Marine open policy, ICC(C) cover and general average contribution

ICC(C) is a restricted cover. It covers loss or damage caused by fire or explosion, the vessel being stranded, grounded, sunk or capsized, overturning or derailment of the land conveyance, collision or contact, and discharge of cargo at a port of distress. It also covers loss or damage caused by sacrifice or general average and salvage charges. It does not cover partial loss caused by washing overboard in ordinary heavy weather. The 120 cartons washed overboard are therefore not covered merely because the sea was heavy; the exporter would need to show that the loss was caused by a covered peril, such as the grounding, and that the washing overboard was a consequence of that casualty. The 40 cartons jettisoned to refloat the vessel are a general average sacrifice and are covered. The ₹18 lakh salvage charges are also covered under ICC(C) as salvage charges, subject to the policy terms and the general average adjustment. The claim should be split accordingly, not treated as one bundled loss.

General average is a principle of maritime law under which extraordinary sacrifices and expenses incurred to save the adventure are shared by the ship, cargo and freight according to their values. The jettison of 40 cartons worth ₹9 lakh is a general average sacrifice; the salvage charges of ₹18 lakh are general average expenditure if they were incurred to preserve the adventure. The adjuster will prepare a general average statement allocating the sacrifice and expenses among the contributing interests. The cargo insurer covers the cargo's general average contribution and the insured sacrifice under ICC(C). The exporter should provide the bill of lading, commercial invoice, packing list, freight and CIF value details, the master's protest or casualty report, the survey report, the general average declaration and the average bond or guarantee if required. The exporter should also declare the shipment under the open policy, because the policy is declaration-based and the insurer needs the shipment details to assess the risk and the sum insured. The claim for the 120 cartons still depends on proving a covered peril.

A marine open policy is a standing contract under which the insured agrees to declare all shipments falling within its scope, and the insurer agrees to cover them automatically subject to the terms. Failure to declare is a breach of the declaration clause, but it does not automatically extinguish cover for a shipment that was intended to be covered. The insurer may be entitled to avoid liability for an undeclared shipment, or to apply the policy's conditions on declaration, depending on the wording. The exporter should regularise the declaration immediately and provide the shipment details. The insurer will then assess whether the shipment was within the open policy's geographical and cargo scope, whether the sum insured of ₹3 crore per shipment is adequate against the ₹1.2 crore CIF value, and whether any misdescription of cargo occurred. The agent should advise the exporter to declare every shipment promptly, keep declaration records, and not rely on the open policy as a substitute for declaring individual shipments.