Global Process Sytems Inc & Anor v Syarikat Takaful Malaysia Berhad

Under an all-risks marine policy, the insured must show that the loss was accidental, in the sense that it was not inevitable. Probability, even very high probability, does not establish inevitability. The insurer bears the burden of proving an applicable exclusion, including inherent vice.

Proximate cause is selected by applying the common sense of an ordinary businessperson or seafarer. Inherent vice may operate with the assistance of ordinary external conditions, including expected weather. Where the insured property cannot withstand the ordinary incidents of the intended voyage, that inherent inability may be the proximate cause even though the loss is not inevitable.

The claimants, owners of an oil-rig production unit, claimed under an all-risks cargo policy for the loss of three legs during a tow from Texas to Malaysia. The policy incorporated the Institute Cargo Clauses (A) and excluded loss caused by inherent vice or the nature of the subject matter.

The legs developed extensive fatigue cracking during the first part of the voyage. Repairs were carried out at Saldanha Bay, but the legs failed in expected rough waters near the Cape of Good Hope. The central issues were whether the loss was inevitable, whether inadequate repairs were the proximate cause, and whether the insurer had established inherent vice.

1. Burden and inevitability. Under an all-risks policy, the insured need only show a loss caused by a casualty or accident, rather than a certainty or inherent vice. The insurer must establish any exclusion relied upon. The question whether the loss was inevitable is assessed when the policy incepted. A very high probability of loss does not amount to inevitability.
2. Proximate cause. Under Marine Insurance Act 1906, section 55, proximate cause is selected by applying the common sense of an ordinary businessperson or seafarer. The inquiry is not confined to the immediate physical event.
3. Inherent vice. The exclusion covers deterioration caused by the natural behaviour of the insured subject matter in the ordinary course of the contemplated voyage, without the intervention of a fortuitous external accident or casualty. The internal vice may operate with the assistance of ordinary weather. The relevant voyage is the intended voyage, including a predictable and reasonable change of route.
4. Application. The legs were already close to failure when the rig reached Saldanha Bay. The claimants neither intended nor attempted to reset the fatigue life of the legs. The theoretical possibility of better repairs therefore did not establish that the repairs were the proximate cause. The legs failed because they were inherently unable to withstand the ordinary incidents of the insured voyage, including reasonably expected weather.
5. The loss was very probable but not inevitable. The insurer nevertheless proved inherent vice under the policy exclusion. The claim was dismissed.