Temperature-Controlled Vaccine Cargo: Packing, Inherent Vice and Delay

ICC(A) is an all-risks cover, so the insured first shows a physical loss or damage during the currency of the policy. The burden then shifts to the insurer to bring the loss within an exclusion.

Clause 4.4 excludes loss caused by inherent vice or the nature of the subject-matter insured. That means deterioration that is internal to the goods, such as a vaccine losing potency because of its own instability. Clause 4.3 excludes loss caused by insufficient or unsuitable packing or preparation. Preparation includes the conditioning of phase-change material, because the PCM is part of the transit packaging system.

The survey evidence is that the PCM was conditioned for only 24 hours instead of 48. That is not a defect in the vaccine itself; it is a failure in the preparation of the packaging. The external heat and the tarmac delay are contributing causes, but the question is which cause is dominant. If properly conditioned PCM would have maintained the +2°C to +8°C range through the Dubai delay, the effective cause is insufficient preparation under 4.3. If the delay was so extreme that no compliant packing could have protected the goods, clause 4.5 (delay) may also be engaged, and delay is excluded.

The insurer must prove the exclusion. It can rely on the surveyor's finding, the data logger, the shipper's own SOP and the manufacturer's stability budget. The assured may argue that the delay was the real cause and that the packing was certified. On balance, the 24-hour conditioning is strong evidence that the loss falls within 4.3 and probably also 4.5. The 620 rejected cartons are therefore likely to be excluded. The 300 quarantined cartons are different: there is no physical loss yet, and no indemnity merely because they are awaiting testing.

A constructive total loss requires that the goods are reasonably abandoned because actual total loss appears unavoidable, or because the cost of preserving and recovering them would exceed their value when recovered. Quarantine pending testing does not meet that test. The goods still exist and may be released. There is no CTL, and no abandonment notice should be served at this stage.

Sue and labour under ICC(A) clause 13 covers costs reasonably incurred by the assured to avert or minimise a loss recoverable under the policy. If the 300 cartons are quarantined to prevent a covered physical loss, the testing and storage costs may be recoverable as sue and labour or particular charges. But if the underlying loss is excluded under 4.3 or 4.5, there is no recoverable loss to avert, and the costs are not covered. The insurer should not pay precautionary costs where the only likely outcome is an excluded inherent-vice or packing loss.

If testing later shows that the 300 cartons are unfit and are condemned, the claim becomes a partial loss of those cartons, not a CTL. The measure is the depreciated value or the cost of replacement, subject to the sum insured.

The deductible under ICC 2009 clause 16 applies to each claim arising from one event, but not to general average, salvage or sue and labour. If the 300 cartons are treated as part of the main claim, the 10% deductible applies to the aggregate claim. If the quarantine costs are accepted as sue and labour, they are not subject to the deductible. The insurer should reserve rights and await the test results before making any payment.

The risk has a clear temperature-control exposure and the policy has no temperature-deviation endorsement. The underwriter should either decline the temperature risk or impose specific terms: a temperature-deviation exclusion with an option to buy back cover; a warranty that PCM is conditioned in accordance with the manufacturer's validated shipper and that the data logger is downloaded and retained; a pre-shipment survey or validation certificate; a route and maximum transit-time condition; and a higher deductible or sub-limit for temperature claims.

The proposal stated 'packing suitable for airfreight' and referred to a validated shipper. If the PCM was in fact conditioned for only 24 hours, that statement may be a misrepresentation of fact. Under the Insurance Act 2015, the insured must make a fair presentation of the risk, including disclosure of material circumstances and not misrepresenting them. The remedy depends on the state of mind. If the shipper deliberately or recklessly under-conditioned the PCM and declared otherwise, the insurer may avoid the policy. If the misrepresentation was innocent or negligent, the remedy is proportionate: the insurer may reduce the claim, impose the terms it would have imposed, or charge an additional premium. The insurer must show inducement, i.e. that it would have acted differently had it known the truth.

A temperature warranty is a term relevant to the actual loss, so the insurer can rely on it. A general 'due diligence' condition that is not relevant to the loss may be limited by section 11 of the Act. The underwriter should also consider whether the assured has a claims history of temperature excursions and whether the forwarder's routing is controlled. Ethically, the insurer should not use the Act retrospectively to avoid the claim if the breach was merely technical; a proportionate remedy or a clear exclusion is more defensible.