Insurance Excluded Losses and Causation .pdf



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4.  EXCLUSION  -­‐  EXCLUDED  LOSSES  
Monday,  February  17th  
 

I.

INTRODUCTION    
 

1-­‐  STATUTORILY  EXCLUDED  LOSSES:  






 
Effect  of  an  exclusion,  as  any  contract  term,  is  a  matter  of  construction.  However,  where  
there  is   inconsistency  between  the  cover  provided  by  the  policy  and  the  exclusions,  the  
exclusion  generally  prevails.  
The  person  relying  on  the  exclusion  must  prove  his  entitlement  to  do  so  (insurer).  
MIA   S.55:   PROXIMATE   CAUSE   RULE:   the   INSURER   IS   LIABLE   FOR   ANY   LOSS  
PROXIMATELY  CAUSED  BY  A  PERIL  INSURED  AGAINST    
MIA   s.55   contains   a   number   of   exclusions,   must   of   which   are   dealt   with   specific   terms   in  
the  policy.  
o The  insurer  is  not  liable  for  losses  not  proximately  caused  by  insured  perils.  
o The   Assured   need   to   prove   that   loss   caused   by   an   insured   peril,   to   be   insured  
(sinon  exclusion)  

 
MIA  1906  s.55  –  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  &  
tear,  ordinary  leakage  &  breakage,  inherent  vice  or  nature  of  the  subject-­‐matter  insured,  
or  for  any  loss  proximately  caused  by  rats  or  vermin,  or  for  any  injury  to  machinery  not  
proximately  caused  by  maritime  perils.  
 
 
(1) any loss which is not proximately caused by a peril insured
against;
(2)(a) any loss attributable to the wilful misconduct of the Assured;
(2)(b) 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;
(2)(c)(i) ordinary wear and tear;
(ii) ordinary leakage and breakage;
(iii) inherent vice or nature of the subject matter insured;
(iv) any loss proximately caused by rats or vermin;
(v) any injury to machinery not proximately caused by
maritime perils.  
 
Subject  to  other  provisions  of  the  Act  and  subject   to   contrary   provision   by   the   parties   (expect  
for  wilful  misconduct)  
 

2-­‐  BUT  there  are  also  STANDARD  FORM  CONTRACTUAL  EXCLUSIONS  (in  general  clauses  and  
war  &  strikes  clauses)  to  exempt  underwriter  from  liability  in  certain  circumstances.  
 
ITCH  83  (International  Hulls  and  Freight  Clauses)  
 
3-­‐  BURDEN  OF  PROOF  
Burden   of   proof   generally   lies   on   a   person   claiming   the   benefit   of   an   exception   to   prove   his  
entitlement  to  do  so  –  so  on  the  insurer  
   

 

II.

INDIVIDUAL  EXCLUSIONS  

1. WILFUL  MISCONDUCT  OF  THE  ASSURED  
 
S.  55(2)(a)  of  the  MIA  
 
• Wilful   misconduct   of   the   Assured:   an   assured   who   consciously   performs   an   act   or  
sets   in   motion   a   series   of   events   calculated   to   cause   a   loss   and   succeeds   in   doing  
so,   may   fail   to   recover   for   3   reasons:   illegality   +   loss   not   proximately   caused   by   an  
insured   peril   +   even   if   the   loss   is   proximately   caused   by   an   insured   peril,   recovery   is  
precluded.    
• The  insurer  is  generally  only   liable   for   fortuitous   losses,  here  not  liable  for  “any  loss  
contributable  to  the  wilful  misconduct  of  the  assured”  
• This  rule  cannot  be  excluded  by  agreement.      
• Idea  of  deliberate  intention  of  bringing  about  the  operation  of  an  insured  peril  so  as  to  
support   an   otherwise   unsupportable   claim   against   the   insurer   (by   scuttling   the   ship)   –  
Extends  to  conscious  or  reckless  omission  to  prevent  conduct  which  is  liable  to  cause  the  
operation  of  an  insured  peril.    
• It   must   be   committed  by  the  Assured  himself:   either   the   “personal   misconduct”   of   the  
assured  or  of  his  alter  ego  or  such  misconduct  on  behalf  of  a  person  from  whom  his  claim  
derives  -­‐  do  not  include  misconduct  of  servants  (because  employees).    
 
Samuel  v  Dumas,  1924  HL*  
Vessel  fraudulently  sunk  on  the  owner’s  instruction  (fraud  of  the  insurer).    
Vessel   was   mortgaged   and   the   mortgagee   was   held   not   to   be   complicit   in   the   manoeuvre.  
Mortgagee  sought  to  recover  for  loss  by  peril  of  the  sea.  House  of  Lords  held  that  the   scuttling  
of   the   vessel   is   not   a   peril   of   the   sea   -­‐   Fortuity   “involves   an   element   of   chance   or   ill   luck  
which   is   absent   where   those   in   charge   of   a   vessel   deliberately   throw   her   away”   -­‐   fortuity  
should  be  assessed  in  absolute  terms  and  not  relative  to  the  assured  claiming  under  the  policy.    
Even   if   the   wilful   misconduct   of   a   SO   in   scuttling   the   vessel   will   not   defeat   a   claim   by   an  
independently   insured   mortgagee,   though   “it   may   well   be   that,   when   2   persons   are   jointly  
insured   and   their   interests   are   inseparably   connected   so   that   a   loss   or   gain   necessarily  
affects  them  both,  the  misconduct  of  one  is  sufficient  to  contaminate  the  whole  insurance.”  
 

2. DELIBERATE,  OR  MALICIOUS,  DAMAGE  
 
-­‐   ICC   (B)   and   (C)   Clauses:   no   cover   for   “deliberate   damage   to   or   deliberate   destruction   of   the  
subject-­‐matter  insured  or  any  part  thereof  by  the  wrongful  act  of  any  person  or  persons.”  –  ICC  
(B)  cl.4.7;  ICC(C)  cl.4.7  

 

3. WEAR  &  TEAR  
 
S.55(2)(c)  of  the  MIA  
 






Consistently   with   the   fortuity   rule,   the   insurer   not   liable   for   ordinary   wear   &   tear,   unless  
the  policy  otherwise  provides  
More  relevant  to  ship  than  to  goods  
Loss  caused  by  ordinary  WT  may  be  excluded  even  if  not  inevitable.    
May  be  eliminated  by  contrary  provision  (but  never  happened)  

 
Stated  more  forcefully  in  ICC,  cl.4.2  

 

4. LEAKAGE  &  BREAKAGE  
 
S.55(2)(c)  of  the  MIA  
 
• Consistently   with   the   fortuity   rule,   the   insurer   not   liable   for   ordinary   leakage   &  
breakage,  unless  the  policy  otherwise  provides  
• Not  concern  extraordinary  LB  resulting  from  an  insured  peril  
• May  be  outset  by  contrary  provision  
 
The  Cendor  MOPU,  2011*  
 
Lord   Mance:   "While   not   myself   attempting   any   exact   definition,   ordinary   wear   and   tear  
and   ordinary   leakage   and   breakage   would   thus   cover   loss   or   damage   resulting   from   the  
normal  vicissitudes  of  use  in  the  case  of  a  vessel,  or  of  handling  and  carriage  in  the  case  of  
cargo,   while   inherent   vice   would   cover   inherent   characteristics   of   or   defects   in   a   hull   or   cargo  
leading   to   it   causing   loss   or   damage   to   itself   -­‐   in   each   case   without   any   fortuitous   external  
accident  or  casualty.”    
 
• Damage  resulting  from  normal  events  are  excluded.  
• Contrasted  to  exclusion  of  inherent  vice.  
 

5. INHERENT  VICE  OR  NATURE  (OF  THE  SUBJECT-­‐MATTER)  

 
S.  55(2)(c)  of  the  MIA  
 
• The  insurer  is  not  liable  for  damages  resulting  from  inherent  vice,  unless  the  insurance  
cover  provides  otherwise.  
• Peril  may  be  introduced  in  the  policy  that  overrides  the  exclusion  of  inherent  vice.  
 
 
 S oya  v  W hite,  1 983  
 
Lord   Diplock:   “This   phrase   [generally   shortened   to   ”inherent   vice”   where   it   is   used   in  
s.55(2)(c)]   refers   to   a   peril   by   which   a   loss   is   proximately   caused  ;   it   is   not   descriptive   of   the   loss  
itself.   It   mans   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.”     Definition   limited   to   the   natural   behaviour   of  
the  SM  in  the  absence  of  fortuitous  perils  (no  overlap  between  the  inherent  nature  of  the  SM  and  
the  fortuitously  pertain  peril  of  the  sea).    
 
Lord  Diplock’s  definition  was  alter  approved  by  the  SC  in  …  
 
The  Cendor  MOPU,  2011  SC*  
 
Lord   Mance:   "While   not   myself   attempting   any   exact   definition,   ordinary   wear   and   tear  
and   ordinary   leakage   and   breakage   would   thus   cover   …   while   inherent   vice   would   cover  inherent  
characteristics   of   or   defects   in   a   hull   or   cargo   leading   to   it   causing   loss   or   damage   to   itself  -­‐  
in  each  case  without  any  fortuitous  external  accident  or  casualty.”  
 

 






Core   of   the   definition:   the   natural   behaviour   of   the   subject-­‐matter   in   the   ordinary  
course  of  events    
Loss  may  caused  by  IV  even  if  not  inevitable    
The  fact  the  SM  suffers  from  IV  and  the  fact  that  it  suffers  a  loss  do  not  per  se  mean  that  
the  loss  was  caused  by  the  IV  (so  as  to  be  unindemnifiable)  
Loss  may  be  caused  by  IV  where  the  intrinsic  nature  of  goods  is  such  that,  from  their  
natural  behaviour,  they  are  “not  fit  to  make  the  voyage  in  the  ordinary  way”.  
IV  also   includes   the   necessary   packing   of   the   goods  (both  adequacy  of  the  material  
and   the   method   of   packing)   –   so   cargo   and   its   packing   -­‐However   ICC   2009,   cl.4.3  
specifically  exclude  inadequate  packing.    
Loss  may  arise  from  the  IV  of  the  SM  even  if  external  factors  affect  its  behaviour:  


 
Noten  v  Harding,  1990  
A   loss   may   be   caused   by   inherent   vice   if   it   results   from   a   cause  externally  from  the  SM  
but  originally  arose  from  the  SM.  Cargo  of  leather  gloves  in  container  –  moisture  from  leather  
gloves   in   a   container   rose,   condensed   and   dripped   onto   the   gloves,   which   became   mouldy   and  
got  moisture,  condenses  inside  the  container.  Question  was  whether  or  not  came  from  the  gloves  
or  not.  At  the  end  it  was  considered  that  even  though  came  from  the  gloves,  the  moisture  came  
from  outside  first.  Loss  was  held  to  be  caused  by  IV  though  it  was  not  inevitable  that  there  
would   always   be   such   an   occurrence,   and   the   fact   that   moisture   had   left   the   goods   to  
return  to  them  did  not  necessarily  make  it  an  external  cause.  
 
• Not   enough   that   the   SM   had   inherent   vice   and   suffered   a   loss;   the   burden   is   on   the  
insurer  to  prove  that  the  loss  was  proximately  caused  by  the  IV.    
 
-­‐  Excluded  in  ICC  –  ICC  cl.4.4  
 

6. RATS  OR  VERMIN  

 
S.55(2)(c)  of  the  MIA  
 
•  The  insurer  is  not  liable  for  any  loss  proximately  caused  by  rats  or  vermin,  unless   the  
policy  provides  otherwise.    
• Damage   directly   caused   by   vermin   is   not   included   with   perils   of   the   seas  (so  can  be  
excluded)  
• However,  if  rats  gives  opportunity  to  another  insured  peril  to  operate  and  if  this  2nd  
one  is  the  proximate  cause  of  the  loss  (and  not  rats),  then  covered  and  the  insured  
can  recover:    
 
Hamilton  v  Pamdorf  (1887)  
Damaged   to   cargo   caused   by   seawater   due   to   rats   gnawing   through   a   pipe   was  
considered   as   a   loss   caused   by   peril   of   the   sea.   Proximate   cause   of   the   loss   was   the   ingress   of  
seawater   and   not   the   rats.   an   ingress   of   sweater   made   pss   by   rats   gnawing   a   pipe   on   board   ship  
is  a  peril  of  the  seas  (so  fall  outside  the  exclusion  and  so  covered):  
 
 

7. INJURY  TO  MACHINERY  
 
S.55(2)(c)  of  the  MIA  
 
• The   insurer   is   prima   facie   not   liable   for   any   injury   to   machinery   not   proximately  
caused  by  maritime  perils.  



This   codifies   the   HL   decision   in   The   Inchamree   1887   HL   (due   to   the   closure   of   a   valve  
which   should   have   been   open,   water   was   forced   into   and   spilt   the   air   chamber   of   a  
donkey-­‐pump;  this  was  held  not  to  be  caused  by  the  insured  perils  of  “perils  of  the  seas  
ad  of  any  other  perils.”  HL:  loss  was  not  caused  by  an  insured  peril,  so  not  recoverable)  
Subject  to  contrary  provision  


 
-­‐   ITVC   (Institute   Time   and   Voyage   Clauses):   Inchmaree   clause   covering   inter   alia   loss   or   damage  
caused  by  bursting  of  boilers,  breakage  of  shafts  or  any  latent  defect  in  the  machinery  or  hull  
Also   in   Perils   Clauses   covers   loss   caused   by   breakdown   of   or   accident   to   nuclear   installations   or  
reactors  
 

8. DELAY  

 
S.55(2)(b)  of  the  MIA  
 
• Enacts   the   rule   at   CL   that   “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”  
–  proximate  causation  is  a  question  of  fact    
• Marine  Insurance  is  to  insure   for   loss   to   property.  The  operation  of  perils  may  cause  
delay  and  delay  may  cause  losses  but  it’s  an  economic  loss  rather  than  a  property  loss.  
• Position   slightly   different   with   freight,   considered   as   an   economic   interest,   in   case   of  
freight  clause  →  won’t  be  excluded  as  an  economic  loss.  
• Subject  to  contract  provision  
 
-­‐  The  Loss   of   Time   Clause  (previously  known  as  the  time  charter  clause)  appears  in  both  the  
time   and   voyage   forms   of   the   current   Institute   Freight   Clauses  :   “this   insurance   does   not   cover  
any  claim  consequent  on  loss  of  time  whether  arising  from  a  peril  of  the  sea  or  otherwise”    
(The  words  “any  claim  consequent  on  loss  of  time”  mean  “any  claim  for  losses  due  to  delay”)  
 
The  Playa  de  las  Nieves,  1978  HL*  
 
Time  charter  party,  containing  a  of  hire  clause  (payment  excluded  for  time  loss  for  in  a  
list  of  cases).  Shipowners  insured  freight  under  a  policy  excluding  “any  claim  consequent  on  loss  
of   time   whether   arising   from   a   peril   of   the   sea   or   otherwise”.   Vessel’s   machinery   broke   down,  
necessity   for   the   ship   to   be   repaired.   Went   off-­‐hire   under   the   terms   of   the   charterparty.    
Shipowner  sought  to  recover  for  loss  of  freight  from  the  assured.    
 
Held:   Lord   Diplock:   the   loss   of   freight   was   due   to   the   Break   down   of   the   machinery,  
which  triggered  the  off-­‐hire  clause.    
 
Question   as   to   whether   the   proximate   cause   of   the   loss   was   a   peril   insured   against  
is  irrelevant  (insurer  tried  to  argue  that  the  breakdown  of  machinery  was  not  an  insured  peril).    
 
The   exclusion   in   the   insurance   cover   “contemplates   a   chain   of   events   expressed   to   be  
either  “consequent  on”  or  arising  from”  one  another.   It  expressly  makes  the  operation  of  the  clause  
dependent  upon  the  presence  in  the  chain  of  an  intermediate  event  (loss  of  time)  between  the  loss  
for   which   the   claim   is   made   (loss   of   freight)   and   the   event   which   in   insurance   law   is   the   proximate  
cause  of  that  loss  (peril  insured  against)…  the  intermediate  event  is  not  a  peril  though  it  may  be  the  
result   of   a   peril   (…)”.   -­‐   The   clause   is   concerned   with   an   intermediate   event   between   the  
occurrence   of   a   peril   insured   against   and   the   loss   of   freight   of   which   the   peril   was,   in  
insurance  law,  the  proximate  cause”    
 
The  clause   “postulates   a   chain   of   events,   viz   (1)   the   occurrence   of   a   peril   insured  
against,  resulting  in  (2)  loss  of  time,  resulting  in  (3)  loss  to  the  assured  of  freight  which  he  
would  have  earned  from  the  use  or  hire  of  his  vessel”    
 
 
“When   a   voyage   charter   is   frustrated   by   the   actual   destruction   of   the   major   part   of   the  
carrying   vessel   or   of   the   machinery   essential   to   enable   the   vessel   to   carry   the   agreed   cargo   or   is  

frustrated   by   the   outbreak   of   hostilities   it   may   not   spring   to   one’s   lips   to   describe   the   resulting   loss  
of   freight   under   the   voyage   charter   as   ‘consequent   on   loss   of   time’.   These   …   may   well   be   the   kind   of  
cases   to   which   Lord   Atkin   refers   as   possibly   having   placed   too   wide   a   construction   on   that   phrase.”  
=  unless  the  claim  is  manifestly  shown  to  be  based  on  loss  of  time  (eg,  on  loss  of  hire  under  
an  off-­‐hire  clause  or  where  frustration  is  constituted  by  a  frustrating  delay),  in  accordance  with  
the  contra   proferentem  rule  of  construction,  a  claim  will  not  easily  be  defeated  by  a  Loss  
of  Time  Clause.  
 
Three  fold  event:  
1) Operation  of  an  insured  peril  
2) Resulting  loss  of  time  
3) Causing  a  loss  to  the  Assured  (a  loss  of  freight)  
=  these   3   folds   have   to   occur   for   the   insured   to   recover   for   loss   by   delay.  NOT  because  of  
the  loss  of  time.    
Otherwise,  Losses  resulting  from  delay  are  normally  excluded.  
 

9. INSOLVENCY  AND  FINANCIAL  DEFAULT  
 
-­‐  Under  the  ICC:  the  insurer  is  not  liable  for  loss  caused  by  insolvency  or  financial  default  of  
sea   carriers,   to   an   assured   who   at   the   time   he   ships   cargo   is   or   should   be   ware   that   such  
financial  instability  could  be  prevent  normal  prosecution  of  the  voyage,  except  if  assignee  taking  
in  good  faith.  The  insurer  does  not  insure  against  inability  to  pay.    
ICC  09,  cl.4.6  –  ICC  82,  cl.4.6  
 
 

10.  DISCORD  (“  WAR  AND  STRIKES”)  

 
-­‐  Exclusion  clauses  for  excluding  the  risk  of  discord  perils  from  both  “marine”  and  “war  and  
strikes”   cover   and   for   allocating   such   risks   between   different   types   of   policy.     Usually  
excluded  from  standard  marine  perils  but  include  in  another  set  of  clauses.  

 

11. BOTTOM  TREATMENT  

 
Standard  Hull  clauses  
 

12. WAGES  AND  MAINTENACE  

 
Standard  Hull  Clauses:  U  shall  be  not  liable  for  wages  and  maintenance  of  the  master,  officers,  
crew  or  any  member  thereof,  except  …    
 

13. AGENCY  COMMISSION  
 
Standard  Hull  Clauses  
 

14. MYSTERIOUS  DISAPPEARANCE  AND  STOCKTAKING  
 
Reverses  the  normal  burden  of  proof    
 

III.

PARTIAL  LOSSES  

 


Losses  may  either  be  total  or  partial.  Partial  losses  cause  practical  problems,  particularly  
if   they   are   small.   There   may   be   doubts   as   to   why   the   loss   is   caused   (wear   and   tear,  
inherent  vice)  it  may  not  be  worth  to  bother  to  bring  and  defend  the  claim.    




 
 
 
 
 
 
 
 




Important   use   if   excluding   or   limiting   the   Assured’s   entitlement   to   claim   in   specified  
circumstances  occurs  in  the  case  of  partial  losses  
Insurance  has  often  been  effected  “free   of   particular   average”  –  S.76  MIA:  ”(1)  Where  
the  subject-­‐matter  insured  is  warranted  free  from  particular  average,  the   assured  cannot  
recover  for  a  loss  of  part,  other  than  a  loss  incurred  by  a  general  average  sacrifice,  unless  
the  contract  contained  in  the  policy  be  apportionable;  but,  if  the  contract  be  apportionable,  
the  assured  may  recover  for  a  total  loss  of  any  apportionable  part.  
(2)   Where   the   subject-­‐matter   insured   is   warranted   free   from   particular   average,   either  
wholly   or   under   a   certain   percentage,   the   insurer   is   nevertheless   liable   for   salvage  
charges,  and  for  particular  charges  and  other  expenses  properly  incurred  pursuant  to  the  
provisions   of   the   suing   and   labouring   clause   in   order   to   avert   a   loss   insured   against.”  
S.76(2)  recognises  that  a  particularly  common  way  of  excluding  partial  losses  has  been  
to   exclude  small  partial  losses   (advantageous   for   both   the   insurer   and   the   assured,   for  
example   eliminate   the   difficulty,   inconvenience   and   expenses   of   small   claims,   or   avoid  
the  necessity  of  discerning  whether  a  claim  was  caused  by  an  insured  peril  or  WT…).    
Historically  two  ways  to  deal  with  it:  
o FRANCHISE   CLAUSE:   excludes   specified   losses   of   less   than   a   certain  
percentage   –   example   with   IFCTCF   83,   cl.12,   IVCF   cl.10   “no   cover   partial   loss,  
other   than   general   average   loss,   under   3%   unless   caused   by   fire   …”   -­‐   cannot  
recover  for  losses  up  to  a  certain  amount,  percentage  (of  the  value  of  the  SM).  But  
if  the  loss  exceeds  the  specified  amount,  you  can  recover  for  the  whole  loss.    
o DEDUCTIBLE   CLAUSE:   an   agreed   amount   is   deducted   from   all   claims   for  
partial   losses   however   large   or   small   the   loss.   So   a   stage   further   -­‐   you   get  
nothing   up   to   a   specified   amount   but   you   can   recover   beyond.   Generally   arises  
out  of  Hull  Insurance  (IHC  03  cl.15,  ITCH  cl.12).  
The   exclusion   rather   it   is   a   franchise   or   deductible   may   be   limited,   some   risks   may   be  
covered  without  regard  of  their  amount.  

 
 

-­‐  SUCCESSIVE  LOSSES  SUFFERED  BY  A  SINGLE  TYPE  OF  SM  
 




In   an   insurance   on   ship,   successive   particular   average   losses   occurring   during   a  
single   voyage   may   be   aggregated   (alone   fall   under   the   limit   but   exceed   it   if   put  
together),  whether  voyage  or  time  policy,  for  freight  and  goods.  
However   the   position   can   be   defined   or   modified   by   agreement   -­‐   commonly   contracts  
exclude  form  the  aggregation  some  partial  losses  like  general  average  or  salvage.  

 
-­‐  LOSS  OF  A  DIFFERENT  CHARACTER    
 
• Exclusion  of  one  type  of  loss  clearly  should  not  apply  to  a  loss  of  a  different  character.  
• S.76   of   the   MIA:   “(3)   Unless   the   policy   otherwise   provides,   where   the   subject-­‐matter  
insured  is  warranted  free  from  particular  average  under  a  specified  percentage,  a  general  
average   loss   cannot   be   added   to   a   particular   average   loss   to   make   up   the   specified  
percentage.  
(4)   For   the   purpose   of   ascertaining   whether   the   specified   percentage   has   been   reached,  
regard  shall  be  had  only  to  the  actual  loss  suffered  by  the  subject-­‐matter  insured.  Particular  
charges   and   the   expenses   of   and   incidental   to   ascertaining   and   proving   the   loss   must   be  
excluded.”  
 
*[Particular  average  means  partial  loss].  
 
 

 

 

5.  CAUSATION  
 
When   we   are   looking   at   a   claim   under   an   insurance   contract,   we   will   look   at   where   the  
Assured   is   arguing   that   the   loss   occurred   as   a   result   of   an   insured   peril   →   regard   to   the  
connection  between  them.  How  is  causation  proved?  
 
Rules  of  causation  provide  a  means  of  distinguishing  between  those  causes  which  trigger  
liability   and   give   rise   to   certain   defences   in   accordance   with   the   contractual   relationship  
between  assured  and  insurer.  Whether  or  not  a  loss  is  covered  by  a  marine  policy  depends  on  
ascertaining   its   proximate   cause   -­‐   Burden:   on   the   claimant   to   prove   (on   a   balance   of  
probabilities).    
 
• FORTUITY:  to  recover  an  indemnity,  assured  must  prove  that  a  loss  was  caused  by  the  
fortuitous   operation   of   an   insured   peril.  Insurance  is  generally  about  fortuitous  losses  
(things   that   may   or   may   not   happen   –   peril   of   the   sea…);   fortuity   does   not   however  
always  work,  some  losses  are  caused  by  deliberate  conducts,  such  as  piracy…  the  guiding  
idea  remains  fortuity  but  is  not  the  single  one.  
• INEVITABILITY:  The   Cendor   MOPU   2011:  lack  of  inevitability  is  no  proof  of  a  fortuitous  
external   accident   or   casualty.   Lord   Mance   queried   “whether   and   to   what   extend   there  
exist   a   further   principle   of   insurance   law,   that   loss   which   is   inevitable   is   irrevocable”:   as  
long   as   the   insured   did   not   know   that   the   loss   would   happen,   then   he   should   be  
covered  (if  both  parties  known  the  loss  was  inevitable,  no  insurance  –  if  assured  alone  
knows,  no  cover)  
 
• S.55(1):   the   general   principle   is   that   the   insurer’s   liability   is   only   for   any   loss  
proximately   caused   by   an   insured   peril   +   subject   to   other   provisions   of   the   MIA   +  
subject  to  contrary  provision  in  the  policy  (most  important)  
 
-­‐  PROXIMATE  CAUSE  
 
Judges  consider  that  what  we  are  looking  for  is  not  the  last  cause  in  point  of  time  (as  it  was  
commonly  treated  before)  but  “the  real,  dominant  or  effective  cause”  or  the  real  efficient  
cause”  (proximate  in  efficacy,  so  more  difficult  to  identify)  –question  of  fact  
 
-­‐  REASONS  FOR  THE  PERIL  
 
The   assured   can   recover   for   a   loss,   which   is   proximately   caused   by   an   insured   peril,   and   the  
nature  and  scope  of  the  peril  is  a  question  o  the  construction  of  the  policy.  If  this  is  so,  and  the  
claim   is   not   excluded   by   law   or   by   a   term   of   the   contract,   the   reason   why   the   insured   peril  
arose  or  operated  so  as  to  cause  the  loss  is  irrelevant.    
Since  negligence  is  in  principle  irrelevant  to  whether  a  loss  has  been  caused  by  an  insured  
peril,  this  is  a  fortiori  true  where  the  peril  causing  the  loss  is  uninsured  
 
-­‐  CONCURRENT  CAUSES  
 
An  uninsured  peril  may  give  rise  to  an  insured  peril  which  proximately  causes  the  loss  and  
enables  the  assured  to  recover  under  the  policy.  If  several  contributing  causes:  attempt  to  
discover  whether  one  of  the  causes  is  plainly  the  proximate  cause  of  the  loss,  in  efficiency  
as  the  dominant  cause  of  the  loss.  
If  one  cause  is  an  insured  and  the  other  an  excluded  peril,  and  shown  that  the  proximate  cause  of  
the  loss  falls  within  the  exclusion:  the  exclusion  prevails.  
 
-­‐  IDENTIFYING  THE  PERIL    
 

Identifying  the  peril  against  which  the  assured  claims  to  be  covered  is  different  from  proving  
causation    
 
-­‐  ANTICIPATED  LOSSES  
 
Assured  cannot   recover   for   a   loss   resulting   from   mere   apprehension   that   a   loss   from   an  
insured   peril   may   or   even   is   certain   to   occur.   If   a   loss   from   one   peril   is   apprehended   and  
avoided   but   a   loss   is   then   suffered,   and   even   if   the   that   loss   would   not   have   occurred   but   for   the  
necessity   of   avoiding   the   original   peril:   no   recovery   for   a   loss   caused   by   that   peril   if   it   did   not  
cause  the  loss  (if  there  is  to  be  recovery:  must  be  because  the  loss  was  caused  by  different  peril  
and  that  peril  was  insured)  
Action   taken   to   avert   one   peril   may   justify   a   claim   for   a   loss   caused   by   another   peril  
(another  peril  -­‐  recover  for  loss  by  fore  where  ship  is  brunt  to  avoid  a  loss  by  capture).  
Sufficient  to  constitute  a  loss  by  an  insured  peril  that  the  loss  was  caused  by  necessary  and  bona  
fide  action  taken  as  a  consequence  of,  and  in  order  to  avert,  the  insured  peril  of  which  there  was  
an   immediate   danger   and   which   was   reasonably   certain   to   cause   the   loss   but   for   the   action   in  
question  (must  be  sthg  equivalent  to  the  relevant  peril).  
 
-­‐  PERILS  OF  THE  SEA  
 
Any   loss   caused   by   the   perils   of   the   sea   is   within   the   policy,   though   it   would   not   have  
occurred   but   for   the   concurrent   action   of   some   other   cause   which   is   not   within   it.  
Otherwise,  underwriters  would  always  be  able  to  raise  the  question  whether  the  vessel  was  able  
to  meet  the  perils  of  the  sea.  
 
 
Proof  of  causation:  
• Insurance  contract  may  get  around  it  by  the  terms  included  in  the  policy.  “caused  by”  or  
as  the  Inchmaree  clause  “provide  the  loss  as  not  resulted  from  due  diligence”.  
• Different  terms  may  be  used  and  deliberately  or  not  intend  to  mean  something.  
• One  of  the  major  qualification  on  causation  →  as  a  general  rule,  if  a  loss  is  proximately  
caused  by  an  insured  peril  it  does  not  matter  that  it  is  caused  by  negligence..  
 
 
Becker  Gray  v  London  Ass,  1987  
Assured  insured  from  loss  against  detention.  In  order  to  avoid  capture,  the  vessel  put  into  a  
port   of   refuge,   into   a   neutral   port.   Held   that   the   loss   occurred   did   not   result   from   peril   of  
detention  as  the  peril  of  detention  was  avoided.  A  loss  resulted  from  mere  apprehension  of  the  
peril  is  not  generally  recoverable.  
 
• However   when   actions   were   taken   where   a   peril   was   imminent   the   loss   of   avoidance  
may  be  recoverable.  →  Knight  of  St.  Michel;  the  Canada  Rice  Case.  
• Distinction   between   when   you   take   action   to   avoid   a   peril   and   where   you   take   actions   as  
a  result,  consequence  of  an  immediate  threat  of  a  peril.  

 


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