Marine Insurance Act 1906 Section 55 — Covered and Excluded Losses
Interlink編集部Included and Excluded Losses under the Marine Insurance Act 1906
Included and excluded losses under the Marine Insurance Act 1906 are determined by identifying the proximate cause of the loss and examining whether that cause is an insured peril or falls within an exclusion under the applicable insurance policy.
Section 55(1) of the Marine Insurance Act 1906 provides that, unless the policy otherwise provides, the insurer is liable for loss proximately caused by a peril insured against and is not liable for loss that is not proximately caused by a peril insured against.
Section 55(2) further provides that the insurer is generally not liable for loss attributable to the insured’s wilful misconduct, delay, ordinary wear and tear, ordinary leakage, ordinary breakage, inherent vice or the nature of the subject matter insured, rats or vermin, or mechanical damage not proximately caused by maritime perils.
The existence of physical damage does not, by itself, establish that the loss is included. Several causes may operate concurrently or successively, including accidental external events, the nature of the cargo, packing conditions, delay, temperature variation, and negligence by the master or crew.
Marine cargo insurance practice therefore requires an analysis of the cause that substantially and effectively produced the loss, followed by confirmation that the cause is an insured peril and that no applicable exclusion prevents recovery.
Scope Covered in This Article
| Topic | Content Covered in This Article | Content Covered in Other Articles |
|---|---|---|
| Proximate Cause | The causal relationship between an insured peril and loss under Section 55(1) | Detailed case-law analysis and litigation-specific causation should be examined with legal counsel. |
| Concurrent Causes | The basic approach where insured perils, excluded causes, cargo characteristics, or negligence operate together | Contract-specific causation clauses must be interpreted under the individual policy and applicable law. |
| Wilful Misconduct of the Insured | The exclusion of loss caused by the insured’s own wilful misconduct | Insurance fraud, non-disclosure, misrepresentation, and fraudulent claims are addressed separately. |
| Negligence of the Master or Crew | The distinction between the insured’s wilful misconduct and negligence or misconduct of the master or crew | Carrier liability, B/L terms, and the Hague-Visby Rules are addressed in separate articles. |
| Loss Caused by Delay | The distinction between economic loss caused by delay and physical loss occurring during a delay | Delivery guarantees, business interruption, penalties, and consequential-loss insurance require separate policies. |
| Ordinary Wear and Tear, Ordinary Leakage, and Ordinary Breakage | The distinction between normal transit-related deterioration and accidental physical damage | Customary allowances and tolerances for specific commodities must be confirmed individually. |
| Inherent Vice | The distinction between deterioration arising from the cargo’s own nature and damage caused by an accidental external event | Refrigerated cargo, chemicals, agricultural products, and other specialist risks are addressed separately. |
| Rats, Vermin, and Mechanical Damage | The basic exclusion structure under Section 55(2) | Pest endorsements, machinery-risk clauses, and electrical or mechanical breakdown cover must be checked under the individual policy. |
| Relationship with ICC | The relationship between Section 55 and the insured perils and exclusions under ICC(A), ICC(B), and ICC(C) 2009 | A complete clause-by-clause comparison of the Institute Cargo Clauses is addressed separately. |
Purpose and Background of the Framework
The fact that cargo has been damaged does not automatically establish the insurer’s liability. It is necessary to determine whether the loss resulted from an insured peril or from a cause excluded or outside the scope of the policy.
A single loss may involve several contributing causes. Improper stowage, severe weather, container damage, prolonged delay, temperature variation, packing defects, and the cargo’s natural characteristics may operate successively or simultaneously.
Section 55 provides the basic rule for identifying the proximate cause rather than focusing only on the event that occurred last in time.
Section 55 also distinguishes the insured’s own wilful misconduct from negligence or misconduct of the master or crew and separately addresses delay, ordinary wear and tear, ordinary leakage, ordinary breakage, inherent vice, rats or vermin, and certain mechanical damage.
In modern marine cargo insurance, the final scope of cover is determined by the applicable ICC(A), ICC(B), ICC(C), war clauses, strikes clauses, temperature clauses, machinery-risk clauses, and other special provisions. Section 55 nevertheless remains a central framework for analysing causation.
Hierarchy of Terms under Section 55
| Category | Basic Meaning | Insurer’s Basic Liability | Main Assessment | Principal Evidence |
|---|---|---|---|---|
| Loss Proximately Caused by an Insured Peril | Loss for which an insured peril is the substantial and effective cause | Liable unless the policy otherwise provides | The cause that effectively produced the loss | Incident reports, photographs, survey reports, and voyage records |
| Loss Not Proximately Caused by an Insured Peril | Loss lacking the required causal connection with an insured peril | Generally not liable | Whether another cause substantially produced the loss | Incident chronology, inspection reports, and expert evidence |
| Wilful Misconduct of the Insured | An intentional or fraudulent act by the insured that causes the loss | No liability | The insured’s knowledge, intention, and conduct | Internal records, instructions, communications, and investigation materials |
| Negligence or Misconduct of the Master or Crew | Negligence or misconduct of the master or crew contributing to the casualty | May remain liable where an insured peril is the proximate cause | Distinction from the insured’s own wilful misconduct | Ship’s logs, casualty reports, and carrier investigation records |
| Loss Caused by Delay | Loss for which delay itself is the proximate cause | Generally not liable | Whether the cause is delay or an independent physical casualty | Voyage records, temperature data, delivery schedules, and storage records |
| Ordinary Wear and Tear, Ordinary Leakage, and Ordinary Breakage | Loss naturally arising in the ordinary course of transit | Generally not liable | Whether the loss is ordinary or caused by an accidental external event | Shipping records, arrival inspections, and industry tolerances |
| Inherent Vice or Nature of the Subject Matter Insured | Deterioration arising naturally from the cargo itself without an accidental external event | Generally not liable | Whether an external accident materially intervened | Temperature records, laboratory analysis, packing specifications, and expert reports |
| Loss Caused by Rats or Vermin | Loss for which rats or vermin are the proximate cause | Not liable unless the policy otherwise provides | Entry route, timing, storage environment, and policy wording | Pest reports, warehouse records, and fumigation records |
| Mechanical Damage Not Proximately Caused by Maritime Perils | Mechanical damage arising from internal malfunction rather than a maritime peril | Not liable unless the policy otherwise provides | External impact versus internal failure | Repair reports, failure analysis, impact data, and maintenance records |
Main Situations in Which Section 55 Becomes Relevant
| Situation | Main Issue | Points to Confirm | Initial Response |
|---|---|---|---|
| Cargo shifts following severe weather | Severe weather and improper stowage | Sea conditions, lashing, packing, stowage responsibility, and expected vessel movement | Preserve photographs, weather data, and stowage records |
| Perishable cargo deteriorates after prolonged delay | Delay, temperature variation, and inherent vice | Temperature deviation, refrigeration failure, duration of delay, and shelf life | Obtain temperature logs, alarm records, and repair reports |
| A warehouse fire occurs during a delay | Independent physical loss during a delay | Whether fire or delay is the proximate cause of the physical loss | Separate fire damage from economic loss caused by delay |
| Liquid cargo loses weight during transit | Ordinary leakage or accidental escape | Normal tolerance, container condition, and seal irregularities | Compare shipping and arrival weights and inspect the container |
| Agricultural cargo heats or discolours | Inherent vice or an external temperature or moisture event | Shipment moisture, ventilation, water ingress, and temperature history | Preserve laboratory results, temperature records, and stowage data |
| Machinery fails to operate after arrival | Internal malfunction or external shock | Impact marks, shock sensors, damaged components, and pre-shipment testing | Arrange an expert inspection before dismantling |
| Cargo is dropped because of a crew-handling error | Crew negligence and an insured peril | Whether the drop is an insured peril and whether the insured acted wilfully | Notify the insurer and reserve rights against the carrier |
| Pest damage is discovered in storage | Rats or vermin, storage conditions, and timing of infestation | Whether infestation existed before shipment or occurred during transit | Obtain pest, quarantine, and warehouse records |
Criteria for Determining the Proximate Cause
The proximate cause is not necessarily the event occurring immediately before the loss or the cause closest to the loss in time.
The assessment identifies the cause that substantially, effectively, or dominantly produced the loss, taking account of the entire sequence of events and the policy wording.
A simple test asking whether the loss would have occurred without a particular event is not sufficient. The analysis must identify the cause that effectively brought about the loss.
| Assessment Factor | Question | Factors Supporting an Insured Peril | Factors Supporting an Excluded Cause |
|---|---|---|---|
| Effectiveness of the Cause | Which cause made the loss a reality? | An accidental external event directly produced the physical damage | The loss developed solely through a natural internal process |
| Continuity of Causation | Did the initial cause operate continuously until the loss occurred? | A natural and unbroken causal chain exists from the insured peril | An independent excluded cause dominated or replaced the earlier cause |
| External Accident | Was an accidental external event involved? | Collision, dropping, seawater entry, fire, or abnormal impact occurred | No external event occurred and only natural deterioration developed |
| Ordinary Course of Transit | Would the phenomenon ordinarily occur during normal transit? | The incident exceeded what would normally be expected | The loss consisted of ordinary wear, evaporation, leakage, or natural deterioration |
| Policy Wording | Is the cause insured or expressly excluded? | The cause falls within an insured peril and no exclusion applies | The cause falls within an express exclusion |
| Commercial Common Sense | Is the cause reasonably within the risk accepted by the insurer? | It is an accidental transit risk contemplated by the insurance | It is a quality, storage, or preservation risk ordinarily borne by the cargo owner |
When Multiple Causes Operate Together
A single loss may involve both insured perils and excluded causes.
For example, inadequately secured cargo may shift during severe weather. Severe weather, poor lashing, inadequate packing, and the shape of the cargo may all contribute to the loss.
It is not always appropriate to select only one cause mechanically. More than one cause may operate as a proximate cause.
Where an insured peril and an expressly excluded cause both operate as proximate causes, the exclusion may prevent recovery. The result depends on the precise exclusion wording, the causal significance of each cause, and the applicable law.
| Combination of Causes | Main Assessment | Possible Insurance Outcome | Evidence to Review |
|---|---|---|---|
| Severe weather and crew stowage negligence | Whether severe weather was an effective maritime peril | Cover may apply if an insured peril is the proximate cause and no exclusion prevents recovery | Weather data, lashing records, and the ship’s log |
| External impact and fragile cargo construction | Whether the loss arose from an external accident or inherent vice | Cover may apply if the external impact substantially produced the loss | Impact records, design data, and expert evidence |
| Delay and refrigeration failure | Whether the loss was caused by delay or by equipment failure and temperature variation | Depends on the cause and any temperature or machinery endorsement | Temperature logs, alarms, and repair reports |
| Inadequate packing and ordinary transit vibration | Whether packing unable to withstand ordinary transit was a proximate cause | The ICC packing exclusion may apply | Packing specifications, photographs, and identity of the packing party |
| Self-heating cargo and ventilation failure | Whether natural self-heating or equipment failure substantially caused the loss | Depends on the existence of an external accident and applicable endorsements | Temperature, ventilation, and laboratory records |
| Vermin and container damage | Whether vermin were already present or entered following external damage | Depends on the policy wording and the effective cause of entry | Entry points, container condition, and pest identification |
Basic Requirements for an Included Loss
| Item to Confirm | Assessment | If Satisfied | If Not Satisfied |
|---|---|---|---|
| Insurance Period | Did the loss occur during the insured transit or insurance period? | Proceed to the next coverage assessment | The loss may fall outside the insurance period |
| Subject Matter Insured | Is the damaged property included in the insurance? | Examine the cause of loss | The property may be outside the insured subject matter |
| Recoverable Loss | Is there physical damage or another recoverable loss under the policy? | Calculate the amount of loss | There may be only economic loss without physical damage |
| Insured Peril | Does the cause fall within the applicable policy’s insured perils? | Examine proximate cause and exclusions | The cause may be uninsured or outside the listed perils |
| Proximate Cause | Is an insured peril the substantial and effective cause? | Recovery may be possible if no exclusion applies | The insurer is generally not liable |
| Exclusions | Does the loss fall within wilful misconduct, delay, ordinary wear and tear, inherent vice, or another exclusion? | The exclusion may prevent recovery | Proceed to loss adjustment and payment conditions |
| Supporting Evidence | Can the causal connection between the event and loss be established? | The claim can be substantiated | Further investigation or expert evidence may be required |
Wilful Misconduct of the Insured
Section 55(2) provides that the insurer is not liable for loss attributable to the wilful misconduct of the insured.
The issue is not mere negligence or an error of judgment. It concerns conduct in which the insured intended the loss, deliberately caused damage for an improper purpose, or knowingly acted in a manner intended to produce the loss.
Examples may include staging a cargo incident, deliberately damaging the cargo, or issuing instructions with the intention of causing an insured loss.
Ordinary operational negligence, carelessness, or poor judgment does not automatically amount to wilful misconduct. The identity of the actor, knowledge, intention, instructions, and awareness of the probable consequences must be examined.
Difference from Negligence of the Master or Crew
Section 55(2) distinguishes the insured’s wilful misconduct from negligence or misconduct of the master or crew.
Unless the policy otherwise provides, the insurer may remain liable where the loss is proximately caused by an insured peril, even though negligence or misconduct of the master or crew contributed to the casualty.
For example, where cargo is dropped because of a crew-handling error, marine cargo insurance may respond if the accidental drop is an insured peril and no applicable exclusion prevents recovery.
Payment under the cargo policy and the carrier’s legal liability are separate issues.
A claim against the carrier requires separate consideration of the B/L terms, governing law, the Hague-Visby Rules or other applicable regime, carrier defences, liability limits, notice requirements, and time bars.
Relationship Between Cargo Insurance and Claims Against the Carrier
| Issue | Cargo Insurance | Claim Against the Carrier | Practical Response |
|---|---|---|---|
| Legal Basis | Insurance policy and incorporated clauses | B/L, contract of carriage, governing law, and applicable convention | Analyse the two contractual relationships separately |
| Main Causation Issue | Whether an insured peril was the proximate cause | Whether the carrier breached its duties and has a defence | Preserve the same casualty evidence for both claims |
| Crew Negligence | May remain covered if an insured peril is the proximate cause | The carrier may rely on contractual or statutory defences | Do not equate policy coverage with carrier liability |
| Liability Limit | Subject to the insured value, sum insured, and deductible | Package or weight limitations may apply | Check the description and number of packages in the B/L |
| Deadlines | Policy notice and claim requirements | Notice requirements and contractual or statutory time bars | Maintain separate deadline controls |
| After Insurance Payment | The insurer indemnifies the insured within the policy terms | The insurer may exercise rights of subrogation to the extent of payment | Preserve evidence and avoid prejudicing recovery rights |
Loss Caused by Delay
Section 55(2) provides that, unless the policy otherwise provides, the insurer is not liable for loss proximately caused by delay, whether the subject matter insured is a vessel or cargo.
The delay exclusion may apply even where the delay itself resulted from an insured peril such as fire, grounding, or collision, if delay is the proximate cause of the claimed loss.
Lost sales, penalties, market-price reduction, business interruption, and emergency replacement costs are generally distinguished from physical loss of or damage to cargo.
Where an independent insured peril such as fire, theft, seawater entry, or dropping occurs during the delay and causes physical damage, the loss is not automatically excluded merely because the cargo was delayed.
Boundary Between Delay Loss and Physical Loss
| Case | Possible Proximate Cause | Main Assessment | Required Evidence |
|---|---|---|---|
| A sales contract is cancelled because of late arrival | Delay | Whether the claim is economic loss rather than physical cargo damage | Sales contract, delivery date, and cancellation notice |
| The market price falls during the delay | Delay or market movement | Whether the cargo itself suffered physical loss | Market data and arrival records |
| Cargo is burned in a warehouse fire during the delay | Fire | Whether fire independently caused the physical loss | Fire report, warehouse records, and photographs |
| Food naturally deteriorates because ambient storage is prolonged | Delay or inherent vice | Whether an accidental external event intervened | Shelf-life data, temperature records, and quality analysis |
| A refrigeration unit suddenly fails during the delay | Equipment failure, temperature variation, or delay | Whether failure was an independent casualty and whether an endorsement applies | Alarm records, repair report, and temperature logs |
| Rainwater enters after storage is moved because of delay | Rainwater entry or delay | Whether rainwater entry independently caused physical damage | Storage records, weather data, and roof or container condition |
The mere existence of delay does not establish that the delay exclusion applies. The cause that substantially and effectively produced the physical damage must be identified.
Ordinary Wear and Tear, Ordinary Leakage, and Ordinary Breakage
Section 55(2) provides that the insurer is generally not liable for ordinary wear and tear, ordinary leakage, or ordinary breakage.
These expressions refer to loss naturally arising from handling, vibration, evaporation, drying, friction, or the ordinary course of transit rather than from an accidental external casualty.
Examples may include minor evaporation of liquid cargo, natural reduction in the weight of agricultural products, ordinary powder leakage from bags, and routine scuffing of outer packaging.
Where leakage or breakage exceeds the ordinary range and results from an accidental event such as dropping, collision, puncture, crushing, or water entry, the loss may be treated as accidental physical damage rather than ordinary leakage or ordinary breakage.
| Assessment Item | Factors Supporting Ordinary Wear and Tear, Leakage, or Breakage | Factors Supporting an Accidental Event | Evidence to Review |
|---|---|---|---|
| Amount of Loss | Within the range normally expected for the commodity | Substantially exceeds the ordinary tolerance | Shipping weight, arrival weight, and industry standards |
| Container or Package Condition | No damage or abnormality is found | Holes, cracks, crushing, or broken seals are present | Photographs, inspection records, and seal data |
| Distribution of Loss | Minor loss is spread generally throughout the cargo | Abnormal loss is concentrated in a particular area | Inspection sheets and stowage plans |
| External Casualty | No unusual event is recorded | Dropping, collision, puncture, or water entry is recorded | Casualty reports and handling records |
| Transit Period | Natural reduction is proportionate to the normal transit period | An abnormal reduction occurs within a short period | Transit schedule and measurement records |
| Cargo Characteristics | The commodity naturally evaporates, dries, leaks, or abrades | A commodity not normally subject to such loss is affected | Product specifications and previous shipment records |
Inherent Vice or Nature of the Cargo
Section 55(2) provides that the insurer is generally not liable for loss caused by the inherent vice or nature of the subject matter insured.
Inherent vice describes deterioration, alteration, spoilage, self-heating, fermentation, discolouration, evaporation, or weight reduction arising naturally from the cargo itself without an accidental external event.
The fact that cargo is susceptible to damage does not mean that every loss arises from inherent vice. Where an accidental external event substantially produces the damage, that event may be the proximate cause.
The assessment therefore considers whether the cargo deteriorated solely through its natural behaviour during an ordinary voyage or whether an accidental external event materially intervened.
Evidence Used to Distinguish Inherent Vice from an External Accident
| Evidence | What It Establishes | Factors Supporting Inherent Vice | Factors Supporting an External Accident |
|---|---|---|---|
| Pre-Shipment Inspection | Quality, moisture, functionality, and appearance at shipment | Instability or abnormality existed before shipment | The cargo was sound at shipment and deteriorated abruptly during transit |
| Temperature and Humidity Records | The cargo’s environment during transit | Deterioration occurred despite normal conditions | A clear temperature or humidity deviation occurred |
| Packing Specifications | Whether packing was suitable for the cargo | Protection was insufficient for the cargo’s known characteristics | An external impact damaged otherwise adequate packing |
| Equipment and Refrigeration Records | Breakdowns, alarms, and periods of interruption | The equipment operated normally and deterioration arose internally | A sudden breakdown or power interruption occurred |
| Expert Report | The mechanism and probable cause of damage | Self-heating, self-reaction, or material deterioration was the principal cause | Impact, water entry, or temperature variation was the principal cause |
| Comparison Within the Same Lot | Differences between exposure conditions and damage | Similar deterioration occurred in several unaffected locations | Damage is concentrated only in the externally affected area |
| Previous Shipment Records | The commodity’s performance under normal conditions | Similar deterioration repeatedly occurred without external accident | The present shipment alone was exposed to an abnormal event |
Loss Caused by Rats or Vermin
Section 55(2) provides that, unless the policy otherwise provides, the insurer is not liable for loss proximately caused by rats or vermin.
Relevant losses may include consumption of cargo, insect infestation, contamination, nesting, damage to packaging, and contamination by droppings or urine.
The investigation should establish whether rats or vermin were present before shipment, entered during storage, or gained access after an accidental event such as container damage.
Under a policy incorporating ICC(A) or another modern clause, the result must be determined from the complete policy wording, endorsements, and proximate cause rather than Section 55 alone.
Mechanical Damage
Section 55(2) provides that the insurer is generally not liable for mechanical damage not proximately caused by maritime perils.
Internal wear, material fatigue, design defects, electrical malfunction, inadequate lubrication, or seizure following long storage may indicate an internal cause rather than an insured peril.
Where internal machinery is damaged by an accidental external event such as dropping, collision, overturning, seawater entry, or abnormal impact, the external event may be the proximate cause.
| Item to Confirm | Factors Supporting Internal Failure | Factors Supporting an External Accident | Supporting Evidence |
|---|---|---|---|
| External Appearance | No external damage or impact mark | Dents, cracks, overturning marks, or water-entry evidence | Arrival and packing photographs |
| Location of Failure | Only worn or internal electronic components failed | Fracture pattern corresponds with the direction of impact | Dismantling report and repairer’s opinion |
| Pre-Shipment Condition | No operational test or an existing defect was recorded | The machine operated normally before shipment | Pre-shipment test and maintenance records |
| Transit Records | No abnormal event was recorded | Dropping, impact, overturning, or water entry was recorded | Shock sensors and handling records |
| Expert Assessment | Ageing, fatigue, wear, or internal malfunction | External force caused fracture or short circuit | Failure-cause report |
| Insurance Terms | Mechanical or electrical breakdown is expressly excluded | An external-accident or machinery-risk endorsement applies | Policy and special clauses |
Relationship with ICC(A), ICC(B), and ICC(C)
In modern marine cargo insurance, the actual scope of cover is determined not only by Section 55 but also by the ICC(A), ICC(B), ICC(C), and any special clauses incorporated into the policy.
ICC(A) 2009 provides broad cover for loss of or damage to the subject matter insured, subject to the stated exclusions.
ICC(B) and ICC(C) 2009 cover loss or damage caused by the perils listed in Clause 1.
Clause 4 of ICC(A), ICC(B), and ICC(C) includes exclusions concerning the insured’s wilful misconduct, ordinary leakage, ordinary loss in weight or volume, ordinary wear and tear, insufficient or unsuitable packing, inherent vice, and delay.
| Section 55 Issue | Main Connection with ICC(A), ICC(B), and ICC(C) 2009 | Practical Assessment | Point of Caution |
|---|---|---|---|
| Loss Proximately Caused by an Insured Peril | ICC(A) provides broad cover; ICC(B) and ICC(C) cover listed perils | Confirm that the proximate cause fits the applicable coverage structure | ICC(A) remains subject to exclusions. |
| Wilful Misconduct of the Insured | Excluded under Clause 4.1 | Examine the insured’s knowledge and intention | Distinguish wilful misconduct from ordinary negligence. |
| Ordinary Leakage, Ordinary Loss in Weight or Volume, and Ordinary Wear and Tear | Excluded under Clause 4.2 | Determine whether the loss is ordinary or arose from an accidental event | Commodity-specific tolerances may be relevant. |
| Insufficient or Unsuitable Packing | Excluded in specified circumstances under Clause 4.3 | Confirm who packed the cargo, when it was packed, and whether it could withstand ordinary transit | The precise clause wording must be applied. |
| Inherent Vice or Nature | Excluded under Clause 4.4 | Distinguish natural deterioration from an accidental external event | Fragility alone does not establish inherent vice. |
| Delay | Generally excluded under Clause 4.5 even where delay results from an insured peril | Determine whether delay or an independent casualty caused the physical loss | Any express exception must be checked. |
| Rats or Vermin | The ICC may not reproduce the same standalone statutory wording | Review the whole policy, endorsements, and proximate cause | Do not determine the result from Section 55 alone. |
| Mechanical Damage | External accident, fortuity, exclusions, and endorsements must be examined | Distinguish internal breakdown from an insured external event | Machinery-risk and electrical-risk endorsements may be relevant. |
| Loss Mitigation and Preservation of Rights | Clause 16 requires reasonable measures and preservation of rights against third parties | Prevent further loss and notify potentially responsible parties | Reasonable expenditure may be separately recoverable. |
ICC(A) Does Not Include Every Loss
ICC(A) generally provides broad cover, but it does not unconditionally insure every loss affecting cargo.
Wilful misconduct of the insured, ordinary wear and tear, ordinary leakage, insufficient or unsuitable packing, inherent vice, delay, specified unseaworthiness or container unfitness, war risks, and strikes risks are addressed through exclusions or separate clauses.
Even where ICC(A) applies, the fortuity of the event, proximate cause, exclusions, and special clauses must be examined.
Under ICC(B) and ICC(C), it is also necessary to establish that the proximate cause falls within a peril listed in Clause 1.
Practical Workflow
- Identify the Cargo Loss
Confirm breakage, wetting, spoilage, discolouration, shortage, mechanical malfunction, or another abnormal condition. - Avert or Minimise Further Loss
Take reasonable measures such as drying, sorting, repacking, relocation, cooling, or segregation. - Notify the Insurer or Insurance Agent
Provide the incident details, cargo information, loss condition, and emergency measures taken. - Confirm the Applicable Insurance Terms
Check ICC(A), ICC(B), ICC(C), special clauses, deductibles, temperature clauses, and other endorsements. - Prepare an Incident Chronology
Record shipment, loading, transit, delay, storage, casualty, and discovery of the loss. - List the Possible Causes
Separate external accidents, negligence, delay, packing, inherent vice, and ordinary wear and tear. - Determine the Proximate Cause
Identify the cause that substantially and effectively produced the loss. - Confirm the Insured Peril
Determine whether the proximate cause falls within the applicable policy’s insured perils. - Confirm the Exclusions
Review wilful misconduct, delay, ordinary wear and tear, packing, inherent vice, and other exclusions. - Collect Technical Evidence
Obtain temperature data, packing specifications, failure analysis, weather records, and expert reports. - Preserve Rights Against Third Parties
Notify carriers, warehouse operators, packers, and other potentially responsible parties. - Prepare the Insurance Claim
Explain the proximate cause, insured peril, non-application of exclusions, and calculation of loss.
Common Practical Cases
| Case | Main Issue | Evidence | Key Assessment | Initial Response |
|---|---|---|---|---|
| Cargo topples after severe weather | Maritime peril and improper stowage | Weather data, lashing records, and photographs | Whether severe weather was an effective external cause | Preserve sea-condition and stowage evidence |
| Cargo is dropped because of crew error | Crew negligence and the insured’s wilful misconduct | Handling report, video, and casualty certificate | Whether the accidental drop is an insured peril | Notify the insurer and reserve rights against the carrier |
| Food deteriorates after prolonged delay | Delay and inherent vice | Temperature data, shelf life, and transit schedule | Whether an independent temperature casualty occurred | Separate temperature variation from the period of delay |
| Cargo is burned in a warehouse fire during delay | Independent physical casualty during delay | Fire report and warehouse records | Whether fire was the proximate cause | Separate fire damage from economic delay loss |
| Agricultural cargo self-heats | Inherent vice | Moisture, ventilation, and laboratory data | Whether heating occurred naturally without external accident | Obtain expert evidence |
| Agricultural cargo heats after container water entry | Water entry and inherent vice | Water marks, moisture content, and container inspection | Whether water entry substantially caused the heating | Establish the condition before and after water entry |
| Liquid cargo shows a weight shortage | Ordinary leakage or accidental escape | Weight records and tank or package inspection | Whether the shortage exceeds ordinary tolerance | Check the quantity difference and container condition |
| Machinery fails internally after arrival | Internal breakdown or external shock | Pre-shipment tests, shock data, and repair reports | Whether an external transit event was the proximate cause | Investigate before dismantling |
| Vermin damage is discovered after arrival | Statutory exclusion and timing of infestation | Quarantine, fumigation, and warehouse records | Whether vermin were present before loading or entered in transit | Identify the vermin and entry route |
Application Scenario 1: Severe Weather and Improper Stowage
Cargo is inadequately secured and topples during severe weather.
The potential causes include improper stowage or lashing and abnormal vessel movement produced by the weather.
If the severe weather caused abnormal movement that substantially produced the cargo loss, a maritime peril may be the proximate cause.
If the cargo would have toppled under ordinary expected vessel movement because the packing or securing was inadequate, the applicable packing exclusion may prevent recovery.
The assessment should therefore consider the severity of the weather, lashing method, packing party, stowage party, and whether the cargo was prepared to withstand the ordinary course of transit.
Application Scenario 2: Refrigeration Failure During Delay
Frozen food is delayed by port congestion. During the delay, the refrigeration unit stops and the cargo temperature rises.
The presence of delay does not automatically mean that all resulting physical damage is excluded.
If a sudden refrigeration failure or external power interruption independently caused the temperature variation and the risk is insured under the policy or a temperature endorsement, the physical loss may be included.
If the equipment operated normally and the extended transit merely caused the cargo to exceed its natural shelf life, delay or inherent vice may be the proximate cause.
Temperature logs, alarm records, repair reports, the duration of delay, and the cargo’s expected storage life should be reviewed.
Application Scenario 3: Self-Heating Agricultural Cargo and Seawater Entry
Agricultural cargo self-heats during transit and suffers discolouration and quality deterioration. Evidence of seawater entry is also found in the container.
The cargo may naturally self-heat because of its moisture content and respiration, making inherent vice relevant.
However, where container damage allowed seawater to enter and materially increased the cargo’s moisture content, thereby accelerating heating and deterioration, seawater entry may be the proximate cause.
Shipment moisture, arrival moisture, the location of container damage, distribution of loss, temperature records, and expert evidence should be examined.
If the heating arose solely from the cargo’s natural behaviour without an external accidental event, the loss may be excluded as inherent vice.
Application Scenario 4: Cargo Dropped Because of Crew Error
During port handling, cargo is dropped because of an error by the master, crew, or carrier’s personnel, and machinery is damaged.
Although the handling error contributed to the casualty, the insured did not wilfully cause the loss.
If the accidental drop is an insured peril and no exclusion applies, the marine cargo policy may respond.
Carrier liability must be assessed separately under the B/L, applicable law, liability limits, defences, notice requirements, and time bars.
Application Scenario 5: Internal Mechanical Failure and Transit Shock
A precision machine fails to operate after arrival. Internal components are damaged, the exterior shows dents, and a shock sensor records a significant impact.
If the component failure resulted solely from fatigue, ageing, or internal malfunction, the loss may be excluded as internal mechanical damage or inherent vice.
If pre-shipment testing confirmed normal operation and the fracture pattern corresponds with an external transit impact, the impact may be the proximate cause.
Pre-shipment tests, shock data, handling records, external damage, and expert failure analysis should be reviewed before dismantling or repair.
Common Misunderstandings
| Misunderstanding | Actual Position | Practical Point |
|---|---|---|
| Any cargo damage is automatically included. | An insured peril must be the proximate cause, and no applicable exclusion may prevent recovery. | Establish the cause, not only the damage. |
| The proximate cause is always the last event before the loss. | The proximate cause is the cause that substantially and effectively produced the loss. | Review the entire causal sequence. |
| Only one proximate cause can exist. | More than one cause may operate concurrently as a proximate cause. | Check for an insured peril and an express exclusion operating together. |
| Crew negligence automatically prevents cargo insurance recovery. | The insured’s wilful misconduct is distinct from negligence of the master or crew. | Determine whether an insured peril was the proximate cause. |
| If cargo insurance pays, the carrier must reimburse the full amount. | Carrier liability is determined separately under the B/L, applicable regime, defences, and liability limits. | Separate the insurance claim from the carrier claim. |
| Every physical loss occurring during delay is excluded. | An independent insured peril occurring during delay may cause an included physical loss. | Determine the proximate cause. |
| If an insured peril causes the delay, all delay-related loss is included. | Loss proximately caused by delay may remain excluded even if the delay resulted from an insured peril. | Separate physical damage from economic delay loss. |
| Fragile cargo always suffers loss through inherent vice. | An accidental external event may be the proximate cause even where the cargo is fragile. | Identify any external casualty. |
| Ordinary wear and tear is the same as accidental breakage. | Ordinary wear and tear arises naturally within expected limits and differs from abnormal accidental damage. | Compare the loss with normal tolerances and external events. |
| Internal mechanical damage is always included under ICC(A). | Fortuity, proximate cause, exclusions, and endorsements must still be examined. | Distinguish external shock from internal failure. |
| ICC(A) includes every cargo loss. | ICC(A) contains exclusions for wilful misconduct, ordinary wear and tear, packing, inherent vice, delay, and other matters. | Review Clause 4 and all other relevant clauses. |
| The insurer alone must investigate and prove the cause. | The insured must also preserve evidence supporting the occurrence, cause, and amount of loss. | Obtain photographs, records, and expert reports promptly. |
Practical Decision-Making Checklist
| Situation | Party to Consult | Points to Confirm | Action if a Problem Is Identified |
|---|---|---|---|
| Discovering cargo damage | Warehouse, consignee, and carrier | Condition, quantity, discovery time, and storage status | Secure photographs, inspection records, and reservation notices |
| Confirming the incident cause | Surveyor, carrier, and operational personnel | Location, chronology, and possible causes | Organise the evidence by cause |
| Determining the proximate cause | Insurer, surveyor, and legal counsel where necessary | The cause that substantially and effectively produced the loss | Analyse the relationship between concurrent causes |
| Confirming insurance terms | Insurer or insurance agent | ICC clauses, special clauses, insured perils, exclusions, and deductible | Obtain the complete policy and confirm the order of application |
| Managing a delay | Carrier, insurer, and cargo manager | Duration, physical casualty, storage life, and economic loss | Separate loss caused by delay from physical damage |
| Handling refrigerated cargo damage | Refrigeration contractor, surveyor, and insurer | Temperature variation, alarms, breakdown, and cargo characteristics | Obtain temperature logs and repair records |
| Investigating possible inherent vice | Expert, manufacturer, and insurer | Shipment quality, natural behaviour, and external events | Obtain laboratory analysis and expert opinion |
| Investigating ordinary wear and tear | Surveyor, industry expert, and cargo owner | Normal tolerance, previous shipments, and abnormal events | Establish why the loss exceeded the ordinary range |
| Investigating machinery failure | Repairer, manufacturer, and surveyor | Pre-shipment condition, external shock, internal failure, and damaged component | Investigate the cause before dismantling |
| Investigating carrier or crew negligence | Carrier, insurer, and legal counsel where necessary | B/L, casualty report, liability limits, defences, and time bars | Manage the insurance and carrier claims in parallel |
| Investigating vermin damage | Quarantine authority, pest specialist, and warehouse | Species, timing, entry route, and fumigation history | Preserve pest-identification and storage evidence |
| Submitting the insurance claim | Insurer or insurance agent | Proximate cause, insured peril, exclusions, amount of loss, and evidence | Prepare a claim clearly linking each loss to its cause |
Do Not Confuse Included Losses with Excluded Losses
An included loss is not merely damage affecting insured property. It is loss proximately caused by an insured peril and not prevented from recovery by an applicable exclusion.
An excluded loss is a loss for which the proximate cause is not an insured peril or which falls within an exclusion under the applicable policy.
Where insured perils and excluded causes are both involved, the analysis must go beyond chronology and identify the cause or causes that substantially and effectively produced the loss.
Policy coverage and the liability of a carrier, warehouse operator, packer, or other third party are separate questions governed by different contracts and legal rules.
Summary
Section 55(1) provides that the insurer is liable for loss proximately caused by a peril insured against and is not liable for loss that is not proximately caused by a peril insured against.
The proximate cause is not necessarily the cause nearest in time. It is the cause that substantially and effectively produced the loss. More than one cause may operate concurrently.
Loss attributable to the insured’s wilful misconduct is excluded. Negligence or misconduct of the master or crew does not automatically prevent recovery where an insured peril remains the proximate cause.
Loss proximately caused by delay is generally excluded, even where the delay resulted from an insured peril. Physical loss caused by an independent insured peril during the delay must be considered separately.
Ordinary wear and tear, ordinary leakage, ordinary breakage, inherent vice or nature of the cargo, loss caused by rats or vermin, and mechanical damage not proximately caused by maritime perils are generally excluded unless the policy otherwise provides.
Inherent vice requires an assessment of whether the cargo deteriorated through its own natural characteristics or whether an accidental external event materially caused the loss.
Under ICC(A), ICC(B), and ICC(C) 2009, the insured perils, Clause 4 exclusions, Clause 16 obligations, special clauses, and deductible provisions must be considered together with the Section 55 causation framework.
When cargo loss occurs, the insured should preserve photographs, survey reports, temperature records, packing specifications, voyage and handling records, machinery-failure analysis, and expert evidence, and should promptly notify the insurer or insurance agent.
