Inherent Vice, Natural Deterioration And Associated Exclusions - What Is Inevitable - Part II

British and Foreign Marine Insurance Company v

. Gaunt [1921] 2 AC 41 is the case most often referred to in England and the US when investigating the basis of all risks insurance and whether "non-accidental" perils can be insured. In this case, wool produced in Patagonia was to be shipped to the assured whereupon certain policies were to be assigned to him. The policies were to cover "all risk of craft, fire, coasters, hulks, transhipment and inland carriage by land and/or water, and all risks from the sheep's back and/or station, while awaiting shipment and/or forwarding and until safely delivered ...". When the assured received the wool in Bradford, the evidence did not establish with any certainty when and how the damage was done. The damage did occur, however, during the period of insurance.

There was evidence that the wool was compressed into bales covered and bound with steel or iron bands and, when they reached the coast during the summer season, the bales were stored on the beach in the open. There was some evidence that the bales were sometimes sprayed with unusually high tides and there were delays before the wool was transported. There was also evidence that a number of the bales were wet. Lord Birkenhead made the following statement on perils covered by the "All Risk" policy:

"All risk cannot of course, be held to cover all damage, howsoever caused. For such damage as is inevitable from ordinary wear and tear, inevitable depreciation is not within the policies ... damage, in other words, if it is to be covered by policies such as these, must be due to some fortuitous circumstance or casualty".

The court then went on to say that the following steps should happen in the natural course of events when dealing with an all risks policy:

- the plaintiff must establish its case and show that the loss comes within the terms of the policy; but

- where all risks are covered by the policy and not merely risks of a specified class or classes, the plaintiff has discharged his special onus when he has proved that the loss was caused by some event covered by the general expression; and

- he is not bound to go further and prove the exact nature of the accident or casualty which in fact occasioned his loss.

Inherent Vice, Natural Deterioration And Associated Exclusions - What Is Inevitable - Part II

By: Willis J. Watson

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