Cargo of Frozen Shrimp: Temperature Excursion on a Feeder
A consignment of 40 tonnes of frozen shrimp, CIF value USD 620,000, moves from a Thai port to Nhava Sheva via a transhipment at Colombo. The marine cargo policy is on Institute Cargo Clauses (A) with a temperature-variation clause requiring the cargo to be carried in a mechanically refrigerated container at -18°C or below. The bill of lading shows the container was set at -18°C. At Colombo the container was held on the quay for 38 hours during a port congestion episode; the carrier's data logger shows the reefer unit was switched off for part of that period and internal temperature peaked at -6°C. On arrival, a surveyor finds partial thawing and refreezing with drip loss and estimates 30% of the cargo is a total loss and the balance is sound but downgraded. The insured claims the full CIF value. The carrier denies liability, relying on a liberty clause and on the congestion being beyond its control.
1. Is the loss covered under ICC(A)? Address the temperature-variation clause, the exclusions, and the carrier's defence.
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ICC(A) is all-risks, so the burden is on the insurer to bring the loss within an exclusion.
- Temperature-variation clause: the cover is conditional on carriage at -18°C or below. The logger shows a breach (peak -6°C) while the container was on the quay. Whether the clause is a warranty or a condition of cover matters: if the cargo was shipped in apparent good order in a compliant reefer and the breach occurred after shipment, the clause is not breached by the insured - the insured did not control the reefer during the 38-hour hold. The clause bites on the insured's own stowage/carriage obligations, not on the carrier's later act.
- Exclusions: ICC(A) excludes loss caused by insufficiency of packing and by delay. The delay exclusion (4.5) is critical: loss caused by delay is excluded even where the delay itself is covered. Here the proximate cause of the temperature rise was the reefer being switched off, not the delay per se. If the switching off was a deliberate carrier act, the loss is caused by that act, not by delay. If the switching off was a consequence of the congestion (e.g., power unavailable), the delay exclusion may bite.
- Carrier defence: irrelevant to the cargo insurer's liability between insured and insurer; it goes to subrogation. The liberty clause and 'beyond control' arguments affect recovery from the carrier after the insurer pays.
Conclusion: the loss is likely covered under ICC(A) because the proximate cause is an external event (reefer shut-off) after shipment, not inherent vice and not delay alone; the delay exclusion should be analysed on the facts of why the unit was off.
2. The surveyor finds 30% total loss and the balance sound but downgraded. How should the claim be quantified, and what does the insured's claim for full CIF value ignore?
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Quantify on a sound arrived value basis, not CIF invoice value, unless the policy is expressly a valued policy at CIF.
- Total loss portion (30%): the insured recovers the insured value attributable to that portion, i.e. 30% of the insured value, less any salvage recovered on that portion.
- Damaged-but-sound portion (70%): this is a partial loss measured by the difference between sound arrived value and damaged arrived value (the depreciation), not by the full value. If the downgraded cargo sells for, say, 70% of sound value, the recoverable depreciation is 30% of the sound value of that portion.
- The insured's error: claiming full CIF value treats a partial loss as a total loss and ignores (a) that 70% of the cargo is merchantable, (b) the salvage value of the 30%, and (c) that CIF invoice value is not automatically the measure - the policy measure is the insured value/sound arrived value.
Also deduct any deductible and check whether the policy is a valued policy; if valued, the agreed value caps recovery but does not convert partial loss into total loss. Refer any subrogation against the carrier separately.