Marine Insurance: Law and Practice
CHAPTER 15
INCHMAREE RISKS
INCHMAREE RISKS
15.1 This chapter will consider those risks which may be found in the second part of the perils clause in standard freight and hulls policies. The risks in question are not all specifically concerned with the matters in issue in The Inchmaree,1 the case from which the clause loosely draws its familiar title, which is not a term of art. At different times, different risks have appeared in the clause and with varying content. As usual, in a given case, the construction of a particular risk depends on the precise terms of the policy. The Inchmaree clause is currently subject to the due diligence proviso and the servant-owner term, both of which are discussed above.2Cargo handling
15.2 Damage to cargo caused during and as the result of any operation of loading or discharge is not a peril of the seas. Thus, in Stott (Baltic Steamers) Ltd v Marten,3 the insured could not recover on that ground. It is accordingly provided that the insurance in the Institute hulls and freight clauses covers loss of or damage to the insured subject matter caused by “accidents in loading, discharging or shifting cargo or fuel”.4 However, losses caused by “accidents in loading, discharging or shifting cargo, fuel, stores or parts” is contained in the first part of the International Hull Clauses Perils clause.5Equipment faults
Under the standard Institute Inchmaree clause
15.3 The Institute hulls and freight clauses cover losses caused by “bursting of boilers breakage of shafts or any latent defect in the machinery or hull”.6 A loss may be caused by the bursting of a boiler or the breakage of a shaft without the bursting or breakage being occasioned by a latent defect: the remainder of the clause does not apply to “any other latent defect”. 15.4 There is no English authority as to what is meant by bursting of boilers.7 It may be noted, however, that a bursting of boilers is recoverable as a risk under the first part of the Institute clauses perils clause if caused by fire or explosion,8 in which case it is not subject to the due diligence proviso.9 Insurance against the bursting of boilers is long established. It is specific in terms and might arguably have been reformulated more generally to embrace losses of a similar kind. However, it has not and, therefore, it should not be treated as covering any event which would not ordinarily be regarded as in fact a bursting of a boiler.10 Recovery for any lesser damage or similar damage to any other part of the subject matter must be sought under some other provision. 15.5 Similarly, the insurance against “breakage of shafts” applies only to shafts11 which break, it being apparently insufficient that the shaft is reduced to such a condition that it might have broken.12 15.6 What constitutes “any latent defect in the machinery or hull” was considered by Robert Goff J in The Caribbean Sea.13 He decided that none of the cases cited to him appeared to be inconsistent with a conclusion that the mere fact that the historical reason for a defect in hull or machinery is defective design would not of itself preclude recovery.14 15.7 If the hull or machinery is not being used for the purpose for which it was or might reasonably be considered to have been intended and designed and, in consequence, it proves to be so inadequate for the task in hand as to cause a loss, it may reasonably be said that such a loss arises from a patent defect in the hull or machinery. If it is being used for its intended purpose, it is inevitably subject to wear and tear, for which, if it causes a loss, the underwriter will not be liable.15 However, the underwriter is liable for “any latent defect in the machinery or hull”, and will be liable for such a defect even though it was revealed by wear and tear.16 15.8 Three elements of this liability may be distinguished: that there is a defect, that it is in the machinery and hull, and that it is latent. To some extent at least these three elements, particularly the first and third, are intertwined. Thus, the mere fact there is a defect is not enough. If it is patent, the underwriter will not be liable because the risk is uninsured, the loss is not fortuitous or because he can avoid the policy for non-disclosure. So far as identification of the relevant type of defect is concerned, Robert Goff J in The Caribbean Sea 17 held it to be where there is a fault in: the materials with which the machinery or hull is constructed; the method of construction or installation; or the design of the machinery or hull. In doing so, he had to consider the view of Kennedy J in Jackson v Mumford 18 that the phrase “defect in the machinery”“does not … cover the erroneous judgement of the designer as to the effect of the strain which his machinery will have to resist, the machinery itself being faultless, the workmanship faultless, and the construction precisely that which the designer intended it to be”.