insurance plus 10-15% to cover
profits. Profit can be upto 25% depending upon case to case.

3) Location Clause: The limit per bottom restricts the exposure of insurers to goods in
transit. But sometimes the goods in transit may accumulate at a particular point e.g.
goods being sent by sea may accumulate at port of shipment awaiting vessel to
arrive. In order to restrict the liability, the insurers incorporate location clause –
which specifically limit the liability of the insurers at a particular locations in the
event of any loss.
In common practice the limit per bottom and limit per location are same but there
can be variation too.

4) Premium Rate: The details of premium rate chargeable under OP/OC are
incorporated specifically.

5) Terms of Insurance: In order to ascertain the value of goods dispatched and

utilization of sum insured, the insured is bound to submit details of dispatches in
the prescribed format to the insurance company. These declarations may be sent
weekly / fort nightly/ monthly/ quarterly/ half yearly.

6) Cancellation Clause: Since open policy is issued for a year, it provides for pre-
mature cancellation by either side by giving one-month notice.

SPECIAL DECLARATION POLICY

- This is a special type of Floating policy.

- Issued to clients with a turnover more than 2 crores
- Issued for Inland transit only.
- Cannot be issued in joint names.
- Policy cannot be assigned.
- Proposal form is required.
- Policy is issued on the basis of turnover of previous year.
- Slab wise turnover discount is given.
- Maximum slab wise T.O discount can not exceed 50%
- Sum insured can be increased twice during the currency of policy.
- Periodical declarations are submitted by insured.
- Insurance claim ratio is to be within 60%
- If incurred claim ratio is more than 60% premium is loaded to bring down
the claim ratio to 60%

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- For new risks, where previous year T.O is not known, SDP can be issued
but discount will be granted at the time of completion of one year provided
T.O is not less than 2 crores.

ANNUAL POLICY

- this policy is issued for transit within India.

- Policy is issued for transit by rail/road from specified depots/ processing
units to other specified depots/ processing units.
- Cover is provided in terms of Inland Transit (Rail/Road) clause.
- Premium rates are charged on the basis of value of risk at any point of time
and distance between 2 points of transit.
- Proposal form is mandatory for this type of insurance.

5. CUSTOM DUTY INSURANCE:

- This policy is issued in respect of imported goods, which are subject to

custom duty.
- Custom duty policy is a policy of true indemnity and it is not agreed value
policy. Claims are paid on the basis of actual custom duty or sum insured
which ever is less.
- Custom duty policy is issued for the benefit of importer only and cannot be
assigned.
- The premium chargeable for custom duty policy is 75% of the normal transit
policy.
- The custom duty policy can be issued only if there is policy on CIF value
of the cargo.
- Custom duty policy is not issued after arrival of ship/ aircraft.
- The claim under Custom duty policy is admissible only if claim under CIF
value is payable.
- All vessel extras as applicable to CIF value policy are also chargeable for
custom duty policy.
- Scope and duration of CIF value policy and custom duty policy are
identical.

6. INCREASED VALUE POLICIES:

- This policy is also issued in case of imported cargo.

- Sometimes after arrival of cargo it is observed that market value of cargo is
more than CIF value + landing charges + Handling charges + Custom duty.
- The difference in market value and total landed cost of cargo can be covered
under increased value policy.
- Again this policy cannot be granted after arrival of vessel/ aircraft in India.
- The policy is a true indemnity policy and claim is settled on the basis of
market value of the cargo on the day of arrival of the cargo at destination.
- The maximum liability is limited to 75% of sum insured under this policy.

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 SPECIAL STORAGE RISK INSURANCE POLICY

- As stated under cover under Marine policies is valid for a specified no. of
days at destination after arrival of vessel, unloading cargo from the air craft.
- In case of any delay in clearance of cargo, delay in commencement of inland
transit, the insured can opt for insurance cover under SSRI Policy.

SALE CONTRACTS:

Normally in any insurance such as Fire & Miscellaneous the insurance policy is
taken by the owner of goods because only owner possess insurable interest in the goods.
The position is however different in Marine cargo because the goods are in transit and
ownership of goods keeps on changing when the goods are still in transit. In view of
this peculiarity who will take the policy i.e. seller or buyer and from which stage to
which stage – will be determined by nature of sale contract between seller and buyer.

There are different types of sale contract recognized universally all over the world
and there contracts mean the same thing in any part of the world and there sale contracts
have been defined and explained by International Chamber of Commerce, Paris.

A brief analysis and interpretation of some of the important contracts in relation to

insurance arrangements is mentioned below:

1) FOB (Free on Board): The seller is responsible for placing the goods or
board the vessel. He is required to pay all expenses till goods cross the ship’s
rail and invoice will indicate the price of goods as “FOB Price”. Seller is
also responsible for arranging insurance of goods from his warehouse till
FOB point. Once the goods cross the ships rail/ loaded on to the vessel
subsequent responsibility will be of buyer and who has to arrange insurance
from FOB point till his (buyer’s) warehouse.

2) FAS (Free alongside): Here seller’s responsibility is to bring goods at the

store by the side of the ship. It is the responsibility of the buyer to fix the
vessel. The seller’s responsibility ceases once the goods arrive safely
alongside the ship. The buyer is also \responsible for loading of the goods
on to the vessel at his risk and responsibility. In this case insurance by seller
can be arranged from his Ware house till FAS point and buyer can arrange
insurance from FAS point till his (buyer’s) warehouse.

3) CIF contracts: Here seller is expected to arrange everything and his duty is
to deliver goods safely in buyer’s warehouse. Seller has to take insurance
policy from his warehouse till warehouse of the buyer. Buyer need not take
any insurance policy.

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 4) CI contracts: (Cost and Insurance): Seller is required to do everything as is
the case in CIF contract except that Freight is payable by buyer at
destination. The shipping company is expected to collect freight from the
buyer before cargo is delivered to the buyer at destination.

5) C& F contracts: Here freight is paid by seller but insurance beyond FOB
point is arranged by buyer in his account. The nature and duties of seller
and buyer in FOB and C&F contract are same. The term FOB is used for
consignments going by sea whereas the term C&F is used for consignments
going by Air.

MARINE POLICY FORM

Earlier SG Form (Ship &Goods) policy was in voyage in U.K Markets. The London
market finally simplified and streamlined the wordings of the policy and clauses. The
revised policy and clauses were adopted w.e.f. 1.1.1982. The Indian market introduced this
new policy form with revised clauses w.e.f. 1.4.1983.

In a marine cargo department only one policy form is used and any type of policy
can be issued b attaching relevant clauses. That means form remains the same and for any
policy relevant clauses are attached.

Contents of MC Policy Form:

1) Assured: He can be seller or buyer depending upon nature of sale contract.

2) Sum Insured: Amount to be mentioned in Indian currency and also in foreign

currency for export policies.

3) Premium: Rate and Amount to be mentioned.

4) Stamp Duty: Stamp duty is charged as per Indian Stamp Act. Stamps of requisite
value are affixed on the policy.

5) Vessel Name: Which is used to ship the cargo.

6) Voyage / Journey: Place of commencement of transit and place of termination of

transit.

7) Affreightment Particulars: (B/L) Bill of Landing No – Sea borne consignment

(AWB) Airway Bill No – Air borne consignment
RR railway Receipt No – Rail borne consignment
GR/LR Lorry/ Goods receipt No – Truck borne
consignment

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 RPP (Regd Post parcel receipt) Post other
consignment

8) Subject Matter: Insured goods details.

9) Type of cover: Whether all risk cover Road Risk cover etc.

10) Clauses to be attached: Depending upon nature of cover.

11) Place of issue of policy.

12) Date and signature:

MARINE UNDERWRITING DOCUMENTS

Various types of documents are used in Marine Underwriting department e.g.

2) Questionnaire
3) Proposal Form
4) Cover note
5) Policy form
6) Marine clauses
7) Endorsements
8) Certificate of Insurance

1) QUESTIONAIRE: There is an exception that unlike other insurances, proposal

form in general is not required in Marine cargo insurance. Instead the proposer fills
up a questionnaire and insurance is granted on the basis of information furnished in
the questionnaire. In Marine cargo, policy can be issued on the basis of information
provided on telephone/ fax/e-mail etc.

2) PROPOSAL FORM: It is mandatory to obtain proposal form in special declaration

policy; custom duty insurance, increased value insurance, Annual policies and
special storage risk insurance policies.

3) COVER NOTE: This document is used in all claims of insurances. A Marine policy
can be insured only when all the relevant information is furnished to the insurers.
At times the insurers assume risk pending non-availability of some information.
For example the insured is unable to provide lorry receipt no and date or Bill of
loading no. and date . In such cases after acceptance of risk, premium is collected
and a temporary document of insurance is insured. Such a document is called cover
note, which is valid for 15 or 30 days. After the insured furnish the relevant
information, a duly stamped policy is issued.

4) POLICY FORM: As stated earlier in Marine cargo department only one type of
policy form is issued and any type of policy can be prepared by attaching relevant

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 clauses. The column in Marine cargo policy is to be stamped as per provisions of
Indian Stamp Act and to be signed as specified in Marine Insurance Act 1963.

5) MARINE CLAUSES: Depending upon the type of policy and coverage of risks
desired by the insured, relevant clauses are attached to the policy before it is issued
to the insured. The clauses will specify the scope of insurance, exclusions under the
policy and important slip attached with the policy mention the steps to be taken by
the insured/ claimant in the event of loss/ damage.

6) ENDORSEMENTS: Sometimes after insurance of Marine policy, some

amendments are required to be done in a policy. Such amendments after insurance
of policy are done by issuing an endorsement e.g. insured had declared that goods
are packed in wooden boxes but subsequently it is found that goods would be

7) dispatched in cardboard cartons. The insured in such cases approach insurance

company for insurance of endorsement to change the mode of packing in the policy.

8) CERTIFICATE OF INSURANCE: This document is primarily issued in care of

export/ import policies where the insurers have issued ‘OPEN COVER’. It gives
information about the goods shipped/ sent. This certificate of insurance is also
stamped as per provisions of the Indian Stamp Act.
Sometimes COI is issued under open policy also but in such cases the COI need not
be stamped because the open policy is a stamped document.

RATINGS MARINE CARGO RATING & UNDERWRITING

CONSIDERATIONS / RATINGS
S
In any Insurance Department, the underwriting department is most important portfolio.
This is because it is the underwriting department, which decides as to whether:
i) to accept / or reject the risk
ii) if accepted what premium to be charged
iii) what conditions / warrantees to be put.

Prior to 1/4/1994 there was All India Marine Cargo Tariff, which provided for basic
rates for inland transit and major commodities export/ import rates.
This Tariff was however withdrawn w.e.f. 01/04/1994 and now insurers are free to
charge any premium rate for any policy in Marine Cargo Department in view of unhealthy
competition GIC came forward with certain guide rates in 1994 to be followed by all Public
Sector Companies. There guide rates can now be reduced/ loaded depending upon the risk
involved. In a detariffed regime the role of underwriter is very important. In Marine Cargo
department the following factors are taken into account to assess the risk:

1) SUBJECT MATTER: Risk varies depending upon subject matter (insured

cargo). Different types of goods are susceptible to different types of

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 damage/ losses e.g. sugar, glass sheets, leather goods, liquid cargo, are
subjected to different types of losses.

2) PACKING: Goods may be fragile but if packed properly, the risk is

considerably reduced. If Rice cargo is packed in gunny bags risks of water
damage is more than what when it is packed in HDPE bags. Wooden
packing is better than cardboard carton packing. New drums are better risk
than second hand drums.

3) VOYAGE: The destination of voyage is very important. There are many

restrictions for insurance of export of cargo to Russia & CIS countries
became of frequent losses. If voyage is not direct and involve transshipment
– the risk increases. For transits within India dispatches to North Eastern
states is considered as bad risk.

4) MODE OF TRANSIT: Air is better than Sea. Transit by Rail within India
is better risk than transit by Road within India.

5) TERMS OF INSURANCE: Wider the insurance cover more will be the

premium. If cover is for IT (C) alone, only bare minimum premium is
charged. When insured agrees for imposition of excess in a policy – a rebate
in premium is given.

6) VESSEL: When goods are sent by sea then name of the vessel is very
important. Depending upon vessel involved in transit of goods, extra
premium may be required to be charged in following cases:

a) Overage extra: When the vessel is more than 15yrs of age, an extra
premium called overage extra is charged.

b) Under tonnage extra: Small vessels are considered as bad risks for
which under tonnage extra is charged.

c) Non-approval: When the vessel is not approved by the company,

an extra premium @1% extra is charged.

d) Non- classification extra: There is a system of classification of

vessels by classification Societies. If the vessel by which cargo is
being supplied is classified by any of these societies, then it is
considered as good risk. If the vessel is not classified by there
societies then it is considered as bad risk and non classification
extra premium is charged @ 0.10% on sum insured.

Some of the classification societies are as under:

1) Bureau Veritas
2) American Bureau of shipping
3) Norske Veritas
4) Lloyds Register

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 5) Registers Italiano.

MARINE CLAUSES

As stated earlier in Marine Insurance there is only one policy form and any type of
policy can be issued by attaching relevant clauses. There are different clauses for Marine
cargo and Marine Hull business. Some of the important clauses used in Marine cargo
business are as under:

1) Institute cargo clause ‘C’

2) Institute cargo clause ‘B’
3) Institute cargo clause ‘A’
4) Institute cargo clause (Air)
5) Duty insurance clause
6) Increased value Insurance clause
7) Inland Transit (Rail or Road) clause C
8) Inland Transit (Rail or Road) clause B
9) Inland Transit (Rail or Road) clause A
10) Institute war clause (cargo)
11) Institute strike clause (cargo)
12) Institute theft, Pilferage & Non-deliver clause
13) Institute war clause (Air)
14) Institute strike clause (Air)
15) Strike, Riots & Civil commotion clause
16) Institute classification

Inland Transit (Rail /Road) Clause – C

This clause is used when goods are in transit within India and it provides the minimum
cover and the risks of physical loss / damage caused by
a) Fire
b) Lightning is covered under the policy

Duration: Insurance attaches with the loading of each bale / package into the wagon /
truck for commencement of transit and continues during ordinary course of transit,
including customary transshipments and ceases immediately on unloading of each bale/
package
a) at destination railway station for rail transit
b) at destination in the policy in respect of road transits

Since this policy offers minimum cover, lowest premium is charged for issuing this
policy. However if the insured desire to have wider cover – i.e. to cover risks more than
Fire lightning, then he can opt for Inland Transit (Rail/ Road) – clause B.

Inland Transit (Rail / Road) clause B

This policy covers the risks of physical loss / damage to insured goods caused by:

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 a) Fire
b) Lightning
c) Breakage of Bridges
d) Collision with or by carrying vehicles
e) Overturning of carrying vehicles
f) Derailment or accidents of like nature to the carrying railway wagon / vehicle.

A comparison of IT(C)& IT (B) would reveal that the IT (B) clause covers more risks
as compared to IT (C). Therefore more premium is charged to issue IT (B) policy than
IT(C) policy.

In addition to the above risks the IT (B) claim can be extended to cover the risks of
a) Theft
b) Pilferage
c) Non-delivery
d) Strikes, riots, civil commotion (SRCC) etc and additional premium is charged for
covering these risks.

Inland Transit (Rail /Road) ‘A’

An insured may like to cover his goods for the maximum risks (i.e. widest cover)
so as to have full protection. In such cases IT (A) policy is insured which cover every type
of risks but there are some exclusions i.e. IT (A) although covers every type of risk but
there are some exclusions which can be relied upon by the insurers to deny the liability.
There exclusions are known as General exclusions.

Duration of Policy:

The duration of the risk under IT (C) has already been explained. The duration
under IT (B) & IT (A) is same and under both these clauses the risk attach from the time
the goods leave the warehouse / or the place of storage mentioned in the policy, for the
commencement of transit and continues during the ordinary course of transit including
customary transshipment if any,
1) Until delivery of the goods to the final warehouse at the destination named
in the policy or
2) In respect of transit by rail only or rail & road, until expiry of 7 days after
arrival of railway wagon at the final destination railway station or
3) In respect of transit by road only, until expiry of 7 days after arrival of the
vehicle at the destination town named in the policy whichever shall occur
first.

REGISTERED POSTAL SENDINGS:

Sometimes goods are sent through Post office from one place to other place through
registered parcels. In such cases risks can be covered by attaching Registered Post Parcel
clause. The risk is covered from the time of insurance of RPP receipt by the concerned post
office and the risk terminates on deliver of the parcel to the addressee.

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 Institute Cargo Clause – C

In case of export / import of goods by sea, Institute cargo clause are issued. Institute
cargo clause C offers the minimum cover for export import of goods by sea.
This clause covers the following risks:
1) Fire or explosion
2) Vessel / craft being stranded / grounded / sink or capsized.
3) Overturning / derailment of the land conveyance
4) Collision or contact of vessel craft / conveyance with any external object other than
water
5) Discharge of cargo at the post of distress
6) General average sacrifice
7) Jeltison.

It may be noted that just like IT (C) clause, ICC – (C) clause covers the minimum risk
but IT (C) clause is used for inland transit only whereas ICC (C) is used for export / import
policies.

Institute Cargo Clause (B)

ICC-B cover is wider than ICC-C, i.e. ICC-B covers more risks than ICC-C. In
other words ICC-B covers the risks mentioned in ICC-C plus the following:

Physical loss / damage caused by:

a) Earthquake, volcanic eruption or lighting
b) Washing overboard
c) Entry of sea, lake or river water into vessel, craft or hold, conveyance, container,
lift van or place of storage
d) Total loss of any package lost overboard or dropped whilst loading onto or
unloading from vessel or craft.

In addition to this there are some extraneous risks which can be covered under ICC-B
on payment of additional premium e.g. risks of
j) Theft, pilferage, non-delivery
ii) Fresh water & rainwater damage
iii) Breakage
iv) Leakage
v) Hook and oil damage etc.

Institute Cargo Clause –A

Just like other ICC clauses, this clause is also used only for export / import of goods
b sea. This clause offers the widest cover like IT (A). All types of damages are covered
except general exclusions.

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 Out of the 7 exclusions mentioned under General Exclusions, only one exclusion
i.e. 46 which deals with the insolvency / Financial default, can be deleted on payment of
additional premium.

Duration of cover: Unlike difference between IT(C) and IT (B) or IT (A), the duration
of risks under ICC A,B,C is same. The duration clause describes the time of
commencement of risk and time of expiry (termination) of risk under the marine policy.
The clause is also known as warehouse to warehouse clause and it’s meaning would be
evident from following wording:
The cover commences from the time the goods leave the warehouse at the place named
in the policy, continues during the ordinary course of transit and terminates either
a) On delivery to the consignees or other final warehouse at the destination mentioned
in the policy.
b) On deliver to any intermediate warehouse used by the insured for the purpose of
storage or distribution or
c) On the expiry of 60 days after discharge from the vessel at the final port of discharge
whichever shall occur first.

In other words the cover is valid for maximum period of 60 das and inland transit
if any should be completed within this time limit.
The time limit of 60 das can be extended on payment of additional premium
provided request for extension is received before expiry of 60 days.

Institute Cargo Clause (Air)

Whenever goods are in transit by Air, either within India or export/ import of goods
from India to anywhere in world or vice versa, then policies are subjected to Institute
cargo clause –Air. This is an all risk cover like ICC-A and with similar exclusions.

The cover under ICC- (Air) is similar to ICC (A) and duration cover is also similar
but with some changes.
The cover is warehouse to warehouse as in ICC (A) but the period of cover after
unloading of cargo from the aircraft at the final place of discharge is limited to 30 days.

In case of export / import of goods by Air, the war & SRCC risks can be granted
on payment of additional premium.

GENERAL AVERAGE

The concept of General Average originated much before Marine Insurance. This
system was based on the principal of equity. In simple terms here losses are incurred
deliberately for the benefit of cargo owners, Ship owner and Freight earner, and losses are
restored by contribution of all those whose interests are saved.

General average has following important ingredients:

1) It is either a sacrifice or an expenditure.
2) The entire adventure should be in danger.

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 3) The act must be extra ordinary in nature.
4) The loss/ expense incurred should be for the common safety of the vessel, cargo
and freight.
5) The loss / expense are shared by all those whose interests are saved.
6) The GA is declared by Master/ Ship owner.
7) G.A adjusters are appointed by insurers to settle such claims.
8) The amount paid by the interests saved is called ‘contribution’.
9) G.A claims are payable provided ____ of loss is covered under the policy.

CHARGES:

In addition to payment of claim in respect of damage to cargo, there are certain

charges / expenses which are paid over and above the claim.
There are following types of charges:

1) Loss Prevention & Minimization charges: The insured is expected to take all steps
so as to prevent / minimize losses. In terms of Marine Insurance Act insurers agree
to pay all reasonable expenses incurred by the insured to achieve this objective e.g.

A) Sue and Labour Charges: These charge are incurred after operation of
marine peril and before arrival of the cargo at destination. Further there
expenses must be incurred by insured, their agent / servant and for the
benefit of insured’s goods only.

B) Particular Charges: These charges are incurred to avoid a loss and expenses
should be for the benefit of insured’s property only and not for common
adventure.

C) Salvage Charges: Sometimes the services of third party are utilized to save
property during transit. So, salvage charges are remuneration payable to
third parties. These services are rendered on non-cure-no-pa basis i.e. no
recovery- no charges.

D) Extra Charges: The services of surveyors are utilized for survey and
assessment of loss for Export claims the services of settling Agents or
survey agents are utilized. Survey free is paid to insured over and above

E) the Marine claims. Sometimes damaged cargo is auctioned through the

surveyors; in such case auction charges are also paid over and above the
claim.

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 MARINE CLAIMS

When cargo is in transit, it is exposed to various risks during Rail/ Road/ Sea/ Air
transit. Due to operation of one or more perils there may be claim under a Marine Policy.
The nature of various claims can be put under following:
1) Non- deliver
2) Short-delivery
3) Pilferage
4) Leakage
5) Damage

The liability under Marine Cargo Policy can be ascertained b analyzing the cause of
loss and correlating the same with the scope of cover under the relevant policy.Due to
operation of any peril the consignment can be totally lost (e.g. non-delivery of entire
consignment, consignment totally damaged b water etc.Sometimes the consignment is lost/
damaged but in a manner that the cost of its retrieval is more than the value of cargo. So
total loss can be either Actual total loss or constructive total loss. The consignment may be
partially damaged – it is known as Particular average.

TYPES OF LOSSES / EXPENSES UNDER MARINE CARGO POLICY

LOSSES

MARINE CLAIM DOCUMENT

When the goods are in transit; different types of loss may arise e.g. Non-deliver,
Leakage, Breakage, Water damage, Pilferage, Theft etc. The Marine claims are, therefore,
required to be supported by certain documents, depending upon nature of loss, type of
carrier, stage at which loss took place. There may be some documents which are required
in all types of claims. Some of the important documents are enumerated below:

1) Original Policy/Original certificate of Insurance/ Original declaration – This is a

document of title because Marine cargo policy is freely available.

2) Contract of Affreightment – This is a document in support of carriage of goods. It

specifies the place of commencement of journey and place of termination of
journey. The nature of this document depends upon mode of transit.

Mode of Transit Document

a) Railways Rail receipt (RR)
b) Road Goods Receipt (GR)
c) Sea Bill of Landing (B/L)
d) Air Airway bill (AWB)
e) Post Regd. Post Parcel Receipt (RPP)

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3) Invoice: It specifies the name of the seller, buyer, description of goods, Unit value/
total value of goods, nature of sale contract (CIF, FOB, CIC&F etc).

4) Packing List: It gives details of packages dispatched under relevant B/L, AWB, RR,
GR etc. their mark no., contents in a box / package.

5) Survey Report / Investigation Report: On this basis of this report insurer ascertain
cause of loss, nature of loss, coverage under insurance policy, salvage value etc.

6) In case goods have been lost then investigation is carried out by an investigator who
submits his investigation Report.

7) Discharge Voucher: This document is required in all claims. It is signed by insured

in confirmation of having received the payment.

8) Claims Form: Not essential in Marine cargo claim but some insurers collect it.

9) Recover Documents: These documents are meant for affecting recovery from
carriers where loss/ damage has taken place due to negligence/ misconduct of the
carriers. There documents are as follows:

a) Letter of Subrogation – B this letter the rights of the claimant against

carriers are transferred to insurer. The document is obtained on a stamp
paper of requisite value and therefore it is a legal document.

b) Special Power of Attorney – This is also a legal document obtained on a

stamp paper of requisite value. By virtue of this document insurer can file
suit against the carrier for recovery of claim amount from the carrier.

c) Open delivery certificate – This is a document showing condition of the

cargo at the time of deliver. It is signed by insured, representative of carrier.
d) Non-Delivery / Short-Delivery Certificate – Issued by the carriers in support
of non-delivery/ short-delivery / damage to cargo.

There are some other miscellaneous documents too, which are required for one
or other type of claim.

1) Letter of undertaking – Obtained from insured when there is a claim for non-
delivery / partial delivery.

2) Bill of Entry – Obtained in case of import claim so as to ascertain payment of

custom duty.

3) Lost overboard certificate (LOB) – Obtained in case of Sea transit when some
packages are lost from the ship.

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 4) Landed but Missing (LBM) – Obtained in case of sea / Air transit when packages
arrive at port of destination but subsequently misplaced or lost.

5) Landing remarks – Obtained in case of air / sea transit. Issued by port authorities to
confirm the state of cargo at the time of arrival.

6) Exchange Control Form (GR-1) – Required in case of export claim org.

7) Letter of Protest – A sworn statement of master of vessel with regard to any adverse
factors / conditions he faced during voyage. This document is only applicable in
case of sea-transit.

8) Copy of claim lodged on carriers – This document indicate the date on which claim
notice was served on carriers.

MARINE RECOVERY

You are already aware that Marine Cargo insurance deals with insurance of good
whilst in transit. It implies that goods are entrusted to carriers by conveyer/ seller for safe
deliver to the consignee or buyer. It is quite possible that goods are not delivered at all or
a part of the consignment is not delivered or the goods are delivered in partially or totally
damaged condition. It ma be noted that carrier is a trustee or bailee of goods and legally he
is responsible for safety of goods.

In case the goods are damaged or non-delivered than the owner of goods
(consumer/consignee) is entitled to sue the carrier for his wrong doing. In such
circumstances the insured is expected to file a claim notice/ suit as per law against the
carrier. There are different statutory provisions depending upon the carriers, which define
the liability, responsibilities, duties and immunities of the carrier e.g.
1) Carriers Act 1865 (Road Carriers)
2) Railway Act 1989 (Railways)
3) Carriage of goods by Sea Act 1971 (Ocean Carrier)
4) Carriage by Air Act.

In the event of damage to cargo / non-delivery of the cargo whilst in the custody of the
carriers, the rights are subrogated to insurers at the time of claim settlement under letter of
subrogation. The insurers thereafter pursue recover from the carriers.

There are three important things to kept in mind for Marine Cargo Recovery:

1) Time limit for filing claim notice- This is the time limit within which the notice of
damage / non-delivery is to be filed against carriers.e.g. time limit is six months in
case the goods are sent by Rail/ Road. It is 7-21 days for Airborne cargo depending
upon domestic international stupment and nature of damage.

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2) Time limit for filing suit- If the carrier does not make good the loss then insurer can
file suit against the carrier within specified time limit e.g. 3 yrs in case of Rail /
Road, 2yrs in case of Airborne cargo and 1 yr in case of Sea borne cargo.

3) The law also specifies the limit of liability of carriers in the event of loss/ damage
in certain cases.

Sometimes when the goods are in transit it is quite possible that goods are
lost / damaged whilst in the custody of custom Authorities, Port Trust Authorities
or any other third party. In such cases also statute provides for rule for recovery
from such authorities.

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