GLOBAL PROCESS SYSTEMS INC V SYARIKAT TAKAFUL MALAYSIA BERHAD

[2009] EWHC 637 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Blair, 31 March 2009

Insurance (marine) – Institute Cargo Clauses A – All risks cover – Oil rig damaged in course of being transported – Causation – Whether loss inevitable – Whether loss caused by inherent vice

An oil rig, Cendor MOPU, was being towed on a barge from Texas to Malaysia. Its legs were in place and elevated in the air above the deck. On the evening of 4 November 2005 a leg was lost at sea, and the remaining two legs fell off the following evening. The loss occurred because of fatigue cracking caused by the repeated bending of the legs due to the motion of the barge. The rig was insured under Institute Cargo Clauses A against all risks, but there was an exclusion for inherent vice. The owners asserted that the proximate cause of the loss was failure to ensure that adequate repairs had been carried out near Cape Town where the tow had stopped en route. The insurers asserted that the cause of the loss was either inherent vice or the inevitable consequence of the inability of the oil rig to undertake the voyage. Blair J held that the insurers were not liable. (1) The assured was required only to show that the loss was accidental or not inevitable; the burden then shifted to the insurers to prove that an exception applied. (2) The loss was not inevitable. It was a low threshold for the assured to show fortuity, in the sense that the loss was not inevitable. In the present case a loss may have been probable, but it was not inevitable. It was unnecessary to decide whether an inevitable loss fell within the policy, although the phrase “all risks” did not include inevitable losses. (3) The insurers had made out the defence of inherent vice. The test for inherent vice was whether there was “inherent inability to withstand the ordinary incidents of the voyage”. There was no rule of evidence that, absent exceptional weather, a loss was to be attributed to inherent vice: every case required a proximate cause to be determined. Further, inherent vice was not excluded simply because there were external events: inherent vice could be triggered by an external circumstance such as the weather. In the present case the proximate cause of the loss was the inability of the rig to withstand the ordinary incidents of the voyage, including the weather which could have been expected, and not the absence of repairs.