Yesterday, all my troubles seemed so far away… the importance of timing in the attachment of marine cargo cover
Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [16.01.20]
This article was co-authored by James Barnett, Paralegal.
This Beatles well known tune surely rang true in the mind of the insured, Swashplate, when Chief Justice Allsop in the Federal Court of Australia held that insurers, Liberty, were not liable to indemnify it under a cargo policy, as the cargo had been inadequately packed less than a day prior to the insurance attaching.
The claim concerned two Bell 427 helicopters acquired in the United States of America for import into Australia. The helicopters were each insured under an Aviation Helicopter Single Transit Policy of Insurance on Institute Cargo Clauses (A) (2009) (the Institute Cargo Clauses). The policies covered transit from Picayune, Mississippi to the Sunshine Coast, Queensland. Coverage included loading and/or unloading risks and was extended to include static cover for up to five days prior to loading (the static cover extension).
The placement slips were submitted under a Master Slip negotiated between the insured’s broker and insurers which contemplated a specific single transit policy for each helicopter. The Master Slip described the period of insurance by reference to ‘LST’, or Local Standard Time.
Packing of the container occurred between 3pm and 5pm on 18 May 2018 (Picayune time). With a 15 hour time difference, this was 6am to 8am on 19 May 2018 (Australian Eastern Standard Time (AEST)).
After the helicopters had been packed, insurers confirmed to the insured’s broker that cover was bound with effect “From: 19 May 2018”. However, there was no reference as to whether this was Picayune time or AEST.
The helicopters were inadequately chocked in their containers which resulted in movement and damage during transit. A claim was made under both policies.
Insurers granted indemnity in respect of the second helicopter, but denied indemnity for the first helicopter, relying on the insufficiency of packing exclusions under clause 4.3 of the Institute Cargo Clauses. This excludes:
|“loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured to withstand the ordinary incidents of the insured transit where such packing or preparation is carried out … prior to the attachment of the insurance…” (Our emphasis).|
The insured maintained that the packing had taken place after attachment of the insurance, such that insurers could not rely on the exclusion. Accordingly, the dispute focused on when the insurance had attached.
The insured argued, among other things, that cover attached either:
- From 13 May 2018 - being five days prior to 18 May - by virtue of the static cover extension; or
- From 12am on 19 May 2019 (AEST) - being 9am on 18 May 2018 (Picayune time) – i.e. about 6 hours before loading commenced.
Insurers argued that the static cover extension provided cover for up to five days starting from 19 May 2018, and not before.
The Court took the view that the various contractual documents, including the placement slip, the policy wording and the Institute Cargo Clauses needed to be read together. While the Master Slip was not considered a contractual document, the Court held it was admissible to assist in the interpretation of the insurance contract.
The Court held that the period of insurance in the placement slip was a plain reference to when the static cover attached. The reference to Local Standard Time to define the policy period in the Master Slip and location of commencement of transit supported the conclusion that the insurance attached from 12am on 19 May 2018, Picayune time and not AEST. The conclusion that cover attached from 19 May 2018 (Picayune time) and not 13 May 2018, gave effect to the policy as a whole, including the static cover extension, and provided certainty as to when the insurance attached. Therefore, insurers were not liable to indemnify the insured for the first helicopter.
This case highlights the importance for insureds, brokers and insurers alike to check commencement dates on cargo policies, ensuring that they take into account different dates and time zones between where the risk is located and where the insurance is taken out.
In this case, a simple one digit change (arguably, at the time the cover was agreed, inconsequential to insurers) from 19 May to 18 May would have seen insurers liable for the claim. Unfortunately though, it looks as if the insured’s troubles are now here to stay, and they are left believing in yesterday….