TYPES OF MARINE CARGO INSURANCE

Ho doubt that J:r.iarine Cargo Insurance is one of the most important

and yit~l P:~?~~~ 9-!
~ns~ran9~, ~p~ is copsi4ered an.indispensable .aid
to interna~ional trade.
Marine Cargo Insurance affords the insured a great diversity of cover.
The insurance markets do in fact offGr their clients numerous forms of cover
which are highly diverse in character and capable of covering the risks to
which the goods are c:Jposed during transit. Marine insurance has become
progressively adapted to the needs of commerce, and the flexibility it has
acquir,ed how allows it to satisfy all requirements, both with respect to the
coverage offered and to the extension in tim:i of the insurance. This great
flexibility goes with the eno1'.'lI!ous variety of cargoes to be -transported·
ranging as they do from raw materials in bulk to the' highly sophisticated
machine which embodies the latest technology.
However, most of marine cargo covers are standardised owing to the
universal nature of said contracts; being exchangeable between exporters and
importers all over the continents of the world.
I think you will agree with me that the British Insurance Market
being the pioneer in this respect established its longstanding practice
in the field of Marine Cargo Insurance, and we find now that the cargo
covers used in the London Market are the same covers used in most insurance
market::i_including our African Countries.
We will therefore confine our study of the different topics of this
paper, to the Engli1?h practice, i.e. Marine Cargo Covers issued-by the
London Market and other insurance markets that use the same documents of
cover.
Under the heading of this paper - Types of Marine Cargo Covers we
wj,11 deal with itolll' i..1;6-~.:Rfso, 1~."e. ·: .
1. Different Forms of Cargo Policies,
2. Analysis of Marine Cargo Institute Clauses,
3. Trade Clauses, and
4. War S.R. c,c. Risks.

UNCTAD/INS/20
GE. 78-70213
 - 2 -

I• DIFFERENT FORMS OF CARGO POLICIES

1. The S.G. Policy Form.

In the London M.erket, the basic form for all marine insurances is
the S.G. Farr.~, as set out in the first schedule of the Marine Insurance
Act 1906. It follows that the perils covered by the insurance are those
set out in the S.G. form, which may be varied by attached, tYIJed or
handwritten clauses by the addition of extra perils, or on thG other
hand, by the:;exclusion of certain perils named in the S.G. Form.
We will now go through the policy wording to study only the peculiar
clauses therein.
The Assignment Clause ; allows for the use of the policy by any
person as a principal or as an agent, or by any assignee, or any person
who at any time during the currency of the policy ac·guires interest in
part or in all. A cargo policy is freely assignable as it is necessary
in many cases for the policy to pass from h~ nd to hand with the goods a.s
a collateral security asked for by the banks.
"Lost or not Lost" , ph~:icse which foll0ws the Assignment Clause makes
the policy retrospective, and the insurance contract which is accepted
after sailing of the carrying vessel, or even after loss, becomes operative
and the policy valid, provided there is no breach of utmost good faith.
Cargo policies are often for the voyage comtemplated. The risk
commences, under the clean form of policy, from the loading of the cargo
al::mmld!. the ships, thus the craft risk at port of loading is not embraced.
The risk terminates when the goods are discharged and safely landed at the
port of destination.
The description of the vriyage fallows the words at a:n.d:,.1 <f'l{~! ·~sit
Clause), then is inserted the name of carrying vessel, the::.,,·,,, insured,
the subject-matter insured and the insured perils which correspond closely
"
with the definition of m~ritime perils in the Marine Insurance Act 1906.
The Sue and Labour Clause ; is a supplementary agreement to the
policy, and so entirely separate from the conditions of the policy that where
such expenses are properly incurred they are paid in full, even in addition
to a total loss. The object of the clause is to encourage the assured
to take all possible steps to prevent or minimize loss.
The Waiver Clause is then inserted to make it cl-ear that neither
assured nor insurer is to be prejudiced by an action taken by either to
';, safeguard the property insured.
r:
I
i
:n I
 - 3 -

The 8. G. E'orm ends with the· I1emorandum which was insert~d in the policy
form, to relieve underwriters of many t+ivial claims that in many cases were
less than the expenses of its settlement. It actually conststs of a "Free
of Particular Average Clause" and two "With Average Clauses". In each case
general average is payable irrespective of percentage (i.e., without referen-
ce to the franchise).
Th8 F.P.A. clause is in respect of c rn, fish,salt fruit, flour and
seed which are warranted free of particular average unless the vessel is
stranded, in which event particular average loss or damage is payable in full
provided the goods are on board the vessel at the time of the casualty, even
though the loss or damage is not caused by it.
The W.A. clauses warrant (1) sugar, tobacco, hemp, flax, hides and
skins free from particular average under 5% and (2) all other goods under 3'%
unless the vessel is stranded, si.mk or burnt, whe~ P.A. loss or damage is
payable in a similar manner as in the F.P.A. part of the memorandum.
If the required percentage is reached, the loss is paid in full, not
simply the excess of the percentage. It is necessary to note this carefully,
as the memorandum percentage is called a franchise. This term however has a
different meaning in other countries. A po~.6cy may be so worded as to be
subject to an excess, which means that insurers pay only the excess of the
specified percantage · or amoumt. • ,

2. The Floating Policy •.

It is a po):j•y which describes the insurance in general terms, and
leaves the name of the ship or ships and other particulars to be defined
by subsequent declaration.
The floating policy is issued for a fixed amount. This amo-qnt is
estimated to cover a number of shipments and the policy remains in force
'
until sufficient shipments have taken place to use up the sum insured.
As each shipment. goes forward it is declared to the insurer who r~.
reduces the outstanding balance of the sum insured by the amount of the
declaration. It follows that the life of a floating policy depende, not
on a period of time, but on the nutnber and size of declarations made on it.
The declarations may be made by endorsement on the policy, or in other cus-
tomary manner, and must include all consignments coIT)ing within the terms of
the policy. However, should a declaration be omitted or er~oneously ma~e,
this may be rectified, even after loss, provided it was made in good faith.
. m11
i !ill'
If(:',
';·:
1! 4 - -
:\ A schedule of voyages and ratEs is usually attached to the floating
policy, which clearly indicates its scqpe and the premium rates appliccible
to a~, sendings coming within that scope. The :;;i0licy may provide al terna ti ve
conditions with a schedule of rates.applicable to each set of conditions,
from- which the assured can select when making a declara:hon.
,j,.
: ,,,

I,;,
The f'loating.policy expires.when:the sum insured is exhausted, that
is to say when the total value of declarations made, equals the sum insured.

3. Open Covers ~

The open cover is probably the most advantageous fom of effecting

cargo.ins'lirance in modern commerce. It is effected on a time basis, provi-
ding forward cover for all the.assured 1 s shipments during a specified period,
usual1.y twelve months. The premium rates are fixed and the insuxed ·cannot,
iri good faith, refuse to ac.cept a shipment coming within the scope of the
cover at th€ fixed cover rate.
With the op.en cover system; -shipments are automatically covered by
an open cover even if declarAd ·late or after a loss occured. However, this
_contl'.'.act is not legally enforceable, it is binding in honour only and the
assured must rely on the insurer to --d.:.~re to his obligation in good faith.
The open cover is effected for a .period of time and has no aggregate
limit such a& the sum. insured in a fioating policy. Declarations are made
in the same manner as in a floa:tingnpcridyq .,Sll.bjecib,; tm;§l: oIDmi t:~per bottom,
i.e. the amount insured carried by any one vessel.
The open cover generally has a location clause limiting the.under-
writer's ~iability at any one location prior to shipment a~ the loading port.
It is customary for both floating policies and open covers to be
subject to the classification clause which limits carriage-, at the agreed 1 ',

,, rate, to certain types.of good class ,essels. The provisions of the classi-
i
I'
''. fication clause - which was amended as from 1st July 1978 - are a very
;
importai:it factor in the\operation of any long term cargo contract. The
effect of this clause is to restrict cover rates to apply only to goods
carried on vessels fully classed, as per the clause, provided the vessel
is not over 15 years old, or 25 years old for liners. Chartered vessels, as
well as vesse-1s under 1000 G.R.T., attract an additional premium if over 15
yeras old. There is an agreed scale of additional premiums for goods
carried on average vessels,· which varies according to the age and flag of
vessel, and the type of cargo.
 - 5 -

Open Covers are usually subject to a cancellation claus0 which gives

either party the option of cancelling the cover instead.of waiting for the
natural expiry. Either party could give the other party thirty days notice
of cancellaticm for marine risks, which is reduced to seven days notice in·.
respect of War and Strikes Risks.

4. Block Policies
This type of policy is mainly used for goods sent overland or by inland
waterways in small consignments, also for valuable goods, and books·sent by
hand or by post. The block policy is issued for a limit per sending, but
with no aggregate limit. The policy is usually issued on a twelve months
basis, but no declarat'i•ons are made. A lump sum premium is p_,id annually
and claims are collected periodically... When the policy is reviewed annually,
the figures are reviewed and the premium rate is adjusted if necessary to
ensure a reasonable profit to the insurer.

II. ANALYSIS OF I1ARINE CARGO

INSTITUTE CLAUSES
-------------------
It has taken many years to adapt the old form of policy to present-day
needs. Each development in Mercantile practice has had. its influence on the
insurance cover required, and whenever the shipowner annulled his obligations
as a common carrier, the underwriter generally had to extend the scope of the
Marine Policy in order to safeguard the assured.
The Cargo clauses in almost universal use are the Institute Cargo
Clauses (F.P.A.), the Institute Cargo Clauses (W.A.) and the Institute Cargo
Clau~es (All Risks).
All three sets of clauses are identical in their fourteen s~b-clauses
with the exception - ., as the difference in title indicates - of the
Average Clause (No.5) :which we will start to study in this analysis._

F.P.A. Clause and Average Clause (No.5) ;

_The abreviation F.P .A. means "free of particular average", thus, the
......I
F.P.A. policy does not cover particular average, that is fortuitous partial
.I loss.
 - 6 -

The abreviation W•.A. is well known as representing the term "with

average", 1·:Av'frage filea:c.s.partial loss. Therefore, the W.A. clauses cover
partial loss, in addition to. the total loss wtiich is covered by all cargo
policies. As it is customary for all cargo policies to cover general average,
so the term ·"with average" is intended to refer to particular average.
Whilst the W.A. Policy covers both total loss and partial loss, the
F.P.A. Policy covers only total loss and general average. As we .will notice,
so many concessions havev been made over the years, in both sub-sections
(No.5) of the two sets, that very little difference re@ains between the two
types of policy.
The commencing words of the F.P.A. clause read
"Warranted free from particular average unless the vessel or craft
. be stranded, su;nk or burnt •.••...•. ".
The commencing words of the Average Clause (W.A. Clause) read :
''Warrranted free from average und~r the percentage specified in the
policy unless general or the vessel or craft be stranded, sunk or
burnt ......... "
We can see that neither sub-claus~'" restricts the sttlement of general
average claims, and they both pay particular average claims irrespective of
percentage .. should the vessel or craft sustain one of th_, casualities mentio-
ned • . The C8:rgo, however, must have been on the vessel or craft at the time
of the casuality and the risk must have attached~
Under both sub-clauses, underwriters will also -pay"
i. Total loss of any -package in (a) loading, (b) transhipment, or (o)
d.i(.<Ci1 discharge;
ii Loss or damage attributable to (a) fire, (b) explos':i:.on, (c) collision,
(d) contact, (e) disolJ,arge of cargo at port of distress;
iii F.P.A. clause only includes the expenses of landing, warehousing and
'
forwarding., pro.vided they e,re incurred at an intermediate port of call
1':, or refuge and would be recoverable under W.A. policy.
!
' ,, Subject to these concessions by Insurers and in the absence of the
I happening of one of the named events, both-clauses warrant that the policy
·shall be free of particular average; but·w-ith .this difference, that in the
I: .. F.P.A. clause the insurance is warranted free from particular average enti-
I , ,
rely, whilst in the Average Clause the policy is warranted free from parti-
cular average only in the event of loss8s below a certain percentage named
in the policy, Some commodities are nore sus::i:e.~table to damage than others,
as is illustrated by the terms of the Memorandum,
 - 7-

In the absence of any clause to the contrary, the percentage of the

Memorandum would prevail, but when particuL.r average is included, i,j; is pore
usual to insert as a special claustc: in tho2 policy the franchiseand the method
of its application, as agreed by the underwriters; e.g. average payable if
amounting to 5% each 10..-r&:les.
A11 Risks Clause (No.5);
This clause covers All Risks fincluding extraneous risks) of loss of
or damage.to the subject-matter insured, irrespective of percentage, but does
not extend to cover loss, damage or expense proximately caused by delay,
inherent vice or the nature of the subject matter insured.
"Risk" is defined as "something which may happen but not something
which must happen". The term emphasises that the loss or damage must be the
result of a fortuitous happening, and due to some external cause. The term
does not embrace inevitabilities. TherefDxe, loss in quantity of a l:i,quid
by reason of evaporation is not covered by an All Risks Policy.
Apart from the average clause explained above, the other important
clauses in the three sets of Ir1Eltitute Cargo clauses are those dealing with
the duration of Cover( Transit Clause). We will deal in detail with the Tran-
sit Clause, ::cs well as the Strikes E:.'·clusion Clause, lcwing the Free of Cap-
ture Clause (No.12) to be dealt with later, when discussing thE:o War Clauses.

Transit Clause (No.l);

Under the ordinary fonn of policy the risk on cargo commences from
the time the goods are -actually placed on board .the. vessel, and ceases when
they are discharged overside at the port of destination (craft risk is only
covered at ports ·where this is customary method of discharge). Modern commer-
cial practice requires insurance cover for goods from the time they corm::ience
their journey whi~h may be from the port of shipment at some inland place
·,
until actually delivered to the final warehouse at the destination named
in the policy, which may also be far from a sea~port.
· The transit clause exteLde the policy to provide this necessary
cover, subjE:ct to the proviso that fr,r;.:J.O case shall the period of cover
after discharge overside frcm the oversE:as vessel at the final. port of dis_s.1.,.:::.r-
ehar.ge ~ exciied1-:(>0 ,.. aays.
The risk does not attach until the goods leave the warehouse, or
place of storage, at the place named in the policy.
 The risk continues during the ordinary course of transit until
termina t·ea. ·by deli very to the consignees or other final warehouse or
place of storage at the policy destination or to any othar warE::house or place
of ·storage ·(either B.t ·policy destination or before that place is reached)
.. .,...
which the assured elects to usG •i..,.' ......

1. for storage other than in the ordinary course of.transit; or

2. for allocation or distribution; '6r
3, by the expiry of 60 days after completion of-discharge overside of the
goods insured frorn the overseas vesel at the.final port of discharge
whichever first occurs.
If, after discharge overside from the overseas vessel but before the
policy terminates by one of the occurrences listed above, the goods are to
be forwarde·d to ·a different destination fror:J that named in the policy, then
.. . .

the irisuran~e temina tes' on the commencement of the transit to the new des-
tination, subject always to termination as above.

Free of Strikes, Riots and Civil Commotions Clause (No.13) ,

This clause excludes loss or damage caused by strikers or locked-out
workmen or persons taking part in labour disturbances, riots or civil com-
motions. The clause stipulates that if the strikers or a r;iotous mob should
damage the goods insured, the loss would not be recoverable unless the F.S.R.
& C.C. clause were deleted. Further, the clause also includes loss or damge
resulting from these events; that is to say, losses conseguentia, upon
shortage of labciu:r, etc •••••..•. during such occurences.
It will be noted that a provision follows the clause, making the appro-
priate Institute Strike Clauses apply i f the F.S.R. & C.'C. Clause should be
deleted.

fu.. Transpo;r!_ :
More recently a demand for separate air cargo clauses was created
by the development of the carriage of cargo by air-era.ft, and therefore the
Institute Air Cargo Clauses (All Risks) were issued in 1965 to cope with
"fails -- demand.
 - 9 -

Institute Air Cargo Clauses (AU Risks)

These clauses follow the general patte:rnc.g"'fi::~.£JA9,@i;M;ute(Cargo(.tl.l~se>s
with suitable amendment where necessary by omitting clauses not applicable
to air sendings and adjustrnents_,in phraseology.
The Transit Clause provides that cover shall not continue for.a period
exceeding 30 da~e after unloading from the aircraft in order to ensure the
quick handling needed for air cargo.
"All Risks" Claus.e rernainst:llil.@IiMg~a, and F. C. & S. as well as S .:i. &
c.c. Clauses are almost the same as in the Institute Cargo Clauses.

III. TBJ~DING CLAUSES

Whilst the Institute Cargo Cl;s.uses, in conjunction with the various
ancillary clauses fulfil the insurance requirements of cargoes of a genere,l
nature, there are a number of foodstuffs and commodities which require a
special clause to provide for the particular hazards of the subject matter
insured and the usages of the trade concerned. Trade Associations on behalf
of their members have negociated with Underwriters' representatives a number
of sets of Trade Clauses which are used almost exclusively fo:r: shipments in
such trades.
The fo~lowing clauses are the important ones in 0urrent use in the
insurance of the subject-matter indicated in the title ;
1. Corn Trade F.P.A. Clauses
2. Flour "All Risks 11 Clauses
3. Jute Clauses
4. Rubber Clauses
5. Timber Trade ]'edera tion Clauses
6. Raw Sugar Clauses
7. Frozen Food Clauses
We will now analyse the above Trade Clauses in the same way that was
\ '

done when analysing the Institute Cargo Clauses, that is by dealing with the
average, and the Transit Clauses of e~ch set of clauses, as well as any other
special clauses not included in the Institute Cargo Clauses.

1. Corn Trade F.P.A. Clauses:

The T,r&,nsi t Clause in this set of clauses provides almost the same
period of cover as that in I.C.C. in a simple wording and it reads as follows,
 - 10 -

)'Fronr<MJ.e:. ;time th~ go.o.d'.J3:.. leave the warehouse at the plac:13 ;named in th13
policy for the commencement of the transit 2.nd continues until the
goods are delive;eE:d to the_ consi~ees,·,&·ui0tlli:er f'.iineJ, v.ra.xehouse at the
destination named in 'the policy 11 •
The Average Clause is similar to F.P.A. Clause of the J;-.C.C., but inclu--
des collision with ship or vessel in perils which break warranty, also pays
for any: oe.:tgor.rootldti~.nt1dr;).tof.i.o!&..tii@f:1.:-;dioitr.1tist-;::, cl:i::ter-:toE pe1'llliYE..:dnd~08d2 agaihs t.
1

The C.orn Trade Clauses includes a special clause not included in I.C.• C.,
i.e. the Increased Value Clause which stipulat8s
"Should additional insurance be placed on cargo h0rE:by insured, the
insured value in this policy shall in event of claim be deemed i?J.-
c creased to total amount insured at time of loss or accident",
The purpose of inserting this clause in the Corn Trade - as well as
the Rubber, Timber and Jute Clauses - is that the market value of said
commodities may increase considerably during its transit, and every merchant
through whose hands the transaction passes may find it necessary to obtain
further insuxance cover to satisfy his contract of sale.
IncrE-:ased Value policies are usually "honour" policies and a.re claused
"without benefit of salvage''. When a loss occurs the original insurer is
entitled to any salvage, and is also liable for all the charges incurrq1 in
proving the claim.

I:
2. Flour "All Risks" Clauses ,
i'
The Transit Clause provides cover "from tiL,e flour leaves mill or
shipper r s warehouse at place named in policy, until del i~ered to consignees,.
i
'.
'
or other final warehouse at policy destination or un til_expiry of 30 days
from midnight on day vessel reports to Customs at port of discharge, whichev£ir
first occur.s. Delay in excess of 30 days beyond control of assured to be
held covered 1'.
The !Y,_erage Clause _reads .. as f,2._llows ,
"All claims whatsoever for damage from hazards of transportation
irrespective of percentage, including loss from short weight due to
bags broken or torn in transit. Franchise of£. 2 any one brand any
one vessel. Excluding damage caused by weevils, insects, worms, grubs
i
I

:! or :j.nherent vice''.
 - 11 -
J. Jute Clauses
TraJ:}_§]-t Clause provides for following cover
11 From the time the goods are loaded on board the overseas vessel at
port of shipment to commence transit, until it is discharged overside
from the overseas vessel at destination and until delivered (i) to
consignees or d>.;lilier final warehouse or place of storage there or (ii)
until on board on-carruing vessel or conveyance if forwared to other
destination, but if i t is awaiting sale, until expiry of 15 days from
midnight on day discharge completed. If seld before expiry of such
15 days cover continue until delivery as in (i) or (ii) above.
Avera~Claus~ is the same as in I.C.C. (F.P.A.) but doBs not include
total loss of package in loading.
The Jute Clauses also incorporate an Increased Value Clause, as in
Corn Trade Clauses.

4. BP.,bber Cla-g,~§..~. :
The Trans1 t ClausE'.cp1"ov1des for following per::...od
Hfrom time goods leave 1;,arehouse or place of storage at port of shipment
and con tinu _s during the ordinary e, urse of tra.nsi t u:, til delivered to
warehouse or place of storage at port of destination and whilst there,
provided not in manuf'acturer 1 s warehouse, for not exceeding 30 days.
If goods are to be forwarded outside limits of port of destination
cover con hnues until loaded on to vessel, craft or conveyance or the
expiry of JO days after the completion of d::..scharge whichever first
occurs. Extensions to limits held covered subject to notice prioir
to exp1 t-y 11 •
'The Avexa.filL Clause provides the following extended cover
;:Averag;e irrespective of percentage. Also cove:c~s theft, pilferage and
't
non-delivery of an ·entire package, explosion, fres.\l wat~r, condensation
in ship 1 s hold, hooks, spillings or leakage of any substance or liquid
damage by other cargo (excluding rubb~r), damage by moisture from wet
or dump dunnage. Excluding mould or mildew unless arising from actual
contact (dm.•ing the insured transit) with sea-water, fresh water, con-
densation of ships hold, spillmgs or leakage of any substance or liquid
or mo1sture from 1,J\;t or damp dunnage. ExcJ.uding .loss, damage or expense
proximately caused by delay, inherent vice-or nature of subject-matter
insured 11 •
 .. 12 -

The Inc~eased Value Clause is also included in this set of clauses.

5. Tl..lllber _T:tad§._]edera t:.i.o_n __Clauses

The period of cover provided by the TransitClause is as follows :
11 Subject to assured hav:mg an insura"Lile :i..nterest insurance attaches at
:_.,

any time the goods are loaded on water or land conveyance or are floated
~tJi~ll., _-~-19-~.J .1:?.:Y.5~11:. _t_l1g~1_,g_l} .~o_J._~9z _o_:g).Y. __s_.hqy~ J?.9.Lt. ..Pf ..~l1.~F1.e_:q t . S?X __9,;-1,§.P!i.~rge)
until delivered at mill, etc., at destii1a tion ( or elsewhere provided
no further sea voyage involved) and are. lh.e1fre..;.m.ade available to_ ..assured
or reaeiver. If stored at place of lending~ ·fire ·risk not covered after l:i
15 days even though not made available to assured or receiver 1i .
The Avera.gg, __Clause reads as follows
(a) All P..:i.sks of loss or damage to the subject-matter insured but
excluding loss, damage or expense proximately caused by delay inherent
vice or nature of the subject-matter insured.
(b) Deck Load F.P.A. unless vessel stranded sunk, burnt, on fire or in
collision, but to pay insured value of any portion of cargo lost by
jettision or washing overboard or in loading~ transhipment or discharge.
Also damage attributable to fire, explosion, collision or contact and
warehousing or special charges, etc. which would be payable on washing
overboard policy.
(c) Each raft or craft or deckload of each bill of lading
to be a,:,;,aparacte insurance if assured requires.
(a), (b) or (c) all sub,iect to franchise of half pe.rcent of insured
value or Z lC whichever is the less.
Likewise, the Trade Clauses include an Increased Value Clause simila1·
C
to Corn Trade Claus as. :,

6. Raw_§_u_gg_Ql.?-E.~-~§ :
The Transit.Clause· in this set of Trade Clausr:ls is the sani<:~ as in r.c.c.
but commences at port of shipment~
The Average Clause stipulates for the following cover:
11
To pay average irrespective d'. percf.:mtage, but sµbject to deduction
fcir ordinary loss; also co_;.,:::rs :
(a) ~Q..cl ...~.h.JJ2.!!!.~!l:_t,§. : risks of theft, pilferago, short and non-delivery,
explosion, fresh,-water, oil, damage by other cargo.

i
 - 13 -

(b) Bulk.Shipments risks of theft, pilferage, explosion, fresh-

"".'wder, oil,_ dernage by other cargo Fnd shortage 1- _proyidedrsm:tr.ta_g.e
E.rises from Accident _during lo.s,ding, tre.nshipment or cl.isc48,rge.
Excluding ~qss, damege or e~pense proximt tely ea.used by del::-.y or
inherent vice".

7. Frozen Pood Cl&uses ;

There ·:-re three sets of. these cl,c,uses which gr'?nt different limits•
of cover ,:,ccording to th'=' wording of the AverF,ge Cl!':.uses.
The first Sf;;t is subject to Full Conditions, 2nd covers loss of, -
deteriorP tion of, or d::cmcge to the interest from eny csuse a.rising during
the currency of the insurnnce. It thus provides the widest scope of cover.
The second se::t is subject to All Risks Cbuse which covers the inte-
rest insured "ge.inst 211 risks of loss of or drm;:;.ge thereto other than loss
or. d;;wge resulting from rny v,ri,,tion in temp8r,ture however cFused but
excludes loss, d.,.·.mE-_ge or exp0nse proximF tely C"'used by delcy, inherent vice
or the mJ.ture of subject-mr.,tter insured. Nevertheless, the policy does
extend to covei' loss of J deterior, tion of ,or d::-mcge to the interest insured
resulting from tny v~ ric: tion in temper::- ture which is F..ttri but.sble to '.
(.s) Ere1:kdown or stoppc1ge of the refrigerc> ting machinery for :,;; period of
not less thc1n 24 consecutivs hours, or,
(b) Strs.nding, sinking, burning or collision of the vessel, cr&ft or con- . "
vey,-.nce, or,
(c) Cont:oct of the vessel, crcft or conveys.nee with s.ny external substance
(ice included) other thtn w2.ter, or,
(d) Fire or explosion, or,
(e) n.:.sch2rge of the interest insured 2t 2 _ port of distress.
'"
The third set provides more limited cover., end the F.P.A. Clause
therein W"rr~·nts the policy free from p1°rticul::-r average but like the All
Risks Cl, use extends to cover loss of, deteriorP tion of or dama.ge to the
interest insured ~ttribukble to the ciouses (t), (b), (c) and (d) ebove but
not if due _to ''Disch21rge of the interest insured a.t F port of distress".
The three s1;;ts of cltuses c:re otherwis0 similer. The second po.rt of
,,11 the clc:uses described <-bovu w·rrr,nt th?t the goods ,,re in sound condition
· nd properly prep3rod, ~p, eked O
nd frozen ,. t the time of r,, tt2chment of insur2nce
 - 14 -

and that the time between the goods first passing into a freezing chamber and
shipment on board the 0verseas vessel-shall not exceed 60 days~ It is also
a provision.that the.assured shall take all precautions to ensure that the
goods remain in refrigerated or insulated space throughout the period of
insurance except during actual loading and unloading operations. The
discovery of any loss, damage or deterioration of the interest insured by
the assured, his agents or servants must be immediately notified by the
underwriters amkinbno !;:asec.~±llfa2clairn be payable if notice is given to
underwriters more than 30 days after the termination of the insurance.
The Transit Clause follows the pattern of that in the Institute
Cargo Clauses except that the risk attaches either :;
(i) on loading cn conveyance at freezing wcrks or cold store at 1lace
1

where transit commences, or

(ii) on loading 0n board the overseas vessel
and continues until teminated as in the Institute Cargo Clauses but delivery
has to be cold store or_place of stcrage ap.£__ ,)nly -2....9:-ays are all0wed after dis-
charge· overside from cverse2-s vessel.

IV. WAR,1 b.R. & C.C. RISK;:.

War risks exist a.lmost all waters in the shape of direlict mines,
torpedoes, etc., frcm the wcirld wars as well as the more local conflicts
which occur from time to time, producing active hazards from bombing and
sird:lar war-like operations. In view of these hazards most cargo· shipments
are covered against war and strikes risks. In fact, the contracts of sale,
as well as the banks demand this cover in addition to the normal marine risks.
The plain form of policy (S.G. Form), includes war perils in a limited
form as such "Men of War, enemies, arrests, restraints and detainments of
all kings, princes,. and peoples of what nation, coriditi~m or que.litY soever".
It also embraces sim.i].ar risks, i-.e. "pirates, rovers, letters 0f mart and·
countermart, surp.:risals and takings at sea".

The F.C. & S. Clause

This clause appears in the Institute Cargo (;la.uses (Clause 12), as
previously referred to when-analysing the I.C.C.,and it reads as follows;
"Warranted free of capture, seLmre, arrests, restraint or detainment,
and the consequences there:of or of any attempt thereat; also from the
consequences of hostilities or warlike operations, whether there be a
declaration of war or not but this warranty shall not exclude collision,
contact with any fixed or floating object (uther than a mine or torpedo),
 - 15 -.

stranding, heavy weather or fire unless caused directly (andJnd.epE:ndently

A of the nature of the voyage or service which the vessel concerned, or
in the case of ccllision, any other vessel involved therein, is
p•rforming) by a hostile act by rJr .::,gainst o.. belligerent power; and for
the purpose of this warranty power includes ~ny authority maintaining n
11.J. na.vHl, military or air forces in assc.cia tion with power.
"l!'u.rther warranted free from the c,nsequences l.)f civil war, revolution,
rebellion, insurrection, or civil strife arising therefrom, or piracy."
It c2,.n readily be seen that the cla.use excludes more than the war
perils specified in the plain policy form. This ia, of cour.sA, to make it
applicable to modern warlike acts, thus enzuring that all war perils are
excluded by the clause.
Upon examining the clause, we will note that it does no± exclude
perils which are esentially ms.rine in nature and specified as stranding,
heavy we~ther, fire, contact or collision except where the peril is directly
caused by the hustile act by, or against belligerent power. The term "contact"
applies to contact with any fixed or floating· object ether than a mine or
torpedo. Eurther, .if either vessel in coL .ision is on an enL ,gement of a
warlike nature, the loss shall not be dewed 2. war loss simply on the grounds
of the engagement of either vessel.

Institute War Clauses

Immediately beluw the F'.U. Clause in the I.C.C. the following provision
is inserted·
"Should CaJ.u.se 12 be deleted, the relevant curent Institute War Clauses
shall be deemed to form part cf this insurance".
It is common uractice to delete .the F.U. & S. (;lause when war cover
..i.; •'..·.

is required to attach tc the policy.

·when separate poliicies are required for the marine and war risks, it
is obviously necessary that thnse policies should be complementary.
The Institute War Clauses are in fact a self·-contained set of clauses
requiring no additional clauses should the policy be against war risks. They
cc,ntain 8 sub-clauses which modify the scope of the policy in the same manner
c1s the r.c.c.
 - 16 -

! ,11
1,1
,::[ I
The first sub-cl2use is in two sections
,11
'ii
(r, J relrtes to the w"'r perils excluded from the merine policy, by the
!· insertion of the F~C. & S. clruse
(b) reletes to wr.r perils which rre not covered by the phin policy.
The'se include hostilities, w::-.rlike aper? tions, civil wf r, revelut.ion,
mines' torpedos' bombs Gnd other engine:.; of we.r.
The 2ctuel perils covered by the ·bove sections of the cleuses are
p;yrble irrespective of pE:rcent-?ge (sub-cleuse 6).
Prob; bly, the most import:3.nt pert of the W2.r Cl 0 ,uses is the second
sub-cle.use which consists of three. seGtions ,
A. The Wf-terborne Cl2use _
This is t•.lw>ys cont2ined in the w.-r Cl·.uses, following the W2.terborne
{.i.Efeement. By this : -greement, of worldwide :£pplication, underwriters a.greed
0

not ibo insure goods :cg2inst WF•r risks whilst on shore, unless s:.t e. port of
tr,nshipment Fnd then only for limites number of dsys.
By this clause cover does. not r. ttr eh until. the goods a.re lo.sded on
the overse{.s vessel 1;1 nd it ceP ses when the goods tre disch&.rged from the
averse,· s vessel. If the vessel : rri ves ,. t her des tins tion, but unloading
is deliyed, cover is limited to 15 deys counting from midnight on the da.y
of r rri v:; 1.
Should the goods be trEnshipped, cover continues during the tranship-
ment but subject to e limit of 15 dnys counting fror.:i midnight on the dr,,y of
,-rrivrl of the ship rt the trrnshipping port. If the fifteen d.,c:ys limit
expires l;efore the goods r re lo;; ded onto the on-c'" rrying vessel the w.r
cover is suspended until the goods rre lorded onto the on-c:orrying vessel,
when it re tfaches.
0

B. Th~ Mines < nd DGreli; t 'i'orpedoes::Extensi.on :

Cl,·use 2 (b) PfOVides t n extension to the pre-w r WE.terborne cl&:use,
the ef:fect of Vhich ls th.~t the insur~nce '"g::-inst the risks of mines r-nd
derelict to·rpedo~.i ,whEether floe ting or subL1erged, commences when the interest
insured is· first lo:::ded on-- the vessel or cr'.'.ft , nd .ce2.ses when the interest
irisured is fimlly discharged. mverside from the ves~el .S?± cr1d_i r,t destination.
 - 17 -

C. ;F1rustr.-:J_i..?.E1....f1:~~~
By this c,h:use the policy ,is "w rr:= nted free of any claim hssed, upon
loss of, or frustr2tion of,: the insured voy·'ge or r dventure cccused by arrests
restr2ints or det2inments of kings, princes, peoples, usupers or persons
· ttempting to u._s_urp power".
Cl::·use two of thE> Institute: Wtr Clr-uses, is so important thr:d it is
ended with E provision thr t r,,.ny cl.,:use in the policy which is d:D.Colil.aistent
with this Chuse 2 is null end ,void.
The other importi:nt sub-sections c,-re clFus~s 3 2,nd 4 which specify
the exclusions under the W;;·r Cleuses. 3 excludes loss, d.?me.ge or
CL"US<3
expense rrising from nucle -r risks, F.nd Cl .use 4 w2rrents th1.> t loss or d.sm8.ge
0 0

proxim;:· tely caused by delr y, inhErent vice or loss of mr.rket are excluded
from wr;. r policy.

Institute Stfj.ke_§l Riot.§.. 2nd Civil Commotions Clc:.uses

This set of cl,rnses is : : lso self-conteined and includes eight sub-
-cl,suses which e:.ppen.r in the Institute C.crgo Clauses.
The first chuse sets out the perils cover0d by the clauses as being
loss of or deomege to the inslired property m=used by
(a.) Strikers, locked out workmen, or persons ta.king part in la,boux
disturb<:•nces, riots or civil commotions, and
(b) Persons .::.cting nwliciously.
It will be observed th2 t persons mentioned in (;c:) a.bove are precisely
the s<cme .s.s those referred to in F. S .R. & C, C. Cleuse. Malicious dem/:l.ge by
strikes - on the other h,c.nd - is not covered by the S.G. fonn snd is an
addition to cover provided by the policy.
There follows the Exclusions Clccuse which frees fhe policy from loss
or da.I!la.ge which is proxime tely c0used by rbsence or shortage of l,'bour
should it not be avEil,19.ble or wlii.:thheld during a.ny strike, lock out, lc1.bour
disturb~nce or civil commotion. It elso mskes the following exclusions"
Loss or d.?me.ge proxime.tely csused by dela.y ,. inherent vice or ne.tuxe
of the subject-matter insured.
Any claim for expenses Prising from delEy other than those recoverable
in principle under York/A,:1twerp Rules 1950.
Loss or dema.ge a.rising froI'J hostilities, WBrlike opere tions, etc.
 - 18 -

The third cl;:rnse is the Transit Cl2use, by which the policy remains
subject to the seme ettacb:cient Pnd terrnin:otion conditions as provided by
the Inst. C0 rgo CJ.:ouses. Cl2ims under the Strikes Cl8uses a.re, however,
pr,y,,.ble irrespective of percent:;,ge, F.s in the Inst. We.r, Clauses.
The generel effect of the cl:=·uses is th?t the strikes, etc. ,cover
is limited to
'.
physic£,l loss of or dr:,m:=:.ge to the goods directly caused by the
.

strikers etc., end thr t loss ;--rising indirectly frori the strikers' ections
is not embraced in the cover. $ome goods such Es fresh fruit, e.re subject
to deteriordion i f dela.yed in del!bve:r;y beyond " retson'?ble time. Such
goods when dehyed 2t 2- strikebound port, or when in 2. vessel delayed by
strikes, cc n become s tot 1 loss by deterion,, tion, e.nd the loss is. to be
0

considered caused by inherent vice 2.nd by del, .y both of which perils are
1

specificc·lly excluded from the Strikes Cover in the policy.

--------------
References
1. Merine InsurFnce - Ca,rgo Pr.sctice
By R.H. Brown
2. Marine Underwriting
CII TUITION SERVICE 75 a.

I!(
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