58.Inherent Vice, Natural Deterioration And Associated Exclusions - What Is Inevitable - Part IV

The court considered the Gaunt case but interestingly went on to consider two further cases

, namely E.D. Sassoon & Co. Ltd. v. Yorkshire Insurance Co. (1923) 16 Lloyd's Rep 129 and Dodwell & Co. Ltd. v. British Dominion's General Insurance Co. Ltd. Lloyd's List newspaper April 1918, which appeared to support the contention that inherent vice can be insured by an express provision.

In Dodwell the court determined that an insurance policy which expressly covers a latent defect or inherent vice was enforceable. Perhaps a better explanation is that, in the absence of an express exclusion, market practice requires that such perils are impliedly excluded. It is a prerequisite for any term to be implied into a contract that does not contradict an express term. Therefore, it is possible to rationalise the Dodwell case by suggesting that the usual implied term in ARPI policies had been supplanted by an express term providing cover for "leakage from any cause whatsoever..." which covered a loss aggravated by heat causing barrel staves to shrink.

The "implied term" theory is slightly different from the reasoning put forward in at least one court in the US. In the case of Compagnie des Bauxites de Guinee v. INA 724 F 2d 369 (1983), the district court found that public policy required that ARPI should cover a risk not a certainty. The Court of Appeal (Third Circuit) refused to decide on that issue although it reversed the lower court on the meaning of fortuity, which is discussed later.

These cases raise two questions:

1. Should the determination of whether a loss is inevitable be considered from the eyes of the assured or some objective bystander?

2. Does the fact that a policy only covers loss for a limited period of time affect the issue of inevitability?

58.Inherent Vice, Natural Deterioration And Associated Exclusions - What Is Inevitable - Part IV

By: Willis J. Watson

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