Piracy in named-perils clauses such as ICC(B), (C) and Institute Bulk Oil Clauses

Piracy claims can consist of (i) a physical loss or damage to insured cargo caused by pirates (ii) and/or could involve piratical ransoms in General Average (GA). 

Even experienced practitioners sometimes take the view that while the former is not covered in named-perils clauses (which is a correct interpretation), the latter is recoverable as the GA clause in ICC (A), (B) and (C)  covers all expenditure and sacrifice so long as they are not caused by an excluded peril. They refer to the following in the Institute Cargo Clauses:

This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this insurance.

This view is incorrect.

Labels Clause (origin of ) in Marine Cargo Insurance

There are many versions of the Labels Clause (see my book Insuring Cargoes-A practical guide to its law and practice, Witherby, UK, 2010 edition for a discussion on various versions of this clause). A simple version reads as under:

Labelled Goods
The Company agrees to pay the reasonable costs of new labels and/or relabelling the goods should the original labels be damaged during the transit.

The origin of the Labels clause is probably owing to the decision of the English courts in Brown Brothers v. Fleming and Others (1902)

This case involved a shiment of whisky in cases from Glasgow to Singapore. Owing to  a sea peril, the straw in which the bottles were packed became wet and discoloured, and some of the labels were damaged by contact with the straw. The cases of whisky were sold in their damaged condition at Singapore.

It was held that the assured was entitlled to recover from the insurers the amount of the  loss from the sale, and were under no obligation to repack or relabel the bottles before selling.  

Justice Bigham J said:

"  There must be a judgment for the plaintiffs for an amount which I will estimate presently. The strw in which the bottles were packed and the labels upon the bottles are part of the subject-matter of the insurance just as are the bottles and corks. Damage to the labels affects the selling value of the whisky on the market just as much as damage to the corks would. The case sited by the defendents in support of their contention is not applicable to the present facts.  There it was sought to recover for a loss in the selling value of certain chests of tea which had not been injured by sea perils at all. Other chests forming part of the same shipment had been damaged , and that resulted in a mere loss of reputation to the tea in question and a consequent loss of market value. In the present case the damage was to what I hold  to be part of the subject-matter of the insurance."

The insurer also contended that the whisky should have been relabelled and repacked previously to sale. Now, what is the obligation upon the assured?  Justice Birgham said:

It is merely to do what a reasonable man can make the best of the matter. I consider that was done in the present case?

I wonder if a similar judgment would be passed today when it is so easy to ship labels by courier from one country to another! However this case is being cited to drive home the importance of a Labels clause in the policy. A word of caution-use the correct version of the Labels clause depending on the type of goods involved and ascertain whether a Labels clause is appropriate in the first place (Hint: goods meant for human/animal consumption).

Mysterious Disappearance Exclusion in Marine Policies

AXL Resources Limited (AXL)[1] approached the Commercial Court against cargo insurers for denial of a claim for the loss of 20 mt of cobalt insured on ICC (A) terms but excluding “‘mysterious disappearance ‘and stocktaking losses”. 

 

The insured was a metal trader. 20mt of cobatt was purchased in July 2008 for US$ 1.8m which was placed in a warehouse in Antwerp. On 27^th Jan, 2009 the warehouse keeper discovered that 20mt of cobalt was missing (could have happened any time between 21.10.2008 to 27.1.2009) though there were no signs of any forcible entry. AXL informed their insurers who had issued a marine open cover which covered the period 8.7.2008 to 7.7.2009. 

The claim was denied on the ground that this was a loss which came under ‘mysterious disappearance ‘exclusion and that the assured did not give reasonable evidence that this was a loss caused by theft.

Now, in the Belgium press there was a report that a criminal gang had been arrested for the theft of cobalt. There was a confession by the gang to the theft of cobalt from a warehouse on the 23^rd of December 2008. There was some evidence that one of the gang members was seen in the vicinity of the warehouse in question where AXL cargo was stored.

AXL filed the claim that this was an accidental loss due to theft.

Know Your Cargo (4) Asphalt/Bitumen/Asphalt Bitumen

Asphalt or Bitumen or Asphalt Bitumen (Bitumen, Asphalt, Asphalt Bitumen are all perhaps the names of different grades of the same cargo and the risks should be more or less the same) requires transportation at very high temperature. If the vessel does not maintain the required high temperature, the cargo will solidify leading to high quantities remaining on board.

Asphalt Bitumen is carried in Asphalt Carriers and ordinary vessels cannot carry them. These Asphalt Carriers have heating systems since this cargo has to be heated upto 160/200˚C and also have their own pumps and lines for loading and discharge. These lines have an in-built heating coil inside. Usually Asphalt Carriers use Thermo oil for heating which is a much more robust system than Stainless Steel coils since the latter would acquire rust sooner or later and can be a source of contamination. Thermo Oil cannot have corrosion since there is no steam heating coils! (i.e., no water)

Tankers must be equipped with sufficient boilers and heating pipes in order to avoid any cooling down but even if during the voyage the tanker cools down the tanker must have sufficient capacity to reheat the bitumen upto a temperature of around 130˚C in order to pump out the Bitumen from the tanker into land-tanks installation

Known Your Cargo (3) Animals In Transit

Animals (both Livestocks and exotic) in transit could involve dolphins, sea horses, crocodiles or performing pandas or circus animals besides cattle/livestock.

Animals are carried in live since frozen meat is costlier and some Islamic countries do not like frozen meat and insist on fresh meat with ritual slaughter locally.

Underwriters prefer shorter journey (e.g Australia to S.E.Asia) since animals become extremely stressed in long journeys with conditions on board livestock carrier/quarantine far from satisfactory especially in hot and humid climates. A lot depends on the type of animals as well-some animals withstand sea transit well, some do not (eg deer).

A vet doctor should accompany the animals (including periods of quarantine) -see suggested warranties below.

The market for this is extremely limited with very few underwriters willing to lead this type of business.

The insuring condition is a mortality form of coverage. Coverage is normally provided by means of, for example, a Lloyd’s Livestock policy form with specific transit clauses attached thereto.

There are some underwriters who do not write this class of business in view of the cruel conditions in which animals are transported by ships and later by domestic conveyances.

Guide to Marine Insurance-Part 8 (Cargo Claims Process/Check-list)

Marine Cargo Claims-Check List of Procedure to be followed
in the event of a marine cargo claim[1] 

Upon receipt of a Shipment at Port/Airport/your warehouse:

Step One: Checking the incoming consignment/container from delivering Carrier

Note:

The purpose of taking photographs of container/packages/stowage on board the lorry or container is to create early evidence of quality of stowage/stuffing

Once the seal is cut, keep both parts of the seal in a sealed bag/envelop until load destuffed, checked/surveyed.

It is recommended that if upon opening the seal the container is empty or partially empty, the container should not be allowed to leave your premises till the surveyor appointed by the Insurer has inspected the container. If this attracts a demurrage I feel the Insurer ought to pay the same-in any case it is better to get this clarified with your insurers.There is also a manuscript clause for this purpose which can be added to an Open Cover.