An electrical transformer was shipped from Ellesmere Port to Rotterdam and there transferred to a container vessel for carriage to Lumut. Severe weather was encountered, but not such as a commercial person would regard as falling outside the range of what could reasonably be expected in the seas in question at that time of year. When it arrived at site, it was found to be seriously damaged and a claim was made under the policy of insurance. The insurers (under an ‘all risks’ policy) said that the damage had resulted from the transformer’s inability to withstand the ordinary incidents of carriage by sea from the United Kingdom to Malaysia during the winter months, and rejected the claim on the grounds that the loss was caused by inherent vice.
Held: The immediate cause of the damage to the transformer was the violent movement of the vessel due to the actions of the wind and sea: ‘These in themselves were certainly events of a fortuitous nature and they were external to the cargo, but were they the real cause of the loss?’
The loss was caused by the inability of the transformer to withstand the ordinary conditions of the voyage rather than by the occurrence of conditions which it could not reasonably have been expected to encounter.
Moore-Bick J said: ‘The expression ‘all risks’ is used in policies of insurance as a convenient way of encompassing all insurable risks to which the property in question may be exposed without attempting to identify them individually. The contract nonetheless remains one under which the insurer accepts the risk of loss occurring through the occurrence of some peril acting on the property insured. A number of consequences follow from this. The first is that in order to recover under the policy the insured must prove that the loss was caused by an accident or casualty of some kind. Insurers accept the risk, but not the certainty, of loss. The second is that although the insured must prove a loss by an accident of some kind, it is not necessary for him to go further and establish the exact nature of the accident by which it occurred. The third is that the policy does not cover the insured against loss due to wear and tear or the inherent vice of the thing insured, whether that loss was bound to occur or was fortuitous in the sense that its occurrence depended on the particular circumstances to which the goods happened to be exposed in the course of the voyage.’ and ‘The action of the winds and waves is, of course, an inevitable incident of any voyage and is therefore a hazard to which all goods carried by sea are necessarily exposed. Goods tendered for shipment must therefore be capable of withstanding the forces that they can ordinarily be expected to encounter in the course of the voyage and these may vary greatly depending on the route and the time of year. In a case such as the present, therefore, the competing causes, namely, perils of the sea and inherent vice, are to a large extent opposite sides of the same coin. If the conditions encountered by the vessel were more severe than could reasonably have been expected, it is likely that the loss will have been caused by perils of the sea (though even then there might be evidence that the goods would have suffered the same degree of damage under normal conditions). If, however, the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage.’
Judges:
Mr Justice Moore-Bick
Citations:
[2004] EWHC 1038 (Comm), [2004] 2 Lloyd’s Rep 609, [2004] 2 CLC 682, [2005] Lloyd’s Rep IR 18
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Soya GmbH Mainz Kommanditgesellschaft v White HL 1983
The cargo, soya beans, was insured against heating, sweating and spontaneous combustion risks. It arrived in a heated and deteriorated condition. The insurers denied liability saying that the proximate cause of the damage was inherent vice or nature . .
Cited by:
Analysed – Global Process Systems Inc and Another v Berhad CA 17-Dec-2009
An oil rig suffered major damage in transit in rough seas. The insurers repudiated liability saying that the damages was the result of a natural vice rather than perils at sea.
Held: The fact that the sea conditions were within the range of . .
Overruled – Global Process Systems Inc and Another v Berhad SC 1-Feb-2011
An oil rig (The Cendor MOPU) was being transported from Texas to Malaysia. During the voyage, three of the four legs suffered damage. The insurers refused liability saying that the damage was the result of inherent weaknesses in the rig.
Held: . .
Lists of cited by and citing cases may be incomplete.
Insurance
Updated: 01 September 2022; Ref: scu.196706