HSSC ~ every Marine Insurer would be bemused – there have been
so many interpretations and varied wording stating coverage for ‘heating,
sweating and spontaneous combustion’ .. ..
what is your take ?
Soya
bean is a species of legume native to
East Asia, widely grown for its edible bean, which has numerous uses. It has found its way in to food plates, in
the form of various dishes. Fat-free
(defatted) soybean meal is a significant and cheap source of protein for animal
feeds and many packaged meals. For example, soybean products, such as textured
vegetable protein (TVP), are ingredients in many meat and dairy substitutes. The beans contain significant amounts of
phytic acid, dietary minerals and B vitamins. Soy vegetable oil, used in food
and industrial applications, is another product of processing the soybean crop.
Traditional unfermented food uses of soybeans include soy milk, from which tofu
and tofu skin are made.
The
main countries growing soybeans are the United States, Brazil and
Argentina. The trade war and
particularly the Chinese tariffs on imports of US soya beans can now clearly be
seen with the start of the soya bean peak exporting period in the US. In the
first eight weeks of the 2018/19 marketing year accumulated US exports are down
39%, from 12.2 million tonnes on 26 October 2017 to 7.5 million tonnes on 25
October 2018.This represents a 56% reduction. The week to 25 October confirmed
the downward trend.In addition to the fall in total exports harming the
shipping industry, an increasing proportion of the demand comes from
destinations closer to the US, further lowering the overall tonne-mile demand.”
BIMCO’s Chief Shipping Analyst is quoted as saying. All this comes at a time when the market is expecting
bumper crop.
Section 55 in The Marine Insurance Act, 1963 deals with : ‘ Included
and excluded losses’.—
(1) Subject to the provisions of this Act, and unless the policy
otherwise provides, the insurer is liable for any loss proximately caused by a
peril insured against, but, subject as aforesaid, he is not liable for any loss
which is not proximately caused by a peril insured against.
(2) In particular—
(a) the insurer is not liable for any loss attributable to the
wilful misconduct of the assured, but, unless the policy otherwise provides, he
is liable for any loss proximately caused by a peril insured against, even
though the loss would not have happened but for the misconduct or negligence of
the master or crew;
(b) unless the policy otherwise provides, the insurer on ship or
goods is not liable for any loss proximately caused by delay, although the
delay be caused by a peril insured against;
(c) unless the policy otherwise provides, the insurer is not
liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by maritime perils.
On
similar lines is built the Institute Cargo Clauses – the ICC (A) is driven by
exclusions and clause no. 4 is - General Exclusion Clause : which states that “ In no case shall this
insurance cover” - inter-alia,
4.4 loss damage or expense caused by inherent
vice or nature of the subject-matter insured
Inherent vice ! ~ dictionary meaning :Hidden defect (or the
very nature) of a good or property which of itself is the cause of (or
contributes to) its deterioration, damage, or wastage. Such characteristics or
defects make the item an unacceptable risk to a carrier or insurer. If the
characteristic or defect is not visible, and if the carrier or the insurer has
not been warned of it, neither of them may be liable for any claim arising
solely out of the inherent vice.
Inherent Vice is a 2014 American comedy-drama crime film
directed by Paul Thomas Anderson, adapted from the novel of the same name by
Thomas Pynchon. The cast included Joaquin Phoenix, Josh Brolin, Owen Wilson,
Katherine Waterston, Eric Roberts, Reese Witherspoon, and others. The film
follows Larry "Doc" Sportello, a stoner hippie and private
investigator in 1970, who is embroiled in the Los Angeles criminal underworld
while investigating three cases interrelated by the disappearance of his
ex-girlfriend and her wealthy boyfriend.Inherent Vice premiered at the New York
Film Festival in 2014 , and began a limited theatrical release later. Critical reception was divided; while some
argued the film had a convoluted plot and lacked coherence, others praised the
cast, particularly Brolin, Phoenix and Waterston. We would be more interested in a judgment of
House of Lords rather than the film ! - the case law referred is :SOYA G.m.b.H.
MAINZ KOMMANDITGESELLSCHAFT v. WHITE – House of Lords – before Lord Diplock, Lord Keith of Kinkel, Lord
Scarman, Lord Roskill and Lord Templeman.
The subject matter of the case was ‘consignment of soy beans insured against heat, sweat and spontaneous
combustion - Cargo arrived in heated and deteriorated condition - Whether cause of damage inherent vice - Whether
underwriters liable – were the interesting Qs posed.
Soya
beans are, a perishable commodity and
one cannot expect to store them indefinitely. The concept of “safe storage” is
probably incorrect since there is no particular set of conditions under which
bulk soya beans cannot be damaged. However, the two crucial aspects are heat
and moisture. The period of safe storage (before noticeable deterioration
occurs) depends largely on the initial moisture content, the temperature of the
beans at loading and the subsequent storage conditions; higher temperatures and
moisture content increase the rate of deterioration.It is a natural
characteristic of soya beans when shipped in bulk that if the moisture content
of the bulk exceeds 14 per cent, micro-biological action, the nature and causes
of which are unknown, will inevitably cause the soya beans to deteriorate
during the course of a normal voyage from Indonesia to Northern Europe to an
extent which will considerably reduce their value on arrival.
Voyages
from Latin America to China usually last around 40 days. Soy beans should be
carried in accordance with the Grain Code. The moisture content of soya beans
is critical; moisture content and average temperature at loading determine the
“shelf/transport-life” of the beans and the lower the moisture content the
longer the shelf/transport-life.
Elevated cargo temperature, mouldy and caked cargo are signs of a cargo
deteriorating due to a high moisture content.
The cargo, soya beans,
the subject matter of insurance 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 of the
subject matter insured, for which they were not liable under section 55(2)(c);
and that the cover only extended to heating, sweating or spontaneous combustion
brought about by some external cause.
The Court held that as a
matter of construction the policy did ‘otherwise provide’ within the meaning of
the opening words of section 55(2)(c) so that the perils of heating, sweating
and spontaneous combustion arising from inherent vice or nature of the subject
matter insured were covered.Lord Diplock
suggested a definition of ‘inherent vice’ in an insurance policy: ‘The facts as
I have summarized them for the purpose of determining the question of
construction of the HSSC policy in the instant case, assume that the loss
resulting from the deterioration of the soya beans during the voyage was
proximately caused by the ‘inherent vice or nature of the subject-matter
insured’. This phrase (generally shortened to ‘inherent vice’) where it is used
in section 55(2)(c) refers to a peril by which a loss is proximately caused; it
is not descriptive of the loss itself. It means the risk of deterioration of
the goods shipped as a result of their natural behaviour in the ordinary course
of the contemplated voyage without the intervention of any fortuitous external
accident or casualty.’ Inability to withstand the ordinary incidents of the
voyage is an appropriate test of inherent vice.
In
another ruling pertaining to a rig, Lord Saville stated that "it would
only be if the loss or damage could be said to be due either to uneventful wear
and tear (or 'debility') in the prevailing weather conditions or to inherent
characteristics of the hull or cargo not involving any fortuitous external
accident or casualty that insurers would have a defence." The Supreme
Court held that the wave that caught the front leg of the rig, at just the
right moment, producing stress that resulted in the front leg falling off, was
a peril of the sea, a fortuitous external accident, and the proximate cause of
the loss suffered.
The
ruling of the Supreme Court, in narrowing the test for inherent vice in matters
of marine insurance, is one that would
be welcomed by policyholders. The Supreme Court avoided attempting to construct
a framework in which levels of adverse weather conditions would be married to
inherent vice considerations. The Supreme Court held that a fortuitous external
accident would preclude the possibility of inherent vice operating as the
proximate cause of any loss suffered.
Interesting and provides lot of learning !
With
regards – S. Sampathkumar
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