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The Covid-19 pandemic still rages unabated across the world, affecting lives, businesses, individuals, and industries in ways that will change the world forever. The effects of the coronavirus Covid-19 outbreak will extend well beyond health and the threat to human lives. Consequent upon its outbreak, governments in many countries imposed “lockdown” to restrict the movements of its citizens and to control the rapid spread of the pandemic. Such lockdowns affected Governments, industries, businesses, professionals, households and people across the planet.

Importers, exporters, and travellers were affected by the outbreak with cancellation of sales contracts and shipping contracts and/or the late delivery of goods. In view of lockdown and availability of  limited workforce at all key points of the supply chain and consequent  reduction in capacity to distribute and handle goods, cargo are being held for a longer duration at ports and storage locations see a volume increase whilst stocks await their next destination. Consequently, the arrival of cargo at Point of Delivery (POD) is considerably delayed.

Basically, Cargo insurance contracts are designed to cover loss/damage to goods while in due course of transit. The scope of coverage includes customary delays and interruptions in transit that are beyond the control of the insured. However, there are exceptions, as well as time limitations and reporting requirements.

A consignment of 5000 MT Basmati rice was despatched from Kandla Port in India on 16th February 2020 to buyer in China which reached at Shenzhen (Guangdong Province), the Port of Destination on 7^th July 2020. It was found to be infested with weevils and declared as total Loss due to delay.  The delay happened due to lock down conditions, quarantine restrictions, port congestions, non-functioning of banks and other problems to contain the problems arising due to Covid Pandemic.

Another consignment of life saving medicines sent from Vadodara to New York reached the destination after nearly 6 months and by that time its shelf life was over and was not fit for its intended purpose. The delay was attributable to Covid induced factors like mentioned above – So it is also a total loss.

There have been several cases of vulnerable /perishable items such as pharmaceutical products and food produce which operate on a stringent and well-monitored time schedule. If the goods are prone to temperature sensitivity or have a short shelf life, it is important to consider the impact COVID-19 may have on their sustainability. Perishable cargo is more prone to damage because of their being physically impacted by delay during transit /at ports and such claims have become source of headache for International traders and Marine underwriters.

The question arises – What about the admissibility of such claims under Marine Cargo Policy???

Marine Cargo Policies are subject to Institute Cargo Clauses (ICC-A or B or C) and ICC (A) is considered to offer widest coverage with the highest premium. Even if it is presumed that in both the above cases the policies were subject to ICC (A) – Are the type of losses mentioned above, which have arisen due to COVID-19 related delays, covered under Marine Cargo Policy?

Let us analyse the losses due to “Delay” in the backdrop of various sections of ICC(A) 2009 version.

Risk Covered Clause of ICC(A) 2009 version says “This insurance covers all risks of loss of or damage to the subject-matter insured except as excluded by the  provisions of Clauses 4, 5, 6 and 7. So although ICC(A), generally thought of as All Risk Policy and offers widest cover but it still has some exclusions.

Now we refer to Exclusion no.4.5 of ICC(A)  which states “ loss damage or expense caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 ) i.e. the only expenses payable are those falling under clause 2 which refers to general average and salvage charges. So, losses/expenses arising due to delay are not covered.

Now we refer to clause 8.1.4 of Duration Clause which interalia states that the insurance cover shall terminate after 60 days of the goods being discharged at the place mentioned in the insurance cover. So, if the delay due to COVID-19 is more than 60 days from discharge, the insurance cover lapses. So, there is no coverage for delay under this section also.

There is another subclause Clause (8.3) in ICC (A) which deals with coverage when the delay is beyond the control of the Assured and the cargo is still in the care and custody of the seagoing vessel. In terms of  clause 8.3 the insurance  remains in force during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to carriers under the contract of carriage. This clause should give some relief to those who have their cargo redirected as a result of the Covid – induced lockdown. If Shipping lines redirect the insured’s cargo and it takes longer to get to the destination, Clause 8.3 provides that cover in terms of the policy to remain in place.

But remember, “All risks” are not really “All Risks” because for a claim to be considered, there must be  what is called a fortuity which means “an actual happening or occurrence”.

Accordingly, the liability of insurer would arise only if there is any fortuitous loss under such circumstances. With the Covid-19 virus, there has not been any fortuity due to which the  cargo has been delayed albeit beyond the control of the insured.

Finally , in terms of clause 9 of ICC(A) if due  to circumstances beyond the control of the Assured ( here Lockdown induced restrictions) either the contract of carriage is terminated at a port or place other than the destination named in the insurance policy or the transit is terminated before unloading of cargo  then the insurance shall also terminate. If, however, a notice is given promptly to the Insurers and continuation of cover is requested then this insurance shall remain in force, subject to an additional premium if required by the Insurers.

However, where there is loss or damage to the goods as a result of the cargo taking longer than expected time to reach its final destination, the resultant losses will normally be excluded by the delay exclusion clause. The clauses that have been tried and tested for many years have now been shaken.

Taking all the above points into consideration, it becomes evident that any loss would fall entirely under the exclusion of delay even though the policy may have been extended as permitted by the Insured.

Therefore, because delay is excluded, there would be no claim in terms of the policy on delays caused by COVID-19.