Maritime Insurance (Ding Jing Huang)

This week’s talk was by Ding Jing Huang, who discussed two maritime insurance cases. The first case discussed was that of the Cendor MOPU (2011) – a Texas-built oil rig which was damaged during its transport to Malaysia. It was established that the legs of the oil rig, which was transported fully assembled, broke off due to progressive stress fatigue. The oil rig was insured for transport against “all risks!”, but with some exceptions – which included inherent vice of the subject matter. This is juxtaposed with the notion of perils of the sea, which need not be a very significant event such as a big storm or shipwreck, but can just be the ordinary movement of the sea. The verdict by the High Court was that the damage was due to inherent vice of the subject matter, in which case the insurer wouldn’t have to pay. However, the Court of Appeals ruled the damage was caused by perils of the sea (damage caused by a “leg-breaking wave”) – and the Supreme Court also ruled the damage was caused by perils of the sea and the insurer was forced to pay up. The second case discussed was the Nukila case (1997), also an oil rig which was also damaged during transport. The damage was called fatigue cracking due to waves and the rig was insured as hull/machinery rather than as cargo. The point of debate in this case was whether the damage was due to a latent defect (defect which is hidden) or not. This latent defect then becomes actual damage due to the waves. This was also the opinion of the Court of Appeals, which ruled that the insurer again had to pay up.

The subsequent discussion focused primarily on the notion “perils of the sea” and what it does and doesn’t seem to include. It was pointed out that in law, these concepts have to be defined – parts of these definitions then need to be defined separately and so on. A lot remains up for interpretation, which is what makes these things so complicated.