The recent Federal Court decision in Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [2020] FCA 15 is a very good example of the importance of timing and clarity in marine insurance broking and underwriting.
The case concerned the carriage of a helicopter from the US to Australia on 2009 Institute Cargo Clauses (A). The helicopter was inadequately chocked in its container which resulted in movement and damage during transit. Insurers relied on the insufficiency of packing exclusions at clause 4.3 of Institute Cargo Clauses (A) (ICC(A)) and declined the claim.
The Insured maintained that the packing had taken place after attachment of the insurance such that Insurers could not rely on clause 4.3 of ICC(A) to decline the claim.
The dispute therefore focused on when the Insurance had attached.
The helicopter had been packed into the container on 18 May 2018 between 3pm and 5pm local time Mississippi (6am to 8am on 19 May 2018 on the Australian East Coast).
The placing slip issued by Insurers stated “Period of Insurance: From 19 May 2018“.
The Insurer maintained that the insurance attached at 12am on 19 May 2018 local time Mississippi such that packing had taken place prior to attachment of the Insurance.
The arguments
In summary, Insurers maintained that the clear contractual meaning of the words used was that the period of the insurance commenced on 19 May 2018 and not before. Further the time and date must be local time Mississippi because: a) that is where the transit was to commence; and b) the Master Slip made express reference to Local Standard Time with regard to the period of cover.
In response, the Insured argued that:
- The relevant words on the placing slip were indicative and non-contractual;
- Cover attached five days prior to loading (i.e. 13 May 2018) in accordance with the five days pre transit Static Cover clause in the Master Slip; alternatively; and
- Cover commenced at 12am on 19 May 2018 Australian Eastern Standard Time which was 9am on 18 May 2018 in Mississippi, prior to the packing of the helicopter.
Chief Justice Allsop found in favour of Insurers for the following reasons:
- The words “Period of Insurance: From 19 May 2018” were plain and should be given their operative effect;
- The Insured’s proposed construction did not give Insurers any clarity as to when Insurers would go on risk;
- The reference to Local Standard Time to define the policy period in the Master Slip and location of commencement of transit supported the conclusion that the insurance attached at 12am on 19 May 2018 Local Standard Time (not AEST);
- The pre transit Static Cover extension did not operate to extend cover prior to the date specified on the placing slip;
- The above approach gave effect to the whole policy and gave a clear and certain time for when the property risk would attach; and
- As such the packing had taken place prior to attachment of the Insurance and Insurers were entitled to rely on the ICC(A) clause 4.3 exclusion.
Lessons Learnt
The case is an important reminder for cargo interests, brokers and underwriters alike to place cargo cover well in advance of the packing of the cargo, be clear as to when the Insurance will attach and specify the relevant time zone if cover is urgently required.
Coverage disputes often turn on the words used in a placement slip or endorsement. This case was no different. As Chief Justice Allsop put it:
“The result is unfortunate: a one digit change to 18 from 19 would see the insurer liable. But it is not reliance on a technicality. The reference to 19 May 2018 was a statement with contractual force as to when the insurance commenced.”
Click here to read our detailed case note.
If you have any questions regarding this or any other marine insurance issue do not hesitate to contact the writers or your usual Transport Team contact.
Written by Chris Sacré, Partner, James McIntyre, Special Counsel and Benjamin Pool, Solicitor.
