cpgs

Cargo Policies, Ghost Ships and Containers: 

Cargo Policies, Ghost Ships and Containers Howard N Bennett Hind Professor of Commercial Law, University of Nottingham Consultant, Denton Wilde Sapte

Commercial Law and Commercial Practice: 

Commercial Law and Commercial Practice Traditionally very close relationship Interpret contracts to conform with business common sense Lord Mansfield’s special jurors How close is the relationship today between commercial practice and cargo insurance law?

Modern Transit: 

Modern Transit Multi-modal Containerised Commercially indivisible Loss of significance of line between on-land carriage and sea carriage

What Does A Cargo Owner Want By Way Of Insurance Cover?: 

What Does A Cargo Owner Want By Way Of Insurance Cover? Comprehensive Institute Cargo Clauses (A) + Institute War Clauses (Cargo) + Institute Strikes Clauses (Cargo) Seamless Uninterested in whether casualty on-land before shipment, at sea, or on-land after discharge at destination.

Modern Cargo Insurance: 

Modern Cargo Insurance Impression of seamless cover responding to indivisible carriage Transit clause (Institute Cargo Clauses, cl 8): Cover attaches on commencement of transit Continues during ordinary course of transit Can endure until delivery at specified destination Reality?

Ghost Ships: 

Ghost Ships No valid classification Not registered with any recognised registry Usually operated by pirates or other criminals Vehicle for cargo fraud Load cargo and disappear, then either change name and repeat, or sink.

Ghost Ships: The Law: 

Ghost Ships: The Law MIA 1906, s 44: ‘Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach.’ Simon, Israel & Co v Sedgwick (1893) Nima v Deves Insurance Co (The Prestrioka) (2002) Nam Kwong Medicines & Health Products Co v China Insurance Co (The Pacifica) (2002)

Ghost Ships: The Reasoning: 

Ghost Ships: The Reasoning Marine policy on a voyage basis insures a marine adventure properly characterised as a voyage between named termini. If the goods never embark upon the voyage in question, risk cannot attach: MIA 1906, s 44. A marine policy can be extended to inland water transit or land risks incidental to any sea voyage: MIA 1906, s 2(1). ICC, cl 8 effects such an extension.

Ghost Ships: The Reasoning (cont): 

Ghost Ships: The Reasoning (cont) If goods embark upon the insured voyage, the risk from the commencement of transit until that point is covered as incidental to the sea voyage. But if insured voyage does not happen, there is nothing to which the extension of cover can be incidental.

Commercial Sense?: 

Commercial Sense? Theft by phantom ship: not covered. Theft by phantom lorry after completion of sea voyage: covered. Partial loss or sue and labour expense before goods loaded on ghost ship: semble not covered. Total loss so goods never make it to genuine ship? Can risk attach?

Insurable Interest: 

Insurable Interest MIA 1906, s 6(1): Need insurable interest at time of loss FOB contract: prior to loading: Buyer has insurable interest in Anticipated profits, and Risk of good faith payment for shipping documents relating to goods stolen before loading Risk of suffering loss because shipping documents forged or fraudulent BUT buyer has NO interest in the goods themselves.

Insurable Interest (cont): 

Insurable Interest (cont) Policy on goods needs insurable interest in goods. No recovery unless can prove post-loading loss. How to prove when loss occurred within a container? ‘Lost or not lost’ clause saves the day NSW Leather Co Pty v Vanguard Insurance Co (1991) Should recovery in the routine situation of containerised multi-modal transport depend upon whether the broker remembers to include such a clause?

Conclusion: 

Conclusion NSW Leather v Vanguard (1991) per Kirby P ‘To apply to containers the law developed for individually packaged cargo strikes me as yet another instance of the incapacity of legal principle to adapt and change to reflect new technological and commercial realities. When such developments as containerisation occur, it is desirable that the law should accept a new principle.’ Time to re-think how cargo insurance should respond to through transit?