A Comprehensive Guide on Institute Cargo Clauses A, B, and C

Businesses in India often rely on marine cargo insurance to protect their shipments. This policy safeguards goods during transportation, whether by sea, land, or air. The Institute Cargo Clauses (A, B, and C) form the backbone of marine insurance. They define the level of coverage provided to goods in transit.

As global trade grows, businesses cannot afford to leave cargo unprotected. One mishap can lead to significant financial loss. That is where understanding these clauses in marine cargo insurance becomes essential.

What Are Institute Cargo Clauses?

To begin with, the Institute Cargo Clauses (ICC) set standard terms and conditions for marine cargo insurance. The Institute of London Underwriters developed these clauses to define the specific risks covered under such policies. Currently, businesses can choose from three types—Clause A, B, and C—each offering a different level of coverage.

Therefore, businesses must understand each clause thoroughly before making a selection. Ultimately, the right choice depends on the type of goods, mode of transport, and the business’s risk tolerance.

Institute Cargo Clause A: All Risk Coverage

Clause A provides the broadest form of coverage. It is also known as “All Risks” insurance. This clause covers all physical loss or damage to goods during transit, except for specific exclusions.

Clause A: Inclusions

• It covers theft, collision, fire, explosion, earthquake, water damage, and more.
• It includes damages caused by loading and unloading.
• It also includes general average and salvage charges.

Clause A: Exclusions

• Wilful misconduct of the insured
• Ordinary leakage or loss in weight or volume
• Inadequate packaging
• Delay, even if caused by an insured peril
• War and nuclear risks (these require separate coverage)

Clause A is ideal for high-value goods, fragile items, or goods shipped by sea or air. Exporters from India may choose Clause A for electronics, machinery, and pharmaceuticals.

• Institute Cargo Clause B: Named Perils Coverage

Clause B provides a more limited scope than Clause A. It covers specific risks that are listed in the policy. It is a middle-ground option between Clause A and C.

Clause B: Inclusions

• It covers fire, lightning, explosion, vessel grounding or sinking, overturning, derailment, and collision.
• It includes the entry of sea or river water into a container or vessel.
• It includes general average and salvage charges.

Clause B: Exclusions

• Theft or pilferage
• Loss or damage during loading/unloading
• Ordinary leakage or wear and tear
• Deliberate damage by authorities

Clause B suits businesses shipping bulk commodities, metals, or materials with low damage risk. Indian businesses may use Clause B for raw materials and semi-finished goods.

• Institute Cargo Clause C: Basic Risk Coverage

Clause C is the most restricted form of coverage. It includes only a handful of perils. This clause is cost-effective but offers limited protection.

Clause C: Inclusions

• It covers fire, explosion, vessel grounding, overturning, or collision.
• It covers discharge at a port of distress.
• It includes general average and salvage charges.

Clause C: Exclusions

• Theft, water damage, and natural disasters
• Mishandling during loading and unloading
• War and nuclear risks

Businesses use Clause C when they want the cheapest option. This is often for non-fragile goods or domestic cargo with low transit risks. For example, a business transporting steel rods within India may prefer Clause C.

How to Choose the Right Clause for Your Business

Choosing the right clause depends on various factors. You must assess the nature of the goods, the route, the packaging, and the value of the shipment. 

• Choose Clause A for high-value or fragile items needing full coverage.
• Choose Clause B for medium-risk cargo that can withstand some conditions.
• Choose Clause C for sturdy goods with low exposure to transit risks.

First, discuss your needs with your insurer, and then ask what is included and excluded in each clause. Moreover, never assume your cargo is fully covered without checking the fine print. For instance, insurers like TATA AIG offer marine cargo insurance that includes these clauses. Additionally, you can customise policies to match your risk profile and budget.

List of Documents for Filing Claims under Marine Cargo Insurance

• Insurance policy copy
• Invoice and packing list
• Survey report from the shipping line
• Photographs of the damage
• Bill of lading or airway bill

Understanding your chosen clause will help during claim filing. Always keep records and communicate with your insurer clearly. A transparent approach ensures a smoother claims process.

What is Freight Insurance, and How is It Related to Marine Cargo Insurance?

A freight insurance policy protects carriers or freight forwarders against liability for cargo loss or damage during transit. In contrast, marine cargo insurance safeguards the cargo owner’s goods, covering risks like theft, accidents, or natural disasters.

On one hand, freight insurance covers the carrier’s legal responsibilities. On the other hand, marine cargo insurance allows the shipper to recover the full value of goods that are lost or damaged. Together, both insurance solutions offer comprehensive protection for shipments in transit.

Conclusion

To begin with, Institute Cargo Clauses A, B, and C help businesses customise their marine cargo insurance plans. Each clause, in turn, offers different levels of protection. As an Indian business, you must therefore evaluate your shipping needs carefully.

Furthermore, use these clauses to build a safety net for your cargo in transit. Rather than seeing insurance as an expense, view it as an investment in business stability.