Institute Coal clauses -1/10/82 CL 267

Snow and coal – poles apart, but the Institute Coal clauses-1/10/82 CL 267 and the Yeti or Abominable Snowman bear a great similarity.  They are both spoken about, read about in books but seldom or never seen in reality, especially in India.

Does this mean that coal, as a commodity is not transported much in India? On the contrary, it is a major commodity as far as imports go and there are requirements for covering inland transits in railway wagons too. So why are the Institute Coal clauses not popular in India?

The Institute Coal clauses, specifically designed for import of coal in bulk is NOT an All-Risks cover. It can largely be compared with an ICC-B cover, i.e. on named -perils basis but with one major named cover, something which is an exclusion under ICC-A too — It covers fire, explosion or heating EVEN WHEN caused by spontaneous combustion, inherent vice or nature of the subject-matter insured. Since this is a specifically stated cover, General exclusion 4.4 ( relating to inherent vice) appearing in ICC ( A, B or C) does not find a place in the Institute Coal clauses. Spontaneous combustion, being one of the major risks associated with coal, one would think that this additional cover would make the Institute Coal clauses popular but that is not the case. In markets where coal had been insured on ICC-B/C terms, the Institute Coal clauses could be seen as a wider cover. Indian insurers are ( at least were, till recently) willing to specifically add heating & spontaneous combustion as insured perils under ICC-A itself and delete Exclusion 4.4. What is more, some insurers widen the scope of spontaneous combustion to say that ‘even without a visible flame’, it would be considered as a fire. In essence, the cover extends deeper to include smoldering, singeing,etc.So why would anybody opt for the Institute Coal clauses which, when compared to ICC-A has the following additional limitations too:

• Institute Coal clauses cover the cargo on ‘port to port’ basis only. Cover sought and granted by insurers are from the mines to load-port, the ocean voyage, intentional storage at discharge-port for anywhere up to 120 days and then the inland transit till final destination. Some underwriters exclude unexplained shortages but many policies do not specifically state this and end up paying for handling, windage and weighment difference shortages.
• The Duration clause of the Institute Coal clauses reads as under: 

‘This insurance attaches as the subject-matter insured is loaded on board the                  oversea vessel at the port or place named herein for the commencement of                      the transit,continues during the ordinary course of transit and terminates as                 the subject-matter insured is discharged overside from the oversea vessel at                   the destination named herein.’

Compare this with Duration clause under ICC, which commences when the                subject-matter insured insured is ‘first moved in the warehouse…’ and                        terminates either on unloading at the final destination, any intermediate                  destination where the assured decides to store the subject-matter (whether              unloaded or not) or 60 days overside the vessel, whichever shall first occur.

Does this mean the Institute Coal clauses will have no relevance at all in the future? I am optimistic that this will not be the case and the way Indian underwriters look at coal will undergo a sea change in the near future. International markets are quite paranoid about coal as cargo, and covers including spontaneous combustion are increasingly becoming rare or come with much higher deductibles. The intentional storage covers at the disport/nearby yards ( including spontaneous combustion) plus the inland transits in open railway wagons are strict ‘No-Nos’ as far as reinsurers go. However, the demand for these wider covers for coal including intentional storage and burgeoning limits in terms of values are still prevalent. With reinsurance support reducing, underwriters may be forced to write coal policies limiting it to their respective capacities — something fraught with danger. A pragmatic approach would be to adopt prevailing international practices, limit the coverage for coal in transit and emphasise on Risk Management measures, especially the SOPs adopted by the assureds while transporting/storing coal. Then we may have a few sightings of the Institute Coal clauses in Indian cargo policies.