Marine cargo insurance: reading the Institute Clauses properly

Cargo insurance is cheap relative to the value at risk, and most disputes come from buying the wrong clause set rather than from insurers refusing to pay.

The three clause sets - Institute Cargo Clauses (A) — all risks of loss or damage, subject to exclusions. The broadest standard cover. - Clauses (B) — named perils, including fire, stranding, general average sacrifice, water damage and jettison. - Clauses (C) — a narrower named-perils list, essentially major casualty events.

Under Incoterms 2020 the CIF default is Clauses (C). If your contract just says CIF, you may be insured for far less than you assume.

Common exclusions to check - Insufficiency of packing. - Inherent vice — the cargo's own tendency to deteriorate. - Delay, even where delay caused the loss. - Unseaworthiness where the assured was aware of it.

General average If a vessel casualty triggers general average, cargo interests contribute to the shared loss in proportion to value, and cargo can be held until security is posted. A proper insurance policy provides that security. Uninsured cargo owners have paid substantial cash deposits to get their goods released.

Practical advice Insure to CIF value plus 10%, name the correct assured, and make sure the policy attaches from warehouse to warehouse if your Incoterm makes you responsible for inland legs.