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Marine cargo insurance (The Lloyds Shipping Law Library)
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MARINE CARGO
INSURANCE
LLOYDS SHIPPING LAW LIBRARY
Series editors: Andrew W. Baker, QC
and Hatty Sumption
LLOYDS SHIPPING LAW LIBRARY
P&I Clubs: Law and Practice
third edition
by Steven J. Hazelwood
(2000) The Law of Ship Mortgages
by Graeme Bowtle and Kevin McGuinness
(2001) The Law of Shipbuilding Contracts
third edition
by Simon Curtis
(2002) The Law of Tug and Tow
second edition
by Simon Rainey
(2002) Admiralty Jurisdiction and Practice
third edition
by Nigel Meeson
(2003) Merchant Shipping Legislation
second edition
by Aengus R. M. Fogarty
(2004) Laytime and Demurrage
fifth edition
by John Schofield
(2005) Marine War Risks
third edition
by Michael D. Miller
(2005) Bareboat Charters
second edition
by Mark Davis
(2005) Limitation of Liability for Maritime Claims
fourth edition
by Patrick Griggs, Richard Williams
and Jeremy Farr
(2005) Enforcement of Maritime Claims
fourth edition
by D. C. Jackson
(2005) Berlingieri on Arrest of Ships
fourth edition
by Francesco Berlingieri
(2006) Bills of Lading
by Richard Aikens, Richard Lord
and Michael Bools
(2006) Voyage Charters
third edition
by Julian Cooke,
Timothy Young, Q.C., Andrew Taylor,
John D. Kimball, David Martowski
and LeRoy Lambert
(2007) Time Charters
sixth edition
by Terence Coghlin, Andrew W. Baker,
Julian Kenny and John D. Kimball
(2008) Ship Sale & Purchase
fifth edition
by Iain Goldrein, Q.C., and Paul Turner
(2008) Shipping and the Environment
second edition
by Colin de la Rue and
Charles B. Anderson
(2009) Ship Registration: Law and Practice
second edition
by Richard Coles and Edward Watt
(2009) London Maritime Arbitration
third edition
by Clare Ambrose
and Karen Maxwell
(2009)
MARINE CARGO
INSURANCE
BY
JOHN DUNT
Consultant
Clyde & Co LLP
Visiting Senior Research Fellow
Institute of Maritime Law, University of Southampton
First published 2009 by Informa Law
Published 2013 by Informa Law from Routledge 2 Park Square, Milton Park,
Abingdon, Oxon OX14 4RN
711 Third Avenue, New York, NY, 10017, USA
Informa Law is an imprint of the Taylor & Francis Group, an informa
business
Copyright © John Dunt 2009
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording,or in any
information storage or retrieval system, without permission in writing from
the publishers.Product or corporate names may be trademarks or registered
trademarks and are usedonly for identification and explanation without intent
to infringe.
Reprinted material is quoted with permission. Whilst every effort has been
made to ensure that the information contained in this work is correct, neither
the authors nor Informa Law from Routledge can accept any responsibility for
any errors or omissions or for any consequences arising therefrom.
Product or corporate names may be trademarks or registered trademarks and
are used only for identification and explanation without intent to infringe.
British Library Cataloguing in Publication Data A catalogue record for this
book is available from the British Library ISBN: 978-1-84311-763-6 (hbk)
Text set 10/12 Bembo byInteractive Sciences Ltd, Gloucester
PREFACE
The purpose of this work reflects the aim expressed by Michael Wilford in Time
Charters, the first book in the Lloyds Shipping Law Library, which is to provide
the busy practitioner with the legal authorities relevant to the issues they may
encounter in relation to marine cargo insurance.
I am grateful to a number of people for their help with the book, and must
thank first of all Professor Charles Debattista, then director of the Institute of
Maritime Law at the University of Southampton, for inviting me to join the
Institute. Emeritus Professor Robert Grime kindly read early chapters and
advised and encouraged me at the outset of the work. Professor Yvonne Baatz
read the drafts on the chapter on law and jurisdiction clauses. Alexander
Sandiforth, research assistant at the Institute, must be commended for his
unstinting research.
I must also thank Clyde & Co for providing secretarial support and library and
information research services. I am most grateful, in particular, to two
colleagues, Bill OBrien and William Melbourne, for reading draft versions of the
central chapters on all risks and the duration of transit. Any errors of course
remain my own. I should also thank Angela Gibson and Erica Bryant for typing
the book.
I am indebted to Shuji Yamagushi for his assistance with the Japanese cases
referred to in the text.
I have had generous support from members of the insurance market, notably
Nick Gooding, chair of the Institute Cargo Clauses Working Party, who was
available to help with points of practice and kindly read the early chapters. Peter
de Boissiere of RSA read a draft of the chapter on the measure of indemnity and
made many detailed and helpful suggestions. Paul Codd of Willis gave the
brokers view of the practice, particularly with regard to the latest developments
with the Market Reform Contract for marine cargo business. Mike Spaull of
Lloyds Agency Department was equally generous with his knowledge of the
standard forms of Lloyds Insurance Certificates. Finally, my thanks to Steve
Hulme of the Market Reform Office and Neil Smith of Lloyds Market
Association.
The book includes, as a central theme, a commentary on the revised Institute
Cargo Clauses 2009. This has meant a need for publication as soon as possible
after the introduction of the clauses on 1 January this year. In this respect, I am
particularly grateful to Laura Brown, editor at Informa, and Dawn Wilkinson,
desk editor, for their encouragement and patience throughout the work.
A book of this type could not exist without the appendices. In this respect I
acknowledge the kind permissions given by the Lloyds Market Association, the
International Underwriting Association of London and Witherbys to reproduce
the Institute Cargo Clauses; the permission from Lloyds Market Association and
the Joint Cargo Committee to reproduce various JCC Clauses; and the
permission of Willis to reproduce their template for the Market Reform Contract.
I am also indebted to Lloyds Controller of Agencies for permission to produce
the standard form of Lloyds Insurance Certificate.
The law is stated as at the early summer of 2009.
John Dunt
Guildford
May 2009
OUTLINE CONTENTS
Preface
Abbreviations
Table of Cases
Table of Legislation
1 History and Definition of Marine Cargo Insurance
2 Law and Jurisdiction Clauses
3 Open Covers, Policies and Certificates of Insurance
4 Insurable Interest and the Indemnity Principle
5 Good Faith, Non-Disclosure and Misrepresentation
6 Warranties, Conditions and Exclusions
7 Causation
8 All Risks and Exclusions
9 Named Perils and Exclusions
10 War, Strikes, Terrorism and Rejection Risks
11 Duration of the Insurance 1: The Transit Clause
12 Duration of the Insurance 2: Termination of Carriage and Change of
Voyage
13 Claims and Losses
14 Recoverable Expenses and Liabilities: Sue and Labour, Salvage, General
Average and Collision Liabilities
15 Measure of Indemnity
16 Subrogation, Double Insurance and Rights of Contribution
APPENDICES
Legislation
1 Marine Insurance Act 1906
2 Third Parties (Rights against Insurers) Act 1930
3 Public Order Act 1986 (sections 1 and 10(2))
4 Reinsurance (Acts of Terrorism) Act 1993
Slips, policies and other documentation
5 Market Reform Contract for Marine Cargo Insurance (based on Willis
proforma)
6 Lloyds Marine Policy: MAR91
7 Certificate of Insurance (Lloyds)
8 General Underwriters Agreement (GUA): Marine Cargo Schedule
9 Subrogation Form
Institute Clauses
10 Institute Cargo Clauses (All Risks) 1/1/63
11 Institute Cargo Clauses (A) 1/1/82
12 Institute Cargo Clauses (A) 1/1/09
13 Institute Cargo Clauses (B) 1/1/82
14 Institute Cargo Clauses (B) 1/1/09
15 Institute Cargo Clauses (C) 1/1/82
16 Institute Cargo Clauses (C) 1/1/09
17 Institute War Clauses (Cargo) 1/1/82
18 Institute War Clauses (Cargo) 1/1/09
19 Institute Strikes Clauses (Cargo) 1/1/82
20 Institute Strikes Clauses (Cargo) 1/1/09
21 Institute Cargo Clauses (Air) (excluding sendings by Post) 1/1/09
22 Institute War Clauses (Air Cargo) (excluding sendings by Post) 1/1/09
23 Institute Strikes Clauses (Air Cargo) 1/1/09
24 Institute War Clauses (sendings by Post) 1/3/09
25 Institute Commodity Trades Clauses (A) 5/9/83
26 Institute Malicious Damage Clause 1/1/82
27 Institute Theft, Pilferage and Non-Delivery Clause 1/12/82
28 Institute Replacement Clause 01/12/2008
29 Institute Classification Clause 01/01/2001
30 Institute Extended Radioactive Contamination Exclusion Clause 1/11/02
31 Institute Radioactive Contamination, Chemical, Biological, Bio-chemical
and Electromagnetic Weapons Exclusion Clause 10/11/03
32 Institute Cyber Attack Exclusion Clause 10/11/03
Joint Cargo Committee Clauses
33 Termination of Transit Clause (Terrorism) 2009 JC2009/056
34 Insolvency Exclusion Clause JC93
35 Contracts (Rights of Third Parties) Act 1999 Exclusion Clause (Cargo)
JC2000/002
36 Cargo Piracy Notice of Cancellation JC2008/024
Index
DETAILED CONTENTS
Preface
Abbreviations
Table of Cases
Table of Legislation
1 HISTORY AND DEFINITION OF MARINE CARGO INSURANCE
Historical background
The London market
Origins of marine cargo insurance
The development of Lloyds and insurance companies
The London market
Policy forms and Institute Clauses
The SG (ships & goods) and G (goods) Policy Forms
The MAR Policy Form and the Institute Clauses
The Market Reform Contract
The development of the Institute Cargo Clauses
The Institute Cargo Clauses
Types of cover under the Clauses
Physical loss of and damage to the cargo and specified expenses
Loss of the adventure
The structure of the Clauses
How the clauses should be construed
Marine cargo insurance defined
The circumstances in which a cargo insurance contract amounts to “marine
insurance”
Marine insurance defined
Land risks incidental to sea voyages
Risks analogous to a marine adventure
Insurance subject to the Institute Cargo Clauses
Carriage of cargo by land: road and rail
Carriage of cargo by air
Cargo in store
2 LAW AND JURISDICTION CLAUSES
Choice of law
English law under the Institute Cargo Clauses and the MRC
The general rule: freedom of choice
Risks situated within the EEA States
When are transit risks situated within the EEA States?
The rules applicable to cargo risks situated within the EEA States
When are storage risks “large risks”?
Risks situated outside the EEA States: all other risks
English law clauses and foreign courts
Choice of jurisdiction
Standard London market jurisdiction clauses
Application of the EC Judgments Regulation
Is jurisdiction under the EC Judgments Regulation exclusive or permissive?
The EC Judgments Regulation and the Lugano Convention
Formalities
Goods in transit by seagoing ships and connected risks
“Large risks”
The court first seised
The common law position
Arbitration
3 OPEN COVERS, POLICIES AND CERTIFICATES OF INSURANCE
Open covers
How cargo insurance operates in practice
The structure of a cargo insurance contract
The development and structure of open covers
The origin of open covers
Open covers: types and terms
Standard open covers
Facultative/obligatory: (“fac./oblig.”) covers
Brokers facilities or lineslips
Brokers facilities considered and defined
Is a facility a contract of insurance?
The position of leaders and followers: agency?
The General Underwriters Agreement (“GUA”)
Coverholders: binding authorities
Policies and contracts of insurance
The Market Reform Contract and the SG and MAR Forms
The contract of insurance as evidence
What the policy must specify: the assured
The “Assured” under London market open covers
The “Assured” under the Institute Cargo Clauses
Knowledge of the “Assured” under the Institute Cargo Clauses
“Employees” of the “Assured” under the Institute Cargo Clauses
“Persons Interested” in storage policies on goods
Designation of the subject-matter insured
The description of the goods: deck cargo
The premium
Certificates of insurance
Certificates of insurance described
The legal status of certificates of insurance
Assignment and tender of certificates of insurance
How is assignment achieved in practice?
Is the assignee bound by the terms of the Open Cover?
4 INSURABLE INTEREST AND THE INDEMNITY PRINCIPLE
The insurable interest requirement defined
The requirement for an insurable interest
The approach of the courts to insurable interest
Insurable interest: property, risk and other economic interests
The further interest covered by a cargo policy: loss of the adventure
Extent of insurable interest: loss of profits and increased value
The special position of bailees
The timing of the insurable interest requirement
The time when insurable interest must attach
Retrospective declarations for cargo “lost or not lost”
Acquisition of a retrospective insurable interest
Sellers interest clauses
5 GOOD FAITH, NON-DISCLOSURE AND MISREPRESENTATION
The principle of good faith
Origins of the principle of good faith
Disclosure by the assured
Time of disclosure
Knowledge of the assured
“Materiality” and “inducement”
The remedy of avoidance
Avoidance and affirmation
Circumstances that may need to be disclosed
Ownership or other interest
Over-valuation
High value brand-named goods
The history of the cargo: second-hand or used goods
Packing and preparation
Previous refusals
Subrogation rights
Moral hazard
Circumstances that need not be disclosed
Circumstances that diminish the risk
Circumstances known or presumed to be known to the insurer
Circumstances as to which information is waived
Circumstances which it is superfluous to disclose by reason of any express
or implied warranty
Misrepresentation by the assured
Materiality of representations
Representations of fact and belief distinguished
Circumstances that may be material
The different approach to inducement
Representations as to existing terms of coverage
6 WARRANTIES, CONDITIONS AND EXCLUSIONS
Warranties
The nature of warranties
The effect of breach of warranty: exact compliance
When compliance is excused: waiver
Express warranties
The form of words for an express warranty
The construction of warranties
Examples of London market warranties
The implied warranty of legality
Conditions
Conditions precedent
Conditions
Innominate terms
Exclusions
Exclusions defined
The burden of proof in relation to exclusions
Exclusions under the Institute Cargo Clauses
7 CAUSATION
Principles of causation
The role of causation in insurance law
The proximate cause rule
Concurrent causes
Proximate cause and wilful misconduct
Proximate cause and delay
Proximate cause and inherent vice