Cargo Drum Failure: Storm or Inherent Vice?
Northstar Shipping insures 400 drums of industrial solvent under a cargo policy incorporating Institute Cargo Clauses (A). The policy excludes loss caused by 'inherent vice or nature of the subject-matter insured' and 'insufficiency or unsuitability of packing'. The drums were reconditioned before shipment. One drum had a latent fatigue crack in a seam that a visual inspection could not detect. During an unusually heavy storm in the Bay of Biscay the vessel rolled heavily for six hours. The drum leaked; solvent vapour accumulated in the hold and ignited from a spark in the ventilation fan, causing an explosion that destroyed the cargo. A surveyor reports that the drum would probably have failed within three months under ordinary handling, but that the storm 'accelerated the failure'. The assured claims £850,000. Northstar's underwriter says the real cause was the defective drum, not the storm.
1. Identify the proximate cause of the loss and explain why the last event in the chain is not necessarily the legal cause.
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Proximate cause is the dominant or effective cause, not the last event. The spark is last in time but is not the legal cause; it is the mechanism by which accumulated vapour ignited. The real contest is between the storm and the defective drum.
If a sound drum would have survived the storm, the storm is the proximate cause and the loss is a peril of the seas. If the drum was already unfit for ordinary handling and the storm merely triggered a failure that was inevitable, inherent vice is the proximate cause. The surveyor's evidence that failure would probably have occurred within three months under ordinary handling points strongly to inherent vice. The word 'accelerated' does not necessarily make the storm dominant; it may show the defect was the effective cause and the storm only hastened it.
The spark is not a novus actus interveniens because vapour accumulation and ignition are foreseeable consequences of a leaking solvent drum. Conclusion: on the reported evidence, inherent vice is the more likely proximate cause, but the assured should obtain evidence on whether a sound drum would have withstood the storm.
2. How do the exclusions for inherent vice and insufficient packing operate, and who bears the burden of proof?
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ICC(A) is an all-risks cover. The assured must show a loss during the policy period; it need not prove the specific peril. The insurer bears the burden of bringing the loss within an exclusion.
Inherent vice: the insurer must show the drum's latent fatigue caused the failure. A latent defect that makes the goods unfit for ordinary transit is inherent vice. Insufficient packing: the drum is the packing for the solvent; if it was not fit for ordinary handling, the exclusion applies. The surveyor's three-month finding supports the insurer. If, however, the storm was extraordinary and a sound drum would have failed, the exclusions are not engaged and the claim is payable as a peril of the seas. If two causes operate, English law looks for the dominant cause; it does not simply apportion. The insurer must prove its exclusion on the balance of probabilities. If the evidence is equivocal, the insurer fails and the assured recovers.
3. What evidence should the assured gather to defeat the insurer's exclusion defence?
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The assured should obtain: (i) the drum manufacturer's specification and reconditioning records; (ii) metallurgical testing of the failed seam; (iii) weather data for the vessel's position and the sea state; (iv) evidence from the master on whether other drums or cargo shifted; and (v) expert evidence on whether a sound drum of that specification would have survived six hours of rolling. The key question is counterfactual: would a sound drum have failed in that storm? If yes, the storm is the proximate cause. If no, inherent vice is. The assured should also check whether the policy has a 'due diligence' proviso (ICC(A) does not) and whether the surveyor's report is admissible and reasoned. The burden remains on the insurer, so gaps in its evidence favour the assured.