Irrespective of Percentage vs. Deductibles – A Conflict in Insurance Documents under LCs

One of the recurring issues in LC operations is how to handle insurance documents that contain both the phrase “irrespective of percentage” and a deductible clause. Traders often assume the “irrespective of percentage” wording will override the deductible, but under UCP 600 and ISBP 821, the story is different. Let’s look at a real case.

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QUESTION

Dear Mr. Old Man,

LC requirement is for Insurance certificate to cover “irrespective of percentage.”

The presented Insurance certificate covers the clauses required in the LC and also indicates “irrespective of percentage.” However, at the bottom, it additionally states: “deductible for each and every occurrence: 0.5% of the consignment.”

Can we still consider that the “irrespective of percentage” wording overrides the deductible mentioned elsewhere in the document?

Regards,

Rohini

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ANSWER

Dear Rohini,

Thank you for your question.

According to ISBP 821 paragraph K14, an insurance document may state that cover is subject to a franchise or deductible. However, when a credit requires insurance cover “irrespective of percentage,” the document must not include any clause making the cover subject to a franchise or deductible.

In this case, although the certificate mentions “irrespective of percentage,” it also specifies a deductible of 0.5% of the consignment. This conflicts with the LC requirement and constitutes a discrepancy under UCP 600 sub-article 14(d) and ISBP 821 K14.

Conclusion:

The “irrespective of percentage” wording does not override the deductible clause. You may raise a discrepancy:

“Insurance document subject to deductible clause, contrary to LC requirement for cover ‘irrespective of percentage.’”

Best regards,

Mr. Old Man