The general principle is that any special characteristic of the cargo is material if it will make it more difficult to assess the extent of the loss. Such disclosure may prompt the underwriter to restrict the offer of cover to insurance of named perils, confining the risk. If the cargo is of doubtful quality the insurers may even wish to arrange a pre-risk survey. On the other hand a history, which of itself has no particular bearing on the risk to underwriters, would not normally be disclosable.
Packing
Is packing and preparation of the cargo disclosable? Whether packing is disclosable may be more a matter of representation than disclosure as it is likely to turn on the description of the goods and their packing in the insurance contract. If cargo described as being “in wooden cases” is partly packed into cartons, these being more susceptible to water damage that amounts to a material non-disclosure. Reached this conclusion on the basis of evidence that, “it [was] not the practice to tell underwriters what sort of packing the commodity in question contained in”. A difference in the packing, so that the packing is not customary for the trade, is likely to be material if it enhances the risk of loss of or damage to the cargo.
The sufficiency of packing and preparation of the cargo is the subject of a specific exclusion under Clause 4.3 of the revised Institute Cargo Clauses. This exclusion only applies, firstly, where the assured packed the goods, at any time, or, secondly, where the goods are not properly prepared or packed by third-party packers prior to the attachment of the risk. Insurers have taken upon themselves the risk of poor packing during the currency of the risk, just as they have always accepted that poor stowage, accompanied by bad weather, leads to a recoverable loss.
However, it is submitted that where an assured knowingly uses poor or inadequate third party packers exposing the cargo to enhanced risk that would be material and, if not disclosed before the contract is concluded, would normally entitle insurers to avoid any claim. The difficulty in practice may be the timing of the non-disclosure for under an obligatory open cover, made directly between insurers and assured, there would not normally be an obligation to disclose in relation to individual shipments. However, if there is non-disclosure of an intention to use inadequate packing where the risk is placed, the insurers may be entitled to avoid, and, on the same basis, non-disclosure of an intention to use inadequate packing would give insurers the right to avoid if it occurred during the initial negotiation of, or the renewal of, an obligatory open cover.
Additionally we should bear the term “Previous Refusals”
If the assured has been refused insurance by one insurer must he disclose that to any other insurers he approaches for cover? Though “elementary marine insurance law that such refusals need not be disclosed”. It should be borne in mind, however, that the underlying reason behind the refusal could be disclosable even if the refusal, of itself, is not disclosable.
The position in certain classes of insurance appears to be different and throws some light on the basis of the rule. Insurers of such classes of business nearly always ask in their proposal forms whether any other insurer has refused the risk. This sends a clear message to the assured that the previous refusal is material and the assured is then under an obligation to disclose any fact of that character.” In marine insurance practice, another underwriter might refuse for reasons unconnected with the risk (e.g., the size of the risk, whether it is too large or too small, or its incompatibility with his own book of business).
