Misunderstandings of All-Risk Clauses

“Misunderstanding of All Risks Coverage” refers to the practical misunderstanding that marine cargo insurance arranged under ICC(A) will unconditionally cover every type of loss merely because it is commonly described as “All Risks” cover.

ICC(A) is one of the principal cargo clauses providing broader protection than ICC(B) and ICC(C). However, the expression “All Risks” does not itself guarantee payment of a claim. Actual coverage depends on the insurance policy and incorporated clauses, the insured transit, the cargo, the circumstances and cause of the loss, exclusions and any additional terms.

This article is not intended to duplicate the detailed contractual analysis contained in ICC(A). Detailed issues concerning insufficient packing, inherent vice, delay, war risks, strikes risks and other exclusions are addressed in their respective specialist articles.

The focus here is practical communication: how a freight forwarder, insurance intermediary or other practitioner should explain the expression “All Risks,” what language should be avoided, what should be confirmed when insurance is arranged, and how expectations should be managed after a casualty occurs.

Scope of This Article

Why the Expression “All Risks” Is Easily Misunderstood

The principal problem is that the ordinary-language meaning of “all risks” sounds very similar to the insurance-market expression “All Risks.”

From a customer's perspective, being told that the insurance covers “all risks” can easily be understood to mean that every loss arising during transit will be paid. Under an insurance contract, however, the scope of cover, exclusions, duration, insured subject matter and additional terms operate together.

A further difficulty is that, when a Booking or insurance arrangement is made, no casualty has yet occurred. The discussion may therefore stop after the simple statement that ICC(A) is “broad cover.” Only after a loss occurs do issues such as packing, cargo characteristics, delay or transit duration emerge, leading the cargo owner to ask why an “All Risks” policy does not automatically pay.

The most effective way to prevent this misunderstanding is therefore not to recite every exclusion at the time of placement. It is to explain simultaneously that ICC(A) is broad cover and that it is not unlimited or unconditional cover.

Distinguishing “All Risks” from the Actual Insurance Contract

Explain “Broad” and “Not Unlimited” at the Same Time

When explaining All Risks cover, it is important not to stop after saying that ICC(A) provides broad protection.

A practical explanation can be divided into three stages.

1. Stage 1 — Explain the position of ICC(A).
   State that ICC(A) provides broader cargo cover than ICC(B) and ICC(C).
2. Stage 2 — Explain the limitation at the same time.
   State that it does not unconditionally insure every loss and remains subject to policy exclusions, duration and other terms.
3. Stage 3 — Explain that an individual claim requires separate analysis.
   State that the circumstances of the casualty and the applicable insurance terms must be reviewed by the insurer or insurance intermediary.

Using these three elements together allows the practitioner to describe ICC(A) accurately without allowing the correct statement that it is “broad cover” to become the incorrect promise that “everything is covered.”

Language to Avoid and Better Practical Explanations

Common Misunderstandings

Cases That Frequently Cause Practical Problems

Practical Example 1 — “ICC(A) Means Everything Is Covered, Correct?”

Scenario: A shipper exporting machinery components worth JPY 12 million asks, “If we insure this under ICC(A), that means everything is covered, correct?”

Answering “Yes, because it is All Risks” may create a serious expectation gap if a future casualty occurs.

The first explanation should be that ICC(A) provides broader protection than ICC(B) and ICC(C). It should immediately be followed by the qualification that it does not unconditionally insure every type of loss and that the applicable duration, casualty circumstances and exclusions must be reviewed in an individual claim.

There is no need at this point to give a complete lecture on insufficient packing or inherent vice. Instead, identify what the shipper is particularly concerned about — breakage, theft, temperature exposure or another risk — and refer any unusual exposure to the insurer or insurance intermediary before the insurance is finalised.

The objective at this stage is not to predict a future claim decision. It is to establish the correct expectation before the casualty occurs.

Practical Example 2 — “Why Is an Investigation Necessary If We Bought All Risks?”

Scenario: Internal damage is found in imported machinery worth JPY 8 million. The cargo owner asks why packing photographs and casualty evidence are required when the goods were insured on All Risks terms.

The freight forwarder should not begin by asserting that an exclusion applies. A better explanation is that ICC(A) provides broad cover, but an individual claim still requires confirmation of the damage, circumstances and relevant policy terms.

Pre-shipment photographs, packing condition, external condition on arrival, unpacking evidence and transit records should then be collected.

The communication should avoid suggesting that the investigation exists simply because the insurer is attempting to avoid payment. Evidence is necessary to establish what occurred and how the actual insurance contract applies to the casualty.

Practical Example 3 — Customer Objection After a Claim Is Not Payable

Scenario: Goods worth JPY 5 million arrive late and the cargo owner claims JPY 2 million for lost sales. After being advised that the claimed economic loss does not fall within the ordinary cargo-damage claim, the customer responds, “We were told this was All Risks.”

If the first explanation that All Risks does not mean unlimited cover is given only after the claim is declined, the customer may perceive it as a new qualification introduced after the event.

The first step is therefore to review what was explained when the insurance was arranged. The distinction between physical cargo damage and economic loss caused by delay should then be explained and the insurance position should be referred to the insurer or insurance intermediary.

If the freight forwarder's placement record merely states “All Risks” without any qualification, the communication process itself should be improved. The basic explanation that ICC(A) is broad but does not unconditionally cover every loss should be recorded before a casualty occurs.

Comparison of Freight Forwarder Involvement

Keep a Record of the Explanation Given When Insurance Is Arranged

Disputes concerning All Risks cover may develop beyond policy interpretation into a separate issue concerning what the customer was told when the insurance was arranged.

When a customer requests “All Risks,” it is therefore useful to record not only the condition name but also the cargo, transit, principal risk concerns, any special cargo characteristics and whether additional risks were checked.

A placement confirmation, email or internal record can also state in substance that ICC(A) provides broad cover but does not unconditionally cover every type of loss. This makes later communication after a casualty more consistent.

The objective is not to send a lengthy list of exclusions with every shipment. It is to ensure, before a casualty occurs, that the customer does not understand the expression “All Risks” as an unconditional guarantee.

Communication Flow After a Casualty

1. Do not immediately say that the claim is payable or not payable merely because the insurance is All Risks.
   Confirm the casualty facts and insurance terms first.
2. Establish what happened.
   Collect the cargo condition, discovery time, transit stage, outer condition and quantity evidence.
3. Identify what the cargo owner is actually claiming.
   Distinguish repair cost, total loss, shortage, delay loss and other heads of claim.
4. Confirm the applicable insurance terms.
   Review ICC(A), duration, endorsements and special conditions.
5. Tell the customer which matters remain under review.
   Make it clear when the coverage decision has not yet been made.
6. Provide the evidence to the insurer or insurance intermediary.
   Use objective documents rather than freight-forwarder speculation.
7. Communicate the insurance decision accurately.
   Explain the relevant issue rather than reducing the response to “paid” or “not paid.”
8. Analyse carrier liability separately.
   Do not confuse the insurance decision with liability of the Contracting Carrier, Actual Carrier or another party.

Decision Checklist

When to Involve an Insurer, Insurance Intermediary or Maritime Lawyer

A dispute over the expression “All Risks” can develop from a simple insurance question into a dispute concerning representations made to the customer, carrier liability or a damages claim.

• a high-value casualty where the cargo owner and the insurance side have materially different expectations concerning coverage;
• a customer alleges that it was promised that “everything would be covered” when the insurance was arranged;
• the explanation given by the freight forwarder or insurance intermediary becomes a disputed issue;
• a damages claim is made against the freight forwarder because the marine cargo insurance does not respond;
• an insurance exclusion and liability of a Contracting Carrier or Actual Carrier are disputed at the same time;
• a substantial claim is made for delay, lost profit or other economic loss; or
• interpretation of the insurance wording itself becomes a legal dispute.

At the initial casualty stage, the normal priority is to collect facts and refer the matter to the insurer or insurance intermediary. Where the dispute develops into questions concerning what was represented, who bears legal responsibility, or whether damages are recoverable from a carrier or freight forwarder, involvement of a maritime lawyer may become appropriate.

Practical Points

The core problem behind misunderstanding of All Risks cover is not simply a lack of knowledge about ICC(A). A correct statement — that ICC(A) is broad cover — can be transformed in the customer's mind into a different proposition: that every loss is unconditionally covered.

For freight-forwarding practice, it is therefore more important to communicate three points consistently than to recite a long list of exclusions: ICC(A) provides broad cover; it does not unconditionally insure every loss; and an individual casualty is determined by the actual policy terms and facts.

Confirm expectations before placement, establish facts before discussing coverage after a casualty, do not promise claim payment in advance, and keep the insurance decision separate from carrier liability. These practices substantially reduce disputes based on the statement, “We were told it was All Risks.”

Summary

Misunderstanding of All Risks Coverage occurs when the broad protection of ICC(A) is interpreted as meaning that every loss is unconditionally insured.

The purpose of this article is not to repeat the detailed analysis of insufficient packing, inherent vice, delay or other exclusions. Those subjects belong to ICC(A) and their respective specialist articles. The focus here is customer communication and expectation management.

A practical explanation is: ICC(A) provides broad cargo cover, but it does not unconditionally insure every loss, and an individual casualty must be considered in light of the insured transit, the circumstances of the loss and the applicable policy terms.

After a casualty, payment should never be determined from the expression “All Risks” alone. Evidence should be collected and the matter referred to the insurer or insurance intermediary. A freight forwarder can support explanation and evidence collection, but should not promise the insurer's final claim decision in advance.