How does Marine Cargo insurance work?


Marine Cargo insurance covers the transportation of goods in a recognizable form of transportation. A marine cargo insurer may also underwrite a number of other types of risk which on first glance do not appear to be linked; e.g. satellite pre-launch (which is the transportation of the satellite from factory to Launchpad), stock throughput (which combines a transit risk with a static storage risk), project cargo (which combines a transit risk with a loss of profits type policy that responds to penalties imposed for items not arriving on site in time – for example for a large construction project) and jewelers block/fine art which covers manufacturing, exhibiting and retailing type risks.

Common covers provided under a Marine cargo Insurance

Marine cargo cover is normally done in clauses. The main clauses used worldwide are the Institute Cargo Clauses A, B and C which give a choice of cover ranging from All Risks with the A clauses (where the individual perils are not named), down to a very limited number of listed or named perils in the C Clauses. These clauses were updated in 2009 however, earlier versions are still in use (1/1/82) and so care should be taken as the provisions are subtly different.

The C clauses cover such perils as

  • fire and explosion
  • grounding or stranding of the vessel
  • jettison of the cargo (disposing of  the cargo over the side of the ship deliberately)
  • sinking
  • collision
  • damage to the cargo if it has to be discharged after damage to the ship

The B clauses cover all the above perils but add three very important ones which are

  • washing overboard (accidently losing the cargo over the side as contrasted with doing it deliberately)
  • entry of sea, lake or river water to the vessel or place of storage, however note that this peril does not cover rainwater, sprinkler water or condensation type damage
  • total loss of a package by falling overboard

More specific clauses (called Trade Clauses) are available to cover specialist cargos such as bulk oil, frozen food, fats and seeds, timber and rubber and they vary the perils to better reflect the likely dangers that those cargos might face such as contamination for oil.

Most marine cargo insurance policies will also cover sue and labor expenses which are those costs incurred by an insured when trying to solve a problem for himself – although the loss may in fact be covered by the insurers. Some cargo is found to be wet damaged on discharge from the ship, but the insured pays for the wet to be separated from the dry, thus preventing the spread of the wet damage. As this action has probably reduced or even removed an insurance claim, the insurers will pay those reasonable costs.

Particular to maritime law, and by reference therefore marine insurance, are the concepts of salvage and general average.

  1. Salvage is the concept of someone voluntarily rescuing you who then earn a reward.
    1. General Average is the concept of all parties (for example ship and cargo) contributing to the costs or expenses one of them makes in order to save everyone. An example of this would be if a ship was unstable in bad weather, some cargo might be thrown overboard in order to restore her stability. By doing this the cargo has been sacrificed to help everybody involved with the voyage and so the ship and any other cargo will pay a share towards the cost of the cargo


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