It is a fact that 2009 version of the Institute Cargo clauses is a marked improvement over the 1982 version. The 2009 clauses not only use simpler language and offer greater clarity but also recognize the rapid changes, containerization has brought about in world trade.
Are these clauses fool-proof with no ambiguity? The answer is No. There cannot be a set of perfect insuring clauses, given the ever-changing methods in the world of business in general and the logistics sector, in particular. There will be grey areas, debates, interpretations till such time,the next set of clauses attempt to plug most of these ambiguities.
Two of these grey areas which readily come to mind are: 1) Duration clause ( 8.1) 2) Insufficiency of packing (4.3)
The wording of 8.1 reads : “…. this insurance attaches from the time the subject-matter insured is first moved in the warehouse or place of storage ( at the place named in the contract of insurance) for the purpose of the immediate loading into or on to the carrying vehicle or other conveyance for the commencement of transit…..”
The key words here are ‘ first moved’ and ‘immediate loading’. Typically, the policies would be simply worded as say, ‘Mumbai to Sydney on warehouse to warehouse basis’. Here, the place named for commencement of transit is Mumbai. The risk would attach at the warehouse in Mumbai, that is known now. When will the risk attach? When the subject-matter insured is FIRST moved in the warehouse. Warehouses could be huge and the loading bay could be at one end of the warehouse and the subject-matter insured may be stored at the other end. Risk attaches when the ‘first movement’ happens. Let’s say, a machine is to be transported from this warehouse and it is picked up by a crane from where it is stored, unfortunately it falls down and gets damaged inside the warehouse itself. Will the marine cargo policy pay?
The purists would say, the words ‘ first moved’ and ‘immediate loading’ are to be read together. A mere movement of the subject-matter insured within the warehouse will not be deemed to be the commencement of transit. Perfectly correct. Problem arises because what is ‘immediate loading’ is not defined by 8.1 or elsewhere. Do we presume that the truck should be waiting at the loading bay and any movement of the subject-matter insured after this will be considered as the first movement and risk attached under the marine policy?
( OR)
Was it the intention of the drafters that the subject-matter insured should be at the loading bay and when the truck arrives,the first movement of the subject-matter insured would be deemed to be the commencement of transit? Possibly, the drafters had containers in mind, wherein the stuffing and sealing would be done and kept ready at the place of loading and when the trailers come in, the container would be ‘moved’ for loading. In case of policies incepting from the port of loading and if the subject-matter insured is break-bulk cargo, the problem gets compounded. Should the subject-matter insured be ready at the wharf and its first movement after the berthing of the vessel should be deemed to be commencement of transit?
Exclusion 4.3 (Insufficiency of packing- 4.3 of ICC ) under ICC-2009 provides a marked improvement over the 1982 version in terms of clarity. Yet, it has certain grey areas. This exclusion can be evoked by an insurer only if a) Such packing is carried out by the Assured or their employees or b) prior to attachment of this insurance. Problem is with what is stated within brackets after this — for the purpose of these Clauses ‘packing ‘ shall be deemed to include stowage in a container and ’employees’ shall not include independent contractors.
The drafters, it appears wanted to make a distinction and rightly so, between FCL and LCL under this exclusion. Under FCL, where stuffing and stowage inside the container happens at the assured’s premises/under his control, by himself or his employees, assured has to take responsibility if the stowage is improper. In case of LCL, where the stuffing and stowage inside the container is not done by the assured or his employees, the assured cannot be held responsible. Outsourcing is common in factories, warehouses, etc.these days. If a FCL stuffing & stowage is carried out at assured’s premises, not by his employees but by outsourced workers of an independent contractor & if the stowage is improperly done ( even if intentional to cut costs or time) leading to a loss, can the Assured cite that exclusion under 4.3 should not apply and the claim paid because neither he nor his employees had carried out the stuffing/ stowage?
Opinions welcome.
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To my opinion the under 8.1 the intention is to cover the last movement immediately prior to loading on the truck. For FCL it’s movement for stowage within the container prior to sealing. This prponement of scope till first movement is more relevant to machineries or overdimemtional cargo.