The Scope of Cargo Insurance Coverage

The coverage the insured can get varies from the minimum coverage provided by the S.G. Policy (Ships and Goods Policy), to the full protection of “All Risks whatsoever”. The S.G. Policy protects goods from damage or loss (total and partial) due to the perils of sea. The goods in transit are also exposed to additional perils like theft, pilferage and leakage. Therefore, the coverage provided by the S.G. Policy must be expanded with a variety of Institute Cargo Clauses. (ICC), such as Free From Particular Average (FPA), With average (WA) or All Risks (AR). Certain cargo types may require special clauses. These are often called trade clauses (e.g. Rubber Clause. Raw Sugar Clause. Timber Trade Federation Clause).

The All Risks Clause offers coverage for all perils. This excludes losses or expenses that are directly related to delay, inherent vice, and nature of the cargo. The coverage for air cargo is provided by the Institute Air Cargo Clauses All Risks (exclusions sendings via post). This clause differs from all other clauses to accommodate the specific transport mode. These clauses can be used to supplement the basic cargo insurance policy (S.G. Policy).

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The Lloyd’s Underwriters Association has replaced the S.G. Policy due to problems encountered by commerce and trade in the understanding of the archaic words of the S.G. Policy. This was done in consultation with the Institute of London Underwriters, and other interested parties. F.P.A. Clauses.

Clause A covers all possible loss or damage to the insured matter, subject to the following exclusions:

Willful misconduct by the Assured; normal leakage, loss of weight or volume; unsuitable packaging; inherent vice; delay or insolvency of owners, managers charterers or operators of vessel; radioactivity and atomic weapons of war.

Clause B protects the insured matter from loss or damage reasonably attributable following risks:

Fire, explosion, stranding, sinking, overturning, derailment of land conveyances; collision of vessel with an external object other than water; discharge cargo a tpot of distress; jettison. Water ingress into vessel, craft or lift van; total loss of package dropped or lost overboard during loading or unloading.

The B clause excludes the following: Deliberate damage or destruction of assured material.

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Clause C protects the insured matter against loss or damage reasonably attributable following risks:

Fire, explosion, stranding; grounding and captivity of vessel; overturning and derailment on land conveyances; collision or contact with vessel other than water; release of cargo at port-of-distress; general average sacrifice; jettison.

Clause B has the same exclusions as C clause. The following losses are not covered:

1. Earthquake or volcanic eruption?
2. Washing overboard
3. Damage to water bodies from the sea, river or lake
4. Total loss of any package dropped or lost while loading on to or unloading off a vessel.

All the above three clauses also exclude damage or loss caused by war, strikes and riots (SRCC). Traders may be able to obtain insurance against losses arising in war and SRCC risk by paying an additional premium.

Important to note that coverage is only for cargo that is water-borne. It does not cover cargo on land. The cargo must be loaded onto the vessel. Coverage ends when it is removed from the vessel at its final port.

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