Marine Insurance: Law and Practice




11.1 As discussed above,1 it is a general rule that a contracting party is entitled to decline to perform his obligations where the other party has failed to comply with a condition precedent to his liability or has substantially failed to perform an intermediate term of the contract. Four particular emanations of this rule are familiar in relation to the period covered by a marine insurance policy. An insurer does not become liable if the insured voyage is not begun;2 and, if it has begun, he is discharged from liability in the case of a change of destination (conventionally known as a change of voyage),3 deviation from the course of the contract voyage,4 or unreasonable delay in prosecuting the contract voyage.5 In summary, for the insurer to be liable, the contract voyage must be prosecuted in accordance with the contract and with reasonable expedition.6 11.2 The substantial bodies of law which have been laid down with respect to these particular situations have encouraged the impression that they form discrete areas of law. Certainly, intention has a different role in change of voyage cases and in other cases: for the insurer may be discharged by the mere manifestation of intention to change the destination; but only by actual implementation of an intention to deviate or to incur an unreasonable delay. Given the uncertain nature of formulating and implementing intentions to alter the insured voyage, it has been observed that “It is often a nice question on the facts whether an interruption of the voyage amounts to a deviation only or is a change of voyage”.7 Whether or not there has been an abandonment of the voyage, a deviation or a change of voyage “is in each case a question of fact, and, indeed, may be one of degree”.8 11.3 In fact, there may be little obvious theoretical or practical difference between an intention to deviate and an intention to change destination. Yet the distinction may need to be made: to determine whether the insurer is discharged for one reason or the other, or both; and/or to determine whether an extension (held covered) clause9 applies to the event which has occurred. Nonetheless, they are particular applications of the general rule stated above. Indeed, the affinity between deviation and unreasonable delay is evident in that, before the Marine Insurance Act 1906 was enacted using the terms in clearly different senses, unreasonable delay was not infrequently expressed as a form of deviation. 11.4 The significance of the general rule is not merely theoretical, for it may also apply to cases not falling neatly, or at all, within the four most familiar categories.10 In Union-Castle Mail SS Co Ltd v United Kingdom Mutual War Risks Assn Ltd 11 two cargo and passenger liners were insured from London on round-Africa voyages returning to London. After receiving Admiralty advice to avoid the Suez Canal area—the sine qua non but not the cause of the ensuing events, which were dictated by commercial convenience —calls were made by both vessels at unscheduled ports, some of the scheduled ports were not called at, and additional passengers were taken on and carried in a reverse direction to the scheduled voyages. Diplock J held that the voyages upon which the vessels were engaged were changed. However, the voyages remained round voyages to and from London, as contemplated by the contract, and there was no change of destination. There was, therefore, no change of voyage within the definition in the Marine Insurance Act 1906, section 45, to which his Lordship did not refer. Nonetheless, his conclusion is consistent with the general rule stated above.12 11.5 Such non-compliance discharges the insurer not because the risk is increased13 but because a different voyage is substituted for the one insured.14

Responsibility for deviation or delay

11.6 The statutory rules on deviation and delay are expressed without regard to the person who is actually or legally responsible for the departure from the contract. They state whether the effect of an event is that the insurer is discharged from liability under the contract or remains liable. This takes account of the fact that the assured may be directly responsible for the event (most obviously an assured shipowner); or that he may be unable directly to control the event (most obviously in the case of an assured cargo-owner) but that he must accept responsibility for what occurs during the adventure to which he is party, with recourse if necessary against those whose actions or omissions cause him to lose the benefit of his insurance. 11.7 A shipowner is generally obliged and entitled to do what is necessary for the proper prosecution of the adventure15 but it is the responsibility of the assured to provide for how far the actual and the insured adventures are consistent, for of course the relationship between assured and insurer is governed by the terms of the insurance contract. Thus, although the applicable principles are the same,16 the question whether or not action is justifiable may be answered differently under the insurance contract and contracts relating to the underlying adventure.17 11.8 In Wingate v Foster,18 salvage pumps were insured “at and from Ardrossan [from the loading on board the Sea Mew] to the Alexandra steamer ashore in the neighbourhood in Drogheda, and while there engaged at the wreck and until again returned to Ardrossan”. After the Alexandra was raised and she was bound for Ardrossan, accompanied by the Sea Mew, the flotilla met with bad weather, making it expedient to make for Belfast; but on its way there the Sea Mew and pumps were lost. Though the return voyage of the pumps on board the Sea Mew might have been justified as an incident of the adventure and the deviation to Belfast justified by the bad weather, the view of the Court of Appeal appears to have been that, once the Alexandra was raised, the policy only applied to the return of the pumps directly to Ardrossan, so that their return as part of the adventure of taking the Alexandra to a place of safety was completely outside the terms of the policy.


11.9 The expression “change of voyage” is conventionally used to refer to the situation where the insured voyage is begun but the destination is voluntarily changed.19 Where, after the commencement of the risk, there is a manifested intention20 voluntarily21 to change the destination contemplated by the policy,22 unless the policy otherwise provides, the insurer is discharged from liability.23 The rule is based upon an expressed intention, whether or not implemented, not to comply with the insured voyage. 11.10 Whether a destination is changed depends initially on determining the contract destination. Where the policy covers sailing to one or more destinations which are to be determined, and the vessel originally sails to one destination but it is later changed by the assured to a different destination within the range covered by the policy, there is no change of voyage.24 11.11 Once the contract destination has been determined, there must be convincing evidence of an intention to change the contract destination before the insurer is discharged from liability. An indication that the destination might be different is insufficient. Thus, in Planche v Fletcher,25 where a policy covered a ship from London to Nantz, with liberty to call at Ostend, but the ship sailed directly to Nantz, the policy was effective, though the ship was cleared for Ostend with bills of lading as from there, this being assumed to be in consequence of a notorious practice for evading prohibitively high French customs duties on English imports. 11.12 It is of course easier to prove manifestation of a change of voyage when the vessel is shown to be actually sailing towards a different destination from the contract destination, and “a mere meditated change does not affect a policy”,26 but evidence of a clear intention to change the destination, for example as expressed in a letter, is sufficient.27 Where there is such evidence, therefore, there may be a change of voyage even though no voyage has yet begun, “[f]or, according to the voyage, the continuance and delay in port may differ”.28 The rule operates regardless of whether the change is otherwise to the insurer’s prejudice or even advantage (as it might, for example, where the vessel proceeds on the same route but stops half-way on the voyage, so reducing the risk). 11.13 Just as there may be a change of voyage while the vessel is still at the port of loading waiting to sail, so may there be a “change of voyage” when the vessel is on the contract voyage and the decision is manifested not to continue with it. This appears to have been the view of the members of the House of Lords in Thames & Mersey Mar Ins Co v HT Van Laun & Co,29 which was decided the year before the Marine Insurance Act 1906 was enacted. In that case, while at an intermediate port, consideration was given to whether the ship might continue to a destination within the contract range, not for the purpose of delivering the cargo of cattle in accordance with the bill of lading contract, but to dispose of it differently, to greater advantage. The case has been criticised on the ground that their Lordships obiter support a rule that there may be a change of voyage where the assured cargo-owner and the shipowner evidence an intention to deliver the subject matter of the contract other than as originally contemplated, even though the destination under the insurance contract is unchanged, and even though the supposed rule is not included in the statutory codification of the law on change of voyage.30 However, Lord Davey in Thames & Mersey v Van Laun 31 made the point that whether or not the destination was changed was merely “the usual test” for change of voyage, ie not the exclusive test. 11.14 The rule in the Marine Insurance Act 1906, section 45 may be another example32 of Chalmers’ codification of the case law on the decided illustrations of an underlying general principle which has not itself been stated in the legislation. Thus, if change of destination is simply the most obvious illustration of a continuing broader principle that an insurer may be discharged from liability because the circumstances occurring are outside the scope of the contract, the supposed rule in Thames & Mersey v Van Laun can legitimately survive as another example of it. However, the scope for the broader principle is limited by the construction of the relevant insurance contract. If the policy applies to carriage and discharge of cargo in a particular way, the supposed rule in Thames & Mersey v Van Laun may apply. But, if the insured adventure is simply a voyage from one port to another, regardless of other elements of the underlying contract of carriage and its performance, there may be no opportunity to apply the supposed rule in Thames & Mersey v Van Laun. Conversely, if the insured voyage is to one or more ports of discharge but the underlying charterparty is to only one of those ports, and then the parties to the charterparty extend their contract to the other port as well, under its existing terms the insurance contract automatically applies to the varied chartered voyage.33 11.15 There are a number of recognised excuses for deviation and unreasonable delay34 but the Marine Insurance Act 1906 records no excuses for change of voyage, presumably because the first two situations are of departure from an adventure which, it is intended, is ultimately to be completed, whereas there is arguably no prospect of completing the insured adventure once the intended destination has been changed. However, in Fraser Shipping Ltd v Colton 35 it appears to have been assumed that a change of voyage may be excused by waiver. 11.16 The principal method of avoiding the prima facie rule on discharge for change of voyage is by contrary contractual provision.36 The Institute Cargo Clauses, clause 10, make use of this facility by accepting that there had been discharge by change of voyage but providing that the insurance of the subject matter would continue in accordance with an extension clause.37


The contract voyage

11.17 A contract voyage is defined by the terms of the relevant contract. This means that the contract voyage under a marine policy may not be identical to the contract voyage within the terms of a contract of carriage, even if the object of the insurance is to insure during performance of the carriage contract. 11.18 An assured’s activities may be constrained by geographical factors, but they need not affect his position under an insurance policy. Thus, an assured shipowner may be bound under a contract of carriage to follow a particular route but he may well be insured under a time policy which provides cover regardless of the ship’s whereabouts or whether or not the shipowner has complied with commercial arrangements for the employment of the vessel. Conversely, the scope of a marine insurance policy may be specifically confined by geographical factors. Thus, ex hypothesi a voyage policy applies from the place of departure (traditionally, the “terminus a quo38) and throughout the contract voyage until arrival at the contract destination (the “terminus ad quem39). 11.19 Furthermore, a hybrid (combined or mixed) policy will ex hypothesi be restricted by geographical factors. Thus, a policy which is essentially a time policy may partly dictate a vessel’s course of navigation: where it applies to a preliminary voyage to an area in which the vessel is to trade for an insured period of time; or where the policy applies for a period of time within a trading area and then until redelivery at a place outside the area; or where the policy applies to consecutive voyages within a prescribed period of time.40 11.20 In fact, the operation of any contract of marine insurance may be dependent on geographical factors. Whether this is so is in any case a question of construction, although in practice the most important question—whether the vessel must follow a specific course of navigation—arises in relation to voyage policies.

Course of navigation

11.21 A contract voyage should be carried out by the contract route. The contract route is the course of navigation specifically designated by the contract, if any, including the proper exercise of a liberty to vary the route; if no course of navigation is designated, it is “the usual and customary course”.41 In practice, where a marine policy includes specific reference to the route, it does so only in a limited sense, for example by identifying particular ports of call, leaving the course of navigation otherwise to be determined by usage. 11.22 “[T]he usual and customary course” may include not only the route taken on the voyage but also the method of performing it. Thus, in Cormack v Gladstone,42 the court made no reference to the fact that customary, but not expressly sanctioned, stopping at Elsineur (Elsinore) to pay the Sound dues might be a deviation, when it held that the opportunity created could be utilised to take in necessary provender for the cargo of sheep. 11.23 A departure from the contract course of navigation is termed a deviation. However, a mere intention to deviate is not a deviation.43 A deviation may be justifiable or unjustifiable.

Variation of performance

11.24 Contracts often contain terms, generally known as liberty or licence clauses, which allow flexibility in performance of the contract and legitimise conduct which could otherwise constitute a departure from the contract.44 Traditional examples are clauses which allow the vessel to call at specified or unspecified places, and for specified or unspecified purposes (eg to trade).45 Clauses which appear to permit flexibility in the performance of a contract perennially raise questions as to: definition of the basic scope of the contract;46 and the extent to which a party is free to act outside the normal scope of that contract.47 11.25 Prima facie, the court must give effect to the terms of the contract agreed by the parties, in particular where their intention is clear.48 However, where a term is capable of more than one interpretation, the courts conventionally resort to principles of interpretation; and in the case of licence clauses they have normally gone further, to restrict the scope of widely drawn liberties. The usual practice is to endeavour to ascertain the main object(s) of the contract and to interpret liberty clauses as only justifying conduct which is consistent with the main object(s).49 In particular, unless they clearly provide otherwise, clauses will not generally be regarded as sanctioning conduct which is: a departure from the contract route; contrary to the expeditious prosecution of the contract voyage; or otherwise inconsistent with the purposes of the contract.50 A fortiori, clauses are unlikely to be applied to familiar circumstances not expressly covered by them and for which express cover can readily be made.51 Indeed, an express liberty generally excludes an implied liberty (for example, one otherwise allowed by usage).52 11.26 If the insured voyage has begun, even though the vessel has not yet reached the port at which cargo is to be loaded, a liberty can still only be exercised consistently with the main object of the contract, so it is a deviation to go on an unauthorised voyage rather than to proceed directly to the port of loading.53 11.27 The obligation to adhere to the contract route means: generally, that, however widely a liberty clause is drawn, it normally only permits action within the course of the contract voyage; and, specifically, that the vessel should only call at such places as they are encountered on that voyage (ie, the vessel should not go back, even on the contract route). Thus, it is a statutory rule of construction that: “In the absence of any further licence or usage, the liberty to touch and stay ‘at any port or place whatsoever’ does not authorise the ship to depart from the course of her voyage from the port of departure to the port of destination”.54 11.28 Where variation of the contract voyage is allowed, even “for any purpose whatsoever”, it is only allowed for purposes consistent with the main object of the contract in issue.55 Thus, the courts have been content to countenance trading within the terms of the insured voyage56 and obtaining information about uncertain destinations;57 but not delivery of goods carried under a previous arrangement while on her way to her port of loading for the insured voyage,58 acting as a floating warehouse,59 obtaining information regarding possible future business,60 earning salvage,61 remaining in convoy with a prize which she was permitted to take,62 or taking on and landing passengers.63 11.29 The Institute Cargo Clauses, clause 8.364 provides that “This insurance shall remain in force … during any variation of the adventure arising from the exercise of a liberty granted to [shipowners/carriers65] or charterers under the contract of [affreightment/carriage66]”. It is a question of construction whether conduct otherwise constituting a departure from the adventure is conduct “arising from the exercise of a liberty.” If it is, it falls within the cover; otherwise, it does not. Therefore, if clause 8.3 were referring to a liberty in the insurance contract, it would be simply, and unnecessarily, restating the normal effect of a liberty clause. However, the clause is concerned with liberties in the underlying contract of carriage and provides that the assured will be covered during the exercise of a liberty granted by the freight contract but not otherwise authorised in the insurance contract.

Intention to deviate

11.30 Although a manifested intention to deviate is sufficient to constitute a change of voyage,67 it is provided by the Marine Insurance Act 1906, section 46(3) that “The intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer from his liability under the contract”.68 Indeed, as a matter of general principle, one party’s unimplemented intention to breach, or otherwise not to comply with, a contract does not normally entitle the other party to be discharged from the contract; though it may do so.69 11.31 The decision in Middlewood v Blakes 70 appears to be consistent with this general rule. In that case, the master’s normal discretion to elect between the most expedient of routes was overridden by the owner’s entry into a charterparty requiring one only of those routes to be taken. Having passed the point at which one of the three routes might have been followed, the vessel was lost before reaching the dividing point between the remaining two routes. The Court of King’s Bench accepted that the insurer would not have been discharged before reaching the first dividing point but held that he was discharged once the vessel was committed to a particular route, even though she had not reached the turning point for that route. The case therefore provides some support for the view that a manifested intention to perform the contract other than as originally contemplated (by substituting a compulsory for an optional course) discharges the insurer from liability. However, although the vessel was not fully engaged on the chartered route, once she had made a commitment to it, that was treated as a sufficient departure from the contract to discharge the insurer. 11.32 Nonetheless, there was no case at common law which decided that a manifestation of intention to deviate could not be sufficient to discharge the insurer. Indeed, there is no reason in principle why a manifested intention to deviate should not be as much evidence, as a manifested intention to change destination, of intention not to conform with the expectations in the insurance contract entitling the insurer’s discharge. However, the statutory formulation of the rule ignores this possibility and has been held to put the matter beyond dispute, the insurer’s protection resting in his discharge once deviation occurs and his entitlement under the usual extension (held covered) clause71 to an additional premium.72

Calling at ports within departure area

11.33 Where the policy is “at and from” or “from” an area embracing more than one possible point of departure, once a point of departure has been chosen and the vessel sails on the contract voyage, it is a deviation to call at one of the other possible points of departure unless that is permissible as a matter of construction and is for the purpose of the voyage.73 11.34 The policy in Ashley v Pratt 74 was “to ports and places in China and Manila, all or any, during the ship’s stay there for any purposes, and from thence [homeward]”. The outward cargo was delivered partly at Tonghoo, China, and the remainder in Manila. A partial homeward cargo was loaded at Manila, then the vessel was lost on her way to collect further homeward cargo at Tonghoo. The insurer was liable though the ship sailed from Manila and was returning to Tonghoo before sailing back to the United Kingdom. “The words ‘China and Manila’ are not to be construed as showing the order in which the ship was to proceed, but as denoting the district comprehending all the ports and places form which she might take her homeward cargo.”75 11.35 If the insured voyage has begun, even though the vessel has not yet reached the port at which cargo is to be loaded, it is a deviation to go on an unauthorised voyage rather than to proceed directly to the port of loading.76

Several unspecified ports of discharge

11.36 Where the policy is to ports of discharge within a given area but the relevant ports are not named, in the absence of any usage or sufficient cause to the contrary,77 the ship must proceed to them, or to such of those as she goes to, in their geographical order; otherwise it is a deviation.78

Several specified ports of discharge

11.37 Where several ports of discharge are specified by the policy, the ship may proceed to all or any of them, but she is not obliged to call at all of them.79 Unless there is a usage or sufficient cause to the contrary,80 she must proceed, to such of them as she does go to, in the order designated by the policy; if not, there is a deviation.81 Once the vessel has called at one of the permissible ports of discharge, it is a deviation to return there, unless the contract otherwise provides.82

Effect of unjustifiable deviation

11.38 Unjustifiable deviation does not affect matters occurring before it. Therefore, the insurer is liable for losses occurring prior to an unjustifiable deviation.83 However, “Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation”.84 11.39 For a deviation to be unjustifiable, it must be voluntary: “Nothing is more clear than the general principle that a deviation never puts an end to the insurance, unless it be the voluntary act of those who have the management of the ship”.85 However, since ex hypothesi an unjustified deviation is a departure from the contract, once it is proved to have occurred, it is immaterial how slight it is.86 11.40 Since from the time of deviation the insurer’s liability is discharged and not merely suspended,87 it does not revive when the vessel sets out to regain or regains her route: “it is immaterial that the ship may have regained her route before any loss occurs”.88


11.41 Although it is not necessary that subject matter insured “at and from” or “from” a particular place be at that place when the contract is concluded,89 it was held at common law that, if it is not there, then, whether the delay be voluntary or involuntary, “it is an implied understanding that the vessel shall be there within such a time that the risk shall not be materially varied, otherwise the risk does not attach”.90 However, the codification of this rule in the Marine Insurance Act 1906, section 42(1) is not expressed to be subject to variation of the risk.91 11.42 Section 42(1) provides that: “Where the subject-matter is insured by a voyage policy ‘at and from’ or ‘from’ a particular place, … there is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract”. However, “The implied condition may be negatived by shewing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by shewing that he waived the condition”.92 11.43 In addition, section 48 provides that: “In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable despatch, and, if without lawful excuse93 it is not so prosecuted, the insurer is discharged from liability as from the time when the delay becomes unreasonable”. The Act further provides that, “When [a] cause excusing … delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable despatch”.94 11.44 In all these cases, “Where by this Act any reference is made to reasonable time, … the question what is reasonable is a question of fact”.95 11.45 However, apart from the specific statutory provisions, the general principle is not restricted to voyage policies and the rule may be stated more generally as follows: where an insurer’s liability is limited by reference to a voyage, the voyage must be begun and prosecuted with reasonable despatch; and the insurer is discharged from liability from the time when delay in prosecuting the voyage becomes unreasonable. Where the adventure is more extensive than a sea voyage—as it generally is with cargo insurance, where goods are commonly insured on “warehouse to warehouse” or similar terms—the principle should apply to unreasonable delay during the land stages of their transit.96 11.46 Unreasonable delay has generally been treated as akin to unjustifiable deviation, has even been described as such,97 and has been held to be included within the scope of clauses extending cover in cases of deviation.98 However, it is not a sub-species of deviation. Rather, both unjustifiable deviation and unreasonable delay are examples of the rule that the insurer is not liable for events outside the scope of the contract. This may be the case for two reasons: first, because the contract no longer applies at the time the loss occurs; and, secondly, because the loss caused by the delay is not an insured physical loss but an uninsured financial loss, for example because of loss of market.99 In Pearson v Commercial Union Ass Co 100 a vessel was insured under a time policy against fire, “lying in the Victoria Docks, London, with liberty to go into dry dock”. After leaving dry dock, she was moored for 10 days for the purpose of refitting paddles and while moored was destroyed by fire. The policy was not a voyage policy and Martin B expressly disclaimed the application of the doctrine of deviation to the case.101 However, the ship was only insured while in the Victoria Dock or the dry dock, or on her way between the two, but not otherwise. In short, the delay in returning expeditiously from the dry dock to the Victoria Dock defeated the claim.102 11.47 The Marine Insurance Act 1906 generally distinguishes between deviation and unreasonable delay; but separate provision is not always made in standard form marine insurance clauses. 11.48 Some delay is an inevitable risk in commercial affairs and may even be prolonged without being unreasonable for these purposes. To be unreasonable, the delay must, in all the circumstances, be inconsistent with the terms of the insurance contract.103 Thus, in Grant v King 104 Lord Ellenborough said:

“The question, Whether there was an abandonment of the adventure? is to be decided from a fair review of all existing circumstances at the time when the voyage might reasonably be presumed to commence. Here the extreme difficulty of procuring men is to be taken into consideration. To discharge the policy, there must be a clear imputation of waste of time. Mere length of time elapsing between the sailing of the vessel and the underwriting of the policy, is not of itself sufficient to avoid the policy; it is capable of explanation. You cannot expect every act of earnest and extreme promptness, hardly short of the institution of a new adventure, shall … be sufficient to amount to a desertion of the policy.”

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