Marine Cargo Policies Do Not Normally Provide Cover for Economical Losses

Engelhart CTP (US) LLC v. Lloyd’s Syndicate 1221 for the 2014 year of account [2018] EWHC 900 (Comm)

Having purchased 1,967.898 metric tonnes of cooper ingots, said to be shipped in 102 containers from New York, the buyer (assured) obtained “Marine Cargo and Storage Insurance Policy” from various insurers at Lloyd’s. The insurance policy, inter alia, stated:

“… noted and agreed that unless otherwise declared the contrary, the broadest coverage shall apply.”

“Container Clause

It is agreed that this Insurance contract is also to pay for shortage of contents (meaning thereby the difference between the number of packages as per shippers and/or suppliers invoice and/or packing list loaded or alleged to have been laden in the container and/or trailer and/or vehicle load and the count of packages removed therefrom by the Assured and / or their agent at time of container emptying) notwithstanding that seals may appear intact, and/or any other loss and/or damage including but not limited to cargo and/or container sweat howsoever arising.”

 

“Fraudulent Documents

This insurance contract covers physical loss of or damage to goods and/or merchandise insured hereunder through the acceptance by the Assured and/or Shippers of fraudulent documents of title, including but not limited to Bill(s) of Lading and/or Shipping Receipt(s) and/or Messenger Receipt(s) and/or shipping documents and/or Warehouse Receipts and/or other document(s) of title.

This insurance contract is also to cover physical loss of or damage to goods insured caused by utilisation of legitimate Bill(s) of lading and/or other documents of title without the authorisation and/or consent of the Assured or their Agents and/or Shippers.”

On arrival at Hong Kong for transhipment, it was discovered that no cooper ingots were, in fact, shipped in the containers. Indeed, no such cargo existed and the containers only contained slag of nominal commercial value.

The assured’s claim for indemnity was turned down on various grounds but it was specifically stipulated by Sir Ross Cranston, sitting as a judge of the High Court, that all risk marine cargo insurance was generally construed as covering only losses following from physical loss or damage to goods and this policy as a whole did not displace the presumption against cover for pure economic loss.

The trial judge  dismissed the assured’s contention that the alleged loss fell under the container clause stressing that the term “shortage” in the clause should be given its ordinary meaning and could not cover a situation where there was no goods in the first place. He also emphasised that the “fraudulent documents” clause expressly and exclusively responded to “physical loss of or damage to” goods through the acceptance of dishonest documents so this clause rather than displacing the presumption against cover for pure economic loss in cargo policies endorsed it in the sense that it did expressly indicate that no cover was available for physical losses.

2 points emerge from the judgment:

  1. Considered from the perspective of the construction of contracts, the decision is not at all surprising. It is in line with the spirit of several high profile judgments of the Supreme Court, such as Rainy Sky SA Kookmin Bank [2011] UKSC 50; Arnold v. Britton [2015] UKSC 36 and Impact Funding Solutions Ltd v. Barrington Support Services Ltd [2016] UKSC 57, which emphasise that construing a written document is “first and foremost” a textual exercise. On that premise, a clear and express wording is required to extend the cover of a marine cargo policy to losses which are economic in nature. General statements in the policy purporting to describe the nature of coverage provided in broad terms are not on their own capable of extending the nature of cover beyond physical loss or damage to goods.
  2. It is somehow surprising that the insurers did not develop an alternative defence to the claim by arguing that the policy in this case was void (or did not attach) as the subject matter of insurance has never existed in the first place (see AF Watkinson & Co. Ltd. v. Hullett (1938) 61 L1L Rep 145) In fact, it was argued forcefully in Marine Insurance Fraud, (2014, Informa Law) at 2-117-2-118) that where insurance is obtained for an imaginary cargo, the non-disclosure and misrepresentation is of such magnitude that there is no cover at all.             

13TH ANNUAL COLLOQUIUM OF THE IISTL — MARITIME LIABILITIES IN A GLOBAL AND REGIONAL CONTEXT

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13th ANNUAL COLLOQUIUM OF THE IISTL

MARITIME LIABILITIES IN A GLOBAL AND REGIONAL CONTEXT

  4-5 SEPTEMBER 2017

The annual gathering, organised by the Institute of International Shipping and Trade Law (IISTL), has now established itself as a regular fixture in the calendar of maritime lawyers. This year’s event will be devoted to Maritime Liabilities in A Regional and Global Context: The EU and Beyond.

 Topics covered will include:

  • Liabilities for ship recycling
  • Wreck removal – Nairobi and beyond
  • National and international oil pollution regimes – an uneasy coexistence
  • Pollution from oil rigs and offshore installations: legal issues arising
  • The boundaries of shipping liability law: what is a ship and why does it matter?
  • Ship arrest – yesterday’s conventions and today’s problems
  • Cyber risks and liabilities for marine sector
  • Smart containers
  • Passenger Liabilities- Life after BREXIT
  • Limitation of liability – new problems
  • Cross-border insolvency and maritime arbitration
  • Direct action against insurers and P & I Clubs
  • Jurisdiction and Choice of law after BREXIT

Speakers and Chairpersons

  • Professor Lia Athanassiou, School of Law, Athens University, Greece
  • Professor Simon Baughen, IISTL, Swansea University, UK
  • Professor Olivier Cachard, University of Lorraine, France
  • Andrew Chamberlain, Partner and Mariner, Holman Fenwick Willan LLP, London, UK
  • Simon Cooper, Partner, Ince & Co LLP, London, UK
  • Professor Marc Huybrechts, University of Antwerp, Belgium
  • Dr Henning Jessen, World Maritime University, Sweden
  • Mr Måns Jacobsson, Former Director of International Oil Pollution Compensation Funds, Sweden
  • Dr Tabetha Kurtz-Shefford, IISTL, Swansea University, UK
  • Associate Professor George Leloudas, IISTL, Swansea University,UK
  • Mr Justice Males, Presiding Judge of the North East Circuit, High Court of England and Wales
  • Peter Macdonald-Eggers QC, 7 King’s Bench Walk, London, UK
  • Associate Professor Theodora Nikaki, IISTL, Swansea University, UK
  • Dr Frank Stevens, Erasmus University, The Netherlands
  • Professor Barış Soyer, Director, IISTL, Swansea University,UK
  • Dr. Jur. Bülent Sözer, Yeditepe University, Turkey
  • Professor Andrew Tettenborn, IISTL, Swansea University, UK
  • Emeritus Professor Rhidian D. Thomas, IISTL, Swansea University, UK

 

Registration, Fees & Accommodation

To register (and book university accommodation) please click the link here: Eventbrite  

  • Fee, inc. materials, dinner & accommodation for 2 nights (3-4 Sept): £440
  • Fee, inc. materials and dinner: £350
  • Fee (for Research Students) inc. materials, dinner & accommodation for 2 nights (3-4 Sept): £265
  • Fee (for Research Students) inc. materials & dinner: £175

 Should you not like to take advantage of our on-campus accommodation, please feel free to make your own arrangements. There are several good hotels in town, notably the Dragon Hotel, tel: 01792 657100, and the Marriott Hotel, tel: 01792 642020. Please note, however, that the organisers cannot take responsibility for booking accommodation off campus.

The closing date for registration is 28 August 2017

Questions & Further Information

Should you have any further queries, please direct your email to: Ms Stella Kounakou 806114@swansea.ac.uk

We looking forward to seeing you at Swansea. 

Professor B. Soyer

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Insurance Fraud Pays – Professor Barış Soyer Wins BILA Book Prize

It has just been announced that Professor Soyer’s recent book “Marine Insurance Fraud” has won the 2015 BILA Book Prize. This prize, for the best book on insurance law, is awarded annually by the British Insurance Law Association Charitable Trust, a body existing to promote research on the interrelationship between law and insurance.

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BILA 2015 Prize for Professor Barış Soyer’s book “Marine Insurance Fraud”

The announcement was made at BILA’s Annual General Meeting on 16 October 2015. Alison Green, Chair of the BILA Charitable Trustees, congratulated Professor Soyer, not only for having written a highly relevant, interesting and accessible book, but also for being the only author to win the Prize twice (having first won the Prize in 2002 for his first monograph on warranties in marine insurance).

soyerHis most recent prizewinning monograph, published last year, gives a comprehensive and coherent legal analysis of the impact of fraud on the position of various parties to a marine insurance contract. At the time of publication it was seen as a winner. In the foreword, Sir Bernard Rix (formerly a Lord Justice of Appeal) stated: “Professor Soyer has written a book on an important and fascinating theme which not only states the law in a clear and concise way, but also analyses it critically, insightfully and helpfully. I am confident that it will be used profitably by a wide range of readers.”

Professor Barış Soyer is the Director of the Institute of International Shipping and Trade Law, a research institute based in the College of Law at Swansea University. He has taught marine insurance and other aspects of commercial law at Swansea for some 15 years.