THE TRANSIT CLAUSE
The insurance under the revised Institute Cargo Clauses covers the goods from the time they leave the shelf until completion of unloading. This period may be described, so far as necessary, as the insured “movement”, which is to be distinguished from the insured “transit”. The view taken in this book, on the basis of the authorities discussed in this chapter, is that transit describes the period from when the goods are loaded on vehicles, or conveyances, for their immediate movement, until the vehicles have reached their destination. This is the approach adopted under Clause 8.1 of the revised Institute Cargo Clauses because “transit” will normally begin after the insured journey has earlier commenced, typically at a shelf within a warehouse. The transit may also end before the insured journey terminates, particularly in those cases where vehicles are not immediately unloaded after arrival. In such circumstances, the vehicles may no longer be in transit but the goods are still insured until completion of the unloading.
The Transit Clause has retained its title although it provides insurance that extends beyond “transit” to cover the insured movement. It should also be noted that the Transit Clause deals not only with the insured journey in terms of the attachment and termination of risk (Clause 8.1) but also with two related matters, firstly, the position where goods are insured to an intermediate destination and then forwarded under another policy (Clause 8.2) and, secondly, the automatic continuation of the cover in the event of delay, deviation and like matters beyond the control of the assured (Clause 8.3). These matters will be considered in turn starting with a detailed analysis of Clause 8.1, which is concerned with a central issue in cargo insurance, the attachment and termination of the risk.
“Attachment of risk”
The revised Institute Cargo Clauses begin by defining the point at which the insurance attaches, as follows:
“Transit clause”
8.1 Subject to Clause 11 below, this insurance attaches from the time the subject-matter insured is first moved in the warehouse or at the place of storage (at the place named in the contract of insurance) for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance for the commencement of transit.”
This section of the book now considers, phrase by phrase, the new wording of the above Clause which is the most significant innovation in the revised Institute Cargo Clauses.
“Subject to Clause 11 below”
The words “Subject to Clause 11 below” make it clear that the extended warehouse-to-warehouse cover is subject to the need for an insurable interest as required by the Marine Insurance Act 1906 and Clause 1.1 of the revised Institute Cargo Clauses. The purpose of repeating the insurable interest requirement in the opening words of the Transit Clause is to deal with a misconception that had arisen in the market, and on insurances worldwide, that the granting of warehouse-to-warehouse cover implied that underwriters were waiving a need for an insurable interest.
“this insurance attaches”
The words “this insurance attaches” are not new and reflect the words “commencement of the risk” used in the Marine Insurance Act 1906, for example, in section 45 in relation to change of voyage. The revised Institute Cargo Clauses now make a distinction between “this insurance”, meaning the insurance cover set out within the Clauses, and the “contract of insurance” which refers to the open cover or, in the case of a C.I.F. buyer, the contract of insurance carved out of the open cover as evidenced by the certificate of insurance. The words in the 1982 Clauses were “place named herein”. As policies are rarely issued for cargo business in the London market, or to the insurance “herein” as appeared in 1982 Clauses, were unnecessarily obscure. In particular, there is no reference to any geographical place for commencement or termination of the risk in the printed Clauses. The distinction now made is between the cover within the Clauses, described as “this insurance”, and the insurance contract evidenced by the open cover or certificate (which identifies the geographical locations for the commencement and termination of the transit) which is now described in the Clauses as the “contract of insurance”.
“from the time the subject-matter insured is first moved”
The revised Institute Cargo Clauses introduce, for the first time, cover “from the time the subject-matter insured is first moved”, which contrasts with the 1982 Clauses where cover was defined as attaching at the point where the goods left the warehouse. In 2008 the view was taken that cover from the time the goods were first moved for immediate loading was broadly more in line with what an ordinary assured would expect and was consistent with the cover, for loading and unloading, normally available in the London insurance market at no additional premium. The first movement of the goods must be linked to the immediate loading onto the carrying vehicle which must be for the commencement of transit, as discussed below.
One of the reasons why such cover was not previously provided within the warehouse under the Institute Cargo Clauses may have been a concern about double insurance. However, in the usual case, where a third party warehouse is involved, a double insurance situation will not arise. Moreover, the assured may have very restricted rights of recovery against warehouse keepers and will be left with no recovery under his cargo insurance, and little or no recovery against third parties, in circumstances where his goods have commenced movement for their journey. Where the warehouse or other place of storage, such as a factory, is owned by the assured there may be a possibility of double insurance, though warehouse cover for goods in store may not always necessarily be on “all risks” terms. In addition, where goods are insured by a manufacturer it is common for there to be pre-transit storage cover but this has not given rise generally to issues of double insurance.
Although defining the moment at which the goods are “first moved” will be within the knowledge of the assured, or his warehouse-keeper, it was not felt that this was likely to give rise to a serious issue of moral hazard. Nor was it thought that determining the point of first movement would give rise to more practical difficulties than had been experienced in the past in determining whether the goods had left the warehouse or place of storage.
“in the warehouse or place of storage”
The revised wording now identifies the place where the risk attaches with the words “in the warehouse or . . . place of storage (at the place named in the contract of insurance)”. This new attachment point eliminates the need for the theory, which had existed in certain sections of the London market, that the words “place of storage” used in the 1982 Clauses were wide enough to include a “place” of storage within a warehouse, such as a shelf. This construction was not intended as the words “or place of storage”. There was also a concern that the final destination of the cargo would not always be a “warehouse” but would frequently consist of other places of storage, for example a factory or a yard adjacent to a factory.
‘for the purpose of the immediate loading”
The words “for the purpose of the immediate loading” in the revised Transit Clause introduce a new concept, as compared to the 1982 Clauses. Accordingly, it may be said that the word “immediate”, which is the key to this Clause, has a good pedigree. The intention of insurers is that goods are only covered if they are being moved, within a warehouse or place of storage, in immediate anticipation of the insured journey. The word “immediate”, in its strict sense, excludes any intervening time, but from earliest judicial decisions it has almost invariably been held to mean the same as “forthwith”, namely with speedy and prompt action and as quickly as is reasonably possible.
The case illustrates the intention behind the revised Institute Cargo Clauses. This is that the first movement of the goods, typically when the goods are taken from the shelf, should be immediately connected by a closely related chain of circumstances with the insured “transit”, meaning carriage by vehicles. If goods are taken from the shelf to be placed in a waiting area, however secure that waiting area may be, then that movement is not for the purpose of “immediate” loading for the commencement of transit. Accordingly, it is submitted that the goods will not be covered during that pre-transit movement or for the time they are held in the pre-transit waiting area. The question arises as to whether goods loaded on a vehicle late on a Friday afternoon for dispatch on a Monday morning fall within the words “for the purpose of the immediate loading”.
The revised Clause uses the word “immediate” adjacent to the word “loading” but there can be little doubt that the word “immediate” is intended to connect the movement of the goods from the shelf to the “immediate” movement of the vehicle on which the goods are to be carried. If that is correct then the loading of the goods on a vehicle which is not to leave until some later time would not qualify the goods as having moved “for the purpose of the immediate loading” within the terms of the revised Clause 8.1. This may prove hard on the assured where the goods have to leave early on a Monday morning and must be loaded on a Friday Be that as it may, the movement will not fall within the standard provisions of the revised Institute Clause and if such movements are frequent the assured needs cover tailored to that situation. It should further be noted that if goods have been loaded aboard vehicles or conveyances, with the intention that the goods will leave immediately, and circumstances beyond the control of the assured, such as a traffic accident on a motorway, prevent the dispatch of the vehicle, then that may be delay beyond the control of the assured. In those circumstances the risk will have attached and will continue as long as it falls within the variations permitted by Clauses 8.3, 9 and 10.
“into or onto the carrying vehicle or other conveyance”
The words “into or onto the carrying vehicle or other conveyance” were introduced to ensure that the pre-transit movement benected as closely as possible with the insured journey. The words “carrying vehicle or other conveyance” must be read so that the words “other conveyance” are read with the words “carrying vehicle”. A typical example of a “carrying vehicle” would be a truck or a truck and trailer designed to carry a container. But there may be other means of “conveyance”, as where the goods are in a dockside warehouse, and are first moved for the purposes of being loaded into a ship which is then the “conveyance”. A “conveyance” would also include a rail freight car. But the “carrying vehicle or other conveyance” in this phrase is to be distinguished from the forklift or other handling equipment that may be used for the pre-transit movement from the shelf to the ultimate carrying vehicle involved in the main part of the insured journey. The intention is to identify the vehicle, or conveyance, used for the insured journey as distinguished from handling equipment, such as forklifts, used for internal movements within the warehouse or place of storage. It is only movement for the purpose of loading of the carrying vehicles, such as a truck involved in the insured journey that triggers the attachment of the risk. Accordingly, movement by a forklift will be insured where the forklift is taking the goods from the shelf to the carrying vehicle for the insured transit but otherwise internal movements by forklift will not be covered.
“for the commencement of transit”
The words “for the commencement of transit” are not new. These words appeared in the 1982 Clauses. The concept of “transit” is first introduced into the Institute Cargo Clauses at this point but it is also relevant in terms of the phrase “ordinary course of transit”. The earlier Clauses spoke of transit in terms of the goods leaving the warehouse or place of storage at the place named “for the commencement of the transit”. It was normally the movement of the goods through the warehouse door, rather than the loading of the goods aboard the carrying vehicle, which was the attachment point. That said, the loading of goods on a vehicle often takes place simultaneously, or virtually simultaneously, with the time when the vehicle leaves the warehouse or place of storage. The risk now attaches within the warehouse or at the place of storage at a time which will be prior to the beginning of transit.
But the concept of “transit” remains equally important under the revised Institute Cargo Clauses as the cover from the “shelf” is only triggered where the immediate loading into or onto the carrying vehicle is for the purposes of the “commencement of transit”. The meaning of transit is one of the most frequently canvassed issues in practice under the Institute Cargo Clauses. It was said in one case that “an exhaustive definition of transit is impossible”.
The revised Institute Cargo Clauses now attach the insurance from the “time the subject matter insured is first moved” within the warehouse but the essential concept of “passage or carriage of the goods from one place to another” still lies at the heart of the insurance cover and, indeed, the revised Institute Cargo Clauses may be said to emphasize the movement of the goods rather than of the carrying conveyance, whether it be a vehicle or vessel.
Accordingly, the phrase “for the commencement of transit” in Clause 8.1 of the revised Institute Cargo Clauses should be treated as the time when the goods are received on the carrying vehicle or conveyance for the commencement of the insured journey and not when they are received by the carriers or Warehousekeepers for the purposes of future movement. It is submitted that there must also be an intention that the vehicles, or conveyances, will commence their journey within a reasonable time. This is because “transit” contemplates movement of the goods from place to place and because the Clause makes it an express requirement that loading is for the “commencement” of transit. Loading of goods for future transit is not loading for the “commencement” of transit and does not attach the risk.
Thus if goods are loaded on vehicles on a Friday afternoon for transit on Monday morning, that is not loading for the “commencement” of transit and the goods will “Ordinary course of transit” The role of the phrase “continues during the ordinary course of transit”
The revised Institute Cargo Clauses provide that cover “continues during the ordinary course of transit”. There is little or no direct English authority on this phrase which plays a remarkably complex role in the context of the Clauses. First of all, the words “continues during the ordinary course of transit” impose an over-arching termination provision in addition to those set out in Clauses 8.1.1 to 8.1.4, which are only examples of when the risk will terminate, albeit common examples. In the 1982 Clauses, the words “continues during the ordinary course of transit” appeared within the first paragraph of Clause 8.1. In the revised Clauses, these words have now been moved to a separate paragraph. While this additional emphasis does not imply a change of meaning it serves to highlight that the Transit Clause fills into three parts: attachment of risk; continuation of risk as long as the subject-matter insured “continues during the ordinary course of transit”; and termination of risk.
The requirement in Clause 8.1 for continuation of the risk “during the ordinary course of transit” has been made more consistent with the provisions of the revised Clause 8.3 of the Transit Clause which continue insurance cover during events falling outside the “ordinary course of transit” (i.e., delay beyond the control of the assured, deviation, forced discharge, reshipment and transshipment etc.). It is to be noted that the revised Clause 8.3 is no longer “subject to termination as provided for above” but only “Clauses 8.1.1 to 8.1.4 above”. This recognizes that matters, such as delay beyond the control of the assured, fall outside the ordinary course of transit. In these circumstances insurance cover is automatically continued. It is also the case that termination of the contract of carriage, or of the transit, under Clause 9, the Termination of the Contract of Carriage Clause, will take the goods outside the “ordinary course of transit”. Where that occurs, additional cover may be provided, subject to prompt notice and an additional premium if required by underwriters.
Two issues arise on the relationship between the “ordinary course of transit” and Clause 10, the Change of Voyage Clause, which deals with change of destination either at the instance of the assured or of the carrier. Firstly, a voluntary change in destination by the assured, after attachment of the insurance will take the goods out of the ordinary course of transit, at least from when they are diverted from the planned or intended route towards the new destination, giving rise to a held covered type situation. Secondly, a change of destination by a carrier before the vessel sails, made with a view to theft of the goods, leads on to the more fundamental issue of whether there has been the operation of a peril within the insurance, such as theft of the cargo, or whether the goods have been taken out of the not be insured over the weekend. “ordinary course of transit”, and have come off risk.
The goods must be on a journey which is in reasonable furtherance of their transit to their ultimate destination. “Transit” will cease if the goods are dealt with for a purpose which is unrelated to bringing the transit to its expected conclusion. At the end of the day it is a question of degree in each case.
It was held that the goods were not in the ordinary course of transit at the time of the loss, a court’s decision is saying:
“… a delay or interruption which, objectively viewed, is not part of the usual and ordinary means of effecting transit, and which is occasioned by some collateral purpose, will disturb the ordinary course of transit. Accordingly, loss occurring within the period of such delay or interruption will not be covered by the policy. . . The reason is not that the insurance has come to an end (for it remains in existence), nor that the transit has come to an end (for the journey is not yet finally over) but simply that the insurance pertains to the ordinary course of transit and what is outside the ambit of that course cannot, logically, be within the cover.”
“The Avoidance of Delay Clause”
The phrase “ordinary course of transit” is intended to be construed in conjunction with Clause 18 of the revised Institute Cargo Clauses which, under the heading “Avoidance of Delay”, provides as follows:
It is a condition of this insurance that the Assured shall act with reasonable dispatch in all circumstances within their control.”
This reflects, in some respects, the requirements of the Marine Insurance Act 1906 section 48:
“Delay in voyage”
In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable dispatch, and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.”
It is submitted that this also represents English law, subject to the following caveats and considerations. The Avoidance of Delay Clause is concerned with avoidance to the delay in the transit and is not a general provision of due diligence “in all circumstances”. Although the Clause refers to “all” circumstances, the subject-matter of the Clause is “dispatch”, and the Clause is not therefore a general due diligence provision but a due diligence type requirement obliging the assured to ensure that the transit itself is carried out without undue delay. As to the second issue, the effect of a breach of the Clause is that the goods come off risk because transit terminates. This is clearer now that the Clause operates in conjunction with the phrase “ordinary course of transit”.
The Clause is a condition precedent or warranty as the assured must show that his goods are insured at the time of the loss so he has the initial burden of proving that he has exercised reasonable dispatch and that the goods remain in the “ordinary course of transit”. If an issue arises as to whether the assured has complied with the Avoidance of Delay Clause in circumstances where the goods remain in the ordinary course of transit, which is difficult to envisage, the assured would have to prove compliance with Clause 18. In practice, as the revised Institute Cargo Clauses now include the requirement that the goods remain “in the ordinary course of transit”, there are unlikely to be any cases that turn solely on the Avoidance of Delay Clause. Its effect, as intended, will be to operate in conjunction with the “ordinary course of transit” requirement. A failure to comply with the Clause will run in parallel with the goods coming off risk because the insurance terminates as the goods are no longer in the ordinary course of transit.
“Termination of risk”
The revised Institute Cargo Clauses, Clause 8, provide that the insurance terminates either:
“8.1.1 on completion of unloading from the carrying vehicle or other conveyance in or at the final warehouse or place of storage at the destination named in the contract of insurance, 8.1.2 on completion of unloading from the carrying vehicle or other conveyance in or at any other warehouse or place of storage, whether prior to or at the destination named in the contract of insurance, which the Assured or their employees elect to use either for storage other than in the ordinary course of transit or for allocation or distribution, or when the Assured or their employees elect to use any carrying vehicle or other conveyance or any container for storage other than in the ordinary course of transit or on the expiry of 60 days after completion of discharge overside of the subject-matter insured from the oversea vessel at the final port of discharge, whichever shall first occur.”
This section of the book considers the term “unloading” and then analyses in turn the four specific termination provisions under Clause 8. These are:
- unloading at the named destination;
- the election to use a warehouse for allocation or distribution, or for storage outside the ordinary course of transit;
- the election to use a carrying vehicle, or container, for storage outside the ordinary course of transit, and
- the provision that terminates the cover, in any event, 60 days after discharge from an oversea vessel.
The meaning of “unloading”
The transit terminates “on completion of unloading from the carrying vehicle or other conveyance in or at the final warehouse or place of storage at the destination named in the contract of insurance”. The phrase “on completion of unloading” reflects the Warehouse-to-warehouse Clause in the first standard Institute Cargo Clauses, which continued the cover “during the ordinary course of transit until safely deposited in consignees’ or other warehouse at destination named in the policy”. The concept of “safely deposited” may, in turn, have owed something to the concept of cover continuing until the goods are “safely landed” as contemplated by the Marine Insurance Act 1906 Schedule 1, rule 5. In the context of this background, the term “unloading” may reasonably be taken to mean that the goods have come to rest safely on the ground.
The same approach would be applicable to the revised Institute Cargo Clauses.
It may further be noted that under the revised Institute Cargo Clauses the cover continues during the unloading process until unloading has been completed. The addition of the words “completion of”, in the phrase “completion of unloading”, indicates this. Where unloading commences, for example, with a forklift taking the goods from the carrying vehicle, and the goods are then carried into a warehouse, the “completion” of unloading in such a case only takes place when the goods are placed on the ground within the warehouse by the forklift. The insurance covers accidents which occur during the forklift journey between the carrying vehicle and the goods being placed on the ground within the warehouse or other place of rest. However, the cover terminates with “unloading” and if the goods, after they have been placed on the ground, are then moved again (e.g., to a shelf) that second movement is not covered. This contrasts with attachment of the insurance under Clause 8.1 which takes place on first movement of the goods (e.g., when they are taken from the shelf for the commencement of the transit as defined in that Clause).
“final warehouse or place of storage”
The words “final warehouse or place of storage at the destination named in the contract of insurance” in Clause 8.1.1 have given rise to a number of cases. The particular issues that arise are: what amounts to a “final” warehouse or place of storage and in particular, whether a transit shed or area can be a “final warehouse”.
“Storage in warehouses other than in the ordinary course of transit”
The insurance cover terminates under Clause 8.1.2 of the revised Institute Cargo Clauses:
“On completion of unloading from the carrying vehicle or other conveyance in or at any other warehouse or place of storage, whether prior to or at the destination named in the contract of insurance, which the Assured or their employees elect to use either for storage other than in the ordinary course of transit or for allocation or distribution, …”
The terms used in this Clause, such as “unloading” the “carrying vehicle or other conveyance”, and “ordinary course of transit” have already been considered. This section of the book therefore concentrates on the assured’s “election” to use warehouses, or other places of storage, for storage other than in the ordinary course of transit, or for allocation or distribution. As the election involves taking the goods out of the “ordinary course of transit”, the cases examining that concept are relevant here, as is the need for the avoidance of delay.
The timing of the assured’s election decision is separate from the termination of the insurance which only occurs on completion of unloading. Thus an election to store the goods outside the “ordinary course of transit” terminates the insurance when that place of storage is reached and unloading is completed. If the assured changes his mind, and the election to use a warehouse for storage outside the ordinary course of transit is reversed before the goods are unloaded, it is submitted that this would be treated as if that election had never been made. In so far as an irrevocable election could be made before the unloading, for example, by cancelling arrangements for further transit, Clause 8.1.2 makes it clear that cover continues until the unloading. Accordingly, the goods will be covered for an accident that occurs during the insured transit before the goods arrive at the non-transit warehouse, albeit that the assured have already elected to use that warehouse for storage other than in the ordinary course of transit.
“Storage on vehicles or in containers other than in the ordinary course of transit”
Cover terminates under Clause 8.1.3 of the revised Institute Cargo Clauses:
“when the Assured or their employees elect to use any carrying vehicle or other conveyance or any container for storage other than in the ordinary course of transit …”
The terms “carrying vehicle or other conveyance” have already been considered in connection with Clause 8.1. The election by the assured to use vehicles or containers for storage, outside the ordinary course of transit, would be approached in the same way as the use of warehouses, or other places of storage, as discussed in connection with Clause 8.1.2 above. The different form of the drafting of Clause 8.1.3, which appears to trigger the termination of the insurance cover when the “Assured or their employees” make the election, may be explained by the origin of this Clause. The intention was to ensure that the extension of cover to “unloading” was not used by assureds as a method of prolonging cover by leaving goods loaded aboard vehicles in circumstances that exposed them to enhanced risk.
The timing of the election calls for special consideration under this Clause. The cover is not terminated on “unloading”, as it is in Clause 8.1.2 (the election to store in warehouses), as the concern is that the goods would not be unloaded but left on the vehicles, or other conveyances, or in a container. This led to the trigger point for termination being the election itself and not the use of vehicles or containers for storage. However, in most cases the two events will be simultaneous. It may be suggested that, in any event, the court is likely to give a purposeful construction to the sub-clause so that it will be the manifestation of the election, most usually by the use of vehicles or containers for storage that will trigger termination. If this is right, a prior decision to use vehicles for storage, that never manifests itself, would not terminate cover. The goods would remain covered while still moving aboard vehicles that have yet to arrive at the place where their use, once stationary, would be for storage rather than for transit. It is the use of the vehicles for storage, once stationary, that will terminate the risk.
It is possible that an assured could elect to use a vehicle or conveyance for storage, outside the ordinary course of transit, at the beginning of the insured journey as, for example, at the compound adjacent to the warehouse of departure where the insurance has attached. In this situation the goods will have been “first moved” and have been loaded on vehicles with a view to the immediate commencement of transit but that transit will then have been delayed. If the assured elect, for their own convenience, to store the goods on vehicles, for example, to await payment from the buyer, the insurance will terminate under Clause 8.1.3. There is no provision for automatic re-attachment and any re-attachment of the insurance cover is a matter to be negotiated with insurers. On the other hand, if the delay is beyond the assured’s control, as, for example, in the case of an accident on the motorway, that is delay beyond the assured’s control and cover continues under Clause 8.3
“Sixty days after discharge from the overseas vessel”
The insurance cover terminates, in any event, under Clause 8.1.4 of the revised Institute Cargo Clauses:
“on the expiry of 60 days after completion of discharge overside of the subject-matter insured from the oversea vessel at the final port of discharge, …”
This “long-stop” provision brings the insurance to an end even if the goods are still in the ordinary course of transit and have not reached the warehouse or place of storage at the destination named in the contract of insurance.
“Inter-relationship with Clause 8.1 and Clauses 9 and 10”
The revised Institute Cargo Clauses, Clause 8.3, provide that:
“This insurance shall remain in force (subject to termination as provided for in Clauses 8.1.1 to 8.1.4 above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transshipment and during any variation of the adventure arising from the exercise of a liberty granted to carriers under the contract of carriage.”
It is to be noted that the continuation of cover is automatic insofar as there is no held covered type requirement as there is in Clauses 9 and 10.1. However, the insurance only continues in force under this Clause 8.3 subject to the termination provisions in Clauses 8.1.1 to 8.1.4 of the Transit Clause itself and the provisions in the subsequent Termination of Contract of Carriage Clause. The revised version of Clause 8.3 recognizes that the goods will not be in the “ordinary course of transit” if, for example, they are delayed in circumstances that are beyond the control of the assured, and avoids the potential conflict between the two Clauses.
“Delay beyond the control of the Assured”
The insurance remains in force under Clause 8.3 during “delay beyond the control of the Assured”. This extends the period of the cover and does not provide insurance for loss damage or expense attributable to delay which remains excluded. Assume that, for example, a ship is delayed by a hurricane, because it is necessary to heave to, and the cargo hatches are nevertheless broken open and the cargo is wet damaged. In these circumstances there is cover for loss of and damage to the cargo caused by the storm which occurs during the extended period of the cover caused by the delay to the ship. However, if a ship is delayed in similar circumstances by a storm and a perishable cargo deteriorates, or there is a loss of market, because of the passage of time and not because of any physical damage directly caused by the storm, then there will be no cover for that loss which will be caused by delay.
The extension of the duration of the insurance cover under Clause 8.3 may need, depending on the circumstances of each case, to be considered in the light of Clause 18 of the revised Institute Cargo Clauses, the Avoidance of Delay Clause.
This requires the assured to “act with reasonable dispatch”. The Marine Insurance Act 1906 section 48 also provides that “the adventure insured must be prosecuted throughout its course with reasonable dispatch”. This section is, in turn, to be construed in the light of the “excuses” for delay to the voyage in section 49 of the 1906 Act, such as delay for the purpose of saving human life, or aiding a ship in distress where human life may be in danger. It is submitted that these “excuses” for delay are only relevant to Clause 8.3 insofar as they may illustrate the type of circumstance that would be “beyond the control of the Assured”
In summary, where delay occurs in the voyage which is beyond the control of the assured, losses caused by that delay or attributable to it are not covered. However, the insurance cover itself continues during the period of the delay (without restriction) as long as the voyage is not terminated in accordance with the first part of Clause 8, that is by the arrival of the goods at their destination, or like matters, and the contract of carriage is not terminated under Clause 9. The assured must act with reasonable dispatch throughout but, subject to that, the extension of the duration of the insurance during delay before discharge could theoretically be of indefinite duration without additional premium. Where the goods have been or are discharged from an oversea vessel, these triggers the 60-day cut-off period. Even where the goods have not been discharged, a point may be reached where the character of the delay changes and an issue arises as to whether or not the adventure has been lost.
“Deviation”
Deviation is defined in section 46(1) of the Marine Insurance Act 1906 which provides that where a ship “without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs”. Deviation, unlike change of voyage, contemplates that the final destination will be achieved but by a different route outside that contemplated by the policy. There is a deviation from the voyage contemplated by the policy where the course of the voyage is specifically designated by the policy and that course is departed from, or where the course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from. The revised Institute Cargo Clauses do not expressly require that deviation be “beyond the control of the assured” but that is probably because deviation is normally outside the control of the assured. In cases where the assured is owner or perhaps more commonly, charterer, of the vessel, and has some control over the route, a deviation could well prove to be in breach of the Avoidance of Delay Clause.
“forced discharge, reshipment or transshipment”
The insurance remains in force under Clause 8.3 during “forced discharge, reshipment or transshipment” which again extends the period of the insurance but does not, of itself, mean that damage caused during these operations is necessarily covered under the insurance. Normally, under all risks insurance, fortuitous loss of or damage to the cargo during such operations would be covered but where the insurance is on more limited terms covering against named perils this will not always be the case.
“variations of the adventure”
The insurance remains in force under Clause 8.3 during “any variation of the adventure arising from the exercise of a liberty granted to carriers under the contract of carriage”. Accordingly, as the insured voyage never commenced, there was never any exercise of a liberty granted to the shipowners under the contract of carriage, and the assured could not avail themselves of the automatic extension of the insurance cover under what is now Clause 8.3 of the revised Institute Cargo Clauses. However, if the variation of the adventure does fall within the liberties in the contract of carriage, then the insurance automatically continues in force without the need for prompt notice to underwriters or an additional premium.
