Glencore International A.G. v Alpina Insurance Company Ltd. & Ors

Storage cover under an open, facultative/obligatory policy is not limited to the premium period. Where a declaration requests storage cover without a time limit, cover continues until the goods cease to be at risk or the insured clearly notifies the insurer that cover is no longer required. Failure to repeat a cargo in later bordereaux is not, without more, such notification.

For diverted fungible goods, sufficient substitute stock does not itself establish an intention to transfer title. The insured loss is avoided only where an equivalent quantity of goods has in fact been transferred or the loss has otherwise been made good.

This was a further first-instance determination in Phase 5 of the Metro Litigation following an earlier judgment delivered on 20 November 2003. The court considered two issues relevant to the preparation of the quantum trial.

The first concerned whether three Cheleken crude cargoes, declared for transit and storage cover without specifying a storage period, remained insured when they were later misappropriated. The second concerned whether losses arose when MTI diverted incoming cargoes for its own purposes while possibly holding sufficient equivalent oil in storage to replace them.

1. Cheleken cargoes. Condition 1.18 did not limit storage cover initially available to 30 or 15 days, according to the applicable premium calculation, and did not require successive declarations to maintain cover. Under the open cover’s facultative/obligatory character, a request without a specified time limit could provide continuous cover until the period expired, the goods ceased to be on risk, or Glencore notified Alpina that cover was no longer required.
2. The purpose of the bordereaux was principally to notify Alpina of risks that had attached and premiums due. Their month-by-month treatment of storage cargoes did not establish separate monthly requests for cover. Nor did the fact that the first 30 days were free of additional premium justify construing the declarations as requests for only 30 days’ cover.
3. Although the cargoes ought to have been included in later bordereaux for premium purposes, omission from those bordereaux was capable of several explanations. It was not clear and unambiguous notification that cover had terminated. The cargoes therefore remained insured at the time of loss, subject to any later calculation of premium.
4. Diverted cargoes. If an unauthorised diversion had been followed by the transfer of an equivalent quantity of fungible goods of the same quality, the loss would have been made good. However, the existence of sufficient stock did not itself establish an intention to make that transfer. The court applied the principle illustrated by James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch. 62.
5. Glencore’s consent to transfers necessary to reflect ordinary operational movements did not make every diversion an operational matter. It was necessary to show that MTI had suitable stock available and intended, from the moment of diversion, to replace the diverted cargo. The records did not establish that intention. A loss under the policy therefore occurred on each diversion.