Table of Contents
The Institute Cargo Clauses A, B and C are three standard marine cargo insurance wordings, ranked from widest cover to narrowest. Clause A is all risks, subject to a list of exclusions. Clause B and Clause C are named perils, so anything outside the list is not covered. B names more perils than C.
Most general merchandise moving in containers should be on Clause A. Clause C is a bulk cargo wording that leaves theft, water damage and handling loss uninsured. Buying C for palletised consumer goods is a common and expensive mistake.
Below is what each set covers, the exclusions that apply to all three, how long the cover runs, and how to match the clause set to the delivery term in your sale contract.
What the Institute Cargo Clauses are
They are standard printed wordings used by the London market and copied worldwide. A cargo policy or certificate rarely spells out the cover in full. It names a clause set, and that set supplies the terms. Two generations are still in circulation, a 1982 version and a 2009 revision, so check which one your certificate names.
Each set has the same skeleton. Numbered clauses at the front say what risks are covered. The next group sets out exclusions. Then come the duration clauses, which say when cover attaches and ends, followed by claims provisions and a duty to minimise loss. Only the first group and part of the exclusions actually differ between A, B and C.
Clause A: all risks, minus what is excluded
Clause A covers all risks of loss of or damage to the insured goods, except as excluded elsewhere in the set. That phrasing puts the burden in a useful place. You prove a fortuitous loss during the insured transit. The underwriter must prove an exclusion to decline.
The additions over B account for most container claims. Theft and pilferage. Non-delivery of a container or package. Deliberate damage by a third party. Contamination, crushing and rough handling on a normal voyage. None of those appear on the B or C list.
Clause A also treats piracy as an insured risk rather than a war risk, which matters on routes where that exposure is real.
Clause B: a wider named perils list
Clause B covers a defined list and nothing else. It takes the C list and adds the natural and handling perils that C leaves out. Earthquake, volcanic eruption and lightning. Washing overboard. Entry of sea, lake or river water into the vessel, container or place of storage. Total loss of any package lost overboard, or dropped during loading or discharge.
Note the shape of the water peril. It is water entering the conveyance or the storage place. Rain falling on goods on an open quay is not that. Neither is condensation inside a container, which usually needs its own extension.
Clause C: the narrowest list
Clause C is built around major casualty to the carrying conveyance. Fire or explosion. The vessel stranded, grounded, sunk or capsized. Overturning or derailment of a land conveyance. Collision of the vessel or conveyance with an external object other than water. Discharge of cargo at a port of distress. Plus general average sacrifice and jettison.
Everything else is uninsured. If the ship arrives safely and your cargo is short, wet or stolen, Clause C pays nothing. That is right for bulk cargo where the realistic loss scenario is the ship, and wrong for almost anything in a box.
| Peril or cause of loss | Clause A | Clause B | Clause C |
|---|---|---|---|
| Fire or explosion | Covered | Covered | Covered |
| Vessel stranded, grounded, sunk or capsized | Covered | Covered | Covered |
| Overturning or derailment of a land conveyance | Covered | Covered | Covered |
| Collision with an external object | Covered | Covered | Covered |
| General average sacrifice and jettison | Covered | Covered | Covered |
| Earthquake, volcanic eruption or lightning | Covered | Covered | Not covered |
| Washing overboard | Covered | Covered | Not covered |
| Sea, lake or river water entering the vessel, container or store | Covered | Covered | Not covered |
| Package lost overboard or dropped during loading or discharge | Covered | Covered as a total loss of that package | Not covered |
| Theft, pilferage or non-delivery | Covered | Not covered | Not covered |
| Deliberate damage by the wrongful act of a third party | Covered | Not covered | Not covered |
| Any other accidental cause not excluded | Covered | Not covered | Not covered |
The exclusions that apply to all three
Buying Clause A does not buy cover for everything. The general exclusions run across all three sets, and they are where declined claims come from.
- Wilful misconduct of the assured.
- Ordinary leakage, ordinary loss in weight or volume, and ordinary wear and tear.
- Insufficient or unsuitable packing or preparation, including stuffing a container badly where the assured or its employees did the stuffing.
- Inherent vice or the nature of the goods themselves.
- Loss caused by delay, even where the delay was caused by an insured peril.
- Insolvency or financial default of the owners, managers, charterers or operators of the vessel.
- Deliberate damage by any person, under B and C only.
- Nuclear or radioactive weapons.
Two more sit in separate clauses. Unseaworthiness or unfitness of the vessel or container applies where the assured knew about it at loading. War and strikes are excluded from all three sets and bought back through separate wordings, which almost every cargo policy attaches as standard.
The packing exclusion catches more shippers than any other. If your own staff stuffed the container and the goods shifted in transit, the underwriter can point at the stow. Photographs taken at stuffing are the cheapest protection you will ever buy.
How long the cover actually lasts
The duration clause is identical across A, B and C, and it defines the insured transit. Cover attaches when the goods are first moved in the warehouse named in the contract for immediate loading. It continues through the ordinary course of transit.
It ends at the first of three events. Completion of unloading at the named destination. Delivery to any other warehouse the assured elects to use for storage or allocation. Or expiry of a fixed period after discharge at the final port, which under the 2009 sea clauses is 60 days.
Two things follow. Goods held in a bonded warehouse on a customs query can run out of cover while nobody is watching. And diverting a container to an unplanned storage site ends the transit there, even if the goods later move on. Tell the broker before you divert.
Matching the clause set to the delivery term
Two trade terms make the seller buy insurance for the buyer. Under the Incoterms® rules published by the International Chamber of Commerce, CIF and CIP both put an insurance obligation on the seller. The required level differs.
Under the 2020 edition, CIP requires cover at the all risks level, which in practice means Clause A. CIF continues to require only minimum cover, which in practice means Clause C. That split was introduced in 2020, and contracts drafted against the earlier edition set both terms at the minimum level. Check which edition your contract names.
Both terms require the sum insured to be at least the contract price plus ten per cent, in the currency of the contract, running to the named destination. A buyer under CIF who wants wider cover has two options. Agree an upgrade in the sale contract in writing, or buy a top-up policy. A verbal assurance that the goods are “fully insured” is worth nothing at claim stage. Our guide to who is responsible for cargo cover under each of the eleven rules sets out where the obligation falls.
Under every other term, neither party is obliged to insure. That does not mean neither party needs to. Risk passes at a defined point, and whoever bears risk after it is exposed whether or not a policy exists. The introduction to the 2020 delivery terms for traders covers where each rule transfers risk. GTCS is an independent Globalior assessment and is not affiliated with, endorsed by, or accredited by the International Chamber of Commerce.
Choosing between A, B and C in practice
Start with the realistic loss scenario for your cargo, not the premium.
- Containerised manufactured goods, consumer products, electronics and anything attractive to thieves belong on Clause A. Theft and handling damage sit outside B and C entirely.
- Homogeneous dry bulk, such as ore, grain or aggregate, can sit on B or C. Pilferage is not a realistic scenario and the major casualty perils are the ones that matter.
- Break bulk steel, machinery and project cargo usually needs A, because handling damage during multiple lifts is a named peril in neither B nor C.
- Temperature controlled cargo needs A plus a refrigerated machinery extension. The standard A wording does not cover machinery breakdown without it.
- Where goods are old, second hand or already damaged, expect the underwriter to restrict cover whatever the clause set. Inherent vice is excluded everywhere.
Whatever you buy, read the deductible and any survey warranty on the certificate. A Clause A policy with a deductible above your typical claim value behaves like no policy at all. Our overview of cargo insurance in transportation covers how sums insured and deductibles are set.
What the policy expects from you after a loss
All three sets impose a duty to minimise the loss and to preserve rights of recourse against carriers, bailees and terminals. That second part has teeth. A claim against the shipping line dies at the one year mark under the standard sea carriage rules. Let it lapse and you have destroyed the recovery your underwriter was counting on. Some background on maritime law and carrier liability helps here.
Separately, if a general average is declared, cargo interests must put up security before the goods are released. A cargo policy responds to that. Uninsured owners fund it themselves, which is why a general average clause is a practical argument for insuring even when no trade term requires it.
Where this sits in contract terms knowledge
Picking a clause set is a contract decision before it is an insurance decision. The trade term fixes who must insure and to what level. The sale contract fixes the sum insured. The transport document fixes who you can recover from. Someone has to hold all three in view, and in most companies nobody does.
If that is the gap in your team, it is the gap the Global Trade Contracts Specialist certification is built to test. Three of its eight domains supply the material this article draws on. Delivery terms and risk transfer. Risk allocation and remedies. Title, documents and carriage.
Be clear about what it is. GTCS is a contracts assessment, not an insurance qualification, and passing it does not make anyone a cargo underwriter or an average adjuster. The exam is 60 questions in 60 minutes, multiple choice and true or false, drawn at random from a larger bank. The pass mark is 85%. One retake is included, so two attempts in total. ClassMarker, an independent online assessment service, delivers and marks it, and you get a score with a topic level breakdown immediately. There are no prerequisites. Full detail sits on the GTCS certification introduction page.
Key takeaways
- Clause A is all risks subject to exclusions. Clause B and Clause C are named perils, so an unlisted cause of loss is simply uninsured.
- Theft, pilferage, non-delivery and deliberate third party damage are covered under A only.
- Clause B adds earthquake, volcanic eruption, lightning, washing overboard, water entering the conveyance or store, and packages lost overboard during handling. Clause C has none of those.
- Exclusions for inherent vice, insufficient packing, ordinary leakage, delay and wilful misconduct apply to all three sets, including Clause A.
- The duration clause is the same in all three, and sea cover ends at the earlier of delivery, storage elsewhere, or 60 days after discharge under the 2009 wordings.
- Under the 2020 Incoterms® rules, CIP requires all risks cover and CIF requires only minimum cover, with a sum insured of at least contract price plus ten per cent.
- The policy requires you to preserve recourse against the carrier, so letting a carriage claim deadline lapse can reduce your recovery.
Frequently asked questions
What is the main difference between Institute Cargo Clauses A, B and C?
Clause A insures all risks of loss or damage except those specifically excluded, so the underwriter must prove an exclusion to decline. Clauses B and C insure only the perils written into the list, so you must prove your loss was caused by a listed peril. B lists more perils than C, particularly water damage, earthquake and packages lost during handling.
Does Clause A cover theft?
Yes. Theft, pilferage and non-delivery are accidental causes of loss and fall inside the all risks wording, provided they happen during the insured transit and no exclusion applies. Clause B and Clause C do not cover them at all. For containerised consumer goods this single difference is usually the reason to pay the higher premium for A.
Are war and strikes covered by any of the three clause sets?
No. War and strikes are excluded from A, B and C alike. They are insured by separate war and strikes wordings, which most cargo policies attach as standard. Clause A does treat piracy as an ordinary insured peril rather than a war risk, which is a meaningful difference on some routes. Check the certificate to confirm the extensions are attached.
Which clause set do I need if I sell on CIF?
CIF requires the seller to provide only minimum cover, which the market reads as Clause C, for at least the contract price plus ten per cent. Many sellers voluntarily provide wider cover, and buyers routinely negotiate for it. If you want Clause A level protection under a CIF sale, write that into the contract rather than assuming it.
When does cargo cover start and finish?
Cover attaches when the goods first move in the named warehouse for immediate loading, and it ends at the earliest of three events. Completion of unloading at the named destination, delivery to any other storage or allocation site chosen by the assured, or expiry of the fixed post discharge period, which is 60 days under the 2009 sea wordings.
Can an underwriter decline a Clause A claim?
Yes, by relying on one of the general exclusions. The most common grounds are insufficient packing or bad container stuffing by the assured, inherent vice, ordinary loss in weight, and loss caused by delay. Clause A shifts the burden of proof onto the underwriter, and it does not remove the exclusions that sit in the same clause set.
Do these clauses apply to air freight?
Air movements use a separate air cargo wording built on the same all risks structure as Clause A, with its own duration clause and a shorter storage period after unloading. There is no air equivalent of the B and C named perils lists. Where a shipment mixes sea and air legs, confirm with the broker that both are covered under one transit.
If you want to discuss how this applies to a specific trade lane or contract, get in touch with Globalior.