Meaning
Marine insurance policies utilize standardized terms to define the extent of coverage for goods during transit, and the institute cargo clauses represent these benchmark conditions developed by the London insurance market. These clauses specify which risks are covered and which are excluded during maritime and land transport of commodities, including battery materials and cells. They establish the liability framework for transit losses due to theft, collision, or fire.
Coverage Level
Three basic levels of coverage exist, ranging from the restricted Class C to the comprehensive Class A. Comprehensive protection covers almost all risks of loss or damage, making it the preferred choice for high-value battery cells which are sensitive to moisture and impact. Class B and Class C offer narrower protection that is restricted to specified major accidents.
Risk Exclusion
Standard clauses do not cover losses arising from inadequate packaging or the inherent vice of the cargo. For lithium battery shipments, this means damage from thermal runaway caused by internal defects is generally excluded. Insurance buyers must negotiate special endorsements to cover these specific electrochemical risks.
Financial Impact
Sourcing agreements mandate the clause level that the seller must procure. The choice of clause affects the premium and the distribution of financial recovery after an accident.
