Coffee Bean Condensation Claim: Inherent Vice or Sea Peril?
A consignment of 400 bags of green coffee in 20 x 20ft containers is shipped from Kochi to Rotterdam on 10 July under a marine cargo policy on ICC(A) terms, deductible USD 2,500 each claim. The bill of lading is clean and the containers are stowed below deck. The vessel meets six days of heavy weather; on discharge six containers show stained bags, mould and condensation. The carrier alleges inherent vice because pre-shipment moisture was 11.8%, said to be high. The surveyor has the pre-shipment certificate (11.8%, within trade norm), container ventilation logs, and lab tests showing low chlorides in the wet staining but high mould counts. Sound CIF value of the damaged cargo is USD 20,000; salvage sale realises USD 4,500; survey fee USD 1,200. Owner claims USD 15,500 plus fee. How do you assess?
1. What causation tests should the surveyor apply to decide whether the loss is inherent vice or an insured sea peril?
Read the worked answer
The surveyor should not accept the carrier's label. The practical tests are:
- Moisture relationship. Compare the 11.8% pre-shipment moisture with the equilibrium moisture content for green coffee and the contract specification. A figure within trade norm does not by itself prove inherent vice.
- Water source. Low chlorides indicate fresh water, not seawater. Fresh water may come from container roof/ door leaks, ship's sweat or cargo sweat. Inspect container roofs, doors, seals and ventilation slots.
- Temperature/ventilation record. Check the ventilation logs, weather during the voyage and whether the containers were opened or ventilated in a way that caused condensation.
- Mould pattern. Localised mould near container walls or roof suggests condensation; uniformly distributed mould within the bags suggests cargo moisture.
- Stowage and duration. Below-deck stowage and six days of heavy weather may produce ship's sweat if ventilation was inadequate.
Inherent vice is an exclusion in ICC(A); the insurer bears the burden of proving it. The surveyor should report the evidence both ways and state whether the effective cause was ordinary transit moisture or an external event such as abnormal weather, container leak or ventilation failure. If the evidence is inconclusive, the report should say so rather than adopt the carrier's assertion.
2. Calculate the net claim payable under the policy, stating your assumptions.
Read the worked answer
On a partial loss of cargo, the indemnity is the sound value of the damaged cargo less its damaged or salvage value, plus reasonable survey costs if recoverable under the policy, less the deductible.
- Sound CIF value: USD 20,000
- Salvage sale proceeds: USD 4,500
- Gross loss: USD 20,000 - USD 4,500 = USD 15,500
- Add survey fee: USD 1,200
- Sub-total: USD 16,700
- Less deductible: USD 2,500
- Net payable: USD 14,200
Assumptions: the survey fee was reasonably incurred to quantify a covered loss and is payable under the policy; the salvage sale realised net proceeds after sale expenses; there is no under-insurance or average condition; and the loss is not excluded as inherent vice. If the survey fee is not covered, the net figure is USD 13,000. If only part of the damage is covered, the sound value and salvage proceeds must be apportioned to the covered portion. The report should show the calculation and identify the causation finding on which it depends.
3. What subrogation rights may the insurer have against the carrier, and how does package limitation apply?
Read the worked answer
After paying the cargo claim, the insurer is subrogated to the cargo owner's rights against the carrier to the extent of payment. The carrier's liability under the Hague-Visby regime depends on breach of the duty to properly and carefully load, stow, carry, keep, care for and discharge the cargo. The carrier may rely on exceptions such as inherent vice or perils of the seas, but a clean bill of lading is not conclusive against the cargo interest.
If the loss was caused by container leakage, inadequate ventilation or another carrier failure, the subrogated claim is viable. Package limitation is the higher of 666.67 SDR per package or 2 SDR per kilogram. For 3,200 kg, the weight basis is 6,400 SDR. If the bill of lading describes 400 bags, the package basis is 400 x 666.67 = 266,668 SDR, so limitation does not reduce the claim. If the bill describes only 20 containers, the package basis is 13,333 SDR, which may cap recovery. The surveyor should obtain the bill of lading, packing list and carrier's delivery records before the insurer pursues recovery.