Deck-stowed container lost overboard: cargo cover, general average and the twelve-month time bar
A Chennai exporter ships 400 cartons of machined auto components to Rotterdam under a CIF contract, insured under the buyer's open cover on Institute Cargo Clauses (A) from warehouse to warehouse. The container is stowed on deck, with the carrier's bill of lading expressly noting on-deck stowage and the shipper's agreement to it. In the Bay of Biscay the vessel meets heavy weather; the lashing fails and the container is lost overboard. A second container is damaged when a hatch cover is stove in and seawater enters. Later, to refloat the vessel after she strands, the master jettisons 60 cartons belonging to another shipper and incurs tug and port-of-refuge charges of $180,000. The buyer receives the survey report on 12 March and gives written notice of claim to the insurer on 5 June; the policy incorporates the standard twelve-month suit time bar. The insured claims the full CIF value of the lost container, arguing constructive total loss because the goods cannot be recovered, and separately claims the general average charges in full.
1. Which of the losses are payable under ICC(A): the container lost overboard, the seawater damage to the second container, and the general average contribution? What difference does on-deck stowage make?
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ICC(A) is an all-risks cover subject only to the listed exclusions, so each loss is tested against the exclusions rather than against a list of insured perils.
Container lost overboard. Payable. The proximate cause is heavy weather and lashing failure, a maritime fortuity. Deck stowage matters for ICC(B) and ICC(C), which exclude cargo carried on deck; ICC(A) contains no deck-cargo exclusion. The decisive point is that on-deck carriage was agreed and noted on the bill of lading. Had the cargo been shipped under a below-deck bill and carried on deck without authority, the insurer would have a serious non-disclosure and unseaworthiness argument, and the carrier would be separately liable for deviating from the contract of carriage.
Seawater damage to the second container. Payable. Accidental entry of sea water through a stove-in hatch is a classic insured peril; it is expressly covered even under ICC(B) and would fall within the all-risks scope of (A).
General average and the tug/port-of-refuge charges. Payable under clause 2 (general average and salvage) and clause 16 (sue and labour). The insured's own cargo was not sacrificed, but cargo owners contribute to a general average that saved the adventure, and the insurer indemnifies that contribution. The jettisoned cartons belong to a different shipper with a different policy; the insured is not indemnified for that loss, only for its own contribution to the adjustment.
Practical step: call for the average adjuster's adjustment and pay the insured's share, not the whole $180,000, which is apportioned across ship, freight and all cargo.
2. Is the loss of the container a constructive total loss? What is the correct measure of indemnity?
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No. This is an actual total loss of that container's cargo, not a constructive total loss. The distinction matters for what the insured must do and for what is paid.
Under the Marine Insurance Act 1963, a constructive total loss arises where the subject matter is not lost but is abandoned because the cost of recovering, repairing or forwarding it would exceed its value on arrival (section 60). The remedy requires a timely notice of abandonment, which the insured did not serve - instead it simply claimed the CIF value on the ground that the goods could not be recovered. Cargo at the bottom of the Bay of Biscay is irrecoverably lost; that is an actual total loss of the part, and no abandonment notice is needed.
The measure of indemnity is the next issue. Cargo policies are valued policies, and the insured value normally represents CIF value plus the customary 10 per cent expected profit. Where the insured value has been declared on that basis, the insured recovers the insured value of the lost part. If the whole consignment was insured for a single lump sum and only one container is lost, the indemnity is not the full sum insured: it is the proportion that the insured value of the lost container bears to the insured value of the whole consignment, as the policy requires apportionment.
So the answer to the insured's claim is: licence the actual total loss of the lost container, pay its proportionate insured value, and reject the constructive-total-loss framing and any claim for the full consignment sum.
3. The insured gave notice of claim on 5 June. What is the effect of the policy's twelve-month time bar, and what should the claims handler do now?
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Notice of claim and the time bar are different things. Under the Institute Cargo Clauses, notice of claim must be given promptly, but a delay between the survey on 12 March and the notice on 5 June is unlikely to be fatal unless the insurer can show prejudice - for example, that evidence has been lost because of the delay. On these facts the container is at the bottom of the sea, so the insurer's position has not been prejudiced by the three-month gap.
The suit time bar is the real trap. The clause requires that any action be brought within twelve months of the date of delivery, or, where the goods are not delivered, within twelve months of the date when they should have been delivered. On a February shipment to Rotterdam, discharge would fall around late March; the insured's right to sue therefore expires around late March of the following year. The notice given on 5 June does not extend it, and the Indian three-year limitation period does not override a contractual time bar that the parties have agreed.
Actions for the handler:
- Diarise the twelve-month date from the actual or due date of delivery, not from the notice of claim, and put the insured on written notice of it.
- Confirm the insured value and the apportionment basis in writing before any interim payment, so the eventual settlement is not re-opened as an admission of the whole consignment.
- Obtain the bill of lading, the average adjustment and the carrier's protest documents while they are still obtainable, to preserve subrogation rights against the carrier, which are themselves subject to a one-year limitation under the Hague-Visby rules.
- Make or decline the payment decision well before the time bar so the insured is not forced to sue merely to protect its position.