All risks insurance

It might ordinarily be thought (as Lord Sumner appeared to think in British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41 at 57) that loss caused by inherent vice cannot be considered fortuitous. Mr Justice Blair’s decision in Global Process Systems Inc v Syarikat Takaful Malaysia Berhad [2009] EWHC 637 (Comm) provides a helpful reminder that fortuity and inherent vice are not always mutually exclusive. The case is discussed by David Turner QC and Clare Dixon of 4 New Square.

Global Process Systems: the facts

The Cendor MOPU was an offshore oil rig. It consisted of a working platform that could be raised and lowered on the rig’s three legs according to the depth of the sea in which the rig was positioned. The legs each weighed about 404 tons and were about 300 ft in length and the platform would be held at the correct height by the insertion of locking pins into ‘ pinholes’ (an inapt term to describe essentially regularly spaced rectangular openings in the legs, each with a cross-sectional area of 160 square inches). As with any rectangular opening in a metal load-bearing structure, stresses were liable to concentrate at the corners of the pinholes, which might ultimately lead to failure through ‘ stress concentration’, more simply known as metal fatigue. The risk of stress concentration was mitigated but not eliminated by the rounding of the corners of each pinhole.