AICC 2004 All-Risks vs ICC-A 2009

Dear Reader, this post is special to me — My 100th post on Marine insurance in my blog balasbroadcast.wordpress.com.

When I started penning or rather keying in my thoughts on marine cargo insurance , little did I realise that there will come a day when I will be writing Post No. 100. There was no doubt in my mind that marine insurance is as vast as the oceans and whatever one knows, learns or teaches, it will only be a droplet.Matter there is aplenty — the various clauses, policies, underwriting, the ever-changing requirements, practices, interpretations, laws governing trade, judgments of Courts the world over, sharing of experiences, tricky claims and much more. Challenge was to be able to put it together on a regular basis, something I was not confident about at all. Thanks to my readers for their support and encouragement, I dare say I have been ‘reasonably regular’ with my posts and have hit the three-figure mark. Hope to keep it going and would welcome your comments and suggestions on my blog.

So what will be the subject of this 100th post? Well, the insurance industry in India and in most parts of the world has grown up with and practiced using the Institute Cargo clauses of the International Underwriting Association of London ( IUA), one of whose merged entities was the Institute of London Underwriters( ILU). Readers will note that there have been two versions so far- 1982 & 2009 and both happen to be in use. Other clauses like the Norwegian cargo clauses, cargo insurance policies of Antwerp, etc are used in select markets and do not have universal acceptance. The very large North American cargo insurance market makes use of the American Institute Cargo clauses -2004 ( All-Risks) devised by the American Institute of Marine Underwriters. At a broad level, though the insuring terms, conditions and exclusions are similar when one compares the American Institute clauses of 2004 with the Institute cargo clauses – A of 2009, certain points stand out in the American clauses which give greater clarity and avoids the ambiguity in ICC. In this post we will take a look at some of the aspects where the Institute Cargo clauses can draw from the American clauses.

If cargo is carried ‘on deck’ on an ocean-going vessel under an On-deck Bill of lading, the American clauses warrant (1B) that no Particular Average ( partial losses) will be paid unless the vessel is stranded, sunk or burnt. However, any loss/damage to cargo reasonably attributed to fire, collision or discharge at a port of distress will be payable. In case of ICC, there is the need for /option given to the underwriter to limit or not limit liability to ‘on-deck’ cargo by naming the perils or saying ‘unless caused by an ICC -C peril’. This limitation does not in any way apply to containerised cargo carried on deck. Many a time, underwriters do not deem it necessary to ask if there will be ‘on deck’ cargo and subsequently in a claim situation, there are problems.

Movements to/from an ocean-going vessel by a craft,raft or lighter is specifically stated to be covered under the AICC 2004. Each of these crafts will be considered as a separate insurance and even if contractually the lighters are exempted from liability, that will have no impact on this insurance cover. ICC too covers movements by other crafts, lighters,etc. but the same is not spelt out explicitly nor is it made clear that even if lighters are exempt from liability, this would not impact cover under the insurance. By deeming each craft, lighter,etc as a separate insurance, the AICC-2004 clarifies the deductible which has to be applied in case of loss.

AICC 2004 defines how a partial loss is to be adjusted, something left to discretion in case of ICC.

“In case of partial loss or damage insured against by this policy, a separation of sound and damaged insured property shall be made and the amount of loss determined by:

(1) an agreed percentage of depreciation, in which event the Assured shall receive such percentage of the insured value of the damaged insured property, or, if there is no agreement

(2) sale of the damaged insured property, in which event the Assured shall receive the difference between the insured value of the damaged insured property sold and the proceeds of sale”

Clause 7 I is something every assured would love —Payment of Loss clause which stipulate that the loss is to be paid not later than 30 days after receiving satisfactory proof of loss & satisfactory proof of interest. If the final loss amount cannot be determined within 30 days after satisfactory proof of loss, advance payment needs to be made adjustable against the final claim amount. ICC would do well to have this incorporated.

Some Non-Institute clauses which have to be asked for or added at the will of the underwriters along with ICC-A 2009 like Labels clause, Machinery clause, Brands & Trademarks clause and Economic & Trade Sanctions clause form part of the AICC 2004 clauses. Automatic coverage.

Returned or refused shipments are held covered under AICC 2004 till they are otherwise disposed off, subject to information and additional premium if any. This will not be considered as Delay or an intentional storage.

” In the event of refusal or inability of the Assured, or Consignee, to accept delivery of insured property, this policy is extended to cover such insured property, subject to the original insuring terms, during delay and/or return or until otherwise disposed of, provided the Assured reports the facts of such situations to the Company as soon as they have knowledge of such an occurrence and pays additional premium if required.

Another interesting and practical cover built into the American clauses is the one relating to ‘ Consolidation/Deconsolidation’ into/from containers. Does not consider this part to an intentional storage, as clearly seen in the wording below:

” This policy is extended to cover the insured property temporarily stopped in transit for the purpose of consolidation or deconsolidation in or from overseas containers for not exceeding 30 days whether the said stoppage in transit is within the control of the Assured or not. Held covered at an additional premium to be named for an additional 30 days provided the Assured gives notice thereof to the Company as promptly as possible but in any event prior to the expiry of the original 30 day period.”

Interestingly, under AICC 2004, Delay is not part of basic exclusions but forms a Paramount warranty which is clear in its wording: ” Warranted free of claim for loss of market or for loss, damage, expense or deterioration arising from delay, whether caused by a peril insured against or otherwise.”

It would appear that AICC 2004 is more beneficial to an assured than ICC-2009. Not totally true as there are certain limitations in the American clauses when compared to certain aspects of ICC 2009. To cit some examples — Duration clause under ICC 2009 is wider attaching from the time the ‘ subject-matter insured is first moved in the warehouse….’, whereas under AICC 2004 , it is when ‘ the insured property leaves the warehouse’. Similarly the definition of Terrorism under SR & CC warranty ( akin to the SRCC exclusion under ICC) does not include ‘religious motive’. So in case of a buyback, whether loses caused by a person acting from a religious motive will stand covered is debatable. AICC 2004 specifically mentions what the treatment will be in case there is another insurance policy covering the same shipment, instead of leaving it open as in ICC-A 2009 to the Contribution principle under the Marine Insurance Act, 1906.

As an assured, as a broker the ask will be for the best of both worlds. Maybe the Americans & the Londoners can draw from one another.