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By: gmanks | January 07, 2015 Comments(0)

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As a consequence of the way that world trade has developed and to some extent changed its character as
a result of more modern transport technology, there is an increased demand from insured parties for up-to-
Uncategorized
date, clearer, and more advantageous terms of insurance. Additionally, the constantly changing threats
Cargo Clauses
from terrorism and piracy have affected the demand for and creation of new clauses. In 2006, an
Marine Losses
examination of existing cargo clauses was initiated, and, at the beginning of 2009, the revised ICC clauses
became available to the insurance market. Besides the Civil Clauses ICC (A), (B) and (C), the updated
clauses cover the ICC War and Strikes Clauses. Tags
International clauses Differences in 1982 & 2009 Wording
Marine Losses

The London market is clearly the dominant marine insurance market in the world, and difficult and complex
risks are to a large extent insured by members of this market. This means that the London market has a
powerful influence on both premiums and the coverage. It is also in London that the standard clauses, the
Institute Clauses, for various forms of marine insurance are established. These clauses are applied
throughout the world. In Scandinavia, it is custom that our Swedish cargo clauses are used for imports and
transport within Scandinavia, and the British clauses for exports. The advantage of using the British
insurance clauses is that they are understood in most countries and that their content is well known in
worldwide business and transport sectors. Against the background of the British influence in the marine
insurance sector, it was natural that overhaul and updating of the Institute Clauses would be a task for
Lloyds Market Association (LMA) * and the Joint Cargo Committee (JCC).**

Preliminary work
When, more than 25 years ago, the radical step of introducing the 1982 Institute Cargo Clauses was taken,
there were considerable misgivings that the custom and practice developed in courts and in the context of
marine insurance since the beginning of the twentieth century would result in legal uncertainties and a
greater number of legal disputes. However, the result was completely different. The clear and lucid form of
the 1982 clauses has over the years meant remarkably few disputes over insurance cover. But nothing
lasts forever, and an overhaul was introduced at the beginning of 2006 when the LMA sent out a
questionnaire to partners throughout the world. A working group consisting of members of the JCC was set
up to analyse the responses. This resulted in a document that the JCC distributed worldwide to interested
organisations in the marine insurance sector to collect their comments on the proposed changes in the text
of the Clauses. In this way, it was ensured that constructive proposals from markets other than London
were included. The final version was ready by the end of 2008, and 1 January 2009 was set as the date for
the revised clauses to come into effect.

Institute Cargo Clauses 2009

General
To promote clarity, there has been some updating of the language used in the Clauses. In particular:

1. A definition of the Assured has been inserted for extra clarity. It now expressly includes either the
person by or on whose behalf the contract of insurance was effected or assignee.

2. The terms goods and cargo does not accurately describe the range and type of cargoes so they have
been replaced by subject-matter insured.

3. The term underwriters has been replaced by insurers.

4. The side headings to the Clauses have been modified and placed in a more conventional manner
above each of the Clauses.

5. The more modern term employees has replaced the rather archaic term servants to be a more
understandable term for use of the Clauses worldwide and does not alter the legal position of the rights
of the assured.

The most important commercial changes to reflect modern practice

1. Insufficiency of Packing or Preparation - the previous clause excluded insufficiency of packing or

preparation even when it was beyond the control of the assured and arose accidentally after the
insurance had attached. This felt inappropriate and is a risk that should be acceptable to insurers and
an assured would expect it to be covered under a marine policy. This is now covered as packing by
third party packers during the currency of the transit. So, the new clause is limited to cases where the
assured or their employees are themselves responsible for the poor packing or preparation, at
whatever time it is carried out. The new clause also sets out the standard by which any insufficiency or
unsuitability is to be judged- the packing or preparation must be sufficient to withstand the ordinary
incidents of the insured transit.

2. Terrorism the terrorism exclusion has been extended to reflect the wide range of threats that may
now be encountered, and the range of motives that may be behind an attack. The clause now requires
the act of terrorism to be undertaken by a person acting on behalf of, or in connection with, an
organization and does not apply to the actions of a lone terrorist. The fourth part of the clause has
been widened to exclude not only political but also acts motivated by ideological or religious
motives. It felt necessary as the American Institute Clauses already incorporated the term ideological.
It them seemed urgent and important to include religious motives.

3. Duration Transit Clause

Under the 1982 Clauses, there was no cover until the goods had left the warehouse, so it would only
have been insured if an accident had happened outside the warehouse. As it has been commonplace
for brokers wording to extend coverage to include loading and unloading operations, this extension
has now been brought into the standard cover and in line with continental European practise. The
insurance now attaches from the time the subject-matter insured is first moved in the warehouse for
the purpose of the immediate loading. This connects the first movement of the goods closely in time
to the loading of the conveyance to be used for the insured transit. Cover does not extend to temporary
storage prior to transit or to such storage in holding areas within a warehouse. Similarly, the transit now
ceases on completion of unloading from the vehicle at the final warehouse rather than delivery to as
stated in the previous clauses. The clause has now become more logical in that cover is provided also
within the warehouse and not only after the subject-matter insured has left the warehouse. There is
also a new part in the clause clarifying that the insurance terminates when the assured or their
employees elect to use any carrying vehicle or other conveyance or any container for storage other
than in the ordinary course of transit. This means that the management need to be aware of decisions
made at the warehouse floor level because of the impact on the coverage.

4. Change of voyage
The assured is, after the attachment of the insurance, entitled to change the destination. In order to get
the voyage covered the insurers must promptly be notified for rates and terms to be agreed. If a loss
should occur, prior to an agreement being obtained, cover may be provided but only if cover would
have been available at a reasonable commercial market rate on reasonable market terms. These
elements, in the revised clause, clearly explain the circumstances in which cover may be available from
underwriters but also the action the assured must take in order to secure his interest. The old version
was using the term held covered which often was misunderstood by the assureds as providing cover,
even it would not be possible.

5. The Unseaworthiness Exclusion

This clause has been modified, in favour of the assured, to limit the exclusion in relation to unfitness of
vehicles or containers to cases where the assured or their employees are privy to such unfitness.
6. The Insolvency Exclusion
The exclusion has been reduced in scope so that the innocent assured or assignee is still protected by
the policy in the event of financial default or insolvency bringing the voyage to an end. The exclusion
will now only apply where the assured is aware, or should have been aware, that financial default may
interrupt the voyage and the exclusion will not apply at all when the insurance has been assigned to a
third party in good faith.

Summary
The new changes in the British clauses do not necessarily mean that the Swedish cargo clauses will have
to be completely revised. The Swedish clauses have previously undergone further interpretation of, among
others, the Transit Clause, and it is more probable that the Swedish insurance market will eventually
revise individual clauses where it is deemed to be necessary.

Despite this positive acceptance, it is likely that the 1982 clauses will continue to apply in parallel with the
2009 clauses for a long while, perhaps mainly in clause referrals in letters of credit. Presumably, in these
cases as in other uncertain situations, interpretation according to the new and more generous 2009
clauses will be used in cases of damage.

There will certainly be grey areas and uncertainties in the 2009 British clauses that will lead to legal
disputes but in view of the limited number of disputes after the introduction of the 1982 clauses, there is
little concern about an increased number of disputes. Hopefully, the opposite will take place, and the 2009
clauses will be able to meet the need for insurance cover sought by businesses throughout the world.

acknowledgement to Sampo Group for the above summary

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Category: Cargo Clauses

Tags: Differences in 1982 & 2009 Wording

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