Perils of the seas needn’t be too perilous

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[co-author: William Thompson]

When the cargo vessel “Irene EM” grounded on 30 October 2009 in the Gulf of Khambhat, underwriters declined cover as the loss was not caused by a peril of the sea.

The term “perils of the seas” refers only to fortuitous accidents or casualties of the sea.  Under section 55(1) of the Maritime Insurance Act 1906 (UK), the insurer is liable only for loss proximately caused by a peril insured against.

At the time of loss the vessel was in disrepair.  It had been seized by Somali pirates for most of the 6 months prior.  The pirates had run the vessel’s machinery with fuel oil instead of diesel and also topped up the fresh water cooling system with sea water.  Maintenance had been neglected and then the crew who had been captives were exchanged with little handover and minimal berthing time to rectify problems or replenish spare parts.  The hull was fouled and the main engine operating at reduced capacity.  The vessel was directed to anchor in the Gulf of Khambhat and await a mooring.  The Gulf was subject to strong tidal flows. 

The vessel dragged anchor and grounded.  His Honour accepted that the crew kept a poor watch and the grounding occurred before any attempt was made to use her engines.  There was some doubt about the vessel’s ability to successfully motor against the tidal flow at the critical time. The insurer asserted the ship was decrepit and its succumbing to debility was not a fortuitous action of the wind and waves.  It grounded through its own inherent weakness removed from any peril of wind or water.  However the Court held the grounding was a fortuity and was a proximate cause of the damage. Justice Smith in the UK High Court did not accept the vessel was incapable of avoiding the grounding nor that the causal impact of the crew member’s negligence in failing to keep proper watch, was so potent as to displace grounding due to tidal flow as proximate causes of the damage.  For those reasons he concluded that the damage was caused by a peril of the seas covered by the policy.

His Honour concluded that the vessel damage sustained due to the 30 October 2009 grounding was an insured event. The claim therefore succeeded with the claimants being entitled to judgment against the appropriate defendants in a total of $18 million together with statutory interest.  The case confirms sea perils cannot be purely incidental to the loss but need not be dramatic to trigger cover.

Venetico Marine SA v International General Insurance Company Ltd & Ors [2013] EWHC 3644 (Comm)