NEGLIGENCE AND THE CASUALTY

How relevant in the real world?

NIGEL CHAPMAN

28th October 2005

2

REAL WORLD?

…. of English Marine Insurance!

A specialised world

3

ANSWER:

Of course it’s relevant - but not always and

Whose negligence are we talking about?

At what stage in the casualty?

4

A COUPLE OF UNCERTAIN CONCEPTS

Due diligence.

Negligent response to casualty and the effect of S78(4) MIA 1906.

5

CASUALTY RESULTING FROM PERIL IN 6.1 ITC

S.55(2)(a) MIA 1906

“The insurer is not liable for any loss attributable to wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;”

6

EXAMPLES

1. Trinder v. Thames & Mersey Marine 1898

Stranding caused by negligence of master who is also a part owner.

2. Lind v. Mitchell 1928

Perils of the sea, followed by premature abandonment. Finding that the proximate cause was the peril of sea.

7

ANY QUALIFICATIONS?

IN A TIME POLICY, ONLY QUALIFICATION IS S39(5) MIA 1906

“with privity of assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

8

WHAT IS THE STANDARD?

NB: This is not a negligence standard but closer to

deliberate.

not “ought to have known”

but “didn’t want to know”.

9

COMPARE NORWEGIAN PLAN

All risks cover but limited by

- considerations of causative unseaworthiness

- discretionary reduction for “gross negligence” whether before or after the casualty.

“Gross negligence lies somewhere between ordinary

negligence and intent” - Commentary to plan.

10

WHERE NEGLIGENCE ITSELF IS THE INSURED PERIL

e.g.

ITC HULLS 6.2.2 & 6.2.3

Master, Crew, Pilots, Repairers & Charterers.

ADDITIONAL PERILS CLAUSE

Negligence, incompetence or error of judgment of any person whatsoever.

NB: Both are subject to the Due Diligence Proviso.

11

DUE DILIGENCE

What does it mean?

Who has to show it?

Who has the burden of proving presence/ absence?

12

WHAT IS THE STANDARD?

cf: Shipping cases concerning Hague/Hague Visby rules

EURASIAN DREAM (2002)

lack of reasonable care.

KAPITAN SAKHAROV (2000)

confined to matters that should have been or were within knowledge of the assured.

13

TO DO WHAT?

ARNOULD - Para 832

Failure to prepare, equip, man and train etc;

as opposed to seagoing or operational negligence in course of voyage.

14

WHO HAS TO DO IT?

SPOONER v. CONNECTICUT FIRE (US 1963)

“purpose is to exclude from cover damage due to shoreside failure of shipowners managerial staff properly to prepare or equip the vessel for the voyage or service she is about to perform.

NB: 1995 ITC HULLS

Assured, managers and

“superintendents” and “onshore management”.

15

BURDEN OF PROOF

BRENTWOOD (Canada 1973)

onus of proof is on the assured.

but

It is for insurers to put point in issue in the first place.

NB: Assured still has to prove negligence by crew.

16

HOW DOES THIS ALL FIT TOGETHER?

eg: VERGINA (2001)

- listing container vessel.

- abandoned and then salved.

- negligent operation of ballast system?

- peril of the sea?

- was salvage expense incurred to avoid covered loss?

17

NEGLIGENT RESPONSE TO THE CASUALTY

S78(4) MIA 1906:

“It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.”

Clear consensus that this must be after casualty has occurred.

NB: ITC HULLS 11.1 mirrors S78(4) but extends duty to “assured, their servants and agents”.

18

APPLICATION OF THE PRINCIPLE

The duty is concomitant with right to recover for sue and labour and/or salvage.

Netherlands v. Youell 1997 Rare for breach to displace insured peril as proximate

cause (viz. Lind v. Mitchell). Unlikely to form separate peril when acts of negligent crew

are covered.

Scope of this rule very limited. Gets very close to wilful misconduct. Viz: GOLD SKY 1972.

19

NEGLIGENCE AND THE CASUALTY - IS IT RELEVANT?

1. Doesn’t enter equation where loss is by named peril. Only qualifications are wilful misconduct and unseaworthiness.

2. Where the assured has to rely on operational negligence, considerations of “management” negligence arise.

3. Negligent failure by the assured to take steps to minimise can break chain of causation in either case.

4. Scope to defeat insurance claim under 2 or 3 is very limited.