Insurance Law Implications of Delay in Maritime Transport

Aysegul Bugra

• Publisher: Informa Law from Routledge
• Year: 2017
• ISBN:
  9781134833795
• Edition: 1
• Topic: Derecho
• Subtopic: Teoría y práctica del derecho

Delay in a marine adventure is an important and frequent phenomenon of maritime transport as it affects various parties and their interests. Insurance Law Implications of Delay in Maritime Transport is the first single book to deal specifically with this issue in the context of insurance law. The book addresses the losses and expenses that may arise from delay or loss of time in maritime transport, the types of insurance available covering or excluding losses arising from it and the impact of delay on voyage policies.

The author, Ay?egül Bu?ra, critically examines and evaluates the scope of several different types of marine insurance policies, including but not limited to: hull and machinery, cargo, freight, loss of hire and marine delay in start-up insurance. Furthermore, the book analyses the current law by tracing back the relevant common law authorities to the 18th century and examines the wordings used in practice from that time to today with a comprehensive and critical approach.

This unique text will be of great interest to legal practitioners, shipping professionals and academics alike.

Chapter 1
Introduction to delay as a risk and fortuity considerations

Introduction

1.1 The occurrence of delay or some loss of time is frequent in maritime transport. This emanates firstly from the fact that many incidents may result in delay, such as including but not limited to perils of the seas, strikes, collisions, detentions, port congestions or health condition of crew members. Secondly, modern speed of transport requires either timely prosecution of marine adventures where a specific time frame is agreed, or failing this, their prosecution in reasonable time. All these circumstances as well as a mere loss of time upon the voyage insured may result in various types of losses and expenses that may be incurred by several parties such as shipowners, voyage and time charterers, cargo interests and project owners whose projects depend upon the timely arrival of goods carried by sea. These losses may be recoverable from the parties who are liable for delay under individual contracts, or depending upon the terms of the contracts, may have to be borne by the parties themselves who incur the losses. The relevant interests of the parties which can be affected by these losses or expenses can also be insurable under several types of marine insurance policies such as cargo, hull and machinery, freight, loss of hire and marine delay in start-up insurance.

1.2 Losses arising from delay have traditionally been excluded under cargo, hull and machinery and freight policies under the Common law. The exclusion of delay losses in cargo policies was due to an analogy with inherent vice and naturally occurring losses. This approach was then embodied in s 55(2)(b) of the MIA 1906 in respect of cargo and hull and machinery policies which provides that:

‘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’.

The main reason behind the exclusion of inherent vice or naturally occurring losses rests upon the fact that the losses in these cases are not fortuitous. The doctrine of fortuity is an obscure area of law and this chapter looks into whether one of the motives behind the exclusion of delay losses can be based on the suggestion that some types of delay losses are not fortuitous.

A number of cases have discussed the requirement for a loss to be fortuitous so as to be recoverable and that insurers are not liable for inevitable losses.¹ It is not clear whether any of the decided cases have ever established the said rule beyond doubt² and even if so, very few cases have addressed the issue of whether delay losses are fortuitous or inevitable. Fortuity which may indeed operate as an ‘unnamed exclusion’³ may at first sight seem to have little to add to the discussion of delay as an excluded peril given the express exclusion found in s 55(2)(b) and the relevant Institute Clauses. Nevertheless those provisions and other delay exclusions almost never distinguish between the types of delay which may give rise to the argument that where they are construed contra proferentem,⁴ some types of delay may be deemed to escape the application of the exclusion such as delay beyond the control of the assured and extraordinary delay. This chapter generally examines delay as a risk and within the context of naturally occurring losses. Particular focus shall also be placed on types of delays with the view of assessing them in the context of the generic delay exclusion and in light of the doctrine of fortuity.

The use of the term ‘delay’ in the marine insurance law context

1.3 The meaning of delay in legal parlance is ‘the act of postponing or slowing’.⁵ The MIA 1906 does not provide a clear definition of the term, however careful reading of the rules set out in ss 42, 48 and 55(2)(b) would shed light on its meaning. Section 42(1) provides the implied condition that:

‘… the adventure shall be commenced within a reasonable time’⁶

which can in turn:

‘be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded’.⁷

A similar provision is found in s 48 which states that:

‘…the adventure insured must be prosecuted throughout its course with reasonable dispatch and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable’.⁸

The term is therefore used in the MIA 1906 context to denote prolongation of voyage beyond a reasonable time, reasonableness being a question of fact which has to be decided on a case-by-case basis.⁹

Definition of ‘peril’ and delay

1.4 ‘Risk’ and ‘peril’ are often used interchangeably, however ‘risk’ that is an equivalent term to ‘peril’ must be distinguished from ‘risk’ in the general sense of the term that insurers undertake which includes uncertainty about the occurrence of a loss.¹⁰ ‘Marine peril’ is defined as ‘the perils consequent on, or incidental to, the navigation of the sea’.¹¹ The MIA also provides examples of marine perils such as perils of the seas, fire, war perils, pirates, rovers, thieves, captures and seizures; however does not limit the perils to this group providing that ‘any other perils, either of the like kind or which may be designated by the policy’ may also be covered.¹² Albeit not expressly enumerated in this definition, delay is stipulated as a peril that is excluded under s 55(2)(b) of the MIA 1906. This being said, it is doubtful whether all types of delay could be caught by this definition, particularly where delay is within the control of the assured and is therefore consequent on the assured’s act and not on the navigation of the sea.¹³

1.5 Rules for Construction scheduled to the MIA reads ‘perils of the seas’ as ‘fortuitous accidents or casualties of the seas’,¹⁴ and ‘peril’ is qualified as the cause of the loss which must be fortuitous.¹⁵ Under English law, defining ‘marine risk’ which is used interchangeably with ‘marine peril’ was approached reluctantly¹⁶ however there were attempts to describe the term ‘risk’ as an accidental cause in a commercial insurance policy where the loss was caused by abnormal delay arising from accidental circumstances.¹⁷

In Schloss Brothers v Stevens¹⁸ the policy was in the printed form of an ordinary Lloyd’s policy at the time and involved a clause covering ‘all risks by land and by water’. The combination of disorganisation of the transport arrangements due to a revolution in the area of the port, the damp climate and storage conditions meant that a delay of two years had necessarily exposed goods to damp. The term ‘all risks by land and by water’ meant for Walter J all risks whatsoever, i.e. ‘all losses by any accidental cause of any kind occurring during transit’.¹⁹ He asked whether the damage was from some accidental cause and answered that:

‘there was an abnormal delay in the transit arising from unusual and accidental causes, which necessarily involved an exposure of the goods to damp’.²⁰

The loss was held to be the direct result of an accidental cause and was therefore recoverable. Delay in this case was a delay beyond the control of the assured and was due to abnormally disorganized transport arrangements arising from a revolution that was going on at the time. The loss, although caused by delay which was not expressly excluded under the policy, was therefore held to be accidental and within the wording ‘all risks by land and water’.

General considerations on fortuity

1.6 English authorities do not seem consistent in deciding whether the loss or the cause of the loss must occur fortuitously. The lack of clarity in this respect could have been due to the fact that ‘in insurance contract law, fortuity is a concept involving both the likelihood of loss and the cause of loss’.²¹ In The Cendor Mopu²² the Supreme Court recently interpreted fortuity in the context of perils of the seas, which are defined as ‘fortuitous accidents or casualties of the seas’ and which do not include ‘ordinary action of winds and waves’.²³ The Court held that ‘ordinary’ qualified the ‘action’ of the winds and waves and not the winds and waves themselves. It followed accordingly that the result of the peril and not the peril itself was the subject of the assessment on fortuity. It is submitted however that the judgment in this case and generally in decisions on perils of the seas would inevitably turn upon the interpretation of the definition thereof and cannot be therefore authority for a general suggestion that the result of the perils and not the perils themselves must be taken into account in assessing fortuity. Shortly after The Cendor Mopu, in The DC Merwestone²⁴ which was decided also in the context of perils of the seas, Popplewell J cited the following part of the decision of the Supreme Court of Canada in CCR Fishing Ltd v Tomenson Inc (The La Pointe):²⁵ ‘In general the word “fortuitous”, as interpreted by the cases, carries the connotation that the cause of the loss should not have been intentional or inevitabl...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• CONTENTS
• Foreword
• Preface
• Table of Cases
• Table of Statutes and Other Instruments
• Table of Legislation
• CHAPTER 1 INTRODUCTION TO DELAY AS A RISK AND FORTUITY CONSIDERATIONS
• CHAPTER 2 CARGO INSURANCE AND DELAY: PHYSICAL LOSS TO THE SUBJECT-MATTER INSURED
• CHAPTER 3 ISSUES ARISING FROM DELAY IN DELIVERY OF CARGO
• CHAPTER 4 CARGO INSURANCE AND EXPENSES ARISING DURING THE PERIOD OF DELAY
• CHAPTER 5 MARINE DELAY IN START-UP INSURANCE
• CHAPTER 6 FREIGHT INSURANCE AND THE LOSS OF TIME CLAUSE
• CHAPTER 7 HULL AND MACHINERY INSURANCE AND DELAY CONSIDERATIONS
• CHAPTER 8 LOSS OF CHARTER HIRE INSURANCE AND LOSS OF TIME
• CHAPTER 9 IMPLIED CONDITION AS TO THE COMMENCEMENT OF RISK
• CHAPTER 10 DELAY IN VOYAGE
• Index