The Marine Cargo Deviation
A UK exporter ships £3m of specialist machinery from Felixstowe to Singapore under a cargo policy incorporating Institute Cargo Clauses (A). The bill of lading names Singapore as the port of discharge. During the voyage the carrier diverts to Colombo to take on additional cargo, a deviation not permitted by the bill of lading. While at Colombo the machinery is damaged by heavy rain during unloading for transhipment. The cargo interest also discovers that the machinery was packed in timber crates that were not heat-treated, contrary to the destination country's import rules, and that the carrier had no knowledge of this. The insurer declines, citing the deviation and the packing.
1. Evaluate the insurer's reliance on the deviation and on the packing.
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Deviation. Under ICC(A) the cover is subject to the transit clause, which provides that cover attaches during the ordinary course of transit and terminates on delivery. An unjustified deviation by the carrier can bring the transit to an end, but the modern clauses are more forgiving than the old law: cover is generally held to continue where the deviation is not the insured's fault, subject to the insurer's rights against the carrier. The insured did not cause the deviation; the carrier did. The insurer's better route is subrogation against the carrier for breach of the bill of lading, not avoidance against the insured. The deviation ground is therefore weak against the cargo interest.
Packing. ICC(A) excludes loss, damage or expense caused by insufficiency or unsuitability of packing or preparation. The crates were not heat-treated, contrary to destination import rules. But the damage was rain damage during unloading, not rejection at import. The insurer must show the packing caused the loss. If the crates were sound for a sea voyage and the rain entered because of the unloading method, the packing exclusion does not apply. If the crates were flimsy and let water in, it does.
Conclusion. The deviation ground is unlikely to succeed against the insured. The packing ground depends on causation, which the insurer must prove. The rain damage is likely covered under ICC(A), which covers all risks save those excluded.
2. What recovery avenues exist and how should the cargo interest proceed?
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The cargo interest should pursue three lines in parallel:
Policy claim. Present the claim under ICC(A), which covers all risks of loss or damage except those excluded. The insurer must prove an exclusion applies; the cargo interest need not prove the precise cause. The rain damage is a classic all-risks loss. The cargo interest should provide the clean bill of lading, the survey report, the packing specification and the unloading records.
Carrier claim. The carrier deviated without justification and is in breach of the bill of lading. The cargo interest can claim against the carrier for the damage, subject to the Hague-Visby package limitation, which may cap recovery well below £3m. The insurer, having paid, will subrogate into this claim.
Packing claim. If the packing was unsuitable, the cargo interest may have a claim against the packer. The heat-treatment failure is a compliance issue that could also trigger regulatory consequences at destination.
Practical steps. Notify the insurer promptly, preserve the damaged goods and packing for survey, and do not abandon the goods without the insurer's consent. Instruct a cargo surveyor at Colombo. Keep the carrier claim alive within the limitation period. Review packing specifications for future shipments so the heat-treatment requirement is built into the purchase order.