Insuring Cargoes - A practical guide to the law and practice

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February 2010

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Insuring Cargoes - A practical guide to the law and practice

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This in-depth practical publication on marine cargo insurance is a guide for insurance practitioners to underwriting and claims practices. It covers topics such as marine insurance and international trade, the basic principles of marine cargo insurance, cargo loss prevention, policy construction and insurable interest.

This book is the culmination of a decade of painstaking research by an experienced practitioner in the field. The idea behind this book is to address the frustration of cargo owners, forwarders and even senior practitioners of marine insurance in not finding a mention (leave alone a solution) to many problems and issues one faces in the field of marine insurance in standard works on the subject. 


The book covers a wide array of topics (supported by case laws from UK, USA, Canada and Australia) including:


  • The book begins with the chapter on International Trade and Marine Insurance. It details various “cargo families” and their exposure to damage, major commodities, dangerous goods, the “container revolution”, restrictive legislation etc.

  • A detailed analysis of the fundamental principles of marine insurance as enshrined in the Marine Insurance Act of 1906 and how modern practices interpret such principles including: good faith, insurable interest, indemnity, adjustment examples of double insurance, successive losses, growing tendency of adjusting partial loss on salvage loss basis instead of MIA1906 basis.

  • An analysis of the practical application of the Institute Cargo Clauses(1983 as well as 2009 editions) as well as comparative clauses used and adopted by other markets such as Sweden, Norway, France, Germany, Canada and USA.

  • An analysis of specific Institute clauses addressing certain types of cargo risk: including Frozen Food clauses, Institute Replacement Clause etc.

  • An analysis of specialty clauses such as Machinery clause and Brands & Control of Damaged Goods clause etc designed to address more current specific underwriting and claims challenges, stock throughput and annual sales turnover policies.

  • There is an in depth discussion on INCOTERMS , Insurable Interest and Sellers Contingency covers. The book deals at length on insurable interest and how modern practitioners in London and the United States offer a wider interpretation to questions regarding insurable interest. There is an interesting discussion regarding the tendency on the part of many insurers in the UK and the US markets to virtually ignore the risk distribution between seller and buyer and issue a warehouse to warehouse cover irrespective of sale terms.

  • "Physical loss or damage" to goods and how notions of "physical" damage has evolved over time. Especially for hi-tech and pharmaceutical industries. Other topics under this heading include: brand protection, removal of logos and brand names, manufacturer's warranty, fear of loss issues and control over damaged goods.

  • Another highlight of the book is a detailed analysis of “Duration of Cover” in Institute Cargo Clauses. A number of complex situations are spelt out and analysed. Practical solutions are offered to the reader.

  • The book deals with salvage sales using the internet including how developed markets address the question of product liability and brand issues by permitting sale of damaged cargoes by removing labels/brand and other trade marks prior to sale.

  • "Insuring conditions" including commentaries on per bottom/location limits, certificate of insurance versus open covers, treatment of warranties in different markets, detailed analysis of deductible excess, deductible excess and ‘normal loss’ ,interpretation of various extraneous perils such as non delivery, heat sweat, spontaneous combustion, burden of proof, rules of construction etc

  • A chapter dedicated to Loss Prevention


In dealing with the above and many other topics, comparisons are made between marine underwriting and claims practices in the London, US, German, Norwegian and French Norwegian markets. Comparative market analysis and discussion is essential yet to date, it has been lacking in other publications on the subject.


This 544 page book, based on the author’s industry experience and extensive research, will be an invaluable tool for law firms, underwriters, brokers, adjusters, surveyors, forwarders and traders.



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1 Marine Insurance And International Trade 1

1.1 The Need For Marine Cargo Insurance 3

1.1.1 Responsibility for Arranging Insurance 3

1.1.2 Restrictive Legislation 3

1.1.3 Trade Sanctions 4

1.2 Cargo Classification 5

1.2.1 Cargo Families 5

1.2.2 Examples of Major Commodities 5

1.2.3 Dangerous Goods 18

1.3 The Container Revolution 18

1.3.1 Types of Container 20

1.3.2 Mechanism of Containerisation 20

1.3.3 Impact on Marine Insurance 21

1.3.4 Containerisation and Terms of Sale 22

1.4 Vessels and Classification 23

1.4.1 Types of Vessel 23

1.4.2 Classification 23

1.4.3 Protection & Indemnity Clubs 24

1.4.4 The Ism Code 27

1.4.5 The ISPS Code 27

1.4.6 Vessel Selection 28

1.5 Financing of International Trade 28

1.5.1 Documentary Credit 28

1.5.2 Documentary Collection 29

2 Basic Principles of Marine Cargo Insurance 31

2.1 The Assured 33

2.1.1 Identification of an assured 33

2.1.2 Norwegian market 36

2.1.3 Position of a buyer holding an assigned certificate 37

2.1.4 Assignor and assignee relationship 40

2.1.5 Multiple assureds 41

2.2 Indemnity 41

2.3 Agreed Value – A Detailed Discussion 43

2.3.1 Binding nature of agreed valuation 43

2.3.2 Multi-party transactions and agreed valuation 45

2.3.3 Effect of agreed valuation on total and partial loss claims 47

2.3.4 Corollary to the principle of indemnity 50

2.3.5 Circumstances where indemnity exceeds Sum Insured 57

2.3.6 Payment of Interest on claims 59

2.4 Utmost Good Faith and Disclosure 59

3 Current Trends in Determining Depreciation_63

3.1 Increasing use of salvage loss method rather than PAM 65

3.2 Are Instances of Salvage Sales Decreasing? 67

3.3 Other Methods of Determining Depreciation 68

3.3.1 Commodity-specific methods of computation 72

3.4 Practice in Other Markets 74

3.4.1 Antwerp market 74

3.4.2 Norwegian market regulations 74

3.5 Manuscript wordings currently in vogue and their impact on indemnity 75

3.6 Other modification to MIA 1906 provisions 77

3.6.1 Brand protection clauses 77

3.6.2 Institute Replacement Clause 83

3.6.3 Pair and Set Clause 88

3.6.4 Cutting Clause 89

3.6.5 Debris Removal Clause 91

3.7 Other Commonly Used Clauses 93

3.7.1 Fumigation clause 93

3.7.2 Peak Value Clause 95

3.7.3 Automatic Increased Value Clause 95

4 Insurable Interest_97

4.1 General Introduction 99

4.2 Assignment of interest and policy 101

4.3 Incoterms (International Commercial Terms) 104

4.3.1 Shipment and destination terms 105

4.3.2 Mode of Carriage and Incoterms 106

4.3.3 Marine Cargo Insurance and Incoterms 106

4.3.4 Incoterms in practice – some practical difficulties 114

4.4 The risk vs title dichotomy 120

4.5 Modern Trends in UK and US markets 120

4.5.1 When the assured is the buyer 121

4.5.2 When the assured is the seller 122

4.5.3 Legal validity of warehouse to warehouse cover irrespective of the Terms of Sale 123

4.6 CIF Term and Nature of the Insurance Policy 130

4.7 For Whom It May Concern 132

4.8 Banks and Marine Insurance 136

5 Contingent Insurable Interest_141

5.1 The Origin of Seller’s Interest cover 143

5.1.1 Reasons for rejection of documents 144

5.2 Key Features of Seller’s Interest Covers 144

5.2.1 Assessment of exposure 144

5.2.2 Seller’s Interest and documentary credit system 147

5.2.3 When does cover incept under a Seller’s Interest policy? 147

5.2.4 Cause of rejection of documents/goods by the buyer 152

5.2.5 MIA 1906 requirement of insurable interest on date of loss 153

5.2.6 Additional clauses in Seller’s Interest 153

5.3 Summary 154

5.4 Buyer’s Interest and Difference in Conditions 155

5.5 Specimen wordings 156

6 Marine Open Cover 165

6.1 Open Cover 167

6.1.1 Advantages of an open cover 167

6.1.2 Features of an open cover 167

6.1.3 Limit of liability 171

6.1.4 Declaration (bordereau) 177

6.2 Limits of liability 180

6.2.1 What is a location? 181

6.2.2 Is Location meant for land based accumulation or onboard vessels or both? 183

6.2.3 Does the location clause refer to port of loading or port of discharge

or any port or place during a voyage? 185

6.2.4 Location Limit and overseas buyers 186

6.2.5 Do the limits apply to each party mentioned as assured? 186

6.2.6 Loading and Unloading clause and location limit 186

6.2.7 Limits of liability and condition of average 187

6.2.8 200% Accumulation clause 189

6.3 Example of Limits per Bottom and Location Operating 194

6.4 Certificate System Under an Open Cover 195

6.4.1 Web based certificate generation 199

6.5 Annual Sales Turnover policies 199

6.5.1 How are premiums computed? 200

6.5.2 Annual policies – a critique 201

6.6 Stock Throughput Policies 201

6.6.1 Advantages of a stock throughput policy 201

6.6.2 A Diagrammatic Illustration of a stock throughput policy 203

6.6.3 Challenges in Administering Stock Throughput Covers 205

6.6.4 Process Clause in Stock Throughput Covers 206

6.6.5 Standard exclusions in a stock throughput policy 207

7 Insuring Terms - 1, Institute Cargo Clauses (A), 1.1.82 209

7.1 MAR Policy Form 211

7.2 Institute Cargo Clauses (A) 1982 211

7.2.1 Risks covered 211

7.2.2 Exclusions 214

7.3 Duration of cover 228

7.3.1 Leaving the warehouse 229

7.3.2 Ordinary Course of Transit 235

7.3.3 Termination of Cover 238

7.4 Termination of transit – some further issues 241

7.4.1 Limits of a port town 241

7.4.2 60 days - counting of 242

7.4.3 Discharge ‘overside’ 242

7.4.4 Delivery of whole consignment or each portion thereof? 242

7.4.5 Delivery to a consignee’s warehouse, but under bond 244

7.4.6 Return of goods for repair 244

7.5 Other Clauses of the ICC (A) 249

7.6 Piracy 260

8 Insuring Terms - 2, The New Institute Cargo

Clauses - A, Cl. 382, 1.1.09 267

8.1 General Changes 269

8.1.1 Removal of side headings 269

8.1.2 Contract (open cover) and cover provided by ICC 269

8.1.3 Modernising the language 270

8.1.4 Defining assured 270

8.1.5 Major Changes 271

8.2 Institute Cargo Clauses 2009 - A detailed analysis 271


8.2.2 Exclusions 272

8.3 Duration of Cover 285

8.4 Other Clauses 295

9 Insuring Terms 3 - Frozen Food Clauses_301

9.1 Temperature Controlled Cargoes 303

9.2 Underwriting Considerations 303

9.3 Temperature Recording Devices 305

9.4 Institute Frozen Food Clauses 309

9.4.1 Institute Clauses 309

9.4.2 Institute Clauses amended to include chilled and/or cooled 314

9.4.3 Extension Clauses 315

9.4.4 Manuscript wordings 316

9.4.5 Warranties 320

9.5 Frozen Food Clauses, Some Issues 322

9.6 Frozen Foods AND Perishables Claims 325

10 Other Institute Clauses and Endorsements_329

10.1 Institute Cargo Clauses – (B) and (C) 331

10.1.1 ICC (B) and (C) - 1982 and 2009 versions 331

10.2 (B) and (C) causation 331

10.3 (B) and (C) exclusions 333

10.4 Comparison of ICC (B) with Extended Transport Accident -

B Clauses of Norwegian Market 334

10.5 Institute Classification Clause 341

10.6 Radioactive Contamination Clause 345

10.6.1 Institute Radioactive Contamination Clause, CL 356, 1.10.90 346

10.6.2 Amendment to RACE - Extended RACE Clause 346

10.6.3 Further Amendment – Introduction of Clause 370 346

10.7 Termination of Transit (Terrorism) JC2001/056 348

10.8 ISM Endorsements 349

10.8.1 ISM Code and Marine Cargo Insurance 350

10.8.2 Compliance with ISM – some further explanation 352

10.9 ISPS Endorsements 355

10.9.1 The International Ship AND Port Facility Security (ISPS) Code 355

10.9.2 ISPS endorsements of JCC 356

10.9.3 ISPS – implication for cargo owners 356

11 Construction of a Policy and Extraneous Perils_357

11.1 Rules for underwriting 359

11.2 Some Manuscript Wordings 359

11.2.1 Deck cargoes 359

11.3 Rules of Construction 362

11.3.1 Rules of construction 363

11.3.2 Contra Proferentem 363

11.4 Rules of Proximation 365

11.4.1 What is proximate cause? 365

11.4.2 Phraseology of Institute Cargo Clauses 366

11.4.3 Concurrent Causation 366

11.5 Burden of Proof 368

11.5.1 Manuscript clauses 369

11.6 Need for Careful Drafting of Policies 369

11.6.1 Mechanical, Electrical and/or Electronic Derangement (MEED) Clause 369

11.6.2 Rust, oxidation, discolouration and/or corrosion 371

11.6.3 Country Damage 372

11.6.4 Shortage risks 374

11.7 Extraneous Perils 375

11.7.1 What are extraneous perils? 375

11.7.2 Interpretation of extraneous perils 376

11.7.3 Non-Delivery 381

11.8 Deductibles 383

11.8.1 Expression of a deductible 383

11.8.2 Each and every loss 384

11.8.3 Major casualty, sue and labour, salvage charges and General Average 384

11.8.4 Meaning of ‘each’ and ‘whole’ in ‘each and whole shipment value’ 384

11.8.5 Deductible and ‘ordinary loss’ 385

11.8.6 A series of losses detected after a time 386

11.8.7 Deductible contrasted with a co-insurance clause 387

11.8.9 Co-mingling warranty, multiple B/Ls covered under separate

certificates issued off open covers 388

11.9 Warranties 390

12 Physical Loss or Damage to Cargo 393

12.1 Changing Trends 395

12.1.1 ‘Fear of loss’ as opposed to ‘physical’ loss 397

12.2 Widening of cover 400

12.2.1 Control of Damaged Goods 400

12.3 Manufacturer’s Guarantee or Warranty 407

12.3.1 Does the policy valuation include the warranty? 407

12.3.2 Does the policy valuation exclude the warranty? 408

12.3.3 Possible Solutions 409

12.3.4 Examples of satisfactory resolution of claims 411

12.3.5 The French Marine Cargo Insurance Policy 414

12.3.6 The Norwegian Marine Cargo Insurance Policy 414

12.4 Guaranteed Outturn Covers 414

12.4.1 Recovery of Shortage/Leakage under ICC (A) terms 416

12.4.2 Recovery of Shortage/Leakage under ICC (A) including

“leakage/shortage howsoever caused or arising” 417

12.4.3 Example of re-adjustment of claim under ICC (A) terms 418

12.4.4 Guaranteed Outturn Cover 419

12.5 Packing 420

12.5.1 Is packing material part of the subject-matter insured? 421

12.5.2 Damage to packing material leading to rejection of the goods 425

12.5.3 Packing exclusion clause in Institute Cargo Clauses 426

12.6 Treatment of delay in marine insurance policies 426

12.6.1 French cargo conditions 428

12.6.2 German cargo conditions 428

12.6.3 Norwegian cargo conditions 428

12.6.4 Russian cargo conditions 429

12.6.5 Swiss cargo conditions 429

12.6.6 Wider covers including delay 429

13 Physical Loss or Damage to Cargo - Ot her Claims Issues_431

13.1 Concealed Damage or Delayed Discovery of Loss 433

13.2 Shortage from ‘Seal Intact’ Containers 434

13.2.1 Fraudulent Bill of Lading Clause 438

13.3 Sweat Damage 439

13.3.1 Cause of sweat 440

13.3.2 Is sweat damage covered in ICC (A)? 441

13.3.3 Pattern of wetness and cause of loss 443

13.3.4 Sweat/condensation in Norwegian Cargo Clauses 445

13.4 Odour Claims 445

13.5 Vermin Damage 446

13.6 Pollution Hazard Clause 447

13.7 General Average (GA) 449

13.7.1 Definition 449

13.7.2 Elements of the GA Act 449

13.7.3 Distinction between General Average (GA) and Particular Average (PA) 449

13.7.4 Contributory values 449

13.7.5 GA and Cargo Insurance 450

13.7.6 Examples of GA 450

13.7.7 GA Security 451

13.8 Salvage 456

13.9 Nature of LOF (and other forms of salvage) - Liability under Clause 2 or 16 of ICC? 457

13.10 Exchange Rates in Marine Cargo Insurance 464

13.10.1 Exchange rate for claims calculation 464

14 Cargo Loss Prevention - Including Some Current Trends_467

14.1 Loss/Damage from Container Shipments 470

14.1.1 Principal causes of loss 470

14.1.2 Loss prevention steps for container movements 472

14.1.3 Loss prevention: moisture/condensation/sweat 476

14.1.4 Some Case Studies 477

14.1.5 Origin of Sweat 482

14.2 Damage Detection Devices 485

14.3 Dry Bulk Cargoes 488

14.3.1 Principal causes of loss 488

14.4 Project Cargo 493

14.5 Difficult destination 496


KS Vishwanath, MA(Econ) is an underwriter and adjuster of international repute. Starting his career in 1981, he has been part of the senior management teams of multinational insurance companies in India, including a period heading the underwriting & technical department of a Royal SunAlliance group company in India. He also worked for many years with a French Insurance company (now part of Groupama), based out of Hong Kong. Vish has been invited to speak on insurance in a number of countries at prestigious forums and many of his articles have appeared in international journals. He now works as a freelancer, offering consultancy on all classes of insurance business, including risk management.

Title: Insuring Cargoes - A practical guide to the law and practice
Number of Volumes: 1
Edition: First
Number of Pages: 542
Product Code: WS1198K
ISBN: ISBN 13: 978-1-905331-95-6 (9781905331956), ISBN 10: 1-905331-95-9 (1905331959)
Published Date: February 2010
Binding Format: Paperback
Book Height: 244 mm
Book Width: 189 mm
Book Spine: 27 mm
Weight: 1.80 kg
Author: K S Vishwanath

Customer Reviews

Missing puzzle! Review by MA
It's like a missing puzzle for my master of law thesis completion! (Posted on 07/11/2013)
An Appreciation by Phillip Taylor MBE and Elizabeth Taylor of Richmond Green Chambers Review by Phillip Taylor MBE & Elizabeth Taylor of Richmond Green
If you’re reading or watching this review, you are probably a shipping practitioner faced with complex claims which tend to hinge on detail and minute practicalities. Or perhaps you’re an insurer, owner, or claims adjuster confronted by complicated underwriting issues. If you’re in any way professionally involved in marine cargo insurance, read this book.

You could well find the answer to most -- if not all -- of your enquiries in it. As you’ll discover, it’s thoroughly researched and readable -- and in our view (although we are not experts in this field) it should be required reading, not just for legal practitioners, but also -- as the author points out -- for underwriters, brokers, forwarders, surveyors, P & I Clubs, cargo owners and shippers.

The sub-title, ‘a practical guide to the law and practice’, is certainly apt. As Vishwanath is an underwriter and adjuster himself, the emphasis is placed on what has happened, what can happen, and what actually does happens to marine cargoes -- and the insurance implications and consequences which can result.
To cite only one example; the consequences of an improperly drafted insurance policy on a cargo can be financially disastrous, whether for individuals or companies. This book can certainly alert practitioners and all others concerned to the contingencies and risks that may impact on a particular cargo and on a particular voyage. The specific aim here is obviously to construct insurance cover that is -- no pun intended – watertight!

Unlike most other books of its kind which focus on the London market and on risks placed in that market, Vishwanath’s book is global in its scope and orientation, with detailed comment on and almost innumerable case references to, issues and events drawn not just from London, but from a number of other jurisdictions, including France, Norway and the US.

The book is also an invaluable source of technical information in plain English, much of it illustrated graphically with photos and diagrams. It’s therefore intelligible not just to the techies of this world, but to the general informed reader. For further ease of reference, crucial points are highlighted and footnoted where appropriate.

Of particular note, there’s an exhaustive and highly detailed chapter four on Incoterms and Insurable Interest included in this edition, with a separate chapter on Seller's Contingency Insurance. None of the contemporary books available on the insuring cargoes contain such a detailed commentary on practical issues concerning these topics which will be most useful to some readers.

So, for practitioners and insurance professionals, not to mention students in this field, ‘Insuring Cargoes’ is a welcome contribution to the literature of cargo insurance and the development of coverage and clauses in international markets, describing in a refreshingly topical way the actual practice of the principles involved.
(Posted on 13/06/2011)
profound, unprecedented, original....” Review by Alan Jervis B.A. Hons. F.C.I.I. Chartered Insurer
'You know - compared to other works and publications I have seen, your analysis of these topics is very profound, unprecedented, original....”'
(Posted on 07/01/2011)
It’s the best book on marine insurance Review by Thomas J. Lynch, CPCU, SCLA, AMIM, MLA, Director of Claims and Recoveries, CSL, N.A-New York City Office
"I am reading your book. It’s the best book on marine insurance that I have read to date. I am sure the book will be a success in U.S.A."
(Posted on 07/01/2011)
Your book stands out compared with other books.. Review by Viggo Kristensen The Nordic Association of Marine Insurers
Your book stands out compared with other books on this subject in the sense that the text is straight forward and understandable to people outside the small group of marine lawyers and insurers. The illustrations and your practical approach will undoubtedly make this book essential reading for insurers, lawyers and other involved persons who lack practical experience in handling and shipping cargo. Old stagers will also have something to learn from your book"'
(Posted on 07/01/2011)

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