ICC Digital Library Forum

Well said by Laurence again. We do not use legal cases to support our views because of the following reasons:

(1) We see DC Pro Discussion Forum as an INFORMAL AND WITHOUT ENGAGEMENT type of exchange of PERSONAL views on the topics under discussion. Hence there is no need to quote legal cases to support our PERSONAL views.

(2) We are free to express our personal perspectives and there is no need to be bound by the legal cases. For example, the Glencore case is only respected in UK but certainly not in USA or other places, not even agreed by the ICC Banking Commission.

(3) If our views have no common sense, then quoting legal cases wont’ help much. Document checking is a matter of simple common sense, as regarded by the masters like Bernard Wheble and maybe also Gray Sinclair.

(4) Quoting too much legal cases would give others the impression that we have no faith in ourselves.

(5) We can do that if it is a paid assignment. Otherwise we have to use our time more effectively in earning our rice and noodles. As a self-employed, we have no choice. A banker like Jeremy is more fortunate as he may spend his time searching for the legal cases in his office whilst he is still paid by his bank. We do subscribe to Lloyd’s law reports each year (quite an expensive cost but we cannot avoid this) as well as cases from USA, and some from China, Hong Kong, Singapore and the Middle East provided by registered subscribers of our DC website (many thanks to them here) but the time to search for suitable cases is not an affordable cost. For example, now we have three expert’s report waiting for us to finish.

(6) We are professionally trained as a court expert witness not to use legal jargons in our expert’s report or the Judges would not be happy and would say: ”You are only a letter of credit expert and not a lawyer. So mind your own business and don’t use legal jargons that you are not absolutely clear”. We understand that once we know something about legal concepts, we have the great temptation to show off our legal knowledge amongst our friends and the temptation is great. We have undergone this and now we fully realise that still waters run deep. And since our professional is DC expert, we have to make sure that we do not act “out of bounds” (a golf terms) and stick to our own expertise. If the Judges don’t like a court expert witness, the expert would kill his client unintentionally. Therefore use of legal cases is an art and we cannot quote it bluntly in our expert’s report.

(7) For those legal cases lovers, we do have a one-day Important DC Legal Cases workshop to please them.

www.tolee.com

[edited 5/10/02 5:51:32 AM]

Although this thread is in the hands of the undertakers and about to be buried, one last question.

Can anyone remember if a pre 1982 l/c requiring 'Institute Cargo Clauses (all risks)' was checked under ART 30 of UCP290 (thereby allowing exclusions as stated above) or ART 29 (where the views expressed by R360 would apply)?

I was checking docs back then but can't remember what my approach was (these sort of things were not, in those days, discussed in such great detail).

Phil

Philip,

Nothing has changed, UCP 290, 400 or 500 as far as determination of discrepancies respecting cargo insurance principles is concerned.

THE PROBLEMS LIE WITH A BANKER’S PERSPECTIVE ABOUT CARGO INSURANCE

We are aware that so far all the comments from bankers are made based on a banker’s understanding about cargo insurance. And we can see where the problems lie. Without a brief explanation on how cargo insurance should work out, which may be different from what bankers think, it is most difficult, if not impossible, to draw a conclusion and to end up the heated arguments. The tug of war never ends.

BRIEF HISTORY OF CARGO INSURANCE DEVELOPMENT

When cargo insurance was first introduced, the insured had to tell the insurer what they wanted to cover, from the “a la carte” menu, a task, which the merchants were not familiar with and also too technical for them. To make it easy for the customers, and on public demand, the insurance companies prepared a few “set menus”, the FPA (Free of Particular Average), WA (With Average) and All Risks (AR). About many years ago, these “menus” were updated and became the ICC (Institute Cargo Clauses) (C), (B) and (A) equivalent to FPA, WA and AR respectively. Meanwhile the Marine Insurance Act of UK was also updated to match.

VERY SPECIFIC COMMODITY POLICIES

Commodity trade Federations and brokers associations also made their own specific “set menus” to meet their own specific needs, for example the FOSFA Trades (A) by the Federation of Oils, Seeds and Fats Association (FOSFA), Frozen Meat (A) – 24 hours breakdown, IMTA Frozen Meat Extension (For use with clause 324), Timber Trades Federation, Jute (Strikes), Frozen Foods (A) (Excluding frozen Meat), so on and so forth.

After these “set menus” were introduced, the insurance business frog leaped.

ICC (A), (B) AND (C) WORK ON DIFFERENT PRINCIPLES

Theoretically, ICC (A), (B) and (C) work out on completely different concepts and so strictly speaking, examination of insurance documents and determination of discrepancies in insurance documents should be different. Unfortunately because bankers do not understand how these three polices work out, they often treat them all the same. And here lies our argument whether an exclusion clause should be a discrepancy or not. Bankers treat it all the same with ICC (B) or (C) and this is the very point that they are wrong. Cheese should be cut with a cheese knife, fish with a fish knife, and steak a steak knife. One cannot use the fish knife to cut steak.

For ICC (B) and (C), the concept is that the insurer only covers what is listed in the insurance policy, nothing more and nothing less. All those risks not mentioned in the policy are automatically, and by definition, not covered. Therefore an exclusion clause (other than rust in steel goods) in ICC (B) and (C) is to take away what the insured should have enjoyed. And this should be deemed as a valid discrepancy. Fair enough.

But ICC (A) works on a completely different principle. ICC (A) covers EVERYTHING, where the term All Risks comes from, EXCEPT those listed out in the “Exclusions List” at the beginning of the policy, in which war, “inherent vice” or nature of the subject (such as bugs in cereals and rust in steel products), ordinary evaporation of liquids, loss due to wilful misconduct of the insured, so on and so forth are not covered. Other than that EVERYTHING is held covered.

Hence, in the case of steel goods, rust is a loss due to the nature of the subject matter insured or inherent vice, if you will, and is within the standard exclusion list category. It is nothing new. The insurer only wants to spell this out specifically in the policy with a rider, to end arguments. Even if there is no such a rider, rust is not a covered risk anyway because it is within the standard exclusions, being nature of the subject mater insured or inherent vice.

However, to be fair to the insured, if the rust is proved not due to the nature of the subject matter insured but due to an insured peril, such as stranding, sinking, burning, collision and/or heavy weather, then those rust will be covered and paid out.

WHY RUST EXCLUSIONS IN AN ICC (A) POLICY SHOULD NOT BE DEEMED TO BE A DISCREPANCY

Therefore rust exclusion should not be deemed to be a discrepancy in ICC (A) particularly because:

(1) Rust is already included in the list of standard exclusions, and that is the backbone doctrine of ICC (A). It is not something taken away from the insured after knowing that the cargo is a steel goods. Any rust proximately caused by an insured risk will be paid.

(2) Claims against rust is a right that the insured agrees to drop off once he enters an ICC (A) contract. Rust exclusion is merely an express announcement or reminder from the insurer to point out that fact.

(3) Even if the rider were removed, if the rust was not caused by an insured peril, the claims would not be successful anyway.

(4) So for us, who know about the basics in cargo insurance, putting the rust exclusions clause in or out from the policy makes no difference in terms of claims or the insured‘s rights?

(5) By naming ICC(A) in the DC, it is only a standardized insurance term, a "set menu", and certainly NOT a SPECIFIC TERM OR REQUIREMENT, as regarded by certain bankers.

DOCUMENT EXAMINATION IS AN ART

Those bankers who now know about this fact cannot deny payment due to a rust exclusion clause in the ICC (A) policy. That is why we say DC examination is an art and not a robotic act. Otherwise a computer would replace all the document checkers one day.

We are also retained by certain bankers to determine discrepancies for them in transport and insurance documents if they are not so sure sometimes whether those should be discrepancies or not. We do this only to old and good customers, as the liability is not justified by the fees we charge. So we never promote or want this business.

PEACE ON EARTH AFTER KNOWING THE FACTS

We need not quote any legal case to support this basic knowledge about cargo insurance. With the above explanation, we hope we can put an end to the arguments here. Jeremy, now you cannot pretend that you don’t know about this fact.

We leave the members to decide whether ICC Opinion No. R360 should be revised or not.

And we would not have put this long posting here if we did not feel the need. We have already lost a few kilos of rice and noodles for the time spent here.

DISCLAIMERS: Our opinions above are purely for discussion purposes and you should not rely or act on it. You have to consult a cargo insurance expert, consultant or lawyer for your own problems.

www.tolee.com

[edited 5/10/02 2:30:09 PM]

Would anybody like to guess the answer to the question I posed under this heading at 10:09 on 7th May or make comments on it ?

If not I will give the answer on Monday.

Laurence

Laurence,

Are you talking about an interesting case where the rust was proximately caused by bursting of the fresh water pipes on board the cargo ship after the leaking pipes were fixed? Due to the negligence of the repair workmen, the pipes bursted again and caused rust damages to the steel goods stowed near by, bundled and marked, but without packing.

The result of the claims depends on many factors, perils covered? pipe leakage caused by collision? unseaworthiness? fresh water or washing over board (sea water)? negligence of crew or contractor? etc. etc.

In order not to spoil the fun and the suspense, we would like to let you tell us the answer (decision of the court), although we may know it if you are talking about this case.

THREE KINDS OF WATER IN CARGO INSURANCE TO GIVE DIFFERENT RESULTS IN CLAIMS

However, if the rust is not caused by humidity, then it must be caused by water. Once we talk about water, in cargo insurance, it is a complicated matter because we have three kinds of water that may be subject to different treatments in claims - rainwater, fresh water and sea water. So even if you could prove that the rust was caused by water, then “which kind of water you were talking about” might make your claim successful or unsuccessful, depending on what kind of insurance you were covered?

We do not wish to go further than this, as it is not appropriate to bring to such depth about cargo insurance and members may get more confused. It may also lead to more questions as a result, from our lecturing experience.

RUST ALWAYS HELD COVERED IF PROXIMATELY CAUSED BY AN INSURED PERIL

However, if the proximate cause is due to a covered peril, such as stranding, sinking, burning, collision and/or heavy weather etc. then we do not have to worry about which kind of water that has caused the rust, we will get paid anyway.

So cargo insurance is a bewildering but interesting subject.

www.tolee.com

[edited 5/10/02 2:56:39 PM]

T. O.

The case you mention is interesting, but not the one I am thinking of, so I will keep up the suspense until Monday.

Laurence

The answer to my question of 7th May :

When is water not really water ?

SUMMARY
Part of a consignment of metal goods examined at the quayside, having been unloaded from the ship, are found to be rusted, despite the ship's captain's insistence that goods left the ship with no indication of rust and there had been no rainfall between unloading and examination. If the importer is to have any chance of succeeding with an insurance claim, he must prove that the cause of the rust is not due to an inherent vice of the nature of the metal itself.

THE REAL CAUSE
After a chemical analysis of the rusted metal which had been stacked high along the quayside, traces of human urine were discovered. The conclusion therefore was that the dockers unloading the metal were "passing water" against these stacks.

Laurence

Laurence,

Very interesting case indeed!

We still have some doubts over the inspection report. How could the inspection agency be so sure that the "water" causing rust to the steel goods was not from a dog or a pussy cat? This probability should be greater as longshoremen need cover to discharge his "water" and it is difficult to find a covered spot there. For dogs and cats, they don't have such problems.

Living in Toronto, we find some dogs discharging their "water" in the piece of grass land in front of our house. These waters are more corrosive and pungent than human "water". Why? After one week, the grass turns yellow. It would take a couple of weeks for the turf to turn green again.

www.tolee.com

[edited 5/14/02 4:27:35 PM]

T. O.

Although we have canine and feline visitors to our garden for much the same purpose as experienced by you in Toronto, we don't suffer the same discolouration. Perhaps we have different breeds or the effects are diluted because of it frequently "raining cats and dogs" !

Laurence

I am taking a tour to Eastern Europe for the period of 18-27 May 2002. Unfortunately, when I arrive Vienna, my friend Heinz Hertl will not be there. Hope to meet him some other time. See you all in 28 May 2002.

T. O.
www.tolee.com

[edited 5/18/02 3:36:18 PM]