The Schope of Inherent Vice after The Cendor MOPU
| Author | Siv Kristiansen |
| Pages | 5-10 |
SSLR The scope of inherent vice Vol 1(2)
5
The Scope of Inherent Vice after The Cendor MOPU
Siv Kristiansen
Introduction
n 1 February 2011, the Supreme Court issued judgment in the case
Global Process Systems Inc v Syarikat Takaful Malaysia Bhd 1
hereinafter called ‘The Cendor MOPU’. The case concerns important
questions and answers as to when insurers will be liable under an all risk
policy; including questions on proximate and concurrent causes and the
interpretation of the phrases “perils of the sea” and “inherent vice”. These
questions and answers which will be analysed in the following.
Facts of the case
An oil rig was transported on a tow barge from the United States to Malaysia
with its legs pointing upwards. This caused severe stress on the legs which
cracked and eventually broke and fell off in turn during the transit.
The rig had been insured under a policy which incorporated the Institute
Cargo Clauses A (1982). ICC (A) covers “all risks”. An ‘all risks’ policy covers
loss or damage from any external cause, subject only to the express exclusions
in the policy. It is settled law that this includes ‘perils of the sea’. Expressly
excluded from ICC (A) is notably “loss, damage or expense caused by inherent
vice or nature of the subject matter insured”2, also referred to as ‘inherent
vice’. Inherent vice is also subject to exclusion under s 55(2)c of the Marine
Insurance Act 1906 (‘the 1906 Act’) and it can be argued that the propositions
in the judgment regarding inherent vice are transferable to the section in the
1906 Act.
Accordingly ‘perils of the seas’ needs to be the proximate cause of the loss3 for
the insurers to be liable under the policy, since loss caused by inherent vice
was expressly excluded. It was common ground that the cracking was due to
‘inherent vice’. The critical question was the cause of the loss of the legs. There
were two candidates to proximate causation: perils of the sea in the form of
the stress put upon the rig by the height and direction of the waves
encountered by the barge; and inherent vice of the subject matter insured.
To determine whether the leg breaking wave which hit the tow or the inherent
vice in the legs was the proximate cause of the loss, the courts had to establish
1 Global Process Systems Inc v Syarikat Takaful Malaysia Bhd (The Cendor MOPU) [2011] UKSC 5
2 Institute Cargo Clause cl 1 and cl 4(4). But damage due to inherent vice is also excluded by the 1906
Act, s 55(2)c.
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