Inherent vice

Global Process Systems Inc and another v Syarikat Takaful Malaysia Berhad [2011] UKSC 5; [2011] WLR (D) 31; TLR 9 February

An oil rig was being carried on a barge with its legs extended 300 feet into the air from Texas to Malaysia. North of Durban the starboard leg broke off at the 30-foot level and fell into the sea. The following evening the other legs broke off and also fell into the sea. The loss resulted from metal fatigue in the legs caused by repeated or fluctuating stresses generated from the effect that the height and direction of the waves had on the pitching and rolling motion of the barge and thrust on the legs. It was common ground that what the barge experienced was within the range of whether it could reasonably have been contemplated for the voyage. The risk of fatigue cracks during the voyage was known from the outset. The failure of the legs as the rig was towed around the Cape was very probable, but it was not inevitable. At first instance, the judge agreed with the insurer’s rejection of the claim on the grounds that proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage, including the weather reasonably to be expected. That meant that the cause of the loss was ‘inherent vice or nature of the subject matter insured’ within the meaning of the policy and that, accordingly, the insurers were not liable for the claim.