Insufficiency of packing- 4.3 of ICC

Possibly the most debatable portion of the Institute Cargo clauses- 1982!

Insufficiency or unsuitability of packing, an exclusion under 4.3 of ICC-1982 was a potent weapon in the hands of claim settlers & loss assessors who knew all claimants would not seek legal recourse and went about invoking this exclusion at the slightest opportunity. Assureds were left fuming but could do little else except fight it out in a Court of Law.

The earlier version of this exclusion 4.3 under ICC-1982 was quite archaic as you can see: 

“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”.

The exclusion was ABSOLUTE. It did not matter if the Assured was involved in the packing or not. If the insurer/loss assessor felt that the packing was insufficient and this caused the loss, the claim could be denied. Innocent importers of cargo, who were in no way involved in the packing were at times victims of 4.3. Most interesting aspect was — nowhere was it defined or explained, what ‘sufficient or suitable packing’ meant. Stowage in a container was also brought under the definition of ‘packing’, but here there was some leeway — the exclusion could be invoked only if the stowage  was a) Carried out prior to attachment of this insurance b) or if the stowage was done by the Assured or their servants.

Many of these shortcomings have been addressed to a great extent in the Institute Cargo clauses -2009, where this section has undergone a few changes to reflect the current trade practices and to ensure that an innocent insured is not penalized by this concept of ‘insufficient packing’. So what are the improvements in 4.3 of 2009 over 1982? 

1. This exclusion can be invoked ONLY IF the packing or preparation is carried out by the Assured or their employees or prior to attachment of this insurance. Packing includes stowage in a container and the same yardstick is applied to both packing & stowage, unlike in the 1982 version, where the applicability of this exclusion was restricted only in case of stowage.
2. There is a clear explanation of what constitutes an insufficient or unsuitable packing — if it is unable to withstand the ordinary incidents of the insured transit. An example would be, in case of transportation of liquid chemicals in sealed plastic drums, the drums should be of such strength, that they can withstand the rolls & pitches associated with the vessel movements, jerks and jolts during the road transit & normal handling procedures. If however a heavier cargo is placed on top of the drum during the voyage ( not by the insured or his employees) and the drum collapses leading to leakage of chemicals, it cannot be construed as insufficient packing.
3. It is also recognized that many third-parties are involved in the stowage, especially in case of LCL, where stuffing happens at a container yard/freight station. The term ’employees’ used in this section would NOT INCLUDE independent contractors. Hence, if a freight forwarder stows the cargo inappropriately in a container leading to claims for cargo damages, same cannot be declined under this section, since stowage is not done by assured or their employees.

Be it 4.3 of ICC 1982 or 2009,my view always has been that any declination of claim for insufficiency of packing ( unless it is a visible, blatant insufficiency) can be successfully challenged. One reason is that it will be very difficult to substantiate technically and legally that the insufficiency of packing alone caused the loss.While this could pave the way for an easier operation of an insured peril or cause aggravation of a loss, given the number of standards set and certifications obtained, before declining a claim under 4.3, insurers should think a hundred times.