Particular Average Warranties, Successive Losses, and the Suing and Labouring Clause under the Marine Insurance Act 1906
Interlink編集部Particular Average Warranties, Successive Losses, and the Suing and Labouring Clause under the Marine Insurance Act 1906
Particular average warranties, successive losses, and the Suing and Labouring Clause under the Marine Insurance Act 1906 determine the extent of an insurer’s liability when partial losses or multiple incidents affect insured cargo and the measures that the insured must take to avert or minimise further loss.
Section 76 governs policies that are warranted free from particular average. It also addresses total loss of an apportionable part, non-coverage below a specified percentage, salvage charges, Particular Charges, and expenditure properly incurred under a Suing and Labouring Clause.
Section 77 governs successive losses under the same policy and the treatment of a total loss occurring after an earlier particular average loss that has not been repaired or otherwise made good.
Section 78 treats the Suing and Labouring Clause as supplementary to the insurance contract. It addresses recovery of expenditure properly incurred under the clause, identifies losses and expenses that are outside the clause, and requires the insured and its agents to take reasonable measures to avert or minimise loss.
These provisions do more than determine whether a partial loss is covered. It may also be necessary to determine whether the insured cargo can be divided into independently identifiable and valued parts, whether separate incidents caused distinct losses, whether an earlier particular average loss was repaired, and whether expenditure was incurred to avert or minimise a loss arising from a peril insured against.
Scope Covered in This Article
| Item | Content Covered in This Article | Content Covered in Other Articles |
|---|---|---|
| Non-Coverage of Particular Average | The effect of a warranty excluding ordinary particular average under Section 76 | The definition of particular average is covered in “Partial Loss, Particular Average, Salvage Charges, and General Average under the Marine Insurance Act 1906.” |
| Apportionable Insurance Contract | The treatment of insured cargo that can be divided into independently identifiable and valued parts | Detailed allocation of insured value and the sum insured is addressed separately. |
| Non-Coverage Below a Specified Percentage | The losses included in the percentage test and the prohibition on adding general average or incidental expenses | The calculation of individual franchise percentages, deductibles, and excesses depends on the policy wording. |
| Successive Losses | The insurer’s basic liability where multiple losses occur successively under the same policy | Detailed adjustment of each loss and claims against responsible third parties are addressed separately. |
| Total Loss Following Particular Average | The restriction on recovery where a total loss follows an unrepaired or unrectified particular average loss | The requirements for actual total loss and constructive total loss are addressed in separate articles. |
| Suing and Labouring Clause | Its supplementary nature and the recovery of expenditure properly incurred under the clause | Contract-specific limits and special provisions must be confirmed from the individual policy. |
| Duty to Avert or Minimise Loss | The duty of the insured and its agents to take reasonable measures after an incident | Detailed procedures for claims against carriers, warehouse operators, and other third parties are addressed separately. |
| Relationship with Current ICC Clauses | The relationship between traditional FPA warranties and ICC(A), ICC(B), and ICC(C) 2009 | A peril-by-peril comparison of the Institute Cargo Clauses is addressed in specialized ICC articles. |
Purpose and Background of the Framework
Marine insurance ordinarily indemnifies covered loss subject to the sum insured and the terms of the policy. During cargo transit, however, a single incident may not be the end of the loss. Separate incidents may occur successively, and preservation expenditure may be incurred between those incidents.
A policy may also exclude ordinary particular average without excluding every other form of recoverable loss or expenditure. General average sacrifice, salvage charges, Particular Charges, and expenditure recoverable under a Suing and Labouring Clause have different legal characteristics and must be considered separately.
Section 76 distinguishes ordinary particular average from losses and expenses that may remain recoverable despite an FPA warranty.
Section 77 prevents separate incidents from being treated automatically as one loss while also preventing double recovery where an unrepaired particular average loss is followed by a total loss.
Section 78 encourages reasonable preservation measures and permits properly incurred expenditure to be considered separately under the supplementary Suing and Labouring Clause.
Hierarchy of Terms under Sections 76 to 78
| Category | Basic Meaning | Insurance Effect | Main Supporting Documents | Practical Point |
|---|---|---|---|---|
| Non-Coverage of Particular Average | A warranty excluding ordinary particular average from the insurer’s liability | Ordinary partial damage to the insured cargo may be excluded | Insurance policy, applicable clauses, and special clauses | General average sacrifice, salvage charges, Particular Charges, and suing and labouring expenditure require separate consideration. |
| Total Loss of an Apportionable Part | Total loss of a part of the insured cargo that can be independently identified and valued | May remain recoverable despite an FPA warranty | Commercial invoice, packing list, insurance schedule, and lot records | The part must have sufficient contractual and evidential independence. |
| Non-Coverage Below a Specified Percentage | A condition excluding particular average below a specified franchise percentage | The percentage is tested by reference to actual loss to the subject matter insured | Loss calculation, insured value, quantity records, and survey evidence | General average, Particular Charges, and investigation expenses cannot be added to reach the percentage. |
| Successive Losses | Separate losses occurring successively under the same policy | The insurer may be liable even where the aggregate losses exceed the sum insured | Incident chronology, separate loss calculations, and repair records | The same physical loss must not be claimed more than once. |
| Total Loss Following Unrepaired Particular Average | A total loss occurring after an earlier particular average loss has not been repaired or otherwise made good | In principle, only the total loss is recoverable | Repair records, prior claim documents, and total loss evidence | The rule prevents double recovery of the same economic loss. |
| Suing and Labouring Expenditure | Expenditure properly incurred to avert or minimise loss from a peril insured against | May be recoverable separately from the physical cargo loss | Instructions, quotations, invoices, photographs, and work reports | Necessity, reasonableness, and connection with an insured peril must be established. |
| Duty to Avert or Minimise Loss | The duty of the insured and its agents to take reasonable preservation measures | Requires action to prevent avoidable deterioration and preserve rights against third parties | Loss notices, claim reservations, survey records, and response chronology | Urgent reasonable action may be required before formal insurer instructions are received. |
Main Situations in Which the Provisions Apply
| Situation | Main Provision | Points to Confirm | Initial Response |
|---|---|---|---|
| Part of the cargo is wetted under an FPA warranty | Section 76(1) | Whether the loss is ordinary particular average, general average sacrifice, or total loss of an apportionable part | Identify the damaged unit, lot, package, and cause of loss |
| One of several cargo lots is completely lost | Total loss of an apportionable part | Whether the lost lot can be independently identified and valued | Compare the commercial invoice, packing list, and insurance schedule |
| Particular average is just below a franchise percentage | Sections 76(3) and 76(4) | Which physical losses may be included in the percentage test | Separate actual cargo loss from general average and incidental expenses |
| Separate incidents occur during the same insured transit | Section 77(1) | The cause, date, scope, and overlap of each loss | Maintain separate evidence and loss calculations for each incident |
| A total loss occurs before an earlier particular average loss is repaired | Section 77(2) | Whether the earlier loss was repaired or otherwise made good | Establish the repair status and the time of the total loss |
| Wet cargo is urgently dried and repacked | Section 78 | Whether the expenditure was reasonable and incurred to avert or minimise covered loss | Record the reason, cost, and condition before and after the work |
| Expenditure is incurred to avoid an uninsured delay loss | Section 78(3) | Whether the loss being avoided is covered by the policy | Distinguish the insured peril from the commercial reason for the expenditure |
| A claim deadline against the carrier is approaching | Duty to preserve rights | Notice, reservation of rights, claim presentation, and limitation periods | Reserve the claim against the carrier in writing |
Requirements for Applying an FPA Warranty
| Item to Confirm | Assessment | If Applicable | If Not Applicable |
|---|---|---|---|
| Existence of the Warranty | Does the policy contain an FPA warranty or an equivalent exclusion of particular average? | Section 76 must be considered | The loss is determined under the ordinary coverage and exclusion provisions |
| Nature of the Loss | Is the loss particular average, general average sacrifice, or total loss? | Ordinary particular average may be excluded | General average sacrifice or total loss must be examined separately |
| Apportionability | Can the insured cargo be divided into independently identifiable and valued parts? | Total loss of an apportionable part may be recoverable | The loss may remain a partial loss of the insured cargo as a whole |
| Specified Percentage | Does the policy exclude particular average below a franchise percentage? | Determine whether actual cargo loss reaches the percentage | Apply the full FPA warranty or ordinary policy coverage as appropriate |
| Classification of Expenditure | Is the amount salvage charges, Particular Charges, or suing and labouring expenditure? | Separate recovery may remain possible | The amount may form part of the excluded particular average loss |
| Connection with an Insured Peril | Does the loss or expenditure arise from a peril insured against? | Recovery may be possible if the remaining requirements are met | Recovery may be unavailable, including under the Suing and Labouring Clause |
What Is an Apportionable Insurance Contract?
Section 76(1) provides that where a policy is warranted free from particular average, the insured may nevertheless recover for a total loss of an apportionable part if the insurance contract is apportionable.
Apportionability does not arise merely because only part of the cargo is damaged. The issue is whether the insured cargo can be divided into separate parts that are independently identifiable and capable of individual valuation under the insurance contract.
Relevant practical factors include separate item descriptions and quantities, individual invoice values, package or lot numbers, insurance declaration details, allocation by container or pallet, and separate sums insured.
| Assessment Criterion | Factors Supporting Apportionability | Factors Making Apportionability Unclear | Supporting Documents |
|---|---|---|---|
| Cargo Identification | The parts can be distinguished by lot, serial, manufacturing, or package number | Similar goods are mixed and the affected part cannot be identified | Packing list, package details, and photographs |
| Quantity | The quantity of each lot or package is separately established | Only the total quantity is recorded | Commercial invoice, weight records, and delivery records |
| Value | Each lot or item has an individual value | Only a single total value is provided without an allocation basis | Commercial invoice, price list, and insurance declaration |
| Insurance Documentation | The sum insured is stated separately by item or lot | The entire cargo is insured for one undivided amount | Insurance policy, schedule, and application |
| Condition of the Cargo | An identifiable part is completely lost while the remaining parts are preserved | Partial damage affects the insured cargo generally | Survey report and inspection records |
| Contractual Unit | There is a contractual basis for treating each part as a separate insured interest | The cargo can be divided only mathematically, without contractual independence | Policy wording, transaction documents, and declaration method |
These factors are practical indicators. No single factor necessarily establishes apportionability. The policy wording, declaration method, cargo composition, and valuation evidence must be considered together.
Determining Non-Coverage Below a Specified Percentage
Sections 76(3) and 76(4) govern the calculation used to determine whether particular average has reached a specified franchise percentage.
Unless the policy provides otherwise, general average loss cannot be added to particular average to reach the specified percentage.
Only the actual loss suffered by the subject matter insured is considered in the percentage test. Particular Charges and expenses incurred to ascertain, prove, or establish the loss are excluded.
This rule prevents legally different losses and incidental expenses from being added merely to overcome the minimum percentage applicable to particular average.
| Loss or Expense | Included in the Percentage Test | Reason | Possible Separate Recovery |
|---|---|---|---|
| Particular average loss to the cargo itself | Included | It is actual loss to the subject matter insured | Depends on the franchise percentage and policy terms |
| General average sacrifice | Not included | It is legally distinct from particular average | Considered under general average provisions |
| General average contribution | Not included | It is not physical particular average loss to the cargo | Considered separately under the policy |
| Particular Charges | Not included | They are preservation expenses rather than physical cargo loss | Considered separately under Section 76(2) and related provisions |
| Survey costs | Not included | They are incurred to ascertain or prove the loss | Depends on the policy and the legal nature of the expense |
| Suing and labouring expenditure | Not included | It is separate from actual loss to the cargo itself | Considered separately under the Suing and Labouring Clause |
Whether separate particular average losses may be aggregated to reach the specified percentage depends on the policy’s calculation unit, such as each incident, the entire voyage, each package, each shipping unit, or another specified unit. Section 76 does not determine that issue uniformly for every policy.
Difference Between a Franchise and a Deductible
| Category | If the Threshold Is Not Reached | If the Threshold Is Reached | Practical Point |
|---|---|---|---|
| Franchise Percentage | Particular average is generally not recoverable | The recoverable loss may be payable in accordance with the policy | The percentage is not necessarily deducted from the amount of loss. |
| Deductible | The specified amount or percentage remains for the insured’s account | Only the amount exceeding the deductible may be payable | The precise calculation depends on the policy wording. |
| Full FPA Warranty | Ordinary particular average is generally excluded | Reaching a percentage does not necessarily restore coverage | Total loss of an apportionable part and separately recoverable expenses must still be considered. |
A franchise percentage and a deductible may both remove small losses from the insurer’s liability, but they do not operate in the same manner. The payable amount must be determined from the exact policy wording.
Successive Losses under Section 77
Under Section 77(1), unless the policy provides otherwise, the insurer is liable for successive losses.
The aggregate amount of separate successive losses may exceed the sum insured without automatically preventing liability under the section.
This does not permit the insured to claim the same physical loss more than once. For each incident, the cause, date, scope of loss, repair status, and overlap with any amount already paid must be established.
| Stage | Cargo Condition | Main Assessment | Required Documents |
|---|---|---|---|
| First Incident | Part of the cargo is wetted | Whether the wetting is a covered particular average loss | Incident report, photographs, and survey report |
| After the First Incident | The cargo is dried and repacked | Whether the earlier loss has been repaired or otherwise made good | Work report, invoices, and inspection records |
| Second Incident | Additional damage occurs in a collision | Whether the additional loss is independent of the first loss | Second incident report and separate loss details |
| Insurance Claim | More than one loss exists | Whether each loss can be calculated without duplication | Separate claim calculations and records of amounts already paid |
When a Total Loss Follows Particular Average
Under Section 77(2), where a total loss follows an earlier particular average loss that has not been repaired or otherwise made good under the same policy, the insured is generally entitled to recover only in respect of the total loss.
For example, if cargo suffers a 20% particular average loss and is then totally lost before the earlier damage is repaired, the insured cannot recover both the earlier 20% loss and the subsequent 100% total loss.
The rule prevents double recovery because the total loss indemnity already reflects the loss of the property in its damaged condition.
If the earlier particular average loss was properly repaired and the cargo’s value was restored before the later incident, the earlier loss is not necessarily absorbed automatically into the later total loss. Each incident and any amount already paid must be assessed separately.
Section 77(2) does not affect the insurer’s liability under the Suing and Labouring Clause. Properly incurred preservation expenditure following the first incident may therefore remain separately recoverable even if a total loss later occurs.
The Suing and Labouring Clause under Section 78
Section 78 provides that an engagement under a Suing and Labouring Clause is supplementary to the insurance contract.
The insured may recover expenditure properly incurred under the clause, subject to the policy wording and the requirements of Section 78.
Because the clause is supplementary, suing and labouring expenditure may remain recoverable even where the insurer has paid a total loss or where the policy is warranted free from particular average or from particular average below a specified percentage.
The clause does not convert an uninsured loss into a covered loss. The expenditure must be necessary and reasonable and must be incurred to avert or minimise a loss arising from a peril insured against.
Losses and Expenses Outside the Suing and Labouring Clause
| Loss or Expense | Recoverable under the Suing and Labouring Clause | Reason | Separate Category |
|---|---|---|---|
| General Average Sacrifice | No | It is treated as general average loss | General Average Sacrifice |
| General Average Expenditure | No | It is dealt with through the general average adjustment | General Average Expenditure |
| General Average Contribution | No | It arises from the general average contribution mechanism | General Average Contribution |
| Salvage Charges | No | They are separately defined and recoverable under maritime law | Salvage Charges |
| Expenditure to Prevent an Uninsured Loss | No | The loss sought to be prevented is not covered by the policy | Insured’s Own Account or Other Insurance |
| Unnecessary Routine Operating Costs | Generally No | They are not reasonable extraordinary expenditure incurred to avert or minimise insured loss | Ordinary Business Expense |
Duty of the Insured to Avert or Minimise Loss
Section 78(4) provides that it is the duty of the insured and its agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.
When a cargo incident occurs, the insured should not allow the loss to worsen merely because formal instructions from the insurer have not yet been received. Urgently necessary and reasonable preservation measures may need to be taken immediately.
Expenditure may not be recoverable where the measures are disproportionate, exceed the cargo value without justification, are directed only at an uninsured loss, or are performed without adequate supporting evidence.
| Measure | Main Purpose | Reasonableness Factors | Evidence to Preserve |
|---|---|---|---|
| Drying Wet Cargo | Preventing further corrosion, mould, decay, or contamination | Urgency, work method, cargo value, and expected reduction of loss | Photographs, moisture records, work report, and invoice |
| Separating Damaged and Sound Goods | Limiting the affected quantity and preventing secondary contamination | Necessity, quantity handled, and available alternatives | Inspection list, quantity records, and work records |
| Repacking | Preventing further physical damage or leakage | Condition of the original packing and need to continue transit | Before-and-after photographs, material costs, and labour costs |
| Temporary Storage | Preventing rain damage, theft, or deterioration | Storage location, period, security, and cost | Warehouse records, entry and release records, and invoices |
| Arranging a Survey | Establishing the cause and extent of loss and preserving evidence | Need for professional examination and proportionality of cost | Survey report, appointment instructions, and fee details |
| Notifying the Carrier | Preserving claims and rights against responsible third parties | Notice requirements, claim period, incident details, and correct recipient | Email, written notice, and proof of receipt |
Relationship with Current ICC(A), ICC(B), and ICC(C)
FPA is a traditional marine insurance concept under which ordinary particular average may be excluded. The current ICC(A), ICC(B), and ICC(C) 2009 must not be interpreted solely by reference to the historical expression FPA.
ICC(A) provides broad coverage for loss of or damage to the subject matter insured, subject to the stated exclusions.
ICC(B) and ICC(C) cover loss or damage caused by the perils listed in Clause 1. A partial loss is not excluded merely because it is partial. The cause of loss and the exclusions must be examined.
ICC(A), ICC(B), and ICC(C) also contain provisions addressing general average, salvage charges, and the insured’s duty under Clause 16 to take reasonable measures to avert or minimise recoverable loss and to preserve rights against carriers, bailees, and other third parties.
| Condition | Coverage Structure | Treatment of Particular Average | Suing and Labouring Expenditure | Relationship with FPA |
|---|---|---|---|---|
| Traditional Full FPA Warranty | Ordinary particular average is generally excluded | Total loss of an apportionable part and other exceptions require separate consideration | May remain separately recoverable under Sections 76 and 78 | Directly reflects the type of warranty addressed by Section 76 |
| Franchise Percentage | Particular average below the specified percentage is excluded | The percentage is tested using actual loss to the subject matter insured | Not added to the percentage test but may be separately recoverable | Sections 76(2) to 76(4) must be considered |
| ICC(A) 2009 | Broad coverage subject to stated exclusions | Particular average caused by a covered peril is generally considered | Reasonable expenditure is considered under Clause 16 | Different from a traditional full FPA warranty |
| ICC(B) 2009 | Coverage for the perils listed in Clause 1 | Coverage depends on whether an enumerated peril caused the loss | Reasonable expenditure is considered under Clause 16 | Must not be treated as automatically equivalent to FPA |
| ICC(C) 2009 | Coverage for a more limited list of perils than ICC(B) | The cause of the particular average loss remains decisive | Reasonable expenditure is considered under Clause 16 | Cannot be explained solely through historical FPA terminology |
| Policy with Special Clauses | Basic coverage may be expanded, restricted, or modified | Additional perils, exclusions, limits, and deductibles must be checked | The special expense provisions must also be reviewed | The complete policy wording is the final reference |
Practical Workflow
- Identify the Incident and Cargo Condition
Confirm wetting, breakage, shortage, contamination, deterioration, or possible total loss. - Avert or Minimise Further Loss
Where urgent, carry out reasonable drying, sorting, repacking, movement, or other preservation measures. - Notify the Insurer or Insurance Agent
Provide the incident details, cargo information, loss condition, and proposed preservation measures. - Confirm the Applicable Insurance Terms
Check any FPA warranty, franchise percentage, deductible amount, ICC clauses, and special clauses. - Classify the Loss and Expenditure
Separate particular average, general average sacrifice, salvage charges, Particular Charges, and suing and labouring expenditure. - Confirm Apportionability
Determine whether each lot, package, item, or policy entry can be independently identified and valued. - Calculate the Specified Percentage
Use actual cargo loss only and exclude general average and incidental expenses. - Prepare an Incident Chronology
Where more than one incident occurred, record the separate dates, causes, loss areas, and repair status. - Confirm Whether Earlier Damage Was Repaired
If a total loss later occurs, determine whether the earlier particular average was repaired or otherwise made good. - Preserve Rights Against Third Parties
Notify carriers, warehouse operators, and other potentially responsible parties and reserve all claims. - Classify the Expense Documents
Separate work costs, storage charges, survey costs, forwarding expenses, and other amounts by legal category. - Prepare the Insurance Claim
Submit separate calculations and supporting evidence for physical loss, salvage charges, Particular Charges, and suing and labouring expenditure.
Common Practical Cases
| Case | Main Issue | Reference Documents | Key Assessment | Initial Action |
|---|---|---|---|---|
| Partial cargo wetting under an FPA warranty | Non-coverage of ordinary particular average | Insurance policy, incident report, and survey report | Whether the loss is general average sacrifice or total loss of an apportionable part | Confirm the legal classification and applicable policy terms |
| One lot out of ten is completely lost | Total loss of an apportionable part | Commercial invoice, packing list, and insurance schedule | Whether the lost lot can be independently identified and valued | Establish the quantity and value of the individual lot |
| Particular average 4%, general average sacrifice 2%, franchise 5% | Prohibition on adding general average to particular average | Loss calculation and general average documents | The franchise test is applied to the 4% particular average alone | Present each category separately |
| Actual cargo loss 4%, survey costs 2%, franchise 5% | Exclusion of survey costs from the franchise test | Loss calculation and survey invoice | Survey costs cannot be added to the actual cargo loss | Separate physical loss from incidental expenditure |
| Additional collision damage occurs after an earlier wetting loss | Successive losses | Separate incident reports, photographs, and repair records | Whether each loss can be identified without duplication | Prepare separate loss calculations for each incident |
| Unrepaired particular average is followed by total loss | Recovery limited to the total loss | Earlier loss records and total loss documents | Whether the earlier particular average was repaired or made good | Avoid claiming the same economic loss twice |
| Emergency drying is performed despite an FPA warranty | Separate recovery of suing and labouring expenditure | Work instructions, photographs, quotations, and invoices | Whether the expenditure reasonably averted or minimised loss from an insured peril | Document the necessity and calculation of the expenditure |
| Cargo is forwarded to prevent price decline caused by uninsured delay | Expenditure to prevent an uninsured loss | Reason for forwarding, policy terms, and expenditure records | Whether the loss being prevented is insured | Consult the insurer before incurring substantial expenditure |
| Rights against the carrier are lost because no notice was given | Failure to preserve third-party rights | B/L, notice records, and limitation-period documents | Whether reasonable measures were taken to preserve the claim | Give written notice immediately after discovering the loss |
Application Scenario 1: Total Loss of an Apportionable Part under an FPA Warranty
A single policy covers ten lots of machinery parts. Each lot is separately identified by item number, quantity, and value.
One lot is completely lost during transit, while the remaining nine lots are undamaged. The policy is warranted free from particular average.
An FPA warranty ordinarily excludes partial damage to the insured cargo. In this case, however, the lost lot is independently identifiable and has a separately established value.
Therefore, if the policy and cargo documents support treatment of each lot as an independent part, the completely lost lot is likely to be recoverable as a total loss of an apportionable part.
Application Scenario 2: Franchise Percentage and General Average
A policy excludes particular average below 5%. The particular average loss to the cargo is 4% of the insured value, and a separate general average sacrifice amounts to 2%.
Although the combined figures total 6%, Section 76 does not permit the general average sacrifice to be added to the particular average for the purpose of reaching the franchise percentage.
The franchise test is therefore applied solely to the 4% particular average. Because the particular average does not reach 5%, that loss may be excluded under the policy.
The separate 2% general average sacrifice must be considered under the general average and insurance provisions independently of the franchise test.
Application Scenario 3: Two Successive Particular Average Losses
Part of the cargo is wetted during the first incident. A later collision damages a different part of the same cargo.
If the cause, date, and physical extent of each loss can be distinguished and no damage is counted twice, the losses may be treated as successive losses.
If each incident arose from a peril insured against and the policy contains no contrary provision, the insurer may be liable for each particular average loss.
The insured should therefore prepare separate calculations and supporting evidence for the wetting loss and the collision loss instead of presenting one undifferentiated estimate.
Application Scenario 4: Total Loss Following Unrepaired Particular Average
Cargo suffers a 20% particular average loss. Before the loss is repaired or otherwise made good, a later incident causes total loss of the cargo.
Under Section 77(2), the insured is generally entitled to recover only for the total loss.
The earlier 20% particular average and the later 100% total loss cannot both be recovered because that would duplicate the same economic loss.
However, reasonable drying and sorting expenditure properly incurred after the first incident may remain separately recoverable under the Suing and Labouring Clause.
Common Misunderstandings
| Misunderstanding | Actual Position | Practical Point |
|---|---|---|
| An FPA warranty means that the insurer can never be liable. | General average sacrifice, total loss of an apportionable part, salvage charges, Particular Charges, and suing and labouring expenditure require separate consideration. | Classify each loss and expense according to its legal nature. |
| ICC(C) is identical to a traditional FPA warranty. | ICC(C) covers loss caused by specified perils and is not identical to a full FPA warranty. | Check the covered perils and exclusions in the current clause. |
| A specified percentage is always deducted from the loss. | A franchise percentage and a deductible operate differently. | Confirm the exact wording and calculation method. |
| General average may be added to reach the franchise percentage. | General average loss cannot be added to particular average for this purpose. | Assess general average separately. |
| Survey costs are included as actual cargo loss in the franchise test. | Expenses incurred to ascertain or prove the loss are excluded from the percentage calculation. | Separate physical cargo loss from survey and evidential expenses. |
| The aggregate payment for successive losses must always remain below the sum insured. | Unless the policy provides otherwise, liability for successive losses may exceed the sum insured in aggregate. | Confirm that the losses are separate and not duplicated. |
| Particular average and a later total loss can always both be recovered. | If the earlier particular average remains unrepaired or unrectified, only the total loss is generally recoverable. | Confirm whether the earlier loss was repaired or otherwise made good. |
| Suing and labouring expenditure cannot be claimed after a total loss payment. | The Suing and Labouring Clause is supplementary, and properly incurred expenditure may remain separately recoverable. | Establish necessity, reasonableness, and connection with an insured peril. |
| Every expense incurred after an incident is suing and labouring expenditure. | General average, salvage charges, ordinary operating expenses, and expenditure relating to uninsured loss are separate categories. | Identify who incurred the expenditure, why it was incurred, and its legal basis. |
| The insured should do nothing until the insurer gives instructions. | The insured and its agents must take reasonable measures to avert or minimise loss. | Take urgent reasonable action while notifying the insurer promptly. |
| Only the insurer must preserve rights against the carrier. | The insured must also take reasonable steps to preserve claims against responsible third parties. | Manage notices, reservations of rights, and limitation periods. |
Practical Decision-Making Checklist
| Situation | Party to Consult | Points to Confirm | Action if a Problem Is Identified |
|---|---|---|---|
| Confirming the insurance terms | Insurer or insurance agent | FPA warranty, franchise percentage, deductible amount, ICC clauses, and special clauses | Obtain the complete policy and confirm the order in which the provisions apply |
| Discovering partial cargo damage | Warehouse, carrier, and surveyor | Extent, cause, quantity, and time of loss | Secure photographs, inspection records, and reservation notices |
| Assessing apportionability | Insurer, accounting personnel, and cargo management personnel | Lot, package, quantity, individual value, and insurance schedule | Submit documents establishing the independence of the affected part |
| Calculating a franchise percentage | Insurer or surveyor | Actual cargo loss, insured value, and applicable calculation unit | Recalculate after excluding general average and incidental expenses |
| Handling multiple incidents | Insurer, carrier, and surveyor | Cause, date, physical scope, and overlap of each loss | Prepare separate evidence and loss calculations for each incident |
| A total loss follows particular average | Insurer, repair contractor, and surveyor | Whether the earlier particular average was repaired and whether value was restored | Avoid duplicate recovery of the earlier loss and total loss |
| Starting urgent preservation work | Insurer or insurance agent | Urgency, necessity, expected benefit, cost, and available alternatives | Take the minimum reasonable measures and preserve complete records |
| Classifying expenditure | Insurer or surveyor | Particular Charges, suing and labouring expenditure, salvage charges, and general average | Record the purpose of the expenditure and the party that incurred it |
| Confirming the insured peril | Insurer or insurance agent | Whether the loss being averted or minimised is covered | Separate expenditure relating solely to uninsured loss |
| Notifying the carrier | Carrier, shipping line, or warehouse operator | Incident details, reservation of rights, notice requirements, and claim periods | Give written notice and preserve proof of receipt |
| Arranging a survey | Insurer or surveyor | Scope, cost, urgency, and evidential purpose | Avoid disproportionate investigation and define the required scope |
| Submitting the insurance claim | Insurer or insurance agent | Loss classification, expense classification, supporting documents, and amounts already paid | Prepare separate claim calculations and eliminate duplication |
Do Not Confuse Non-Coverage of Particular Average with the Duty to Avert or Minimise Loss
Non-coverage of particular average limits the insurer’s liability for ordinary particular average under the relevant policy wording.
The duty to avert or minimise loss requires the insured and its agents to take reasonable measures after an incident to prevent avoidable deterioration.
The fact that particular average is excluded does not permit the insured to abandon or neglect the cargo.
Even where ordinary particular average is excluded, salvage charges, Particular Charges, or expenditure properly incurred under the Suing and Labouring Clause may remain separately recoverable.
The Suing and Labouring Clause does not turn an uninsured loss into a covered loss through an expense claim. The loss being averted or minimised must arise from a peril insured against.
Summary
Section 76 addresses warranties excluding particular average, total loss of an apportionable part, non-coverage below a franchise percentage, salvage charges, Particular Charges, and suing and labouring expenditure.
Even where ordinary particular average is excluded, separate recovery may remain possible for general average sacrifice, total loss of an apportionable part, salvage charges, Particular Charges, and expenditure properly incurred under the Suing and Labouring Clause.
When determining whether a franchise percentage has been reached, only actual loss to the subject matter insured is considered. General average, Particular Charges, survey costs, and expenses incurred to prove the loss are not added.
Section 77 provides for liability for successive losses unless the policy states otherwise. Where a total loss follows an unrepaired or unrectified particular average loss, only the total loss is generally recoverable.
Section 78 treats the Suing and Labouring Clause as supplementary to the insurance contract. Properly incurred expenditure may therefore remain separately recoverable even after payment of a total loss or where particular average is excluded.
General average loss, general average contribution, salvage charges, and expenditure incurred solely to prevent an uninsured loss are not recoverable under the Suing and Labouring Clause.
Under the current ICC(A), ICC(B), and ICC(C) 2009, coverage must not be determined solely by the traditional FPA concept. The applicable insured perils, exclusions, Clause 16 duties, franchise percentage, deductible amount, and special clauses must be examined.
When a cargo incident occurs, the insured should take reasonable measures to avert or minimise further loss, preserve evidence and rights against third parties, classify each loss and expense correctly, and promptly consult the insurer, insurance agent, surveyor, or legal counsel where necessary.
