Insurance Law Implications of Delay in Maritime Transport

Aysegul Bugra

Document

Page 43

CHAPTER 3 Issues arising from delay in delivery of cargo

Introduction

3.1 A delay during sea transit together with a delay in delivery may result mainly in three types of losses. These are physical damage to or loss of goods;1 economic loss as a result of the decrease in the market value of cargo between the time of the expected delivery and actual delivery; and pure economic loss where, by way of example, an industrial plant cannot operate given that parts of an essential machine are delivered after the date of delivery2 or where a cargo owner loses his sale contract. Whereas the first category of loss results from delay in transit, the second and third categories rather arise in consequence of delay in delivery. The third category of loss may or may not be covered under marine delay in start-up insurance or business interruption policies depending on their respective wordings. This being said, there is a general view based on pre-MIA case law that the loss of market value caused by delay in delivery is not recoverable under cargo policies on the ground that mere delay in a voyage does not result in loss of the adventure insured and that this type of loss is consequential to cargo policies. This chapter will look at the pre-MIA authorities and assess whether they could survive the enactment of the Act. It will further elaborate on the meaning of delay in delivery in the context of insurance contracts; on whether the assured can claim for a total loss of goods where the delivery of goods is delayed and whether the generic exclusion of delay would strike out such claim; and on the scope of loss of market and loss of market value caused by delay.

Meaning of delay in delivery

3.2 Under a contract of carriage, delay in delivery may arise where the parties explicitly agree a delivery time in the contract and such agreement is not

Page 44

complied with;3 where such delivery time is not expressly stated yet is implied or where a reasonable time required for delivery is exceeded.4 In the absence of an agreed time, some international conventions such as the Hamburg Rules5 provide a formula resting upon reasonable time required for a diligent carrier to deliver, having regard to the circumstances of the case.6 As for the Rotterdam Rules,7 an agreement as to the time of delivery can be both express and implied.8 3.3 Under cargo policies, as the time of delivery of the goods insured would be an element related to the contract of carriage, reference would have to be made to the contract of carriage and to whether it has an express or implied condition in interpreting delay in delivery. Certain cargo policies available in the market contain express references to ‘delay in delivery’ without actually defining it.9 Standard form market terms such as the Institute Cargo Clauses 2009 contain references to the contract of carriage through which certain charges and liabilities or the termination of the policy are determined.10 The Clauses do not however refer expressly to the contract of carriage in the clause which excludes ‘losses caused by delay’11 and this raises the question of whether ‘delay’ would extend to delay in delivery ascertainable by reference to the contract of carriage despite the absence of express reference thereto in the clause.12

Page 45

Where the contract of carriage does not refer to a specific period for delivery, such period can be determined by Courts by reference to ancillary elements such as the type of cargo (where goods are seasonal which require delivery in a particular season); and the intention of the assured to sell the goods in a particular market and the loss of that market. An example to the former can be found in Federation Insurance v Coret 13 where the goods which were seasonal handbag parts were temporarily lost and were delivered after the season where the assured had intended the goods to be sold. The Court opined that ‘there was no obligation to deliver within a specified delay’14 yet the loss of the assured resting upon the goods missing their market was held to be within the scope of application of the exclusion ‘loss or damage arising from loss of market, or for loss, damage or deterioration arising from delay’. In the absence of clear indication as to the time or interval for resale of the goods in the market, Courts may take notice of a particular period where the market prices are high so as to determine the most likely delivery period for the resale of the goods by the assured. In Lewis Emanuel v Hepburn 15 where the goods had deteriorated in value given the delay following a strike, the Court emphasised that the goods would have been sold at a time which was not precisely stated and accepted the evidence submitted by the assured as to an interval of a week where the market prices were high.16 3.4 In addition to the criteria determining whether there is delay in delivery in an insurance dispute, another complexity lies in the calculation of the loss of the assured, in particular the loss of market value. Despite that a reasonable time may be allowed or an interval may be anticipated for delivery,17 the exact time or day when the goods should have been delivered is difficult to determine. This would consequently affect the calculation of the measure of damage, i.e. the difference in the value of the goods between the time the goods should have been delivered and the time of their actual delivery.

Marine Insurance Act 1906 and delay in delivery

3.5 The Marine Insurance Act expressly deals only with two modes of delay: delay at the commencement of the voyage,18 and delay in voyage.19 The sole

Page 46

express reference to delay in delivery is found in the context of insurable interest with respect to seller’s delay in making delivery.20 There is dicta to the effect that delay in delivery losses are excluded under s 55(2)(b) albeit they are not expressly excluded thereunder. In Weissberg v Lamb 21 where under an all risks policy the goods were damaged while being loaded on board the ship, the assured paid charges to the removal contractors who then sought to claim that amount back from the insurers under the sue and labour clause. The Court opined that had the assured not paid the charges there could have been delay in delivery of the goods which would be a peril outside the scope of the policy as per s 55(2)(b) and that therefore the sum could not have been recovered as sue and labour.22

Mere delay not resulting in loss of marine adventure and common law authorities

3.6 Prior to the enactment of the MIA, there had been several common law authorities whereby the courts had held that so long as non-perishable goods could be forwarded to their destination, there would be no actual loss of goods other than the expense in forwarding them if they were merely delayed on the voyage. In some of the pre-MIA authorities, the disputes turned on whether it was a mere delay upon the voyage or the initial peril causing damage to the ship which required repairs (and consequently delay in the arrival of goods for the season) or depriving it from prosecuting the voyage (such as detention) that resulted in the impossibility of prosecuting the voyage to the port of destination. In Barker v Blakes 23 a non-perishable cargo was carried upon a vessel which could not prosecute the voyage due to a prolonged detention in consequence of which the cargo had to be sold. Lord Ellenborough enunciated that:

‘The impossibility of prosecuting the voyage to the place of destination, which arose during and in consequence of the prolonged detention of the ship and cargo, may be properly considered as a loss of the voyage and such loss of voyage, upon received principles of insurance law, as a total loss of goods which were to have been transported in the course of such voyage’.24

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.