Coverage A of the Institute Marine Cargo Clauses

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Russian: Оговорка A Института Лондонских Страховщиков по страхованию грузов

The first general policy is referred to as Coverage A of the Institute Marine Cargo Clauses. Coverage A is quite similar to a traditional "All Risks" policy, in that it covers all risks of loss or damage to the subject-matter insured, yet it is not identical to one. For one, it is written in plain English, which makes it much simpler to decipher. Moreover, unlike traditional "All Risks" policies, which can be written with U.S. or British clauses (and the different interpretations they imply) a policy written with Coverage A of the Institute Marine (See Table 1. below) Cargo Clauses is identical in all countries. Despite its name, a Coverage A policy (and an All Risks policy) is not truly an All Risks policy, as it covers all perils except the some of them (improper packing, inherent vice[1], ordinary leakage[2], unseaworthy vessel[3], and nuclear war), as well as a number of risks for which specific additional coverage must be purchased separately as endorsements to the main policy: strikes and other civil disturbances (Strikes, Riots, and Civil Commotions) and acts of war and seizure by a government (Free of Seizure and Capture). Nevertheless, Coverage A of the Institute Marine Cargo Clauses is the maximum coverage that an exporter or an importer would need to purchase in the case of a shipment for most trade lanes in the world, specifically from a developed country to another, as long as the route does not cross a particularly hot spot of the world[4].

An insurance certificate gives evidence of risk coverage for merchandise shipped. It is sent to the bank with other collection documents[5], and normally is used only when required by Letter of Credit or Documentary Collection procedures. There are many types of insurance policies available. Coverage requested is usually 110% of the value of the cargo shipped [6].

Table 1. Marine Insurance Coverage Summary

Perils Covered Against Coverage A of the Institute Marine Cargo Clauses Coverage B of the Institute Marine Cargo Clauses Coverage C of the Institute Marine Cargo Clauses All Risks Coverage With Average (Typical Coverage) Free of Particular Average (Typical Coverage)
Jettison YES YES YES YES YES [7]
Loss Overboard YES YES YES YES [7]
Seawater Damage YES YES YES YES [7]
Lightening YES YES YES YES [7]
Condensation YES YES
Improper Stowage by Carrier YES YES
Pilferage YES YES
Leakage YES YES
Breakage YES YES
Damage While Loading/Unloading YES YES YES YES
Damage on land Before Loading YES YES YES YES YES YES

The Incoterms rules and insurance [8]

The Incoterms rules deal only with the seller's obligation to take out insurance to the benefit of the buyer under CIF and CIP. Under all other terms, it is for the parties themselves to arrange insurance as they see fit.

The seller's insurance obligation to the benefit of the buyer:

■ stems from the nature of the C-term, which requires the seller to contract for carriage - without assuming the risk of loss of or damage to the goods in transit;

■ requires the seller only to take out insurance on minimum terms (the С clause of the Institute Cargo Clauses (LMA/IUA) or any similar set of clauses); and

■ invites the buyer to agree with the seller to arrange additional insurance or to arrange it himself.

Whenever the goods are not intended to be sold in transit, it is natural for the contracting parties to arrange their own insurance in order that the seller can protect himself against risks of loss of or damage to the goods up to the point he is at risk. For the seller, this will require transport insurance up to the point of delivery according to the F-, C- and D-terms, and, conversely, there is no need for him to procure transport insurance when the goods are sold EXW


  1. Hidden defect (or the very nature) of a good or property which of itself is the cause of (or contributes to) its deterioration, damage, or wastage. Such characteristics or defects make the item an unacceptable risk to a carrier or insurer. If the characteristic or defect is not visible, and if the carrier or the insurer has not been warned of it, neither of them may be liable for any claim arising solely out of the inherent vice. -
  2. Ordinary leakage, ordinary loss in weight or volume of the subject matter: The ordinary leakage or ordinary loss in weight or volume is a form of inherent vice. The natural processes of evaporation (liquid turns to gas) and sublimation (solid turns to gas) may be involved. - Annex Six: Important Cargo Insurance Terminology -
  3. If the vessel, or any of its parts or equipment, is not reasonably fit for its intended purpose or if its crew is not reasonably adequate or competent to perform the work assigned. - Ninth Circuit Jury Instructions - Admiralty and Maritime Law Guide -
  4. David, P., Stewart, R. International Logistics: The Management of International Trade Operations - Thomson: Mason, Ohio. 2007 - Ch.10, 10.8a.
  5. Bill of lading (or air waybill), invoice, insurance certificate, etc., exchanged against buyer's or importer's payment or acceptance (commitment of payment). Also called collection paper. -
  6. Wood, D.F., Barone, A., Murphy, P. International Logistics. Amacom, 2002 – Figure 12–1 Continued, p. 314
  7. 7.0 7.1 7.2 7.3 Under an FPA policy, any partial loss incurred would not be covered unless it is due to a ship sinking, burning, becoming stranded, or being involved in a collision; a total loss would be covered
  8. Guide to Incoterms 2010: Understanding and Practical Use / by J. Ramberg – ICC Publication No 720E, 2010 edition - p.34
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