In brief - Insurer found not liable to indemnify

The decision of Chief Justice Allsop in the Federal Court of Australia in Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [2020] FCA 15 highlighted the importance of ensuring there is a proper understanding of the relevant time zone for attachment of risk under a marine cargo policy. 

The Chief Justice found that the insurer was not liable to indemnify as cargo that was loaded on 18 May 2018 in the United States of America was insured only from 19 May 2018 rather than from 18 May 2018 as would have been required.

Helicopter damaged during transit between Mississippi and Queensland

The claim concerns damage to a Bell 427 helicopter, which was insured under an Aviation Helicopter Single Transit Policy of Insurance for carriage from Picayune, Mississippi to the Sunshine Coast, Queensland from 19 May 2018 until arrival at the Sunshine Coast Airport in Queensland. 

Coverage included loading and/or unloading risks and coverage was extended to include static cover for up to five days prior to loading.

The helicopter was damaged during transit when it moved in the shipping container because the temporary wheels were not chocked in their final stowage position or there was insufficient or unsuitable strapping used to secure the helicopter within the container. 

The container for the helicopter had arrived for loading at 3pm on 18 May 2018 (Picayune time), being 6am Australian Eastern Standard Time (AEST) on 19 May 2018. As soon as the container arrived, the helicopter was moved and taken outside for loading into the container. The doors of the loaded container were shut shortly before 5pm (Picayune time) on 18 May 2018. The container was then loaded on the truck which departed for the vessel loading port at New Orleans.

The Aviation Helicopter Single Transit Policy 

The insurance broker Austbrokers had an insurance facility with Liberty arranged in May 2017 and extended in 2018. A master slip was issued for a single transit policy for the helicopter and the policy wording referred to incorporated the 2009 Institute Cargo Clauses (A). The master slip described the Period of Insurance as "Risks attaching during the period from 23 May 2017 to 22 May 2018 both days inclusive".

The placement slip for the relevant policy noted the period of insurance to be from 19 May 2018 to date of arrival at Sunshine Coast Airport.

Under clause 4.3 of the Institute Cargo Clauses (A), the policy excluded "loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured…where such packing or preparation is carried out …prior to the attachment of this insurance…".

Was the insufficient packing carried out prior to attachment?

Chief Justice Allsop took the view that the various contractual documents, being the placement slip, the Liberty policy wording and the Institute Cargo Clauses needed to be read together. While not without relevance, the master slip was not considered a contractual document.

He considered that the question was whether by acceptance of the placement slip a business person would understand the parties to have agreed cover was to attach or commence by reference to a nominated time, (12am, 19 May 2018, Picayune, Mississippi time) rather than by reference to the anticipated voyage policy.

He concluded that the wording on the placement slip regarding the period of insurance was intended to mark out the commencement or attachment of risk, and 19 May 2018 Picayune time as the commencement of static cover.

He expressed the view that although the policy was made in Australia, it was the date and time at the place at which the activity occurred that was referred to - "loading" for the static cover extension or movement of the helicopter "for the purpose of the immediate loading" for the transit risk.

As insufficient packing occurred in Picayune on 18 May it was prior to attachment of the risk.

In the circumstances, there was no entitlement to indemnity under the policy.

Lessons for brokers

The case demonstrates the importance of brokers making full and proper enquiries about transport arrangements and having a clear recognition of the local time at the loading place from which the policy cover should attach.

While the outcome might seem somewhat harsh or overly technical, the consequences could have been easily avoided had the placement slip referred to 18 May rather than 19 May under the Period of Insurance.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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