Cargo Under ICC(A): Condensation, Crush Damage and a General Average Demand
Vardhman Autocomp Ltd, Chennai, shipped 12 pallets of machined castings to Rotterdam on CIF terms, insured under an Institute Cargo Clauses (A) policy for Rs 1.85 crore (110% of CIF value), with a warehouse-to-warehouse transit, a deductible of Rs 1.5 lakh and the bills of lading claused 'shipper's load, stow and count'. The containers were transhipped at Colombo. On delivery, 4 pallets showed rust and water staining and a further 2 pallets had crushed cartons with deformed castings. The surveyor at Rotterdam found that the rust was caused by condensation, the container's desiccant bags having been omitted by the consolidator, and that the crush damage occurred when a Colombo stevedore dropped a sling. Each pallet is valued at Rs 15 lakh. The receiver incurred Euro 4,000 (about Rs 3.6 lakh) in repacking and Rs 1.2 lakh in survey fees. The carrier has denied liability, relying on the Hague-Visby package limitation and the claused bill of lading, and the insured's notice of loss reached the carrier 9 days after delivery. The vessel grounded in the approach channel at Colombo and the owners have declared general average, demanding a cargo contribution of Rs 6.5 lakh.
1. Which heads of loss are recoverable and what is the net settlement? Show the apportionment and the deductible.
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ICC(A) is all risks subject to the exclusions, so each cause must be tested separately.
Rust and water staining on 4 pallets (Rs 60 lakh). The proximate cause is the omission of desiccant by the consolidator - insufficiency or unsuitability of packing (clause 4.3) and arguably inherent vice (4.4). Packing includes preparation of the cargo for transit, and desiccant is part of that. Excluded, even under an all-risks cover. The insured's remedy lies against the packer/consolidator, not the cargo insurer.
Crush damage on 2 pallets (Rs 30 lakh). A dropped sling during transhipment is a fortuity in the insured transit and falls within no exclusion - covered.
Costs. The survey fee (Rs 1.2 lakh) and repacking (Rs 3.6 lakh) must be apportioned on the same 2:4 basis: recoverable share = 2/6 x Rs 4.8 lakh = Rs 1.6 lakh. Repacking to replace water-stained packing is part of the excluded loss, not a sue-and-labour expense to avert a covered loss, so it cannot be recovered in full.
Settlement: Rs 30 lakh + Rs 1.6 lakh = Rs 31.6 lakh, less the Rs 1.5 lakh deductible = Rs 30.1 lakh.
Deductible check: confirm whether it applies each and every loss or each and every conveyance. If both causes arose from one event in the same container, apply one deductible, not two.
Reserve separately for the general average contribution (see next task) and record the subrogation potential against the stevedore for the crush damage only.
2. Is the general average contribution payable under the policy, given the insured's allegation that the grounding was caused by unseaworthiness?
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Cover. Under the ICC(A) general average clause, the insurance covers the cargo's contribution to general average and salvage charges incurred to avoid or in connection with the avoidance of loss from any cause except the risks excluded by clauses 4, 5, 6 and 7. The cover is deliberately broader than the peril cover: a contribution can be payable even where the casualty itself would not be a covered peril. Unseaworthiness is not one of the ICC(A) exclusions - it is a defence the carrier may have against cargo, not an exclusion in the cargo policy.
Procedure before paying:
- Obtain the average bond, the master's protest, the casualty report and the average adjuster's preliminary adjustment showing contributory values and the basis applied (York-Antwerp Rules).
- Confirm the expenditure was for the common safety - re-floating expenses in the approach channel are general average expenditure.
- Verify the contributory value of the cargo. If the insured value bears a lower proportion to the contributory value, the policy pays the contribution only in that proportion; with Rs 1.85 crore at 110% of CIF the position is usually adequate, but check the adjustment.
- Pay against a general average guarantee or bond so the cargo can be released, rather than remitting cash to the shipowner, and secure the insurer's rights in the adjustment.
Unseaworthiness point. If unseaworthiness is proved, the carrier's own right to contribution may be reduced and the cargo's exposure cut, so do not pay before the adjustment is final or a guarantee is issued with a reservation.
3. What are the insurer's subrogation prospects against the carrier, and what should the adjuster do before and after payment?
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Crush damage (covered, Rs 30 lakh plus costs). The carrier is prima facie liable for damage occurring during its period of responsibility (tackle to tackle, including stevedoring at Colombo). The 'shipper's load, stow and count' clause does not protect the carrier against its own stevedore's handling negligence. The carrier will invoke the Hague-Visby package limitation under the Indian Carriage of Goods by Sea Act, 1992 - the higher of 666.67 SDR per package or 2 SDR per kilogramme. With only 2 pallets and heavy castings, the weight basis will usually give the higher figure, so the limitation may not bite hard; check the declared weights.
Notice and time bar. Article III rule 6 requires written notice before or at delivery, or within three days if the loss is not apparent. Notice here was 9 days late, so the burden shifts to cargo to prove the carrier's liability. The one-year suit time from delivery still runs and must be diarised immediately.
Condensation loss. No carrier route: the cause is packing, for which the carrier is not liable, and the claused bill of lading supports the carrier on that head.
Before payment: obtain the bill of lading, delivery receipt, survey report with photographs, stevedore tallies and a statement from the receiver; confirm the insured has not signed a full and final settlement with the carrier or the consolidator; take a letter of subrogation. After payment: send notice and a reservation to the carrier and its P&I club, instruct a Rotterdam/Colombo correspondent, and protect the one-year limit by suit or a written time-bar extension.