Institute Clauses in marine insurance

 

Institute Clauses In Marine Insurance

INSTITUTE TIME CLAUSES

•       IN THE 19TH CENTURY, LLOYD’S AND THE ILU (INSTITUTE OF LONDON UNDERWRITERS) DEVELOPED STANDARDIZED CLAUSES FOR THE USE OF MARINE INSURANCE.

•       THESE HAVE BEEN MAINTAINED EVER SINCE AND ARE KNOWN AS INSTITUTE CLAUSES.

THE INTERNATIONAL HULL CLAUSES

•       THE INTERNATIONAL HULL CLAUSES (IHC) ARE A SET OF STANDARD TERMS AND CONDITIONS THAT GOVERN MARINE INSURANCE POLICIES FOR HULL AND MACHINERY.

•       THESE CLAUSES ARE USED BY INSURERS AND REINSURERS WORLDWIDE AS A BASIS FOR THEIR MARINE INSURANCE CONTRACTS.

•       THE IHC PROVIDE A COMPREHENSIVE FRAMEWORK FOR THE COVERAGE, RIGHTS, AND OBLIGATIONS OF THE INSURED AND INSURER IN RELATION TO THE HULL AND MACHINERY OF A VESSEL.

•       THEY COVER VARIOUS ASPECTS SUCH AS INSURABLE INTERESTS, PERILS INSURED AGAINST, EXCLUSIONS, DEDUCTIBLES, VALUATION OF THE INSURED VESSEL, CLAIMS SETTLEMENT, AND OTHER IMPORTANT PROVISIONS.

•       THE IHC ARE TYPICALLY USED FOR OCEAN-GOING VESSELS OF VARIOUS TYPES, INCLUDING CARGO SHIPS, TANKERS, PASSENGER VESSELS, AND OFFSHORE INSTALLATIONS.

•       THEY AIM TO PROVIDE A STANDARDIZED APPROACH TO HULL AND MACHINERY INSURANCE, ENSURING CONSISTENCY AND CLARITY IN THE INSURANCE COVERAGE ACROSS DIFFERENT POLICIES AND JURISDICTIONS.

•       HOWEVER, IT'S IMPORTANT TO NOTE THAT INDIVIDUAL INSURERS MAY MODIFY OR ADAPT THE IHC TO SUIT THEIR SPECIFIC NEEDS OR TO COMPLY WITH LOCAL REGULATIONS.

•       THEREFORE, IT IS CRUCIAL TO CAREFULLY REVIEW AND UNDERSTAND THE TERMS AND CONDITIONS OF THE SPECIFIC MARINE INSURANCE POLICY BEFORE PURCHASING COVERAGE OR MAKING A CLAIM.

THE INTERNATIONAL HULL CLAUSES ARE DIVIDED INTO THREE PARTS:

•       PART ONE CONTAINS THE PRINCIPAL INSURING CONDITIONS.

•       PART TWO PRESENTS A RANGE OF ADDITIONAL CLAUSES THAT WERE FREQUENTLY REQUIRED BY ASSUREDS AND ADDED TO ITC SEPARATELY.

•       PART THREE CONTAINS PROVISIONS FOR CLAIMS HANDLING AND SETS OUT THE RIGHTS AND RESPONSIBILITIES OF UNDERWRITERS AND ASSUREDS.

THE INSTITUTE TIME CLAUSES

•       THE INSTITUTE TIME CLAUSES (ITC) ARE A SET OF STANDARD TERMS AND CONDITIONS THAT GOVERN MARINE INSURANCE POLICIES FOR TIME-BASED RISKS.

•       THESE CLAUSES ARE PRIMARILY USED FOR INSURING VESSELS AND THEIR ASSOCIATED RISKS DURING A SPECIFIED PERIOD, OFTEN REFERRED TO AS A VOYAGE OR TIME CHARTER.

•       THE ITC PROVIDE A FRAMEWORK FOR COVERAGE, RIGHTS, AND OBLIGATIONS OF THE INSURED AND INSURER IN RELATION TO THE VESSEL AND THE VOYAGE OR TIME CHARTER PERIOD.

•       THEY COVER ASPECTS SUCH AS INSURABLE INTERESTS, PERILS INSURED AGAINST, EXCLUSIONS, DEDUCTIBLES, CLAIMS SETTLEMENT, AND OTHER IMPORTANT PROVISIONS.

•       THERE ARE DIFFERENT VERSIONS OF THE ITC THAT PROVIDE TO DIFFERENT TYPES OF RISKS AND VESSELS. FOR EXAMPLE, THE INSTITUTE TIME CLAUSES (HULLS) COVER THE HULL AND MACHINERY OF THE VESSEL, WHILE THE INSTITUTE TIME CLAUSES (CARGO) COVER THE CARGO BEING TRANSPORTED.

•       THE ITC ARE WIDELY USED IN THE MARINE INSURANCE INDUSTRY AS A BASIS FOR TIME-BASED INSURANCE CONTRACTS.

•       HOWEVER, INSURERS AND REINSURERS MAY MODIFY OR ADAPT THE CLAUSES TO SUIT THEIR SPECIFIC NEEDS OR TO COMPLY WITH LOCAL REGULATIONS.

•       THEREFORE, IT'S IMPORTANT TO CAREFULLY REVIEW AND UNDERSTAND THE TERMS AND CONDITIONS OF THE SPECIFIC MARINE INSURANCE POLICY BEFORE PURCHASING COVERAGE OR MAKING A CLAIM.

THE INSTITUTE TIME CLAUSES-HULL

•       THE INSTITUTE TIME CLAUSES, WHICH AFFORD COVERAGE FOR A SPECIFIC PERIOD, (USUALLY 12 MONTHS) ARE THE MOST IMPORTANT CLAUSES IN MARINE HULL INSURANCE POLICIES.

•       DEPENDING ON THE NATURE AND DEGREE OF RISKS, THERE ARE THREE CATEGORIES OF ITC:

•       (1) INSTITUTE TIME CLAUSES (HULL) THAT PROVIDES MAXIMUM COVERAGE (I.E. PERILS AND OTHER LOSSES AND EXPENSES COVERED).

•       (2) INSTITUTE TIME CLAUSES (FREE PARTIAL AVERAGE-FPA) THAT PROVIDES SIMILAR COVERAGE TO THAT OF THE HULL’S CLAUSES, BUT EXCLUDES COVERAGE ON MACHINERY DAMAGES, &

•       (3) INSTITUTE TIME CLAUSES (TOTAL LOSS ONLY) THAT PROVIDES COVERAGE ONLY IN THE EVENT OF A TOTAL LOSS. THIS IS USUALLY EXTENDED TO OLD VESSELS.

THE INSTITUTE TIME CLAUSES-CARGO

•       THE INSTITUTE CARGO CLAUSES (ICC) DEFINE THE RISKS COVERED, CIRCUMSTANCES EXCLUDED, DURATION OR VALIDITY OF COVERAGE AND CONDITIONS OF CLAIMS. COVERAGE IS PROVIDED ON AN A, B, OR C BASIS, A HAVING THE WIDEST COVERAGE AND C THE MOST RESTRICTED.

THE PURPOSE OF INSTITUTE CARGO CLAUSES

•       WITHIN THE CONTEXT OF MARINE INSURANCE, INSTITUTE CARGO CLAUSES SERVE A SPECIFIC PURPOSE.

•       THIS IS TO SPECIFY WHAT IS AND IS NOT COVERED WHEN THERE IS DAMAGE OR LOSS TO THE SHIPMENT.

•       COVER CAN INCLUDE ANYTHING FROM THE CARGO TO THE CONTAINER THAT HOLDS IT AND EVEN THE TRANSPORTATION USED TO SHIP SAID CARGO.

•       THE DIFFERENCE IN COVERAGE IS DETAILED BY EACH DIFFERENT CATEGORY OF CLAUSE: A, B, AND C. CLAUSE C IS THE MOST RESTRICTIVE OF THE THREE, WITH A BEING THE BROADEST.

      Institute Cargo Clause ‘A’

•       INSTITUTE CARGO CLAUSE A IS THE WIDEST COVERAGE YOU CAN PURCHASE.

•       ALSO KNOWN AS AN ‘ALL RISKS’ CARGO INSURANCE POLICY.

•       FOR THIS REASON, IT IS THE MOST EXPENSIVE OF THE THREE ( A,B, & C ).

         WHAT EXACTLY DOES IT COVER?

•       CLAUSE A COVERS MAXIMUM RISKS. IT CAN COVER THE CARGO, CONTAINER, AND TRANSPORTATION, AND ANY EXCLUSIONS CAN BE FOUND IN THE GENERAL EXCLUSION CLAUSES.

      Institute Cargo Clause ‘B’

•       THIS CLAUSE IS A MORE RESTRICTIVE KIND OF COVERAGE.

•       FOR THIS REASON, YOU SHOULD EXPECT TO PAY A MODERATE PREMIUM.

•       IN THE CASE OF THIS CLAUSE, YOU MIGHT ONLY REQUEST FOR THE MORE VALUABLE ITEMS IN YOUR CARGO TO BE COVERED OR FOR PARTIAL CARGO COVERAGE.

Institute Cargo Clause ‘C’

•       THIS CLAUSE, OF COURSE, IS THE MOST RESTRICTIVE OF THE THREE.

•       IT COVERS ONLY VERY LIMITED RISKS.

•       FURTHERMORE, MOST OF THE SITUATIONS COVERED MUST HAPPEN DURING CARRIAGE.

•       THE MAIN ASPECTS OF COVER INCLUDE:

1. GENERAL AVERAGE
2. FIRE / EXPLOSION
3. VESSEL GROUNDING / CAPSIZING
4. COLLISION
5. GENERAL AVERAGE SACRIFICE                                                                                               The Differences Between Institute Cargo Clauses A, B, and C                                                                                     

•       THE MAIN DIFFERENCES BETWEEN THE THREE LEVELS OF INSTITUTE CARGO CLAUSES ARE WHAT THEY COVER, AND IN WHAT CIRCUMSTANCES SAID ITEMS ARE COVERED.

•       EACH CLAUSE SETS FORTH DETAILED PARAMETERS FOR WHAT IT DOES AND DOESN’T COVER.

•       BECAUSE OF THE DIFFERENCE IN COVER THE PREMIUM PAYABLE FOR EACH WILL VARY.