Insurance Law Implications of Delay in Maritime Transport

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Cargo insurance and delay: physical loss to the subject-matter insured


2.1 The main interest covered by a cargo policy is physical loss of or damage to the cargo. This type of loss has been the subject of the earlier cases on delay through which the current exclusion of delay losses in s 55(2)(b) of the MIA and in the standard market conditions have been developed. The motives behind excluding these losses were mainly twofold: the first one rested upon an analogy to inherent vice as an excluded event and the second one related to the approach to proximate causation in the late 19th century which sought to exclude delay as the last cause in time. This chapter will analyse the origins of the delay exclusion from the scope of cargo policies and assess whether the earlier authorities can survive the changes in law as to the rule of proximate causation. It will also be speculated on how the new rules on causation can be applied to circumstances involving delay as a cause of loss.

Delay and loss by deterioration

2.2 In cargo insurance, delay cover may be provided in the British market on an ad hoc basis by express provision in the policy1 by including the wording ‘deterioration from any cause’2 against a higher premium. Moreover, even after

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the conclusion of the insurance contract, the insurer may extend the cover to losses caused by delay by endorsement.3 This being the case, losses caused by delay are customarily excluded in standard form cargo policies4 which followed the delay exclusion in s 55(2)(b) of the MIA 1906. The common law background of this generic exclusion shall be scrutinised below. It is noteworthy that the analysis of the earlier common law authorities which were embodied in s 55(2)(b) would have an impact on several common law jurisdictions as their relevant legislations contain equivalent provisions.5

A general review of the pre-MIA authorities

2.3 Delay is an event which is capable of causing loss of or damage to perishable goods. Therefore most of the cases constituting the basis of the current law on delay as an excluded peril are on deterioration of perishables. Close examination of these early cases is required so as to determine in which context they assessed delay and whether they are currently still good law. One of the most influential decisions of the law on delay was Gregson v Gilbert.6 The negligence of the captain in finding the destination of the vessel caused delay on the voyage and want of provisions, which consequently resulted in the natural death of the slaves which were at the time considered as cargo. The delay in this decision was not considered as an event that had to be excluded, it was merely stated as an event resulting in the natural death of the slaves if coupled by want of provisions and the negligence of the captain. Following this decision, the Slave Trade Act 1790 (30 Geo. 3, c. 33),7 s 8, and the Slave Trade Act 1794 (34 G. 3, c. 80), s 10 had been passed prohibiting the insurance on slaves for losses caused by natural death or ill-treatment.

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2.4 Following the enactment of the statutes on natural death of slaves, a similar issue was raised in Tatham v Hodgson 8 a few years later. Several slaves had perished for want of food owing to the prolongation of the voyage due to bad weather. The dispute arose as to whether the loss was by perils of the seas or by the natural death (mortality) which was statutorily excluded. The Statute 30 Geo. 3, c. 33, s 8 on which the policy was then based had enacted that it was not lawful for any owner of a vessel to insure any cargo of slaves against any loss or damage, except the perils of the sea, piracy, insurrection, or capture by the King’s enemies, barratry by the master or crew, and destruction by fire. Moreover the Statute 34 Geo. 3, c. 80, s 10, which had recited the former Act, provided that no loss or damage was recoverable on account of the mortality of slaves by natural death or ill treatment, or against loss by throwing overboard of slaves on any account whatsoever. The ordinary course of the voyage was six to eight weeks yet the voyage had lasted for over six months, in other words the delay was unreasonably long for the specific voyage. It was argued that the length of the voyage arising from the perils of the seas was the genuine source of the death and that accordingly the loss was not natural, thus excluded.9 Delay was not discussed as a cause of the loss which was not covered by the policy. It was merely an event causing death because of the want of provisions whereas the fundamental issue was whether the death was natural given the statutory exclusion.10 Delay in this case was merely an event induced by the perils of the seas, causing the exhaustion of the provisions which resulted in the loss. Accordingly, the natural death would not have been caused but for the delay; nonetheless the relation of delay to the loss was merely incidental in that it would not have caused the loss had there been sufficient provisions. The Court decided that the loss was by mortality and not by perils of the sea by referring to the intention behind passing the Statute, namely to prevent situations where masters would knowingly equip the vessel with less provisions than required and claim against insurers for the loss of slaves. Although in this case Lawrence J mentioned that delay could be the cause of the loss where the slaves had died of fevers occasioned by the length of the voyage,11 that was merely due to the natural death exclusion of the Statute. Perhaps the only ratio that can be extracted from the judgment is that unreasonable delay in the voyage was considered distinct from the perils of the seas (whereas an ordinary delay could have been a natural result of the perils of the seas and not a distinct peril) and had occasioned want of provisions and consequently natural death which was an excluded peril according to the Statute. Given that the judgment was delivered upon consideration of the provisions of the Statute, it is not clear whether the authority of Tatham v Hodgson should have been an authority for the general suggestion that delay losses are excluded under English law which

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was later on enshrined in the MIA 1906. It is submitted that this argument can be supported by the view expressed by Abbott CJ in Lawrence v Aberdein 12 who considered13 that underwriters would be liable where live animals perish for want of provisions as a result of the prolongation of the voyage by perils of the sea in the absence of an express exclusion of mortality or statutory prohibition. This background used to be the background against which the leading cases on the exclusion of delay, i.e. Taylor v Dunbar 14 and Pink v Fleming 15 were decided. 2.5 In Taylor v Dunbar 16 a cargo of meat had become putrid given that the vessel carrying the cargo had been delayed due to bad weather. The meat was in no way affected or injured by the sea water however had to be jettisoned because of the damage. It was held by the court that the reason why the goods deteriorated was delay on the grounds that it was not among ‘other perils, losses and misfortunes’ recoverable under the policy and that ‘delay in the voyage has never been considered as covered’.17 This principle was subsequently embodied in the Marine Insurance Act 190618 and has been thenceforth one of the few leading cases on delay. Two points require clarification in respect of the decision. Firstly, the judgment contained no particular reference to causation and delay as the last cause in time. Upon the facts of the case, there was more than one delay and albeit the first delay had occurred prior to the perils of the seas, the unexpectedly long delay had incidentally occurred last in time. It is submitted that considering the approach taken by courts to proximate causation in the nineteenth century,19 it would nevertheless not be a fallacy to argue that the unreasonably long delay in the voyage was held not to be covered as it was the last cause in time although this was not expressly held in the decision.20 The second point relies on the fact that the interpretation of Tatham v Hodgson lacked consideration of the statutory exclusion of mortality which was the main ground upon which the earlier judgments on delay were delivered, as well as the speech of Abbott CJ in Lawrence v Aberdein.21 Even where it is assumed that Taylor v Dunbar was a correct interpretation of the early cases on delay, it may have nevertheless been interpreted when it was enacted in the MIA 1906 as to apply to all types of delay, both to ordinary and extraordinary delays. This is given that there were specific statements in the

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judgment as to the comparison between the ordinary duration of the voyage and the actual and unreasonable length of the voyage.22 One of the reasons according to which an unexpected duration of the voyage can be held as a proximate cause or a cause of the loss can be because this type of delay may not be the natural result of a preceding peril (e.g. perils of the seas and ordinary delay resulting from it) and in this sense it may be a delay that could break the chain of causation between the initial peril and the loss. 2.6 It is well known that the MIA 1906 is an Act codifying the pre-MIA authorities and that the common law authorities continue to apply, save in so far as they are inconsistent with the express provisions of the Act.23 The exclusion of delay in s 55(2)(b) is general and ambiguous as to whether it excludes both ordinary and extraordinary delay. It can therefore be argued that if Taylor v Dunbar is considered as good law – this work supports the opposite view – against the background of earlier decisions, s 55(2)(b) would apply to only extraordinary delays.24 It is noteworthy that in some of the Scandinavian jurisdictions, the unusual length of delay was an essential element for the cover available for deterioration losses caused by delay.25

‘Last cause in time’ rule

2.7 According to the approach to the proximate causation rule prior to Ley-land Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd,26 the cause must not have been too distant to the loss in time or in space.27 The rule was applied in the leading case on deterioration and delay Pink v Fleming 28 where a cargo of fruit was insured under a marine policy against ‘damage consequent on

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collision’. The vessel carrying the cargo had sustained damage due to a collision in consequence of which she had to be repaired and the fruits be discharged and re-shipped during which they had perished. The dispute turned on whether the proximate cause of the loss was delay or collision, in which case the assured would have been able to recover. The speeches delivered as to the cause of the loss approached the matter from different angles. It was stated by Lindley and Bowen LJJ that the damage had been partly caused by delay and partly by the handling of the fruit which necessarily took place in the discharging and re-shipment for the purposes of the repairs;29 whereas Lord Esher MR, delivering the leading speech, found that the handling was the proximate cause of the loss.30 The Court had observed that delay was not within the wording ‘consequent on collision’ as it had not resulted naturally from the collision. The ground for this argument was that a collision might have occurred without either delay or handling of cargo. The concerns with such an argument are twofold; firstly that it has an inclination of adopting ‘but for’ causation which is no longer applicable following the proximate causation doctrine;31 and secondly that some delay during the voyage is the natural consequence of collision even if handling is not, especially where repairs are necessary. The crucial point is whether the delay which ensues is unreasonably long compared to the expected duration of the voyage of the goods. Moreover, the reference of the Court to Taylor v Dunbar 32 as an authority supporting their view is controversial. A closer examination of the latter would suggest that the reference of Pink v Fleming was not plausible. It is submitted that the authority of Pink v Fleming can no longer apply following Leyland 33 and losses caused by delay in circumstances where delay is the last cause in time can therefore no longer be excluded on this basis. The principles arising from the above cases, as conceived at the time of the enactment of the MIA 1906, were embodied in s 55(2)(b).

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Delay as a proximate cause in deterioration cases

(a) General overview of proximate causation

2.8 The problem of causation involves prioritising some causes over others or rejecting the idea that some are causes.34 The device developed to achieve the finding of a proximate cause of loss was codified by the MIA in s 55(1) which is a default rule and operates unless the policy otherwise provides.35 The delay exclusion set out in the MIA36 and in many other standard form policies is subject to the proximate causation rule, hence a close scrutiny of the rule is required so as to have a better understanding of delay exclusions and their scope. A strict reading of s 55(1) which expresses that an ‘insurer is not liable for any loss not proximately caused by a peril insured against’37 raises an important issue as to proximate causation. It may be read as suggesting that the insurers would not be liable where a proximate cause of the loss is not expressly covered. This line of interpretation could invite the conclusion that The Miss Jay Jay 38 was not correctly decided39 where the Court of Appeal held that the assured could recover where the loss was proximately caused by both a peril insured against and an uninsured peril. Against this background, it is possible to reconcile The Miss Jay Jay and s 55(1) on the ground that s 55(1) refers solely to single proximate cause situations, i.e. where the other cause is not a proximate cause of the loss. This suggestion may be supported by the fact that before Leyland,40 the proximate cause was accepted as the last cause in time, therefore a single proximate cause was mostly to be found among other causes. The approach of Courts in the pre-MIA decisions showed a determination to find a single cause and the possibility that there could have been two or more proximate causes was rarely acknowledged.41

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It would follow that the ensuing s 55(2)(b) on delay arguably applies to circumstances where delay is the single proximate cause of the loss. The reluctance to find a single dominant cause and the importance given to concurrent causes gives insurers room to exclude liability where one of the proximate causes is excluded.42 This approach is of essence for delay exclusions which are ambiguous as to the type of delays and do not distinguish between a delay beyond and within the control of the assured as separate perils. As a result of this approach, policies would not meet the reasonable expectations of the ordinary assureds who are unaware of this rule of causation43 and who would expect to be covered in case of delay beyond their control, and yet may be left without cover.

(b) Proximate causation and delay following Leyland

2.9 The approach of Pink v Fleming 44 to proximate causation and delay has not yet been challenged by a higher court in England. Nonetheless, the 19th century cases on causation in relation to delay inevitably require careful consideration in the light of the abandonment of the last cause in time approach to proximate causation. Mainly two views exist as to the applicability of the earlier authorities on the recoverability of losses caused by delay: The first view rests upon the proposition that Taylor v Dunbar and Pink v Fleming were decided before the introduction of the new proximate causation doctrine established by Leyland and shall no longer apply in resolving disputes on causation where delay is involved as a peril.45 The second view argues that although Pink v Fleming is no longer good law given the abandonment of the earlier rule, the authority of Taylor v Dunbar is not yet challenged in English courts and that the insurers could still exclude liability on facts similar to Taylor v Dunbar.46 It is noteworthy that even though it can be submitted that Taylor v Dunbar where the last cause in time rule of causation was not

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expressly applied can be reconciled with Leyland and is still good law, the type of delay there excluded was merely extraordinary delay. 2.10 It is submitted that the former view is favoured for three reasons. Firstly the MIA had been enacted against the background of cases where courts were trying to find a single proximate cause of the loss; this approach was challenged by Leyland and was followed by lower courts in the following years.47 Secondly, an analogy can be drawn from the inherent vice exclusion and the recent speech of Lord Mance in The Cendor Mopu,48 where he enunciated:

‘… it might be thought relevant that the 1906 Act, crystallising statutorily the concepts of perils of the seas and inherent vice, was enacted against the background of the Victorian authorities, and before the definitive emergence of the modern conception of proximity’.49

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