Marine cargo insurance: choosing between the standard cargo clauses

Marine cargo cover is written on standardised international clauses, which makes it one of the more comparable products in commercial insurance. What is not comparable is which set of clauses you bought, and most shippers could not say without looking.

The three levels

Clause A is an all-risks cover: it responds to physical loss or damage from any cause except those specifically excluded. It is the broadest and the one most general merchandise should be on.

Clause B is a named-perils cover, adding to the basic list things like earthquake, volcanic eruption, lightning, washing overboard, and entry of water into the vessel or container. Clause C is the narrowest, essentially covering major casualties - fire, explosion, vessel stranding or sinking, collision, general average sacrifice.

The practical consequence is that under Clause C, a container that gets wet and ruins your consignment produces no claim at all, because water ingress is not a listed peril at that level. Businesses arrive at Clause C by comparing premiums, and discover the difference only once.

General average: the obligation nobody expects

General average is an ancient principle of maritime law under which, when a sacrifice is made deliberately to save a voyage - jettisoning cargo, or the cost of salvage after a fire - the loss is shared proportionately by everyone with an interest in the voyage.

That means your cargo can be entirely undamaged and you can still owe a contribution, sometimes a substantial one, before the carrier will release it. A general average bond and security are demanded, and goods are held until they are provided.

Your container can arrive in perfect condition and still be held until you pay a share of somebody else's loss.

All three cargo clause levels cover general average contributions and salvage charges, which is one of the strongest arguments against shipping uninsured. An uninsured shipper facing a general average declaration has to find the security personally.

Packing, and the exclusion that follows from it

Insufficiency or unsuitability of packing is an exclusion in all three sets of clauses. Damage caused because goods were inadequately packed for the journey is not a marine claim, however the damage looks.

This is the exclusion most frequently relied on to reduce settlements, and it is largely within the shipper's control. Packing specifications, photographs of goods as packed before sealing, and documented container-stuffing procedures are cheap insurance against a contested claim.

Duration and the transit clause

Cover typically runs warehouse to warehouse but terminates on a defined trigger - delivery at the named destination, or the expiry of a stated number of days after discharge at the final port, whichever comes first. Cargo left at a port beyond that window is uninsured.

Where customs clearance or onward transport is slow, an extension needs to be requested before the period runs out. Requesting it afterwards is not a request; it is a disclosure.

Practical setup for regular shippers

Move to an open cover or sales turnover policy so that every shipment is automatically covered and declared periodically. Agree the valuation basis in advance - typically invoice value plus freight plus duty plus a 10 per cent margin. And confirm who bears the risk at each stage under your delivery terms, because the incoterm decides whether it is your loss to insure at all.