When you’re covered – and when not

INSURE OR perish should be the watchwords of all traders, who constantly fight their way through a jungle of risk, according to Malcolm Hartwell, director in the shipping department of attorneys, Deneys Reitz. And one of the ways of sensibly managing certain of these risks is to shift the transit risks onto a marine insurer, he added. Obviously the risks faced by perishable foods are more extensive than those faced by general cargo. “Of particular concern to traders in perishable products is the risk that the cargo will be damaged as a result of a variation in temperature,” said Hartwell. “The carriage of perishable products is, by definition, a highly specialised trade and underwriters will not simply provide cover against all loss or damage caused by any variation in temperature.” He pointed out that one of the broadest exceptions relied on by underwriters to limit their exposure to risks is that they will not be liable for loss or damage caused by the inherent nature of the cargo being carried. “It is, for example,” Hartwell said, “inherent in the nature of bananas that if they are not carried at precisely the right temperature and with the requisite levels of CO2, they will ripen prematurely. Underwriters will not cover that risk.” Insurers also limit their exposure to certain of the risks caused by the inherent nature of perishable foods by only providing for cover or loss or damage caused by a variation in temperature in certain circumstances. “Those limited circumstances,” Hartwell said, “are: fire or explosions; stranding or sinking; overturning or derailment; collision or contact; discharge at a port of distress; and the breakdown of refrigerating machinery. “The standard cover provided only responds to a claim in the event that the machinery breaks down for a continuous period of not less than 24-hours – but, by agreement with insurers, this period can be reduced.” According to Hartwell, the Institute of London Underwriters (ILU) has developed the most common standard form of cover – and has also produced specialist trade clauses for, amongst other things, frozen meat and other frozen products. “Those clauses come in two forms,” he said. “The institute’s “frozen food clauses (A)” to a large degree mirror the risks covered on general cargo by the ICC (A) clauses. The other form is to be found in the “frozen food clauses (C)” which cover specific risks, but also incorporate the exclusions to be found in the ICC (C) clauses.” Many of the disputes under the “frozen food clauses (A)”, Hartwell added, arise out of an interpretation as to whether or not the cause of the loss has been a breakdown of refrigerating machinery for the requisite minimum period. “This,” he said, “is reflected in the fact that the limited cover provided by the “frozen food clauses (C)” will not respond to a claim arising out of any breakdown of refrigerating machinery. “Traders must bear in mind that the all risks cover provided by the (A) clauses will be far more expensive than the limited cover provided by the (C) clauses.” Traders should note that the institute’s “frozen food” clauses also specifically exclude frozen meat – which is dealt with by the appropriate “frozen meat” clauses. These, Hartwell told FTW, broadly provide the same cover as the “frozen food” clauses and extended cover is also available for frozen meat. “The effect of all of the above,” he said, “is that traders in perishable products must be alive not only to the special risks related to the cargo which they trade, but also to the particular insurance cover available to indemnify them against loss or damage flowing from such risks.”