Cargo Insurance: Institute Cargo Clauses A, B and C Compared, 110% Cover and CIF vs CIP

ICC (A), (B) and (C): what each covers

The Institute Cargo Clauses, published by the Lloyd's Market Association and the International Underwriting Association, are the standard wording for cargo insurance in many markets. The 2009 edition has three sets:

• ICC (A) covers all risks of loss of or damage to the subject-matter insured, except as excluded by the exclusion clauses. Theft, rough handling and water damage are covered unless an exclusion applies.
• ICC (B) covers loss or damage reasonably attributable to fire or explosion; the vessel or craft being stranded, grounded, sunk or capsized; overturning or derailment of land conveyance; collision or contact with any external object other than water; discharge of cargo at a port of distress; earthquake, volcanic eruption or lightning; general average sacrifice; jettison or washing overboard; entry of sea, lake or river water into the vessel, conveyance, container or place of storage; and total loss of any package lost overboard or dropped while loading or unloading.
• ICC (C) covers fire or explosion, stranding, grounding, sinking or capsizing, overturning or derailment of land conveyance, collision or contact with an external object, discharge at a port of distress, general average sacrifice and jettison. It does not cover earthquake or lightning, water entering the container, washing overboard or packages dropped during loading.
• All three also cover general average and salvage charges and the assured's share under a both-to-blame collision clause.

What is excluded

The three sets share the main exclusions: wilful misconduct of the assured; ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear; insufficient or unsuitable packing or preparation where done by the assured or before the insurance attaches; inherent vice or nature of the goods; delay; insolvency or financial default of the owners or operators of the vessel where the assured is aware of it; and nuclear weapons. Unseaworthiness of the vessel is excluded where the assured was privy to it. War and strikes, riots and civil commotions are excluded and are covered only by adding the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo). ICC (B) and (C) also exclude deliberate damage by the wrongful act of any person, which ICC (A) does not.

How long the cover lasts

Under the transit clause, the insurance attaches from the time the goods are first moved in the warehouse or place of storage for immediate loading for the start of the transit, continues during the ordinary course of transit, and ends on completion of unloading at the final warehouse or place of storage at the destination named in the contract, or, if earlier, on the expiry of 60 days after completion of discharge from the oversea vessel at the final port of discharge. Goods left at the port longer than that, or taken to a different place for storage or distribution, may lose cover, so ask the insurer to extend it.

CIF and CIP under Incoterms 2020

• Under CIF, the seller must obtain cargo insurance complying with at least the cover in ICC (C) or similar clauses, for at least 110% of the price in the contract, in the currency of the contract, covering the goods from the point of delivery to at least the named port of destination.
• Under CIP, the seller must obtain insurance complying with ICC (A) or similar clauses, also for at least 110% of the price, unless the parties agree a lower level of cover.
• Under the other rules, neither party has to insure the other, but the party carrying the risk usually insures itself. Under FOB, CFR or CPT the buyer carries the risk once the goods are delivered, so it should arrange its own cover from that point.
• The 110% covers the invoice value plus 10%, a customary margin for the buyer's expected profit and costs.

Insurance documents under a letter of credit (UCP 600 Article 28)

• The insurance policy, certificate or declaration under an open cover must be issued and signed by an insurance company, an underwriter or their agents or proxies.
• If it shows it was issued in more than one original, all originals must be presented.
• Its date must be no later than the date of shipment, unless it shows that cover is effective from a date not later than the shipment date.
• It must be in the currency of the credit, and if the credit does not state an amount, it must cover at least 110% of the CIF or CIP value of the goods.
• Cover must run at least from the place of taking in charge or shipment to the place of discharge or final destination stated in the credit.
• Cover notes are not accepted, and an insurance document showing an "all risks" notation or clause is accepted when the credit asks for all risks.