Marine Cargo Insurance

John Dunt

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12 DURATION OF THE INSURANCE 2: TERMINATION OF CARRIAGE AND CHANGE OF VOYAGE

12.1 This chapter analyses the position under the Institute Cargo Clauses where the contract of carriage is terminated1 or there is a change of voyage.2 The insurance is only extended under these provisions, as contrasted with delay beyond the control of the assured and the other matters dealt with in Clause 8.3,3 if prompt notice is given to insurers. Under Clause 9, Termination of Contract of Carriage, prompt notice to insurers enables an additional premium to be agreed if required: under Clause 10.1, Change of Voyage, notice allows both rates and terms to be agreed if available on market terms. Both Clauses contain held covered or analogous provisions, the general principles of which are considered before the two Clauses are analysed in more detail.

Held covered and analogous provisions

General principles

12.2 The general principles of held covered, so far as cargo is concerned, were summarised in Liberian Insurance Agency Inc v. Mosse.4 In this case, a consignment of enamelware was sold c.i.f. Monrovia where it was found to be damaged on arrival. The question before the court concerned the applicability of the held covered5 clause when the goods clearly did not match their description. The goods were described as “Enamelware (cups and plates) in wooden cases”. However, a large portion of the goods was neither plates nor cups. Some of the goods were packed in cartons and not wooden cases. Furthermore, some items of enamelware were touched up by overpainting. Donaldson J., in rejecting the assured’s argument that they were entitled to rely on the held covered clause, summarised the application of the clause as follows:6

“(i) The assured seeking the benefit of the clause must give prompt notice to underwriters of his claim to be held covered as soon as he learns of the facts which render it necessary for him to rely upon the clause.
(ii) It is no obstacle to the operation of the clause that it will defeat underwriters’ right to avoid the contract for non-disclosure or misdescription.
(ii) The assured cannot take advantage of the clause if he has not acted in the utmost good faith.
(iv) The clause does not contemplate any alteration in the terms of the insurance other than in respect of premium.7
(v) The clause only applies if the premium to be arranged would be such as could properly be described as a reasonable commercial rate.”

Donaldson J found on the facts that no underwriter would have quoted for the risk unless protected by an FPA (Free of Particular Average) warranty.8 The assured cannot take advantage of Clauses 9 and 10 if he has not acted with the utmost good faith which gives rise to an obligation of disclosure and a duty not to misrepresent any facts material to the additional risk. This aspect of the good faith duty is discussed further in relation to non-disclosure and misrepresentation.9 This section therefore considers the prompt notice requirement and the principle that there is no absolute right to cover unless cover could be obtained at a reasonable commercial market rate on reasonable market terms.

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