Professional Documents
Culture Documents
“Inherent Vice” implies that no external or extraneous peril caused the loss; rather,
the loss or damage results from the internal composition of the property, or some aspect
of the property that brings about its own destruction. [Harmon v. Safeco Insurance Co.
of North America, 24 Kan. App. 2d 810, 954 P. 2d 7, 10 (1998) ]
Inherent vice relates to internal decomposition or some quality which brings about
the object’s own injury or destruction, not an extraneous cause. [Employers Casualty
Company v. Holm, 393 S.W. 2d 363, 367 (Tex. Civ. App. 1965).]
“Latent Defect,” on the other hand, generally refers to a defect not readily
observable or discoverable upon reasonable inspection. [Board of Education of Maine
Township High School Dist. 207 v. International Insurance Co., 292 Ill. App. 3d 14,
684 N.E. 2d 978, 990, app. Denied, 175 Ill. 2d 523, 689 N.E. 2d 1137 (1997).]
A latent defect is a defect that could not be discovered by any known or customary
test. [General Motors Corp. v. The Olancho, 220 F. 2d 278, 2d. Cir. 1955.]
Analysis indicates that the latent defect and inherent vice exclusions are attempts
to embody, in the text of the policy, the need for fortuity. An insurer can only reasonably
be expected to insure against the happening of a contingent or unknown risk of loss.
3. Under ICC B version 1982, ICC B cover stranding, how about grounding?
Under ICC B version 1982, the scope of the insurer's liability is both stranding
and grounding. In clause 1.1.2 ICC B 1982 “vessel or craft being stranded grounded,
sunk or capsized “.
4. What is a refuge port?
A port of refuge is a situation in which a vessel must divert to port because an
emergency makes it unsafe to travel further. The master decides to change the port of
refuge when he realizes that continuing the voyage would be dangerous to the safety of
the crew, the ship and the environment.
According to IMO, ship 's place of refuge is a place where a vessel in distress can
be safely taken to, in order to prevent further damage or deterioration of the ship.
The guidelines of IMO state two situations for use of places of refuge:
● In case the safety of life on distressed ship is not in jeopardy but the vessel has
been damaged and cannot be left in its current location without causing further
damage
● The safety of life of those on the distressed vessel is in jeopardy
5. What is the exclusion of every single insurance condition under ICC 1963 &
1982?
FPA 1963
Warranted free of loss or damage
● caused by strikers, locked-out workmen, or persons taking part in labor
disturbances, riots or civil commotions;
● resulting from strikes, lock-outs, labor disturbances, riots or civil commotions.
Should Clause No. 13 be deleted, the relevant current Institute Strikes Riots and
Civil Commotions Clauses shall be deemed to form part of this insurance.
WA 1963
AR 1963
ICC A 1982
In no case shall this insurance cover
● loss damage or expense attributable to wilful misconduct of the Assured
● ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear
of the subject -matter insured
● loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject - matter insured (for the purpose of this Clause 4.3
"packing" shall be deemed to include stowage in a container or liftvan but only
when such stowage is carried out prior to attachment of this insurance or by the
Assured or their servants)
● loss damage or expense caused by inherent vice or nature of the subject -matter
insured
● loss damage or expense proximately caused by delay, even though the delay be
caused by a risk insured against (except expenses payable under Clause 2 above)
● loss damage or expense arising from insolvency or financial default of the
owners managers charterers or operators of the vessel
● loss damage or expense arising from the use of any weapon of war employing
atomic or nuclear fission and/or fusion or other like reaction or radioactive force
or matter.
In no case shall this insurance cover loss damage or expense arising from
unseaworthiness of vessel or craft, Unseaworthiness unfitness of vessel craft
conveyance container or liftvan for the safe carriage of the subject -matter insured, and
Unfitness where the Assured or their servants are privy to such unseaworthiness or
unfitness, at the time the subject- Exclusion Clause matter insured is loaded therein.
The Underwriters waive any breach of the implied warranties of seaworthiness of
the ship and fitness of the ship to carry the subject-matter insured to destination, unless
the Assured or their servants are privy to such unseaworthiness or unfitness.
In no case shall this insurance cover loss damage or expense caused by
● war civil war revolution rebellion insurrection, or civil strife arising therefrom,
or any hostile act by or against a belligerent power
● capture seizure arrest restraint or detainment (piracy excepted), and the
consequences thereof or any attempt thereat
● derelict mines torpedoes bombs or other derelict weapons of war.
In no case shall this insurance cover loss damage or expense Strikes
● caused by strikers, locked-out workmen, or persons taking part in labour
disturbances, riots or civil commotions
● resulting from strikes, lock-outs, labor disturbances, riots or civil commotions
● caused by any terrorist or any person acting from a political motive.
ICC B 1982
In no case shall this insurance cover
● loss damage or expense attributable to wilful misconduct of the Assured
● ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear
of the subject-matter insured
● loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject-matter insured (for the purpose of this Clause 4.3
"packing" shall be deemed to include stowage in a container or liftvan but only
when such stowage is carried out prior to attachment of this insurance or by the
Assured or their servants)
● loss damage or expense caused by inherent vice or nature of the subject-matter
insured
● loss damage or expense proximately caused by delay, even though the delay be
caused by a risk insured against (except expenses payable under Clause 2 above)
● loss damage or expense arising from insolvency or financial default of the
owners managers charterers or operators of the vessel
● deliberate damage to or deliberate destruction of the subject-matter insured or
any part thereof by the wrongful act of any person or persons
● loss damage or expense arising from the use of any weapon of war employing
atomic or nuclear fission and/or fusion or other like reaction or radioactive force
or matter.
In no case shall this insurance cover loss damage or expense arising from
unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or
liftvan for the safe carriage of the subject-matter insured, where the Assured or their
servants are privy to such unseaworthiness or unfitness, at the time the subject-matter
insured is loaded therein.
The Underwriters waive any breach of the implied warranties of seaworthiness of
the ship and fitness of the ship to carry the subject-matter insured to destination, unless
the Assured or their servants are privy to such unseaworthiness or unfitness.
In no case shall this insurance cover loss damage or expense caused by
● war civil war revolution rebellion insurrection, or civil strife arising therefrom,
or any hostile act by or against a belligerent power
● capture seizure arrest restraint or detainment, and the consequences thereof or
any attempt thereat
● derelict mines torpedoes bombs or other derelict weapons of war.
In no case shall this insurance cover loss damage or expense
● caused by strikers, locked-out workmen, or persons taking part in labor
disturbances, riots or civil commotions
● resulting from strikes, lock-outs, labor disturbances, riots or civil commotions
● caused by any terrorist or any person acting from a political motive.
ICC C 1982
In no case shall this insurance cover
● loss damage or expense attributable to wilful misconduct of the Assured
● ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear
of the subject-matter insured
● loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject-matter insured (for the purpose of this Clause 4.3
"packing" shall be deemed to include stowage in a container or liftvan but only
when such stowage is carried out prior to attachment of this insurance or by the
Assured or their servants)
● loss damage or expense caused by inherent vice or nature of the subject-matter
insured
● loss damage or expense proximately caused by delay, even though the delay be
caused by a risk insured against (except expenses payable under Clause 2 above)
● loss damage or expense arising from insolvency or financial default of the
owners managers charterers or operators of the vessel
● deliberate damage to or deliberate destruction of the subject-matter insured or
any part thereof by the wrongful act of any person or persons
● loss damage or expense arising from the use of any weapon of war employing
atomic or nuclear fission and/or fusion or other like reaction or radioactive force
or matter.
In no case shall this insurance cover loss damage or expense arising from
unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or
liftvan for the safe carriage of the subject-matter insured, where the Assured or their
servants are privy to such unseaworthiness or unfitness, at the time the subject-matter
insured is loaded therein.
The Underwriters waive any breach of the implied warranties of seaworthiness
of the ship and fitness of the ship to carry the subject-matter insured to destination,
unless the Assured or their servants are privy to such unseaworthiness or unfitness.
In no case shall this insurance cover loss damage or expense caused by
● war civil war revolution rebellion insurrection, or civil strife arising therefrom,
or any hostile act by or against a belligerent power
● capture seizure arrest restraint or detainment, and the consequences thereof or
any attempt thereat
● derelict mines torpedoes bombs or other derelict weapons of war.
In no case shall this insurance cover loss damage or expense
● caused by strikers, locked-out workmen, or persons taking part in labor
disturbances, riots or civil commotions
● resulting from strikes, lock-outs, labour disturbances, riots or civil commotions
caused by any terrorist or any person acting from a political motive.
6. There is distinguish total loss and partial loss in FPA, WA. So, how about AR?
The term "All Risks" means a policy that indemnifies for loss or damage to the
subject-matter insured arising from any cause, except where the loss is inevitable
(certainly occurring) and perils specifically excluded by the terms of the policy,
excluding losses directly caused by delay and internal vice or by the nature of the
subject-matter insured. dangerous. Coverage under this condition has no deductible.
7. Assume your consignment has loss & damage due to piracy. Which insurance
condition in which the insurer compensate for that under ICC 1963?
The WR clause of the ICC 1963 includes the risk of piracy. This is a special
insurance condition, so the person buying insurance when wanting to buy this
insurance is required to buy the original insurance before FPA, AR or WA this
means, when the goods are damaged due to the risk of piracy, the insurer will
have to indemnify the insured for the value of the insured goods.
12. Refer to particular average & partial loss. Someone said that they are the same.
How about your opinion?
I don’t agree that particular average & partial loss are the same.
A particular average loss is a partial loss of the subject matter insured, caused
by a peril insured against, and which is not a general average loss.
It is emphasized that ‘particular average’ is not simply another name for a partial
loss. A particular average loss is a form of partial loss, but does not include a general
average loss or particular charges.
13. Are there any insurance conditions in which the insurer refuses to compensate
the general average? If any, what are they?
- Rule 1: No jettison of cargo shall be allowed as general average, unless such
cargo is carried in accordance with the recognised custom of the trade.
- Rule 4: Loss or damage sustained by cutting away wreck or parts of the ship
which have been previously carried away or are effectively lost by accident shall
not be allowed as general average.
18. What is the difference between constructive & actual total loss?
● Actual Total Loss
This kind of loss occurs when the goods are completely destroyed or damaged
beyond recognition or initial state. If the policyholder is deprived of the insured goods,
that too would be considered as an actual total loss of goods.
Example: If a ship carrying your cargo sinks or is completely destroyed due to a
fire or other covered reasons, then this will be considered as an actual total loss. If the
policyholder can't trace their ship or get their goods back, this too will be considered as
an actual total loss under which they are entitled to claim the full amount of lost goods.
However, it's important to remember that once the claim is settled, the title of goods
will be transferred to the insurer. If they receive any amount from the sale of the
damaged goods, then the policyholder can't claim any part from that amount.
● Constructive Total Loss
This usually happens when the cargo needs to be abandoned as it is not
commercially viable to retrieve them. This can happen due to certain situations; the
cargo may not be destroyed completely but it is not economically practical to repair or
restore it to its original state. This is common when ships are damaged as the cost of
repairs may exceed the ship's value.
For Example: If the cargo is safe but the cost of retrieving it is more than the
cargo's cost, it is better to abandon it. In such a case the policyholder surrenders the
interests to the insurer and gives them notice of abandonment. They can raise a claim
for total loss.
19. What is ISM Endorsement?
The International Safety Management (ISM) code was adopted by the SOLAS
convention and in 2002 , it was made applicable to all cargo ships. The aim- To ensure
safety of human life at sea & to avoid environmental pollution. All ships had to be ISM
Code- compliant or the owners/ charterers should hold a current Document of
compliance.
The endorsement states that if a ship in which the insured cargo is carried is NOT
ISM compliant or there is no Document of compliance produced, any loss, damage or
expense to the cargo would not be payable as a claim. This is however only if the insured
was aware of the vessel being not ISM compliant or as a prudent businessman should
have been aware of this fact. This exclusion would however not affect the rights of an
innocent third party( assignee) claiming under the policy.
21. According to your speech, under FPA, partial loss will be discarded. Are there
any cases in which the insurer compensate for partial loss?
In some cases, insurance companies are liable for partial losses. The conditions in
which FPA clauses no longer apply vary. There are two types of conditions generally
used, American and English.
In American FPA provisions, the insurer’s liability for partial cargo loss is
eliminated unless stranding, sinking, fire, or collision caused the loss.
In English FPA provisions, the insurer’s liability for partial cargo loss is
eliminated except in the case that a stranding, sinking, fire, or collision event occurred.
The difference is subtle but important. In the American version, the policyholder
must prove that stranding, sinking, fire, or collision caused the partial loss, whereas the
English version only requires a stranding, sinking, fire, or collision to have occurred at
all. It is much harder to claim a partial loss in the American version because the insured
must prove one of the events caused the damage in order to retain coverage.
22. Someone said that stranding & grounded will be accepted to compensate by
the insurer. How about you?
It is up to different kinds of ICC editions.
In ICC 1963, in terms of FPA, liability for an accident must be accidental.
However, in the case of stranding and grounding, the ship is often entangled or stranded
in the water with a periodic nature (stranding), it cannot be called a sudden accident.
Therefore, under the insurance terms of 1963, the insurer is not liable for losses caused
by stranding/ grounding.
In ICC 1982, The scope of the insurer's liability is both stranding and grounding.
Consider one of the following cases:
If the ship only touches the bottom and then continues its journey (Touch and Go),
it is not called stranding;
If the ship runs aground in the specified river, creek or channel (specifically
specified in the ship insurance) or dragged through the mud, it is not called a stranding;
Or to avoid a storm, the captain steers the ship into a port. At low tide, a ship
bottomed is not considered stranding;
Cases in which the master steers his ship to a dry place to avoid sinking is also
covered by this definition.
23. What risk occurs in container transportation & what insurance conditions
cover them?
• Some of the containers get into the water because off the improper packing of
loads, with the poor arrangement, poor container accomplishment, parametric
swing (a kind of rocking experienced only by container ships, rocking causing
strong deviations of the ship to the side), and also with poor fixing.
• Containers falling out of the ship when there are bad weather conditions.
• The insurance conditions can cover them are ICC(A) - ICC1982, Protection and
indemnity association (P&I) insurance, Hull & Machinery Insurance (H&M)
insurance.
24. Are Term A & All Risks the same or not? Explain your choices
They are not the same.
e.g: While term A covers the risk of pirates, the AR under ICC 1963 considers it
a war risk and needs to be purchased separately.
29. Referring to exclusions scope, are ICC 1982 & 1963 the same? If any, prove
that.
They are not the same. Because ICC 1963 does not mention the financial
insolvency of the shipowner and does not include it in the group of exclusions.
30. What is the difference between partial loss & particular average?
A particular average loss is a partial loss of the subject matter insured, caused by
a peril insured against, and which is not a general average loss.
It is emphasized that ‘particular average’ is not simply another name for a partial
loss. A particular average loss is a form of partial loss, but does not include a general
average loss or particular charges.
31. Refer to stranding & grounding, which one has been compensated under ICC
1963 and 1982?
Under ICC 1963: Stranding has been compensated. Because in terms of FPA,
liability for an accident must be accidental. However, in the case of stranding and
grounding, the ship is often entangled or stranded in the water with a periodic nature
(grounding), it cannot be called a sudden accident. Therefore, under the insurance terms
of 1963, the insurer is not liable for losses caused by grounding.
Under ICC 1982: The scope of the insurer's liability is both stranding and
grounding.