Case law - Cargo Flashcards
- Asfall v Blundell [1895] BOLD
Asfar v Blundell [1896]. In this instance, the ship carrying a consignment of dates was sunk in the Thames after a collision with another vessel, and the dates were not destroyed, but were deemed unfit for human consumption. Because the dates had become unmerchantable as dates, no freight was payable on delivery as they were, effectively, a constructive total loss.
If it is so changed in its nature by the perils of the sea as to become an unmerchantable thing, which no buyer would buy and no honest seller would sell, then there is a total loss.
- Bayview Motors Ltd v Mitsui Marine & Fire Insurance Co [2003]
Two consignments of motor cars were stolen from a fence compound at Santo Domingo, the port of destination, which was controlled by customs. The goods were insured under the 1963 Clauses which were in materially the same terms as the Institute Cargo Clauses (1982). The Court of Appeal held that the provision for termination of cover on delivery of the goods “to the consignees’ or other final warehouse or place of storage at the destination named in the policy” does not apply where that is not the end of their journey, and moreover that a custom compound is a holding area, similar to a transit shed, where goods are not held for storage but for customs purposes. The goods were still, therefore, covered under the policies when the loss took place.
- Berk v Style [1956] BOLD
Inherent vice
A cargo of kieselguhr (material used for filtration) was shipped in bags from Africa to London on “all risks” terms. On arrival it was found that many of the bags had burst. The claim for the cost of re-bagging, etc., was rejected by the Court on the basis that the bags had burst because of insufficient strength and this weakness was an inherent vice for which insurers were not liable.
- Boon and Cheah v Asia Insurance Co Ltd [1975]
Total loss
The plaintiffs shipped 668 large steel pipes aboard a barge to be towed from Prai to Brunei. The pipes were insured with the defendants for $938,702, but were warranted free from particular average. During the voyage, all but 12 of the pipes were lost, and even those were damaged. Because the shipment was not covered for partial loss, the plaintiffs, relying on the de minimis rule, claimed that the loss was either a constructive or an actual total loss. The Malaysia High Court ruled that in the circumstances of the case, the de minimis rule could not be applied, and, therefore, the loss was not an actual total loss.
In my judgment, 12 pipes measuring a total of 360 ft, weighing 36 tons, costing $14,400 and insured at $16,000, affect far too high a proportion of the whole consignment of 668 pipes to be capable of being dismissed as a matter of de minimis. It may well be that in the case of a single pipe or two out of the whole consignment, the rule would apply, but I fail to see how it is possible to hold that 12 pipes can be ignored or treated a stifling and to be brushed aside. I find, therefore, on the facts before me that a consignment of 668 pipes is not totally lost when 12 pipes making it up are not lost.
- Bowring & Co v Amsterdam London Insurance Co [1936]
Inherent vice
Case of a policy on bags of ground nuts, “to pay average and/ or damage from sweating and/or heating when resulting from external cause”. Wright J held, as to the burden of proof, that it was for the plaintiffs to prove heating or sweating from an external cause, though if the last words had not been there, if the cover had been simply against heating or sweating, he would have held that it was for the defendants to show that the heating or sweating was due to inherent vice. He held on the evidence that the greater part of the damage was due to inherent vice—to the excessive moisture content of the goods on shipment—and was therefore irrecoverable; but a small part was due to sweat water dripping onto the goods from the ship’s sides and beams and causing heating, and this he held to be heating from an external cause. Sweating was said to mean sweating of the goods themselves, of which there was no evidence.
- British and Foreign Marine Insurance Co v Gaunt [1920] BOLD
All risks cover & fortuity
A shipment of wool was sent from Chile to England on all risks terms “from the sheep’s back” to the warehouse in Europe. On arrival it was found to have sustained water damage at some time while en route to the loading port, but Insurers declined the claim because the Assured were unable to specify exactly how and when the damage had occurred. The House of Lords allowed the claim saying that under an “all risks” policy the Assured was only obliged to show that some fortuity had occurred (and that no exclusions applied) and “he is not bound to go further and prove the exact nature of the accident… which occasioned his loss.”
- Brown v Fleming [1902] BOLD
Part of the thing insured
Where the insurance was on “228 cases whisky”, and the straw and labels were damaged Bigham J held that the assured could recover for the loss arising from the sale of the cases of whisky in their damaged state: Brown v Fleming (1902). The ground of the decision was that the straw and labels were part of the thing insured.
- Butler v Wildeman [1820]
Jettison and washing overboard
The ICC (B), in cl 1.2.2, makes provision for loss caused by ‘jettison’ and ‘washing overboard’ to be insurable risks; the ICC (C), in cl 1.2.2, only provides for loss caused by ‘jettison’. Whilst the term ‘washing overboard’ is self-explanatory, ‘jettison’, as it applies to marine insurance, is not. Jettison is a specific insurable marine peril. It is not simply the intentional casting overboard of the subject matter insured, but the intentional casting overboard of the subject matter insured for good reason. In Butler v Wildman (1821) 3 B&Ald 398, Bayley J stated: [p 403] ‘…its true meaning, in a policy of insurance, seems to me to be any casting over board ex justa causa.’ (Just or lawful cause).
- De Monchy v Phoenix Insurance Company of Hartford [1929]
Section 55(2)(c) of the Marine Insurance Act 1906 states: Unless the policy otherwise provides, the insurer is not liable for…ordinary leakage and breakage.
Clause 4.2 of all the Institute Cargo Clauses repeats this exclusion, but only for leakage, not for breakage. The term “ordinary” in insurance policies limits exclusions to non-exceptional leakage or breakage. In De Monchy v Phoenix Insurance Co of Hartford, the meaning of “leakage” was clarified as an insured peril. In Re Traders and General Insurance Association Ltd, the court addressed whether the policy covered all types of leakage or only those caused by insured perils. The case involved 100 barrels of turpentine shipped from Florida to Rotterdam, where a shortfall of 115 gallons was noted. The insurers denied the claim, arguing that there was no visible leakage and suggesting contraction due to temperature changes. The House of Lords ruled in favour of the plaintiffs, stating that the discrepancy indicated a physical loss covered by the policy. Leakage was defined as any gradual escape, whether through a small hole or the material’s pores, not caused by intentional damage.
Leakage I take to mean any stealthy escape either through a small hole which might be discernible, or through the pores of the material of which the cask is composed. I think upon the true construction of the clause the parties intended that if there were any gradual escape of the turpentine from the receptacle from any cause other than wilful damage, the insurers were to pay.
Section 55(2)(c) of the Marine Insurance Act 1906 states: Unless the policy otherwise provides, the insurer is not liable for…ordinary leakage and breakage.
Clause 4.2 of all the Institute Cargo Clauses repeats this exclusion, but only for leakage, not for breakage. The term “ordinary” in insurance policies limits exclusions to non-exceptional leakage or breakage. In De Monchy v Phoenix Insurance Co of Hartford, the meaning of “leakage” was clarified as an insured peril. In Re Traders and General Insurance Association Ltd, the court addressed whether the policy covered all types of leakage or only those caused by insured perils. The case involved 100 barrels of turpentine shipped from Florida to Rotterdam, where a shortfall of 115 gallons was noted. The insurers denied the claim, arguing that there was no visible leakage and suggesting contraction due to temperature changes. The House of Lords ruled in favour of the plaintiffs, stating that the discrepancy indicated a physical loss covered by the policy. Leakage was defined as any gradual escape, whether through a small hole or the material’s pores, not caused by intentional damage.
Leakage I take to mean any stealthy escape either through a small hole which might be discernible, or through the pores of the material of which the cask is composed. I think upon the true construction of the clause the parties intended that if there were any gradual escape of the turpentine from the receptacle from any cause other than wilful damage, the insurers were to pay.
- Duff v Mackenzie [1857] BOLD
Total loss
This was an action brought in respect of the loss of a master’s personal effects, which were insured with the defendants for £100, but the policy was warranted free from all average. When the plaintiff’s vessel Lion was destroyed by fire, the master succeeded in saving about one-third of his effects, the remainder being lost. The master sought to be indemnified for his loss by his insurers, but the insurers denied liability, on the basis that the effects were only insured for a total loss. The court ruled that the master could recover under the policy, as the personal effects that had been lost had been totally lost. That is, the effects were all different and, therefore, could be itemised as individual total losses and easily apportioned as such.
- Fabrique de Produits v Large [1923]
Theft and total loss
The plaintiffs insured three cases of chemicals, each separately, with the defendants, under a policy of marine insurance, warehouse to warehouse, from London to Bordeaux and thence to Switzerland. The policy of insurance included cover for loss by thieves, but was warranted free from particular average. Whilst the goods were in the warehouse, awaiting shipment, two of the cases were stolen and the plaintiffs claimed on their policy of insurance. The insurers rejected the claim on the basis that, first, theft had to include violence and, secondly, the goods were warranted free from particular average (fpa). The court ruled that the thieves, in breaking into the warehouse, had committed an act violence and the violence did not have to be against the person. Also, regarding the warranty of fpa, the loss was not a particular average loss of the whole, but a total loss of part (two cases) of the goods insured.
- Francis v Boulton [1895] BOLD
The plaintiffs lighter was loaded with bags of rice which were insured with the defendants but warranted ‘free from particular average, unless the vessel or craft be stranded, sunk, on fire, or in collision…’. During the course of her passage up the Thames, the lighter came into collision with the steamer Ulleswater and was sunk. The lighter was refloated and, on the advice of the Salvage Association, the plaintiff had the rice kiln-dried and then sold at a considerable loss as river damaged. After failing to succeed in an action against the owners of Ulleswater, the plaintiff and the underwriters brought this action in order to settle the dispute between them as to whether there had been a total or partial loss. The court ruled that the loss was a partial loss, as the rice was still merchantable, in that it could still be conditioned and kiln-dried.
Where damaged goods have prior to sale been necessarily conditioned, it is the value of the conditioned goods, and not that of the goods less the cost of conditioning, that is to be compared with the sound value, in order to ascertain the proportion of loss.
- Global Process Systems v Syakaral Takaful Malaysia [2011]
Supreme Court was asked to consider whether the proximate cause of a loss was the perils of the sea or the inherent vice.
Global Process Systems (“GPS”) purchased an oil rig which they required to be towed from Texas to Malaysia. During the course of the voyage, three of the rig’s legs broke. The experts agreed that the loss occurred as a result of fatigue cracking which had developed as a result of the motion of the sea in addition to a final “leg-breaking” wave. However, it was common ground that there had been nothing unusual about the weather conditions during the voyage.
The marine cargo policy in question covered “all risks of loss and damage to the subject matter insured” but excluded “loss, damage or expense caused by inherent vice or nature of the subject matter insured.” At first instance it was held that there was an inherent inability of the legs to withstand the normal incidents of the voyage and so the proximate cause of the loss was inherent vice. This decision was overturned by the Court of Appeal. The Supreme Court dismissed the insurers’ appeal from the Court of Appeal’s decision and held that the proximate cause of the loss was a question of fact to be determined applying the common sense of a business or sea-faring man. The exceptional set of circumstances combined with the “leg-breaking” wave in this case was held to be sufficiently external and fortuitous to support a finding that inherent vice was not the proximate cause of the loss.
- Hills v London Assurance Co [1839]
Actual total loss, cargo shipped and insured in bulk
it is clear that there can be no total loss on part of a cargo so shipped and insured. In Hills v London Assurance Co a cargo of wheat, valued at £1,600 and warranted free of average, was shipped in bulk and insured in bulk by one entire insurance. A quantity of the wheat to the value of about £70 was pumped up out of the hold into the sea during a storm and totally lost. This was held not to be an actual total loss of part of the wheat, but only an average loss on the whole, for which the underwriters were not liable.
- Ionides v Hartford [1859]
When someone transfers (assigns) their insurance policy to someone else (the assignee), the new person can only use the insurance for the coverage the original policyholder (the assignor) agreed to transfer.
In Ionides v Harford, the original owners of a grain shipment insured it for the journey from Galatz to Emden, and then onward to the UK. During the voyage, they sold the cargo to a buyer, including the insurance, but only up to Emden. When the cargo was lost after leaving Emden on the way to the UK, the court ruled that the buyer couldn’t claim insurance for that part of the journey because the original insurance assignment only covered the trip to Emden.
- John Mahn v Russell [1960]
In John Martin Ltd v Russell, the goods were placed in a transit shed at Liverpool, the port of discharge, and sustained damage there before transit to the purchasers from the assured had commenced. It was held that although the transit shed could be regarded as a “warehouse” and, probably, as the “consignees’ warehouse” although not owned or leased by the consignees, it could not be regarded as a “final warehouse” under the current terms of the “warehouse to warehouse” clause. Furthermore, the cover continued notwithstanding the fact that the consignees had no intention of delivering the goods to a “final warehouse.”
Since that decision, the words “or place of storage” have been added to the clause 8.1.2, making it unnecessary to consider whether delivery, (or now unloading) is to (or at) a “warehouse” or not. The proposition that the word “final” should apply to all the locations referred to in cl.8.1.1 appears to be confirmed by Bayview Motors Ltd v Mitsui Mar & Fire Ins Co [2003].
- Johnson v Sheddon [1802]
Meaning of ‘gross value’
Section 71(4) then goes on to define the meaning of ‘gross value’, which is based on the ruling in Johnson v Sheddon. The question put before the court was whether the difference between the sound value and the damaged value should be calculated on the basis of gross prices or net prices. That is, the gross price of the goods which would include freight, landing charges, etc, or the net price, which would be the bare price of the goods themselves.
The plaintiff insured a cargo of brimstone with the defendants for a voyage from Sicily to Hamburg. When the cargo arrived in Hamburg, it was found to be damaged by seawater, and the plaintiff suffered a partial loss. The question before the court was whether the measure of indemnity should be calculated on the basis of the difference between the respective sound and damaged net values, or the respective sound and damaged gross values. The court ruled that the indemnity should be based on the difference between the respective sound and damaged gross values, although the underwriter should not be liable for any charges due after the arrival of the goods at their port of destination.
- Lewis v Rucker [1761] BOLD
Valued policy
The Act, in s 27(2), provides the definition of a valued policy in the following terms: A valued policy is a policy which specifies the agreed value of the subject matter insured.
The purpose of a valued policy was considered in the old case of Lewis v Rucker (1761) 2 Burr 1167, where hogsheads of sugar were insured under valued policies of insurance for a voyage from the West Indies to Hamburg. When, on arrival at Hamburg, the hogsheads were found to be damaged by seawater, the owner of the goods claimed on his policy and the court was obliged to consider the significance of a valued policy which, at the time, was thought by many to be a means of effecting a wagering policy.
A valued policy is not to be a considered a wager policy, or like ‘interest or no interest’ …The only effect of the valuation is fixing the amount of the prime cost; just as if the parties admitted it at the trial: but, in every argument, and for every other purpose, it must be taken that the value was fixed in such a manner as that the insured meant only to have an indemnity.
- London and Provincial Leather Process Ltd v Hudson [1939]
Under all the Institute Cargo Clauses (cl 4.6), the insurer is not liable for: loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel
This is a new exclusion, which was not included in previous versions of the Cargo Clauses. It would appear to have the effect of excluding a category of loss formerly covered under the All Risks Clauses, where the detention or sale of the insured property arising from the insolvency of a third party (including, potentially, the shipowners and others whose insolvency or financial default is referred to in the new cl 4.6) was within the scope of the risks covered.
This change renders cases like London and Provincial Leather Process Ltd v Hudson (1939) less relevant under current policies, nonetheless, the cases are relevant for the purpose of illustrating the effects of insolvency, a risk no longer covered by the ICC (A). In that case, the plaintiffs recovered under an all-risks policy after lamb skins sent to Germany for processing were lost due to the insolvency of the processing company, Popper. The court ruled the loss was accidental or fortuitous, as the goods were unexpectedly taken by administrators and subcontractors, constituting a covered risk under the policy. The court ruled in favour of the plaintiffs because the insolvency of the German company was of an accidental or fortuitous character.
- Lysaght v Coleman [1895] BOLD
Containers and packing materials
Unfortunately, the statutory definition of ‘goods’ provided by r 17 of the Rules for Construction has failed to clarify whether containers and packing materials, usually essential to the safe carriage of goods, may be considered as part of those goods and, therefore, covered by the policy of insurance. A general test appears to be that where the containers or packing materials are supplied by the owner of the goods and may also be considered, for practical purposes, as an integral part of the goods, then the containers and packing materials should be included within the cover provided by the policy of insurance. Much, therefore, depends upon a question of construction of the policy.
In this case, where the policy was on “galvanised iron”, Lord Esher MR said: “I think I ought to say also that it is clear that the insurance was on the iron, so that no claim could arise in respect of damaged packing cases”.
Ranking towards CTL
The cost of examining goods which are suspected of having suffered damage cannot be included as an item ranking towards a constructive total loss, where no such inspection takes place and it is not established that the goods were in fact damaged.
- Maignen & Co v National Benefit Assurance Co [1922]
The policy words were “including leakage or breakage however caused irrespective of percentage”, it appears that the plaintiffs admitted that they ought to make an allowance for loss that was bound to occur due to the inherent character of the goods. The insurance was on hogsheads of burgundy, and Greer J held that leakage covered not only the wine that disappeared, but also that which, though not lost from the barrels, went bad owing to the leakage of the remainder.
- Masefield AG v Amlin [2011]
Piracy
In the early 2000’s the proliferation of piracy in the Gulf of Aden and around the Indian Ocean caused the shipping and insurance industry to consider issues which had not arisen for many years - the last piracy case to be heard in the English Courts being in 1590 (Hicks v Palington). The “Bunga Melati Dua” was hijacked by Somali pirates. The ransom was paid and the ship returned to her owners within 6 weeks. The assured attempted to claim that cargo was an or CTL on account of hijacking, on the ground that they were “irretrievably deprived” of the cargo (ATL), or a CTL because ATL appeared unavoidable. It was argued that prospects of recovering cargo should not be taken into account, because paying ransom was contrary to English public policy, therefore the possibility of recovering the insured property this way should be disregarded.
The Court of Appeal upheld the judgment at first instance, determining that payment of ransom is not contrary to public policy, and therefore not illegal under English law. The Court also found that an assured is not irretrievably deprived of property if it is legally and physically possible to recover it (and even if such can only be achieved by disproportionate effort and expenses).
- Mayban General Insurance Bhd v Alstom Power Plants Ltd [2004]
Damage to cargo in unexceptional adverse weather that it was unfit to withstand. It was said in this case, contrary to the view expressed in earlier editions of this work, damage due to insufficiency of packing amounts to inherent vice because the subject matter of the insurance includes the materials in which the goods are packed. Whether or not that view is correct as a general rule (which is doubtful), it is clear that insufficiency of packing is not inherent vice on the construction of the 2009 Institute Cargo Clauses.
Departed from the conventional understanding of inherent vice. Mayban has now been disapproved.
- Middows v Robertson [1929]
Frustration Clause
During World War II, goods aboard three German ships (Minden, Wangoni, and Halle) were lost under different circumstances: two ships were scuttled to avoid capture, and one returned to Germany with its cargo. The insurance policies included frustration clauses, and the insurers argued they were not liable, claiming the voyages were frustrated once war was declared.
The House of Lords ruled that the losses constituted constructive total losses caused by the German Government’s actions, and the insurers were liable. The frustration clauses did not apply because they addressed the loss of the voyage or adventure, not the physical loss of goods. The court clarified that claims involving physical loss or damage fall outside the scope of frustration clauses, ensuring the policies still covered war-related perils.
Key interpretation: The clause’s phrasing, “based upon” rather than “caused by,” gives it a broad remit but does not override coverage for insured perils causing actual loss of goods
- Overseas Commodities Ltd v Style [1958] BOLD
Breach of warranty
The plaintiffs shipped two consignments of tinned pork from France to London under an all risks policy of insurance underwritten by the defendants. The policy contained a clause which stated that all the tins should be marked by the manufacturers verifying their date of manufacture.
When the tins of pork were delivered, many of the tins were found to be rusty or broken and much of the pork was either condemned or sold off cheaply. The plaintiffs claimed on their policy of insurance. However, the insurers rejected the claim on the basis that, as many of the tins did not have the date of manufacture upon them, the plaintiffs were in breach of the warranty. The court ruled that the words ‘for verification’ in the clause meant that the tins must be so marked and the lack of such marks on many of the tins amounted to a breach of a warranty and, thus, the underwriters were not liable.
- Ralli v Janson [1856] BOLD
Actual total loss – cargo shipped in separate packages but not separately insured
In this case, an insurance was effected by two policies on 2,688 bags of linseed, valued at £1,600, “free of average”, for a voyage from Calcutta to London. The ship met with a hurricane and was driven into the Cape of Good Hope, where 1,023 bags were found to be in such a state from sea-damage that a large portion of the linseed was at once thrown into the sea as rotten and worthless, and the rest was then and there sold and only realised a few shillings, and if sent on in the vessel would have lost the character of linseed before arriving in England.
The remaining 1,165 bags 117 were brought sound to England. The question was whether on the 1,023 bags the assured were entitled to recover, notwithstanding the memorandum, as for a total loss of part of the cargo. It was held that they were not.
In the US, the law appears to be the same: namely, that “the underwriter is not liable for any partial loss on memorandum articles unless there is a total loss of the whole of the particular species, whether the particular article is shipped in bulk, or in separate boxes or packages”.
- Roux v Salvador [1836] BOLD
The plaintiff shipped a cargo of 1,000 salted hides aboard Roxalane from Valparaiso to Bordeaux. The hides were insured with the defendants under a voyage policy of insurance, which covered the usual perils, but was warranted free of particular average unless the ship be stranded. On the voyage from Valparaiso, by way of Cape Horn, Roxalane encountered severe weather and had to put into Rio de Janeiro for repairs. Accordingly, all the cargo was landed, and it was then that the hides were found to have been so wetted by seawater that they could not be taken onwards to Bordeaux because they would, through further putrefaction, have lost their character as hides. They were, therefore, sold in Rio de Janeiro for a quarter of their true value. The plaintiff claimed on his policy of insurance for a total loss brought about by the damage and eventual sale of the hides in Rio de Janeiro. The court ruled that the plaintiff could recover for a total loss, as the goods were both perishable and out of the control of the assured.
- Safadi v Western Assurance Co [1933]
Land transit risks under cover policies
Bales of cotton in transit from Manchester to Damascus were destroyed by fire whilst they were delayed in the Customs House at Beirut. The reason for the delay was suggested as being civil unrest between Beirut and Damascus but, in reality, it turned out that the goods had not been released from the Customs House because nobody had paid for them. When Mr Safadi claimed on his policy of insurance, the insurers refused payment because, they contended, the delay had not been beyond the control of the assured. It was held that the goods were no longer in transit and that the held covered clause could not be applied as the delay was within the assured’s control. The court concurred with the insurers and ruled in their favour.
- Sassoon & Co v Yatsher Insurance Co [1923]
Coverage of inherent vice
It was considered that named perils of mould and mildew in an insurance on a cargo of cigarettes would not extend to cover damage due to inherent vice, but Atkin LJ was inclined to consider that damage by inherent vice, which might or might not happen, would be covered.
There was considerable discussion as to whether mould or mildew caused by inherent vice would be covered. It was held, having regard to the Marine Insurance Act 1906 s.55(2)(c), that it would not, but that the onus was on the defendants to establish the cause of the mould and mildew, and that they had failed to establish that it was caused by inherent vice. The Court of Appeal agreed with Roche J on this point. Scrutton LJ also agreed with the general proposition that it was necessary to prove a casualty, but added: “I am inclined to take the same view as Mr. Phillips when speaking of fire where he says: ‘This loss like a loss by capture is in its kind extraordinary,’ and mould and mildew are in the same position as fire and capture. The result of that is that if you prove its happening you prove a casualty unless the underwriters show it happens: ‘from the qualities or defects of the subject insured’”. Atkin LJ apparently accepted the distinction drawn by Scrutton LJ, and also thought it arguable that the policy was intended to cover and did cover mould or mildew caused by inherent vice.
- Soya GmbH v White [1983] BOLD
Inherent vice (if the policy otherwise provides)
In Soya GmbH Mainz Kommanditgesellschaft v White (1982), the plaintiffs claimed insurance for soya beans that arrived in a deteriorated condition. The insurers denied the claim, citing non-disclosure of damage to a previous shipment and arguing the loss was due to inherent vice. However, the policy included a “heat, sweat, and spontaneous combustion” (HSSC) clause.
The House of Lords ruled in favour of the plaintiffs, holding that the HSSC clause made the insurers liable for losses caused by inherent vice involving internal heating, sweating, or spontaneous combustion. Lord Diplock clarified that inherent vice refers to the natural risk of deterioration during the voyage without external accidents. While such risks are typically excluded under marine insurance, the HSSC clause explicitly extended coverage to these internal processes, overriding the exclusion in Section 55(2)(c) of the Marine Insurance Act. The judgment emphasized that interpreting the HSSC clause to exclude inherent vice-related losses would contradict commercial common sense. The inclusion of the clause demonstrated the intent to insure against specific risks stemming from the natural behaviour of the cargo.
- Taylor v Dunbar [1869] BOLD
Loss by delay
The plaintiffs effected a policy of insurance upon 26 packages of dead pigs shipped aboard Leopard from Hamburg to London. In addition to perils of the seas, the policy also included a clause which provided cover for ‘all other perils, losses and misfortunes’. Because of bad weather, Leopard was delayed at the mouth of the River Elbe for a week, by which time the pig carcasses had become so putrid, they were jettisoned. The plaintiff claimed for the loss on his policy of insurance. The court ruled that the loss was not attributable to a peril of the sea, nor was it a loss covered by ‘all other perils, losses and misfortunes’.
The facts stated in the case show beyond a doubt that the proximate cause of the loss of the meat was the delay in the prosecution of the voyage. That delay was occasioned by tempestuous weather: but no case that I am aware of has held that a loss by the unexpected duration of the voyage, though that be caused by perils of the sea, entitles the assured to recover under a policy like this.
- Traders & General Insurance Association v Bankers & General Insurance Co [1921]
Ordinary leakage and breakage
This was a claim by the original insurers upon their re-insurers. Under the policy, a consignment of 289 barrels of soya bean oil was shipped to Genoa. The policy covered loss by perils of the sea and also contained a clause which stated: ‘To pay average, including the risks of leakage in excess of 2%. Barrel by barrel over trade ullage.’ During the voyage, the vessel carrying the consignment of soya bean oil encountered severe weather and, on arrival at Genoa, a Lloyd’s surveyor reported that the barrels were old and second hand and that leakage had taken place because the barrels were not strong enough for their purpose. The plaintiffs rejected this report, and stated that, because new barrels absorbed oil, it was desirable to use old barrels which, on this occasion, had been supplied by a reputable company. The court ruled in favour of the plaintiffs. On the evidence presented, there was good ground for saying that the loss was caused by perils of the seas. Bailhache J was reported to have held that:
The main question raised was whether the word ‘leakage’ must be read as meaning leakage simpliciter or only leakage caused by a peril insured against. In his opinion the word in this policy was intended to cover leakage of any kind, whatever might be the cause of it. Leakage caused by a peril insured against would be covered in any event, and it would have been unnecessary to say anything about it. Apart from the question of construction, he thought that on the evidence there was good ground for saying that the loss was caused by perils of the seas, which were perils insured against. The fair inference was that the bad weather started the damage to the barrels, even though their subsequent handling at Genoa might have increased it. The original insurers made such good use of the report of the surveyor at Genoa that they induced the insured to accept a considerable reduction of his claim, and the compromise made by them was clearly reasonable, and the defendants were therefore liable.
- Wadsworth Lighterage Ltd v Sea Insurance Co Ltd [1929] BOLD
A wooden barge was insured against total loss including damage by collision, standing or sinking. The barge had spent 50 years carrying coal on the River Mersey and sank at her moorings on a calm night. It was held that the loss was due to ordinary wear and tear and therefore excluded by Section 55 of the MIA. The sinking had occurred because “a very old barge which had been bumping about in the Mersey for a long time had come to the end of its tether”. The loss was therefore due to the general debility of the barge rather than any fortuity.
- Whiting v New Zealand Insurance Co Ltd [1932]
Computing the measure of indemnity
This case concerned the indemnity calculation for 893 dozen ladies’ Panama hats that were found mouldy upon arrival in London. The court ruled that indemnity should be based on the difference between the sound value and damaged value of the goods at their place and time of arrival.
Key points:
1. Measure of Indemnity: Under Section 71(3) of the Marine Insurance Act 1906, the loss is measured as the difference between the gross sound value and the damaged value at the place of arrival.
2. Unvalued Policy: For unvalued policies, the depreciation is relative to the “insurable value,” which is defined by Section 16(3) as the prime cost of the goods, plus shipping expenses and insurance charges.
3. Timing and Valuation: The insurable value is determined when the risk attaches, per Section 16(4). If no immediate market value is available, the calculation should use the best estimate of market or other value at the time of arrival.
The court’s decision emphasized that the indemnity aligns with the actual loss in market value upon delivery, reflecting the economic impact on the insured.
- Wünsche Handelsgesellschaft m.bh v Tai Ping Insurance Co Limited [1998]
In Wunsche v Insurers, the plaintiffs, CIF buyers of canned mushrooms and asparagus, claimed under ex-factory insurance policies for damage and pilferage to goods shipped from China to Hamburg. The Court of Appeal upheld that the insurers were liable for damage sustained before the goods were containerized at Shenzhen, but clarified that goods already lost (pilfered) before appropriation to the insurance contract were not covered.
Key Points:
1. Insurance Coverage: The policies were retrospective, covering goods from the ex-factory stage, despite being effected later.
2. Appropriation: The court ruled that goods must be appropriated to the contract to be covered by the insurance. While damaged goods could be covered retrospectively, goods already lost (missing or pilfered) before appropriation could not be insured.
3. Contractual Flexibility: The court acknowledged that parties can agree to provide retrospective cover for goods already appropriated but not for those that were missing at the time of appropriation.
4. Judgment: The insurers were liable for damages to goods appropriated to the contract, but not for pre-appropriation losses of non-existent goods.
This case reinforces the principle that retrospective insurance requires the goods to exist and be identifiable to the contract of insurance.
