When exporters or importers, or even freight forwarders, purchase insurance for chilled and frozen cargo, they may think they won’t have to worry about any issues arising during transport.
As a policyholder, you tend to assume you’ve taken out comprehensive insurance. But this isn’t necessarily the case.
Granted, the Institute Frozen/Chilled Food and Frozen/Chilled Meat clauses provide extensive coverage. But there are certain scenarios that aren’t covered, which may lead to disputes in the event of a claim.
That’s why understanding the insurance policy provisions for refrigerated cargo is key to picking the right insurance plan to suit your needs.
Let’s find out more about the Institute Cargo Clauses for frozen or chilled food and meat.
Why is a specific insurance policy needed for perishable foods?
Food products are very sensitive to temperature fluctuations. This means they must be transported within a controlled temperature range. Otherwise, they may become unfit for human consumption and even pose a risk to health.
Besides, any damage to perishable products reduces their commercial value. And let’s not forget that refrigerated cargoes tend to be valuable (e.g., a container load of frozen lobsters).
Now, the cold chain logistics involves plenty of steps:
- Loading onto means of transport
- Delivery to the retailer
So, the ugly truth is cold chain breaks may happen at any time, exposing you to large financial losses.
As the 2009 Institute Cargo Clauses don’t provide coverage for the carriage of this group of cargo, taking out specific insurance is a must to minimize your risk.
What’s the background of the new Institute Frozen/Chilled Food and Frozen/Chilled Meat Clauses?
In 2017, the Joint Cargo Committee (JCC) published a new edition of the 1986 Frozen Food and Frozen Meat Clauses. This long-awaited revision was made to reflect current trade and insurance practices.
Amendments were made with a view to:
- Aligning the clauses wording with the 2009 Institute Cargo and Strikes Clauses.
- Avoiding ambiguities.
Although they differ in the scope of insured risks and exclusions, the 2017 clauses don’t provide protection against a greater number of risks than the previous version.
What levels of coverage do the new clauses provide?
The 2017 Clauses provide four levels of coverage. Starting with the broadest cover:
- Institute Frozen/Chilled FoodExtension Clauses (all risk plus extensions).
- Institute Frozen/Chilled Food Clauses (A) (all risk).
- InstituteFrozen/Chilled Food Clauses (A) – 24 Hour Breakdown.
- InstituteFrozen/Chilled Food Clauses (C).
What are some meaningful differences between the 2017 and 1986 clauses?
“Frozen/chilled” versus “frozen” cargo.
The 2017 clauses also cover chilled cargo (food or meat, respectively), which couldn’t by definition be insured under the 1986 edition.
That’s why the word “frozen” has been replaced by “frozen/chilled” throughout the text, including in the new name of the clauses.
All risks cover.
Under the 1986 clauses, frozen goods were insured against all risks, excluding losses resulting from “any variation in temperature howsoever caused”.
With temperature fluctuations being one of the main reasons to take out insurance for frozen food, the fact is this clause didn’t quite provide protection against all risks.
Besides, the clause wording was ambiguous. Cover was linked to a breakdown of refrigeration resulting in its stoppage for a period of not less than 24 consecutive hours.
This makes you wonder what would qualify as a “breakdown”. Any event resulting in a machine stopping?
The 2017 Institute Frozen/Chilled Food Clauses (A) seek to provide all risks cover. Hence, the limitation in terms of losses caused by temperature fluctuation has been omitted.
This exclusion has been amended for clarity. The new wording “Loss damage or expense arising from infection prior to attachment of this insurance, bone taint, salmonella…” leaves no room for misinterpretation.
Damage attributable to bone taint or salmonella is not covered. No matter whether it occurs before or after the commencement of the insurance contract.
This exclusion deals with the unseaworthiness or unfitness of the vessel carrying perishable cargo.
The clause has been expanded so that the exclusion for damages arising from a vessel not being seaworthy doesn’t apply in the following case:
“Where the contract of insurance has been assigned to the party claiming”, who would have purchased the insured cargo in good faith under a binding contract.
The previous CL 334 Extension Clause has been moved to the body of the Clauses in the 2017 edition. The reason for the change of this crucial clause is to remove any ambiguity as to its effect.
“This insurance excludes any claim… where the period between the first passing of the subject-matter insured into a freezing/cooling chamber and attachment of this insurance exceeds 60 days”.
The 1986 clauses end with a special note (both for frozen food and meat). It states that, if the goods can’t enter the importing country because of local regulations or as a result of an embargo, the insured isn’t entitled to claim for damage or loss to the cargo.
Due to uncertainty about its legal status and effect, this note doesn’t appear in the 2017 clauses. It’s been replaced by an exclusion for “loss damage or expense caused by embargo, or by rejection prohibition or detention by any government or their agencies or departments”, under Clause 6.
As you can see, understanding insurance policy wording is not easy. So, it’s only natural that doubts arise in relation to the interpretation of certain clauses.
But signing an insurance contract without fully grasping its terms and the legal obligations arising from it may put you in a difficult situation in the event of a claim.
Actually, claims denials often happen over a lack of understanding about what a policy covers, causing you to foot the bill. And it will be an expensive one if you’re dealing with frozen and chilled cargo.
Here’s our piece of advice: hire a legal consultant to review your policy. Relying on an expert advisor with experience in marine law and insurance will give you peace of mind when signing your insurance contract.