Short answer: marine cargo insurance pays for physical loss of or damage to goods in transit, and for your share of general average, on the terms of the clauses in the policy. Under the London-market Institute Cargo Clauses, (A) covers all risks except those excluded, while (B) and (C) cover only named perils. For food, (C) leaves out everyday causes of loss such as rain, handling damage and theft, and even (A) excludes inherent vice, insufficient packing, delay and ordinary loss in weight. Know who insures under your Incoterm, state the clauses and insured value in the contract, and discuss extensions before the goods sail.
What cargo insurance is for, and who arranges it
A carrier's liability is not a substitute. Under the Hague-Visby Rules as enacted in the UK, the carrier is not responsible for, among other things, inherent defect of the goods or insufficient packing; where liable, it can limit liability to 666.67 units of account per package or 2 per kilogram, whichever is higher, and suit must be brought within one year of delivery (UK legislation, Carriage of Goods by Sea Act 1971, Schedule). Other regimes apply to other bills of lading, but in each case a carrier claim is a recovery action, not insurance.
The Incoterm decides who must insure:
| Incoterm | Seller's insurance obligation to the buyer | Who normally arranges cover for the main voyage |
|---|---|---|
| EXW, FCA, FAS, FOB, CFR, CPT | None | Buyer |
| CIF | Institute Cargo Clauses (C) as the default; higher cover only if agreed | Seller, for the buyer; buyer may top up |
| CIP | Clauses (A) or equivalent, at least 110% of the contract price | Seller, for the buyer |
| DAP, DPU, DDP | None, but the seller bears risk to destination | Seller, in its own interest |
Sources: ICC, Incoterms® 2020; ICC Academy, CPT or CIP; ICC Academy, C or D rules. How the rules divide risk and cost is covered in Incoterms® 2020 rules for food trade.
A, B and C compared in plain language
The 2009 Institute Cargo Clauses are published by the Lloyd's Market Association and the International Underwriting Association; the copies consulted are hosted by an insurer ((A) CL382, (B) CL383, (C) CL384). The table summarises clause 1 of each set; it does not reproduce the wording.
| Peril category | (C) | (B) | (A) |
|---|---|---|---|
| Fire or explosion | Yes | Yes | Yes |
| Vessel stranded, grounded, sunk or capsized | Yes | Yes | Yes |
| Land conveyance overturned or derailed | Yes | Yes | Yes |
| Collision or contact with an external object | Yes | Yes | Yes |
| Discharge at a port of distress | Yes | Yes | Yes |
| General average sacrifice; jettison | Yes | Yes | Yes |
| Earthquake, volcanic eruption, lightning | No | Yes | Yes |
| Washing overboard | No | Yes | Yes |
| Sea, lake or river water entering vessel, container or store | No | Yes | Yes |
| Total loss of a package lost overboard or dropped in loading or unloading | No | Yes | Yes |
| Other accidental loss or damage, such as rain, theft or handling | No | No | Yes, unless excluded |
Food-relevant exclusions in all three sets: ordinary leakage and loss in weight; insufficient packing; inherent vice; delay (see below).
All three sets cover general average and salvage charges (clause 2). General average arises when an extraordinary sacrifice or expenditure saves a common adventure; every interest saved contributes rateably (UK legislation, Marine Insurance Act 1906, section 66), so undamaged cargo can still owe a contribution. Adjustments usually follow the York-Antwerp Rules where the transport document incorporates them; the CMI records YAR 2016 as the latest version, with a technical alteration to the Rule XXI interest provision approved in October 2022 (CMI, York-Antwerp Rules). Check which version your bill of lading names.
Insured value, the uplift and what your LC may require
For CIP, ICC training material states that the seller's cover must be for at least 110% of the contract price (ICC Academy, CPT or CIP). For CIF, ICC's public page names (C) as the default level and allows higher cover by agreement, but gives no percentage (ICC, Incoterms® 2020). State the insured value in the sales contract, for example invoice value plus a stated percentage for freight, duty and margin, and check the certificate against it. Any gap to landed or resale value is uninsured. Increased value cover can be bought separately, with claims shared in proportion (clause 14).
A letter of credit may specify the insurance document, clauses, minimum value and currency the seller must present; check them against the contract before accepting (see reading an LC before you accept it).
Regular importers often use an open cover, under which each shipment is declared; English law recognises such a floating policy (UK legislation, Marine Insurance Act 1906, section 29). No shipment then sails uninsured because someone forgot to buy cover.
Exclusions that matter for food
Even (A) is "all risks" except as excluded. The clause 4 and 5 exclusions in the (A) set that most affect food are:
- Ordinary leakage, loss in weight or volume, and wear and tear (4.2). Normal shrinkage of grain, sugar or oil is not a loss; agree tolerances in the sales contract.
- Insufficient or unsuitable packing or preparation (4.3), where carried out by the assured or before the insurance attached. Packing includes stowage in a container, so poor stuffing by the seller before cover began is outside the policy. See container stuffing for bagged and cartoned food.
- Inherent vice or nature of the goods (4.4). Deterioration from the product itself, such as moisture already in the cargo, is excluded.
- Delay (4.5), even when an insured peril caused it, including lost shelf life.
- Unseaworthy vessel or unfit container (5.1). The vessel limb applies where the assured was privy to the unseaworthiness at loading (5.1.1). The container limb applies only where the container was loaded before the insurance attached, or by the assured or its employees, and they were privy to the unfitness at loading (5.1.2). Under 5.2, the vessel limb does not apply against a buyer who bought in good faith under a binding contract and to whom the policy has been assigned, the usual position of a CIF or CIP buyer.
Temperature. None of the three standard sets contains a specific temperature-variation peril or exclusion, which is why specialist reefer wordings exist; when perishables deteriorate, the dispute is usually accident versus inherent vice or delay.
Extensions to discuss with your broker
Refrigeration breakdown. Specialist wordings exist. The Institute Frozen Meat Clauses (A) 24 Hours Breakdown (CL324, 1986), for example, cover all risks except temperature variation, and cover temperature variation only from listed causes such as a breakdown of refrigerating machinery lasting at least 24 consecutive hours; they also exclude the assured's failure to take reasonable precautions to keep the goods refrigerated (Institute of London Underwriters, Frozen Meat Clauses (A) 24 Hours Breakdown, broker-hosted copy). This older wording is only an example; ask which wording your insurer proposes and what temperature records a claim will need. For the cold chain itself, see chilled lamb by air.
War and strikes. Clauses 6 and 7 of the cargo clauses exclude them; they are added back by separate clauses. The Institute War Clauses (Cargo) cover risks such as war, civil war and capture or seizure, but generally only while the goods are on the oversea vessel, ending on discharge at the final port or 15 days after arrival (LMA/IUA, Institute War Clauses (Cargo) CL385). The Institute Strikes Clauses (Cargo) cover strikers, riots, civil commotions and terrorism, on a warehouse-to-warehouse basis like the cargo clauses (LMA/IUA, Institute Strikes Clauses (Cargo) CL386).
Rejection by the importing authority. The standard sets insure loss of or damage to the goods; refusal of entry is a different risk. One broker, for example, markets separate rejection cover and describes it as cover for food shipments at risk of rejection by authorities such as the US FDA, Middle Eastern health and veterinary agencies and EU border inspection posts (commercial context: Tysers, cargo rejection). Its terms are not published there; ask for the wording.
How long cover lasts
Under clause 8 of each set, cover attaches when the goods are first moved in the warehouse for immediate loading and ends at the earliest of: unloading at the final warehouse; unloading at another place the assured chooses for storage or distribution; or 60 days after discharge from the oversea vessel. Clause 8.3 keeps cover in force during delay beyond the assured's control, deviation and transhipment. If the contract of carriage ends at another port, cover continues only if the insurer is given prompt notice (clause 9).
Two gaps catch food importers. The assured must have an insurable interest at the time of loss (clause 11), so an FOB buyer's policy does not respond to a loss at the seller's warehouse before risk passes. And frozen-food wordings may end cover much sooner after discharge, while war cover ends at the port.
The first 48 hours after a suspected loss
Clause 16 requires the assured to take reasonable steps to avert or minimise loss and to preserve rights against carriers and others; insurers reimburse the reasonable cost (LMA/IUA, Institute Cargo Clauses (A)). In practice:
- Do not give a clean receipt. Note seals, container condition and visible damage in writing. Under the Hague-Visby Rules, notice should be given at removal, or within three days if the damage is not apparent.
- Notify the insurer or the claims agent named on the certificate and ask for a survey before goods are moved, sorted or destroyed. Networks such as Lloyd's Agents provide independent marine surveying and claims adjusting (Lloyd's, Lloyd's Agency Network).
- Minimise the loss. Separate sound from damaged goods.
- Put the carrier and other bailees on written notice that you hold them responsible.
- Start the file: bill of lading, invoice, packing list, insurance certificate, seal numbers, photographs and temperature records.
- Diary the time bar. The one-year carrier limit runs from delivery. On payment, the insurer normally takes over your recovery rights (UK legislation, Marine Insurance Act 1906, section 79).
If general average is declared, the carrier will usually hold cargo until security is given: a general average bond with the commercial invoice, plus the cargo insurer's guarantee, or a cash deposit set by the adjuster if the cargo is uninsured (AIMU, general average paper, 2023).
Worked example: mould in a dried-fruit container
Hypothetical teaching example. Names, figures and prices are invented for illustration.
A buyer purchases one container of dried fruit CIF at 54,000 CU. The contract expressly requires cover for 110% of invoice value, so the sum insured is 59,400 CU. On arrival, mould affects cartons worth 30% of the consignment. The surveyor finds no sea-water entry and attributes the mould to moisture migration inside the container.
| Question | Narrow cover, (C) or (B) | Broad cover, (A) |
|---|---|---|
| Is there an insured peril? | No. Moisture migration is not a named peril, and (B) covers only sea, lake or river water | Possibly, as accidental damage, unless an exclusion applies |
| What does the insurer test? | Nothing further | Inherent vice (4.4): was the fruit too moist when packed? Packing (4.3): was the stuffing adequate, and done before cover attached? |
| What evidence decides it? | Not reached | The load-port moisture result, stuffing photographs, liner and desiccant records, and the survey's damage pattern |
| Claim value if accepted | Nil | 30% × 59,400 = 17,820 CU, less an invented 500 CU deductible = 17,320 CU |
If the evidence shows fruit within specification and adequate stuffing, the (A) claim has a basis. If it shows fruit packed above its moisture limit, the loss is inherent vice under every cover, and the buyer's remedy lies against the seller, supported by any independent inspection certificate that covered moisture.
Common mistakes
- Accepting a CIF certificate unread, then finding (C) cover after a loss.
- Insuring at invoice value, leaving freight, duty and margin uninsured.
- Assuming temperature damage to reefer cargo is covered under standard (A) clauses without checking the wording.
- Signing a clean receipt for damaged cargo, or destroying goods before survey.
- Letting the carrier time bar run while the insurance claim is pending.
Limits and what to recheck
The 2009 Institute clauses and English statutes are reference points; your policy may use other wordings, deductibles and extensions, and some destinations have local insurance requirements. Confirm clauses, insured value, transit period, extensions and claims procedure with a licensed broker or insurer before shipment, and take legal advice on disputed claims.
FAQ
Is marine cargo insurance compulsory? Not under the Incoterms rules, except that a CIF or CIP seller must obtain it for the buyer. A letter of credit, a lender or national rules may require it.
What is the difference between Institute Cargo Clauses A and C? (A) covers all risks of loss or damage unless excluded. (C) covers only named major casualties such as fire, sinking, stranding, collision and jettison.
Does cargo insurance cover rejection by the importing country? Not under the standard clause sets, which insure loss of or damage to the goods. Separate rejection cover is marketed by some brokers; its terms vary.
Next step
Before booking the shipment, put a one-page insurance instruction beside the purchase order. Record the Incoterm, the party responsible for cover, the exact Institute clauses and any war, strikes, refrigeration or rejection extensions, the insured value and currency, the transit endpoints, and the claims contact and survey instructions. Send it to the licensed broker or insurer for written confirmation, then compare the issued certificate against the contract and any letter of credit before loading.
Resources
- UK legislation (The National Archives) — Carriage of Goods by Sea Act 1971, Schedule (Hague-Visby Rules) — https://www.legislation.gov.uk/ukpga/1971/19/schedule (accessed 23 September 2026)
- UK legislation (The National Archives) — Marine Insurance Act 1906, sections 29, 66 and 79 — https://www.legislation.gov.uk/ukpga/Edw7/6/41/section/29 (accessed 23 September 2026)
- International Chamber of Commerce — Incoterms® 2020 — https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/ (accessed 30 September 2026)
- ICC Academy — CPT and CIP Incoterms® 2020 explained — https://academy.iccwbo.org/incoterms/article/incoterms-2020-cpt-or-cip/ (accessed 30 September 2026)
- ICC Academy — Incoterms® 2020: C or D rules? — https://academy.iccwbo.org/incoterms/article/incoterms-2020-c-or-d-rules/ (accessed 23 September 2026)
- LMA and IUA — Institute Cargo Clauses (A) CL382, 2009 (insurer-hosted copy) — https://www.if-insurance.com/globalassets/industrial/files/marine-cargo/institute-clauses/institute-cargo-clauses-a-2009.pdf (accessed 30 September 2026)
- LMA and IUA — Institute Cargo Clauses (B) CL383, 2009 (insurer-hosted copy) — https://www.if-insurance.com/globalassets/industrial/files/marine-cargo/institute-clauses/institute-cargo-clauses-b-2009.pdf (accessed 30 September 2026)
- LMA and IUA — Institute Cargo Clauses (C) CL384, 2009 (insurer-hosted copy) — https://www.if-insurance.com/globalassets/industrial/files/marine-cargo/institute-clauses/institute-cargo-clauses-c-2009.pdf (accessed 30 September 2026)
- LMA and IUA — Institute War Clauses (Cargo) CL385, 2009 (insurer-hosted copy) — https://www.if-insurance.com/globalassets/industrial/files/marine-cargo/institute-clauses/institute-war-clauses-cargo-2009.pdf (accessed 30 September 2026)
- LMA and IUA — Institute Strikes Clauses (Cargo) CL386, 2009 (insurer-hosted copy) — https://www.if-insurance.com/globalassets/industrial/files/marine-cargo/institute-clauses/institute-strikes-clauses-cargo-2009.pdf (accessed 30 September 2026)
- Institute of London Underwriters — Institute Frozen Meat Clauses (A) 24 Hours Breakdown CL324, 1986 (broker-hosted copy) — https://www.cib.co.za/wp-content/uploads/2018/08/INSTITUTE-FROZEN-MEAT-A-24-Hour-Breakdown-Cl-324-1986.01.01.pdf (accessed 23 September 2026)
- Comité Maritime International — York-Antwerp Rules — https://comitemaritime.org/work/york-antwerp-rules-yar/ (accessed 30 September 2026)
- American Institute of Marine Underwriters — General Average: Recent Trends and Challenges (2023) — https://www.aimu.org/aimupapers/General%20Average-Recent%20Trends%20and%20Challenges-10-05-2023.pdf (accessed 23 September 2026)
- Lloyd's — Lloyd's Agency Network — https://www.lloyds.com/resources-and-services/lloyds-agency-network (accessed 23 September 2026)
- Tysers (commercial broker page) — Cargo rejection — https://www.tysers.com/cargo-rejection-insurance/ (accessed 30 September 2026)
