As insurance brokers dealing with clients from, among others, the TSL (Transport, Shipping, and Logistics) industry, we encounter cargo damages. We can assist in the settlement of claims under various policies. Including the cargo insurance policy (CARGO) – if the Client has purchased it. In such cases, we deal with the Institute Cargo Clauses in practice. And it shows that in the context of the ICC, the exclusion 4.3 ICC.A is an extremely important issue.

Institute Cargo Clauses – What Are They?

The Institute Cargo Clauses (ICC) are English insurance conditions with a more than two-hundred-year insurance tradition. They are universally accepted in international cargo insurance. The scope of insurance coverage depends on the set of clauses applied. They are universal in nature, as they can be applied to most types of cargo and various means of transport.

They can be divided according to three scopes of coverage. The first, and at the same time the broadest possible scope of insurance coverage, is based on the “all risks” principle. This is offered by the Institute Cargo Clauses (A) 1/1/82.

The next two sets of clauses are designated by the letters B (intermediate scope of insurance). And C (narrowest scope of insurance). They offer limited insurance protection for listed types of risk (named risks).

A Specific Case!

The spectrum of damages, depending on the activity profile of the insured entity, can be broad. However, in this article, we will focus on a particular damage incident involving one of our clients. This specific client is a global technology leader.

The damage seems straightforward! Inoperative, damaged machine (which is significant for the entire case) – required transportation to the manufacturer in Japan for repair. The transportation was insured by one of the Polish insurers under an individual policy based on the General Terms and Conditions of Insurance and ICC.A. The insurer was aware that it was insuring the transport of a damaged machine. Everything was inventoried in a document presented to the insurance company for review at the negotiation stage.

During the transportation, the machine was damaged. Namely, after the machine was delivered to the recipient, it was found to have numerous signs of corrosion.

It is noteworthy that the cargo for transportation was prepared by an external entity (not the insured or his employees). The loading was also included in the scope of protection.

In the course of the claim settlement, the necessary documentation was provided. A report by an expert engaged by the insurer in Japan was presented. He determined that the subject damage (corrosion) did not occur during transportation (no external intervention in the cargo, contact with water, or excessive humidity). It was caused by a possible hidden defect (normal wear and tear) while at the same time lacking appropriate anti-corrosion measures. In the refusal decision, the insurer invoked the exclusion 4.3 ICC.A. According to its content, the insurance does not cover any loss, damage, or expense attributable to insufficient or improper packing or preparation of the insured object. This applies to situations where stowage performed by the Insured or his employees before the commencement of the insurance. In the context of these clauses, “packing” includes stowage in a container (arrangement and securing). And the term “employees” does not include independent contractors.

What is the conclusion?

Was the application of such exclusion justified? The dispute with the insurer lasted several weeks. Finally, we convinced the insurer to change the decision! We broke it down based on photographic documentation taken by the insured before the transportation began. Helpful was the documentation from the inventory of the machine made before the insurance. Documentation was presented to the insurer before the policy was signed. Supporting were also contracts and statements from the external entity that secured the goods for transportation.

Answering the question can the Insurer always invoke exclusion 4.3 ICC.A?

The answer is not so obvious.

Everything depends on the condition of the cargo before the damage, the way of documenting the actual state of the property. And also on the entities engaged by the parties to prepare the cargo and organize the transport.

This all shows that every case is different and already at the insurance stage requires a special analysis of the case. It also requires analyzing the Client’s needs and close cooperation of the insurance broker concluding the insurance agreement with the insurance claims department. As well as with the Client (insured) and other entities involved in the transport.

What should be done to prevent the insurer from applying the exclusion 4.3 ICC.A?

• Remember to make photographic documentation of the cargo, securing it at every stage of the transport.
• Prepare appropriate reports on the condition of the cargo.
• Ensure that external entities providing services for you have entered into a proper written agreement with you.
• Always choose professional counterparts with long-standing experience and an unblemished reputation. Even if they make a mistake, it is important that they still cooperate with you at every stage of the claims procedure. Relationships are necessary and important!

And finally, remember that a good broker will always try to find a solution. Especially in such complex matters as Exclusion 4.3 ICC.A