Perils of the Seas and Inherent Vice in Marine Insurance Law
Introduction to ‘perils of the seas’ and ‘inherent vice’ in marine insurance law
The expressions ‘perils of the sea’ and ‘inherent vice’ have long been used to express insured and excluded risks by both assureds and insurers, and are stipulated in both the Institute Cargo Clauses and the Marine Insurance Act (MIA) 1906. They have a profound impact in the insurance market, as they affect both the assured’s and the insurer’s respective interests under all types of marine insurance policies. The meaning of ‘inherent vice’ and the concept of ‘perils of the sea’ has changed dramatically since the Supreme Court decision of The Cendor MOPU where the ruling created a shock wave in the London marine insurance market due to it appearing to run counter to accepted learning. The Supreme Court reclassified how inherent vice is viewed. Although it is expressed in the legislation and in policy wordings as an excluded peril, the Supreme Court treated it as an alternative to ‘perils of the sea’. Likewise, The Cendor MOPU introduced a new rule to the issue of causation in the context of marine insurance and highlighted that loss cannot be caused by both: it must be by one or the other. Therefore, if there is a peril of the sea, there cannot be inherent vice. In other words, inherent vice is not an exclusion but is, instead, a statement of the circumstances in which there is no peril of the sea. This new interpretation has led to heated discussions in later cases. Accordingly, concurrent causes were abolished, and the ‘sole cause’ test was adopted by the Supreme Court.