Inherent Vice: What about It?

AuthorVasiliki Digoni
SSLR Inherent vice: what about it? Vol 1(2)
Inherent Vice: What About It?
A Case Comment on Global Process Systems Inc v Syarikat Takaful Malaysia
Berhad (The Cendor Mopu) [2011] UKSC 5
Vasiliki Digoni
n 2005, Global Process Systems bought the oil rig Cendor MOPU and
arranged for her to be transported from Texas to Malaysia on a barge with
her three massive tubular legs extending some 300 feet into the air. The
oil rig was insured with Syarikat Takaful (the insurers), on a policy which
incorporated the Institute Cargo Clauses (ICC A), in particular clause 4.4
which states that ‘loss, damage or expense caused by inherent vice or nature of
the subject matter insured’ is excluded from cover.
When the barge arrived at Saldanha Bay some repairs were made to the legs.
Afterwards, the barge proceeded to its final destination. On the evening of 4
November 2005, however, one of the legs broke off and fell into the sea. The
following evening, the other two legs fell off as well.
Global Process Systems brought a claim under the policy arguing that the loss
was caused by perils of the seas. The claim was rejected by the insurers, who
contended that the real cause of the loss was the weakness of the legs
themselves, which constituted inherent vice and was thus an excluded peril.
At first instance, Blair J held that the proximate cause of the loss was the fact
that the legs were incapable of withstanding ‘the normal incidents of the
insured voyage including the weather reasonably expected’,1 and therefore fell
within the inherent vice exclusion.
The judgment was overturned by the Court of Appeal where Waller LJ in the
leading speech stated that the correct test to apply was whether the rig was
capable of withstanding weather that was bound to occur, rather than whether
she was capable of withstanding the weather which was reasonably expected
to occur. Given that Blair LJ had found that the loss was ‘very probable but not
inevitable’,2 it followed that it did not fall within the limits of the exclusion.
The Supreme Court
The insurers appealed to the Supreme Court, where their claim was
unanimously dismissed. Their Lordships held that the loss of the legs of the
1 Per Mayban General Insurance v Alstom Power Plants Ltd [2004] 2 Lloyd’s Rep 609
2 [2009] 2 All ER (Comm) 795 at [87]

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