Delay

Delay was not an insured peril in the old Lloyd’s SG Form. S 55(2) of the 1906 Act stipulates that delay discharges the underwriter’s liability on the loss arising thereof proximately. It can unequivocally read from the phrase “the insurer on ship or goods” that this provision is applicable to hull and cargo policies but freight policies. Therefore, delay remains out of coverage in modern cargo clauses as an affirmation and emphasis of this statutory rule; a standard hull policy is also bound by this stipulation unless it is otherwise altered particularly.

Virtually, delay is not a welcoming issue before English courts and the decisions in this regard are not as flourished as other perils in the same kind in cargo and hull cases. A few historic judgments have provided limited authorities in terms of delay as a cause of loss. In Taylor v Dunbar,266 _{the vessel carrying meat from Hamburg to London was encountered with}

tempestuous weather. As a result, the meat became putrid and was thrown overboard at sea in necessity. The judges unanimously agreed that the loss was solely caused by the retardation and delay, although such delay was occasioned by the adverse weather condition. The decision was reaffirmed by Pink v Fleming267 _{where a portion of goods had}

gone bad on arrival after the vessel collided with another one. The court held that the loss was due to the handling which took place in discharging and re-shipment for repairs and delay consequent on collision accordingly.

Moreover, it is explicitly demonstrated in Shelbourne & Co. v Law Investment and Insurance Corporation268 _{how delay could result in the remoteness between an insured peril and the}

265 _{Supra 147, per Viscount Findlay} 266 _{Supra 56}

267 _{Supra 57}

loss. Two barges insured by river insurance collided and led to damage of each barge. The insured claimed damages for loss in consequence of detention for repair after the collision. The Judge followed the well-known principles of marine insurance that “no allowance for time is recoverable” and concluded that the claim was too remote from the insured perils and unrecoverable accordingly. It may be observed from these decisions that delay entitles underwriters to a powerful defence to exclude their liability.

A typical scenario can be drawn in these cargo cases: the adventure designated for carrying the cargo insured meets with adverse sea conditions, which leads to unreasonable delay and causes a physical loss of the cargo ultimately. In pure causation terms, a causation chain may be established starting from perils of sea to delay to inherent vice sometimes and finally to the physical loss of the cargo. So far, dependent upon The Cendor Mopu, if inherent vice, as a risk form, is triggered by an external source, the case cannot be regarded as a loss proximately caused by inherent vice. Therefore, the competing causes remain perils of the sea and delay. Which one contributes more efficiency to the loss? The literal reading of S 55(2)(b), “although the delay be caused by a peril insured against”, seems to provide an answer that delay overrides the perils of the sea in the chain and courts should pay more attention to the result of delay. English courts have basically complied with this reading and have not looked to a further degree beyond delay itself. Technically speaking, it is not a product of the obsolete test “nearest cause in time”; rather, it is in line with the efficiency standard. Physical loss is mainly and directly caused by loss of time, instead, perils of the sea only affects the adventure but not to the extent as serious as to endanger the physical safety of the hull and cargo. Accordingly, delay succeeds in interrupting and cutting the causal link between perils of sea and the physical loss of cargo. However, if delay is no more than a consequential one and has no independent contribution to the loss, there is hardly an efficient causal link between such delay and the loss. In particular, in a case where a peril by definition includes loss of time, such as captures, seizures and detention, the effect of such delay should be absorbed by the initial risk.269

Besides the physical loss or damage of the subject-matter insured, a policyholder often claims for financial loss in the form of loss of market value due to delay, in addition. One of the unresolved issues in the decision of Masefield v Amlin270 _{relates to the loss of market}

value resulting from delay in causation terms. The Somalia pirates took possession of the vessel and cargo on board for the purpose of ransom in this case. The assured cargo owner claimed for an actual total loss, alternatively a constructive total loss. The Court of Appeal held that the assured’s claim in either form was defeated based on the fact that the vessel was released after the payment of ransom. No physical loss of the cargo had been incurred. Additionally, the assured contended that the biodiesel cargo had dramatically lost its

269 _{Supra 224, p 190}

economic value due to the delay caused by the piratical seizure and had taken this part into the sum of claim. However, the court did not respond to this issue, as it became irrelevant as the claim lacked a fundamental ground-a factual loss-in the first place. Nonetheless, it was held in Federation Insurance Company of Canada v Coret Accessories Ltd271 _{that the}

assured only insured goods by an ordinary form of open cargo policy against a permanent loss; it did not insure any goods which were delayed in transit or temporarily lost but which were subsequently delivered to the owner. On balance, unless the policy clearly indicates to the contrary, the physical loss as well as a financial loss directly attributable to the loss of time will not be recovered in hull policies and cargo policies.

In relation to freight policy, a freight policy is designed to insure the loss of freight when the adventure is frustrated, interrupted or delayed as the result of insured perils. In this context, delay is treated more as a form of consequence than acting as a cause of loss, as the loss in this type of case is ascertained, i.e. loss of freight. It is suggested in Arnould’s that the problem with this type of dispute is mostly in determining whether the proximate cause of the loss of freight is the initial operation of an insured peril or the decision of the charterer in cancelling the charter.272

However, it is also maintained that a “Time Charter” Clause or a “Loss of Time” Clause containing in a freight policy and a “Frustration” Clause contained in a war risks policy may debar the claim “consequent on the loss of time, whether arising from a peril of the sea or otherwise”.273 _{The authoritative construction of these clauses has been given by the House of}

Lords in the leading case, The Playa de Las Nieves.274 _{The question for the House of Lords}

was “Does the time charter clause in the Institute Time Clauses: Freight excludes a claim by the assured for chartered freight lost under the off-hire clause in his time charter?” Per Lord Diplock, this Clause does not concern the question of the “proximate cause” at all by using the phrase “consequent on”:

It contemplates a chain of events expressed to be either "consequent on" or "arising from" one another. It expressly makes the operation of the clause dependent upon the presence in the chain of an intermediate event (viz. "loss of time") between the loss for which the claim is made (viz. loss of freight) and the event which in insurance law is the "proximate cause" of that loss (viz. a peril insured against). The intermediate event, "loss of time", is not itself a peril though it may be the result of a peril. That is why the words "whether arising from a peril of the sea or otherwise" are not mere surplusage as was suggested

271 _{[1968] 2 Lloyd’s Rep.109} 272 _{Supra 13, p 956}

273 _{ITC(1983)-Freight, Cl 14 and Institute War and Strike Clauses (Freight)}

274 _{Naviera de Canarias SA v Nacional Hispanica Aseguradora SA (The Playa de las Nieves)}

obiter by Mr. Justice Bailhache in Russian Bank for Foreign Trade v. Excess Insurance Co. Ltd., [1918] 2 K.B. 123 at p. 127. They are there to make it plain that the clause is concerned with an intermediate event between the occurrence of a peril insured against and the loss of freight of which the peril was, in insurance law, the proximate cause.

The true interpretation of Lord Diplock’s judgment is the need to distinguish the loss of freight proximately caused by an insured peril from those relating to delay. It can be understood from two aspects: on the one hand, the purpose of the underwriters inserting such a clause is literally to exclude any liability connected to the loss of time. The way Lord Diplock to interpret is in line with the insurer’s intention. On the other hand, although Lord Diplock has described the loss of time as an intermediate event and intended to rule a tenuous causation test in this regard, the phrase “consequent on” does not provide any contrary agreement than the doctrine of proximity and it essentially comes to the same conclusion as S 55(2)(b). This clause will not allow the insurer to abuse his exemption as long as a minor delay occurs or where a peril by definition includes a loss of time. In contrast, as aforementioned, the effect of a significant delay with independent causal effect normally overrides the efficiency of its earlier insured peril. Lord Diplock’s judgment supports the view that the loss of freight arising from delay will not be recovered in compliance with “Time Charter Clause” and S 55(2)(b), on the condition that delay efficiently contributes to the frustration of the voyage or loss of freight. In one word, under the freight policy, the insurer’s liability is equally restricted within the scope of the insured perils in the case of delay.