himr2


Table of contents

Introduction

Historical development of English and French marine insurance regimes

The elaboration of marine insurance law is intrinsically linked with the development of maritime trade, its characteristics and its needs. Yet, maritime business is a human activity, which is located in an unfriendly environment. Indeed, the risks incurred at sea are boundless and certainly could not be borne by a private uninsured shipowner. Hence, the absence of insurance cover would be the death of marine affairs. As early as the sixteenth century, the bases of marine insurance were already settled under the law of the maritime nations. Marine insurance law was made up with regional port customs and the courts were prepared to enforce marine policies. Indeed, the clauses of the marine insurance policies reflect the various sources of marine insurance law, namely freedom of contract, law and custom.

With the upsurge of the London insurance business, some standard policies appeared to be commonly used. The Lloyd’s underwriters formally adopted the Ship and Goods policy in 1779. In France also, the merchants commonly used standard forms, depending on local business. Indeed, each of the principal maritime centres drafted one or more forms of policy. When the great period of codification started with the reign of Louis XIV maritime law was one of the first targets of the well-known first minister Colbert. The text that resulted from this work was the Marine Order of 1681, which sets all the principles of French maritime law. The law was incorporated in the commercial code of 1807 without great changes and remained good law until the middle of the twentieth century. For its part, the common law experienced a first statutory intervention with the Marine Insurance Act of 1745, which aimed merely at avoiding gaming and wagering contracts. Following legislation did little substantive, until the Marine Insurance Act of 1906.

Modern law of marine insurance in the United-Kingdom and in France

In the United-Kingdom, the case law that raised over the centuries was only later codified in the Marine Insurance Act of 1906. The Act drafted by Sir Mackenzie Chalmers admirably codified the law of marine insurance. Rodière said, "it denotes from his authors both a science and a practice of the marine insurance unparalleled". Its aim was to provide practitioners with a comprehensive coverage of some 200 years of judicial decisions. The Act lays down rules that may be compulsory but that are mostly presumptions operating in the absence of any contrary agreement between the parties. In comparison to the Marine insurance Act 1906, the Act that governs French marine insurance law is quite recent, since it is from the late 1960’s. Indeed, the Loi n° 67-522 of July 3^rd, 1967 and the décret n° 68-44 of January 19^th, 1968 are embodied in the Titre VII of the Livre 1er of the Code des Assurances. The French approach is hence to codify the marine insurance law as a part of the general insurance law. French legislation is a framework on which the insurers can surely rely, while drafting their contracts of marine insurance.

In practice, British and French markets have elaborated standard wording published by recognised body of practitioners in order to give more flexibility to the law. In Britain, for more than 200 years, the S.G. form of policy governed the contracts of marine insurance, providing for a "named perils" basis for indemnity. Its rigidity was strongly criticised, as being inadequate to the contemporaneous requirements of insurance. The modern development of marine insurance law led to the creation of different forms of insurance, which provide cover for cargo, hull and freight. It is observed that the Institute Cargo Clauses of 1982 were revolutionising the old S.G. policy approach. In particular in providing an "all risks" cover (I.C.C. (A)). On the other hand, French policies rely widely on the marine insurance legislation. Therefore, the important part of the forms is the exclusion clause, which sets limits to the legal "all risks" liability of the insurer.

Marine risks

The heart of marine insurance law is to be found in the concept of marine risks. Undoubtedly, marine adventures involve special and tremendous risks. The performance of the contract of marine insurance depends mostly on external factors completely out of reach of the parties. Illustrated by the "perils of the sea" marine risks are unavoidable casualties inextricably related to the marine adventure. However, the reality is that "maritime perils" is a broader notion. When Scott L.J. said "It could not have happened on land; it was a happening which is characteristic of the sea, and behaviour of ships" it did not mean that the concept is restrictive, but merely that it has some boundaries.

Can human failures or deliberate acts still be called marine risks, and incidentally be covered under the policy of insurance? Whether risks are covered or not by the policy of insurance is a question of the bargaining power of the parties. Theoretically, freedom of contract allows the insurers to underwrite any risks for a consequent premium. Indeed, human intervention in marine risks, although quite unavoidable, has been seen as creating enhanced risks irrecoverable under the policy of marine insurance.
However, public policy dictates that all risks shall not be covered, especially where the assured is at fault.

Plan of the dissertation

First of all, it is imperative to define the policy of marine insurance and discuss the features of this specie of contract. However, the policy of insurance must be understood in the context of the particular legal regime underlying it. While the English law of marine insurance is built on the idea of "named perils" insurance cover, French law applies the "all risks" system. The particular marine insurance regime chosen by each country inevitably leads to differences in carrying the legal process.

Human intervention in marine risks takes various forms. First, direct interventions are those which proximately cause the damage to or loss of the subject-matter insured. They may be accidental as the mere negligence or deliberate, like the perils of barratry and wilful misconduct. They are likely to be covered unless the purpose of the act is to claim on the insurance like in the case of wilful misconduct. Moreover, the cover of negligence of the assured is a debatable topic that needs precise enquiry. Secondly the indirect intervention in marine risks of the assured sending his ship to sea in an unseaworthy state is always blameable even if it may be insured in some circumstances.


Part 1:
Determination of risks in UK and French Marine insurance Law

Chapter 1 - Foundations of English and French contract of marine insurance

1 – The contractual features of the marine policy of insurance
1.1 - A reciprocal and consensual contract
1.2 - A contract of indemnity
1.3 - An aleatory contract

2 - Marine risks in perspective
2.1 - The classification of risks
2.2 - The enhancement of the concept of marine risks

Chapter 2 – Two distinct systems of insurance

1 – The English system on "named perils basis" and the French system "all risks"
1.1 - The statutory provisions
1.2 - The policies of marine insurance ...
1.3 - The extension of the covered perils

2 - The practical consequences on the conduct of legal process
2.1 - Burden of proof in marine insurance law
2.2 - Causation in marine insurance law



Chapter 1 - Foundations of English and French contract of marine insurance

The foundation of insurance is the law of contract. The contract of marine insurance is therefore commanded by the common law principles directing the contract law in the United-Kingdom and the civil code of 1804 in France. The sacrosanct doctrine of freedom of contract applies in marine insurance despite the standardisation of the forms of policy. Hence, the construction of the contract is the crux of the insurance litigation.

Insurance law may be categorised according to the nature of the risks insured. Marine insurance law is concerned with what can broadly be called marine risks. The extreme weight of marine losses led to a very early development of marine insurance (even before general insurance) and to its speciality.

Although a contract of marine insurance obeys the general principles of contract law it is undoubtedly distinguished as a special contract. One of the most significant features of it is that it is subordinated to a special piece of legislation. The law of marine insurance is codified in the English Marine Insurance Act 1906 and in the French Code des Assurances. Both sets of rules focus on the definition and fundamental characteristics of the contract of marine insurance, as well as the rights and obligations of the parties to it, and have a real practical significance. Indeed, if following the doctrine of freedom of contract they are mostly guidelines, some of the provisions are nonetheless compulsory.

1 – The contractual features of the marine policy of insurance

The contract of insurance bears a number of characteristics, described by Channel J. in Prudential Insurance v. I.R.C.:

"It must be a contract whereby for some consideration, usually but not necessarily in periodical payments called premiums, you secure to yourself some benefit, usually but not necessarily the payment of a sum of money, upon the happening of some event. Then the next thing that is necessary is that the event should be one that involves some amount of uncertainty. There must be either uncertainty whether the event will ever happen or not, or if the event is one which must happen at some time there be uncertainty at the time at which it will happen".

This extensive definition reflects the main features of the contract of marine insurance that is a reciprocal, consensual and aleatory contract which object is indemnity.

- A reciprocal and consensual contract


The policy of marine insurance is, firstly, a reciprocal contract. Indeed, it is in consideration of the payment of a certain sum called the "premium", genuine declaration of the risk and compliance with the warranties on the part of the assured, that the underwriter agrees to indemnify the assured against marine losses. This feature is of real significance in practice since it can provide the underwriter with a successful defence in case of non-compliance of the assured with his contractual obligations.

French lawyers talk about the contract of marine insurance being consensual, but English lawyers will be more familiar with the concept of utmost good faith. The parties to such a contract must disclose every material circumstances, which are known to them. The consensual character of the contract is prescribed in article L.172-2(1) C. Ass. and sections 17-20 M.I.A., which state that every contract of marine insurance is a contract uberrimae fidei. But the case law is more explicit, and a slight mistake in the name of the insured ship inevitably voids the policy of insurance. In Ionides v. Pacific Fire & Marine Insurance Co, the court held the cargo policy to be vitiated by the misrepresentation that the goods were shipped on board the "Socrates" instead of the "Socrate", the former being a new Norwegian ship and the latter an old French vessel.

- A contract of indemnity

The purpose of the contract of marine insurance is to indemnify the assured of losses occurring in the marine adventure, without any further benefits than a fair compensation. Here, the combined reading of section 1 and section 3(2) of the Marine Insurance Act will help understanding what is the insurer liable for. Defined in section 3 M.I.A., marine adventure refers necessarily to maritime perils, of which marine risks. But more significant is the opening section of the Marine Insurance Act that defines the contract of marine insurance as follows:
"A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure."
The statutory definition emphasises that the contract of marine insurance is a contract of indemnity. This key concept of insurance law has been discussed in some eighteenth century cases, which ratio decidendi are codified in the Act. Blackburn J. said in Lloyd v. Fleming:
"A policy of marine insurance is a contract of indemnity against losses accruing to the subject-matter of the policy from certain perils during the adventure".
Similarly, under French law, article L. 171-1 C. Ass. suggests that the compulsory object of a contract of marine insurance is the indemnity of marine risks. The principle of indemnity is reinforced by article L. 171-3 C. Ass. that requires both an insurable interest and the occurrence of a damage to or loss of the subject-matter insured.
Practically, under an indemnity policy the underwriter is committed to reimbursing the assured after a loss of or a damage to the subject-matter insured.

- An aleatory contract

The benefit or the loss that may result to each of the parties to an aleatory contract depends on an uncertain and fortuitous event. About the contracts of insurance in general, Merkin writes that:
"[They], like wagering contracts, are aleatory contracts ‘depending on an uncertain event or contingency as to both profit and loss’; for financial or other consideration the insurer agrees to pay or otherwise benefit the assured on the happening of a specified event or contingency which is outside the control of the insurer".
However, if "insurance is a contract upon speculation" unlike in wagering contracts all risks are not acceptable in insurance contracts, for legal, commercial or moral considerations. Some criteria must be fulfilled in order for the assured to enjoy a valid contract of insurance according to the doctrine of the insurability of risk. The major conditions of the insurability of the risk are that losses must be reasonably unexpected, or accidental and consistent with public policy. Bennett puts it this way:
"Marine insurance is concerned with mitigating the adverse consequences of accidents; it is not a financial instrument for the replacement of defunct or obsolete plant and machinery, nor it is an investment which can be cashed in by the assured at his discretion."
Accordingly, the contract of marine insurance requires fortuity in the existence and fulfilment of the risk. In British & Foreign Marine Insurance Co. v. Gaunt, it was clear to the court that an "All Risks" policy does not cover inherent vice nor mere wear and tear, since it can only cover a risk and not a certainty.
In French law, article 1104(2) and article 1964 of the civil code are the pillars of the aleatory contracts doctrine. The civil code drafters when defining the "contrat aléatoire", in the article 1964, first quoted in a list of examples the contract of marine insurance.
"Le contrat aléatoire est une convention réciproque dont les effets, quant aux avantages et aux pertes, soit pour toutes les parties, soit pour l'une ou plusieurs d'entre elles, dépendent d'un événement incertain.
Tels sont :
Le contrat d'assurance,
Le prêt à grosse aventure,
Le jeu et le pari,
Le contrat de rente viagère.
Les deux premiers sont régis par les lois maritimes."
Indeed, article L. 172-11 C. Ass. covers risks called "fortunes de mer", of which it is easy to discover the same root as fortuity. The aleatory aspect of the contract of marine insurance is obviously underlined here.
The "aléa" in French law is a hazard of which depends the validity of the contract of marine insurance. Indeed, in an aleatory contract, the duty of at least one of the parties is going to be depending on - in relation to its pecuniary character and even its existence - a fortuitous event covered under the insurance. The hazard delimits the bounds of the acceptable risk. The object of a contract of insurance is to indemnify after an uncertain event - cause of the damage - has occurred. If the loss of or damage to the subject-matter insured was predictable, the contract of insurance is useless, because it does not work as a guarantee. The risk must be uncertain objectively to a prudent assured. According to a decision of the Cour d’Appel de Paris, in the absence of aléa the contract of insurance is void. The time to take into consideration in determining the existence of such a vital element of the contract is on the conclusion of the contract. Two decisions of the Cour de Cassation assert that a risk already realised at the time of the conclusion of the contract render the policy null and void.
With the increasing demand of insurance to cover commercial liabilities and the diversification of risks in general, the notion of aléa has inevitably expanded. The insurance of human fault or negligence that was aberrant to an early author like Emerigon is now usually covered.

2 - Marine risks in perspective
Contrary to what the popular language may suggest, the subject of insurance is the pecuniary interest of the assured in or in respect of the property exposed to peril, in other words, the risk of the adventure. Therefore, the essence of the underwriter’s liability hinges upon the understanding of the concept of marine risks. The central enquiry that starts as soon as a claim for indemnity is brought before the insurer is to determine whether the factual situation to the prejudice of the assured falls within the category of insured perils.
Before going any further in the line of argument, it is necessary to be aware of the various meanings of this all-purpose word: "risk". The term risk is primarily used to denote the perils themselves to which the subject-matter of insurance may be exposed, as when sea risks are contrasted with land risks, or when goods are insured against "all risks". Sometimes the term is used to indicate the risk run by the person whose property is exposed to danger. Still, it is also used to denote the liability undertaken by the insurer in respect of his contractual obligation.
2.1 - The classification of risks
Marine insurance is special according to the variety of risks the subject-matter can encounter. Classifications of risks oppose maritime perils to war risks and traditional risks to special risks, as well as strictly navigation risks to human fault related risks.
Marine insurance policies focus on perils common at sea but unknown on land. As the well learned Lord Herschell said marine adventure "has its own perils, to which either it is exclusively subject or which possess in relation to it a special peculiar character". However, it does not preclude the underwritten risks to be partly land risks as in the "warehouse to warehouse" clause in cargo policy. Nonetheless, in the context of the statute that establishes a lex specialis, the special object of the contract of marine insurance is to provide for an indemnity against marine losses, i.e. "losses incident to marine adventure".
As a rule, marine risks are insured risks others than war and strike risks. They may be divided into three broad categories: traditional risks, additional or special risks and 3/4ths-collision liability. The human factor may or is likely to intervene in the three types of insured perils, however this dissertation will essentially focus on the two firsts. Marine insurance practitioners distinguish between maritime risks, as perils of the seas, rivers, lakes or other navigable waters, fire, …and war and strike risks that are expressly excluded from the full conditions policies on hull and Institute Cargo Clauses.
2.2 - The enhancement of the concept of marine risks
Marine risks strictly speaking, as in section 3 of the Marine Insurance Act, have been joined by extraneous perils. Historically, the expression refers to additional perils inserted in hull policies after the unfortunate outcome of the Inchmaree case. The "Inchmaree" was insured under a time policy (the S.G. form as it was). During the voyage, an engineer had negligently left a valve closed when it should have been kept opened. This eventually resulted into the burst of the donkey-engine of the vessel. The unique legal issue before the court was whether the loss was one caused by an insured peril. Could the negligent act of the unfortunate engineer be assimilated to one of this fortuitous accident covered under the broad heading of perils of the seas? The House of Lords held that although "peril of the seas" was an extensive notion, it requires a real connection with the misfortunes of the seas. The insurer could not be liable for an injury to the machinery not proximately caused by maritime perils, according to section 55(2) M.I.A.


Chapter 2 – Two distinct systems of insurance
Insurance companies always wish to evaluate the degree of risk the subject-matter they insure is facing. Firstly, such an evaluation leads to fixing the value of the policy, the premium and to entering the contract itself. It justifies the duty of utmost good faith and disclosure and the functioning of the "held covered" clause. Secondly, insurance policies usually state a list of specified perils and excluded risks. Underwriters, then, know precisely the limits of their liability.
In carrying out a maritime adventure the risks endangered are numerous. Indeed, the seriousness and variety of risks at sea surpass easily the land risks. Bearing in mind the freedom of contract doctrine, invariably present in the contract of marine insurance, shall "marine risks" be a catch-all concept subject to exclusions or be no more but no less than what the parties have agreed in the contract?
Maritime nations have adopted two antagonistic doctrines developing the national law of marine insurance in different perspectives.
1 – The English system on "named perils basis" and the French system "all risks"
Opening any English marine insurance law textbook, the reader is facing, straight on after the title of the chapter on marine risks, a list of insured and excluded perils. Indeed, the Anglo-Saxon policies for the insurance of ships are traditionally "named perils" forms. The insured perils in English law are named in the Act as well as in the policies of insurance. Section 55(1) cannot be clearer: the insurer is only liable for the loss caused by a peril insured against.
"Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against."
It is suggested that it may be easier to assert if a peril is covered under a British policy than under a French one. Apparently, under the English form, either the peril is named and covered or it is not insured. Conversely, the notion of fortuity is essential in French marine insurance law, because the "all risks" system provides for a single insured peril - the fortune de mer - whose definition necessarily includes a fortuitous element. Significantly, perils insured against vary widely according to the type of policy.

- The statutory provisions

In section 3 of the Marine Insurance Act 1906, a marine policy is stated to insure a lawful "marine adventure". There is no such an adventure unless "any ship, goods or other moveables are exposed to maritime perils", section 3(a) goes on to say. Therefore, it is necessary to define what are these perils.
"‘Maritime perils’ means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war, perils, pirates, rovers, thieves, captures, seizures, restraints, and detainment’s of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy."
The Act, reproducing the impression of the old S.G. policy, insists on giving an enumeration of the insured perils. The list is inclusive and not exhaustive and the parties are practically including and excluding risks according to the maritime business overall circumstances.
However, the interesting bit here is the concluding catch-all phrase "and other perils… which may be designated by the policy". This was for long understood as being no more than a drafting technique enabling the insurance market to adapt to the development of their clients’ expectations. Yet, although the courts of England used to apply the doctrine of ejusdem generis, confusion was in the mind of the practitioners and the term was eventually omitted from the I.T.C.H. and I.V.C.H. (1983). Moreover, the courts took on two occasions a restrictive approach upon the construction of the Act.
Firstly, in Scott Steamers Ltd v. Marten, Lord Atkinson said that "a peril whose only connection with the sea is that it arises on board ship is not necessarily a peril of the seas nor a peril ejusdem generis as a peril of the seas". The peril ejusdem generis is no more than a peril of the seas according to the Rule 12 of Schedule 1. Secondly, the crucial question was whether it was possible to convert non-marine risks into marine risks simply by designation. But in The Captain Panagos D.P., Mustill J. decided that it should not be this way and that the mortgagees could not benefit from the amount of the insured value stated in the marine policy of insurance in relation to their financial interests.
"(…) There is the problem created by the words 'or which may be designated by the policy'. One interpretation, consistent with the literal words, would be that any designation of perils in 'the policy' would suffice to make a peril into a maritime peril. Such a reading would produce an absurd result. (…) In my judgment, recourse to s. 2 (2) is a dead end, and it is preferable to concentrate on the first part of the definition of 'maritime perils' in s. 3. This identifies the perils as those which are 'consequent on, or incidental to, the navigation of the sea'. It is only the exposure to perils of this nature, which gives the adventure the characteristic of a marine adventure, within s. 3(2)."
The Captain Panagos D.P. really suggests that the concept of maritime perils is restrictive. This line of argument may be criticised, because it clearly contravenes freedom of contract. The contractual definition of insured perils should not be halted by anything else than any kind of connection to the maritime adventure. Why should it be that the general content of the marine insurance policy spoke more of an insurance against physical damage to (and liability of) the ship than against a financial damage to the mortgagees' interest ?
The French law of marine insurance, initiated by the Marine Order of 1681, has always had a very different approach towards the definition of the insured perils.
"Seront aux risques des assureurs toutes pertes et dommages qui arriveront sur mer, par tempêtes, naufrages, échouements, abordages, changements de route, de voyage ou de vaisseau, jet, feu, prise, pillage, arrêt de prince, déclaration de guerre, représailles et généralement toutes autres fortunes de mer."
Even if this article looks very much like an enumeration, which it is, the reader must not be misled. Indeed, French marine insurance law took the view that what was important to ascertain the underwiters’ liability was less that the loss was due to one of the listed perils, but more that it could be included in the expression "autres fortunes de mer". Although the phrase "fortunes de mer" could literally be translated into "perils of the seas" the legal effect of it is disparate. Indeed, the manifold insured risks covered under the heading fortunes de mer are more comprehensive than the "fortuitous accidents or casualties of the seas". Indeed, it covers any peril incident to navigation or exploitation of the subject-matter insured. The all risks cover can only be understood in relation to the excluded perils stated in the policy. The French marine insurance cover is extremely wide since, all that is not expressly excluded is covered and the excepted perils are to be construed strictly.
In practice, the insurer is always liable unless he can prove that the cause of the loss is extrinsic to maritime hazards. Marine insurance policies were "all risks" by statute, however the insurers used to restrict the scope of their liability using their contractual freedom in the policy. This system had provided French marine insurance market with satisfactory results over the centuries and that is the reason why the article 15(1) of the 1967 Act, embodied in article L.172-11 of the French insurance code avoids the enumeration stating singly the general expression of "fortune de mer".
"L’assureur répond des dommages matériels causés aux objets assurés par toutes fortunes de mer ou par un événement de force majeure."
Likewise, article 1 of the French policy of marine insurance for hull (98) provides for a general cover of the subject-matter insured by references to the expression "fortune de mer". It is an "all risks" cover in the sense that any peril, which is not explicitly excluded under article 3 of the policy, is covered, subject to the provisions of the Act.
The policy of marine insurance enables the parties to the contract to state clearly the risks underwritten. It is the first document to turn to in case of loss. Potential assured enjoy a wide range of standard forms of policy to ensure their enterprise is safely protected. The English policy forms are construed in the light of the definition of maritime perils. Therefore, contracts of marine insurance are fundamentally linked with national regulations.

- The policies of marine insurance

In practice, the policies covering hull & machinery of ship are frequently referred as "full conditions" forms. Indeed, they are covering most of the possible perils that one may encounter at sea, in clause 6.1 I.T.C.H. and clause 4.1 I.V.C.H. for the traditional perils and clause 6.2 I.T.C.H. and clause 4.2 I.V.C.H. for the additional perils. The cargo policy forms I.C.C. (B) and I.C.C. (C) also follow the specified perils approach, although they are "restricted perils" covers.
On the other hand, the Institute Cargo Clause (A) is an "all risks" policy, meaning all fortuities are covered by the insurance, excluding those losses that are inevitable or which are expressly excluded by the policy conditions. But, even the "All Risks" cargo policy requires the cause of the loss to be compatible with statutory provisions and the nature of the contract of marine insurance in general. It was so outlined by Lord Sumner in British & Foreign Marine Insurance Co. v. Gaunt:
"There are, of course, limits to "all risk." They are risks and risks insured against. Accordingly the expression does not cover inherent vice or mere wear and tear or British capture. It covers a risk not a certainty; it is something, which happens to the subject-matter from without, not the natural behaviour of that subject-matter, being what it is, in the circumstances under which it is carried. Nor is it a loss which the assured brings about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself. Finally, the description "all risks" does not alter the general law; only risks are covered which it is lawful to cover and the onus of proof remains where it would have been on a policy against ordinary perils."

The "All Risks" policy form remains an exception in English marine insurance, notwithstanding the possible misuse of the phrase by practitioners in relation to the full conditions hull policies.

- The extension of the covered perils

The extension of the insured risks in English policies is the feature of the post-1906 marine insurance development. Until 1951, the London marine insurance market was governed by the S.G. policy covering the perils enumerated in the form. As a result, it was suffering very hard the competition of the continental markets more liberal in their cover. The first extension of cover were provided under the Institute Cargo Clauses (F.P.A.) and (W.A.) giving the opportunity of waiving the Memorandum percentage. However, the significant change in the marine insurance tenor and shape was due to the introduction of the Institute Cargo Clauses "All Risks", in 1982. The effect was to void the Memorandum and to reduce the significance of the cause of the loss. Still, the English conception of restricted insurance cover prevails, as Lord Sumner said, "‘All risks’ has the same effect as if all insurable risks were separately enumerated".
2 - The practical consequences on the conduct of legal process
In both systems of determination of the insurance cover, the indemnity is depending on the loss being one incident to an insured risk. As Mr Justice Greer pointed out in Banco de Barcelona and others v. Union Marine Insurance Co Ltd:
"(…) Marine insurance cases afford no exception to the general rule that before a plaintiff can become entitled to judgment he must prove his case, that is to say, he must establish his cause of action to the reasonable satisfaction of the tribunal".
The assured relies mainly on documentation and surveyors expertise to evidence (a) the damage to or loss of the subject-matter insured and (b) the value to which the claim amounts. The proof, in civil cases, is said to be on a balance of probabilities.
Yet, English and French distinct systems of determination of covered risks lead to divergent exigencies in providing proof. Where policies are on restricted conditions - all the English policies except the "All risks" I.C.C.(A) - the degree of evidence required from the assured is such as to demonstrate that the loss was caused by a particular peril insured against. Conversely, French "all risks" policies only require the assured to show that the subject-matter has been loss or damaged. The onus shifts directly to the insurer to show that the loss or damage did not arise from the operation of covered risks but from an excluded peril.
2.1 - Burden of proof in marine insurance law
In French law, following the maxim actori incumbit probatio, the assured, as claimant, bears the burden of proof. Once evidence of the loss is brought, the assured need only to show that it was caused by a marine peril and was not expressly excluded. In practice, French "all risk" policies favoured the assured since no persuasive step is required. Indeed, once the loss is evidenced, it is for the underwriter to initiate a defence. In all cases, unexplained losses are presumably covered, unless the insurer brings the positive proof of an excluded cause.
Equally in English law, the burden of proof rests on the assured. However, the British shipowner faces more difficulties to see his claim succeeding than the French one. First, in order to found a claim upon the insurance, the assured must prove the existence of the loss or damage. Secondly, that the loss or damage was proximately caused by one of the insured perils, following the doctrine "he who asserts must prove". The burden of proof only shifts when both stages are positively demonstrated. The common law principles impose that the claimant proves his case on the balance of probabilities. Exceptionally, under the all risks policy, the assured is merely required to show hat the loss occurred fortuitously.
2.2 - Causation in marine insurance law
The cause of the loss in marine insurance law is of utmost importance, since it determines the liability of the insurer. In other words, the indemnity depends on the origin of the casualty, and whether the peril is covered or excluded from the policy. Causation test is essential in cases involving a multiplicity of causes.
English law adopted the maxim causa proxima, non remota, spectatur reflected in section 55(1) M.I.A. that states that – unless the policy provides otherwise – the insurer is only liable for any loss proximately caused by a peril insured against. Historically, the causation test laid down by Lord Esher in Pink v. Fleming used to determine the proximate cause as the last cause in time. However, the House of Lords in The Leyland case favoured the "efficient and predominating" cause of the loss. The case interestingly arose in the tragic context of the First World War, when the insured vessel was first torpedoed by a German submarine before grounding in Le Havre, and eventually sunk. It was held that the grounding was not a novus actus interveniens but that the torpedoing was the proximate cause of the loss.
In analogous circumstances, the Conseil d’Etat and Cour de Cassation in The "Iris" could not agree on the correct causation test to apply, resulting in a denial of justice. French courts tend to analyse two causes as one creating and the other aggravating the damage. In The trawler "Adrien-Pla" the vessel sunk in good navigation conditions without any impact being felt. The immediate cause of the loss was the entry of seawater in the hull, but another cause was the unseaworthiness of the vessel. The Cour de Cassation decided that since there was two causes of the loss one of them excluded and the other covered the indemnity should be made to 50% of the insured value. Such an apportionment of liability could not happen under English marine insurance law. Indeed, the courts of England can either grant the full compensation for the loss incurred or reject the claim. There is no middle way option.
However, one should not assume that English and French marine insurance law are not comparable in any way. Although the legal regimes are built on different pillars, the included and excluded losses are pretty much identical under an English or a French policy of marine insurance.





Part 2:
Direct human intervention in marine risks:
Negligence, barratry and wilful misconduct

Chapter 1 - The insurable human intervention in marine risks
1 – The development of the insurable peril of negligence
1.1 - Negligence of the servants or agents of the assured
1.2 - Negligence of the assured
2 – The special risk of barratry
2.1 - The extent of the peril of barratry
2.2 - Causation and barratry
2.3 - Evidence and practice of barratry

Chapter 2 – The limit of the insurable human intervention in marine risks:
Wilful misconduct
1 – Wilful misconduct as an absolute excluded peril
1.1 - Statutory and policy exclusions
1.2 - Judicial definition
2 – Legal safeguards against wilful misconduct
2.1 - Causation and wilful misconduct
2.2 - Evidence and wilful misconduct

Should underwriters be liable when the novus actus interveniens in the chain of causation is of human nature? Negligence, barratry and wilful misconduct are actual manifestations of direct intervention in marine risks by some persons immediately linked to the insured adventure. The cover of these perils depends upon the interplay of various criteria. Firstly, regarding the act causing the loss, its seriousness and the foreseeability of its consequences will affect insurability. Secondly, regarding the acting person, his position towards the insurer and his state of mind, will be taken into consideration.
In the Marine Insurance Act, the peril of negligence is allied with misconduct in section 55(2)(a):
"The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;"
Likewise, article L.172-13 C. Ass. reads:
"Les risques assurés demeurent couverts, même en cas de faute de l'assuré ou de ses préposés terrestres, à moins que l'assureur n'établisse que le dommage est dû à un manque de soins raisonnables de la part de l'assuré pour mettre les objets à l'abri des risques survenus. L'assureur ne répond pas des fautes intentionnelles ou inexcusables de l'assuré."
Therefore, legislators admit that all faults cannot be covered, setting the limit through the degree of seriousness of the act and the position of the person committing it.
Marine risks cannot be restricted to the only act of God or unavailable circumstances types of situation (to use the vocabulary of the liability of the carrier). It should also include the entire risks incidental to the navigation and management of ship, that is to say negligence and barratry of the men. Modern British law allows the assured to protect his interests against the result of negligence and barratry, subject to the terms of the policy. French law goes, apparently, one step further when admitting the fault of the assured himself. The general rule laid down by the 1967 Act is that the fault of the assured or of his servants is covered unless constituting a want of due diligence or an act qualified either as inexcusable or intentional misconduct. Clearly, civil law is less subtile than common law, as the phrase "baraterie du patron" includes the entirety of prejudicial acts to the assured, ranging from mere negligence to intentional or criminal misconduct of the master and crew.

Chapter 1 - The insurable human intervention in marine risks
From the point of view of the shipowner, negligence in the course of the maritime adventure is a risk, which includes fortuity. However, it was traditionally considered contrary to public policy to allow a person to insure against the consequences of his own negligence or that of his servants. But, towards the end of the nineteenth century, Collins L.J. opined that a man may lawfully stipulate against the consequences of his own negligence. Does the marine insurance practice reflect this idea? The grant of indemnity to the assured appears to be settled on slightly different grounds under English and French law.
1 – The development of the insurable peril of negligence
Negligence is not confined to be a maritime peril. However, the extreme conditions encountered at sea are likely to impart human failings with tragic human and financial consequences.
The peril of negligence reflects a human act or omission that causes the loss. In English law, negligence has been early judicially defined in Blyth v. Birmingham Waterworks as:
"Doing something which ought either to have been done in a different way or not at all, or omitting to do something which ought to have been done."
There are varying degrees of negligence, some of which amount to misconduct. In French law, negligence is generally described by the phrase "faute simple." This ordinary fault equals to human defect or misconduct that is involuntary - to differentiate with the "faute intentionnelle" - but also of a lesser degree of seriousness - to differentiate with the "faute inexcusable." The law of insurance also treats differently the peril of negligence according to its author. The 1967 Act envisages the cases of negligence of the onshore servants of the assured as well as the personnel on board. Article L. 172-13(1) C. Ass. even allows the assured to be indemnified for the loss caused by his own negligence provided that it does not amount to a want of due diligence.
The nineteenth century experienced the raise and fall of the debate on the cover of negligence in British marine insurance law. Underwriters contended that the peril of negligence was not expressly covered in the policy and therefore the loss resulting thereof irrecoverable. On the other hand, the S.G. form of policy specifically insured against both perils of the sea and barratry. Hence, one could hardly explain why the intermediary peril of innocent act of neglect should be excluded from cover. More significantly, negligence was analysed as a remote, legally insignificant, cause. In Walker v. Maitland it was said that:
"[T]he underwriters are liable for a loss, the proximate cause of which is one of the enumerated risks, though the remote cause may be traced to the negligence of the master and mariners."
Accordingly, once it was evidenced that the ship was lost or damaged through perils of the sea, fire, or any other included risks, negligence was irrelevant to the plea of both the claimants and the defendants. The immediate cause of proximity doctrine justifies what Lord Herschell said in The Xantho:
"[I]f that which immediately caused the loss was a peril of the sea, it matters not how it was induced, even if it were by the negligence of those navigating the vessel."
Codifying the case law, the Marine Insurance Act enunciates in section 55(2)(a):
"[The insurer] is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;"
Under the statutory provision, negligence of the master or crew is covered as a remote cause of the loss, bearing in mind that the proximate cause of the loss or damage is a maritime peril insured against.

- Negligence of the servants or agents of the assured

In most of the cases involving negligence, there is an alternative ground for the claim. Negligence of itself does not cause the loss, but causes the occurrence of an insured or uninsured peril. For instance, negligent navigation may cause the stranding of the vessel covered under the head of claim of peril of the sea. However, in few cases, negligence directly causes the damage inside the ship just like the machinery breakdown in The "Inchmaree" case.
The celebrated case raises the question of the legal effect of negligence in the absence of any other expressly included or excluded peril contributing to the loss. The steamer "Inchmaree" was insured under a hull & machinery time policy, covering her against loss or damage proximately caused by any of the perils expressed in the S.G. form of policy. The assured was trying to recover from the insurance, under the head of claim of perils of the sea, a damage to the machinery of the ship. In fact, a crew member had negligently left a valve closed when it should have been kept open, causing, through irregular working of a pump, a donkey-engine to burst. The underwriters rejected the claim on the grounds that the damage had been proximately caused by negligence of the personnel on board. Subsequently to a decision in favour of the assured, the House of Lords held that the proximate cause of the loss was effectively negligence. As negligence was neither a peril of the sea nor a risk within the ambit of the ejusdem generis term, the assured failed his claim.
The "Inchmaree" case was certainly not welcomed by the marine industry. Shipowners did not wish to be exposed to misfortunes in such a wide area of risk. One year later, underwriters were extending of the S.G. cover to include expressly the peril of negligence of the master, officers and crew. The clause resulting thereof was officially known as the "negligence clause". In the current policies, the "Inchmaree clause" is to be found in clause 6.2.2 I.T.C.H.(95) and clause 4.2.2 I.V.C.H.(95).
The gist of the clause is that, the indemnity accrues for damage to or loss of the hull and machinery of the insured vessel (only), directly caused by any of the "additional perils", provided the underwriter cannot show a lack of due diligence on the part of the assured. In a sense, the due diligence provisio of clause 6.2 is the heir of the nineteenth century condition precedent to the underwriter’s liability that the owner has himself being diligent in procuring sufficient and competent crew. In addition, the provisio requirement is the modern recognition that if the assured is not anymore responsible for the acts of his servants and agents, he shall nevertheless be diligent in providing them with a safe ship.
As time passed by the vital clause has undergone some simplifications. First, the additional deductible of 10% was repealed. Then, the two sub-sections division into H. & M. and A.H.F. conditions united. Finally, the new clause 6.2 include ‘superintendents and onshore management’, so the obligation to be diligent will extend further down into the shipowners’ management structure. Revisions of the clause enable the underwriter to stick to the shipowners’ company realities, although the substance remains the same. Ultimately, in English law, the association of section 55(2)(a) to clause 6.2.2 provides a sufficient cover to any loss or damage caused by the negligence of the master or crew.
As an "all risks" type of cover, French policies underwrite negligence of the servants or agents of the assured in any event. This assumption is reinforced by the statutory provisions of articles L.172-13(1) and L.172-14 C. Ass., where the negligence of the servants onshore, master and crew is covered, under the term of "fault". Interestingly, both mere negligence and misconduct are considered under these articles. Historically, French law did not distinguished between negligence and wilful misconduct of the mariners, comprehended in the large concept of "barraterie du patron". In the early twentieth century, negligence was incorporated in hull cover under the head of claim of "fortune de mer". Exclusion was made against the situations of fraud by the use French concepts of "fraude" and "dol". Contemporary policies do not expressly include negligence as a covered risk, but it is admitted to be part of the perils of the sea (i.e. "fortune de mer").
The French concept of fault does embrace negligence in navigation but not negligence in the management of the ship and cargo. In The S.S. L’Estrel case, a crew member negligently connected the water horse to the wrong filling line, flooding the cargo room loaded with sugar, and causing the constructive total loss of the goods. The shipowner claimed on the insurance following his liability to a third party - the cargo-owner – resulting from the peril of negligence of his servant. The Cour de Cassation held that the commercial fault did not fit in the judicial definition of the peril of negligence. However, French authors consider that this decision is wrong and that the peril of negligence, covered under article L.172-14 C. Ass., requires a large interpretation.

- Negligence of the assured

In the early nineteenth century, Lord Ellenborough in Bell v. Carstairs opined that:
"[A loss] occasioned by any act or neglect on the part of the assured; for it has been so occasioned, it would not be a loss against which the underwriter would, upon any principle of reason or justice as applied to this species of contract, be required to indemnify him: the indemnity stipulated on his part being only against the perils described in the policy (...)"
It is observed that section 55(2)(a) M.I.A., which commands to disregard the contributory negligence of the master or crew, does not refer to the assured. It is then be a matter for the courts to determine whether the negligence of the assured shall be treated as a remote or a proximate cause of the loss, according to the modern law of causation. One may have some doubts on whether the loss proximately caused by negligence of the assured is recoverable under current policies of insurance for hulls. First, the assured is not named in the inventory of persons whose negligence is covered under clause 6.2.2 I.T.C.H.(95). Secondly, as the assured was himself the author of the negligence – proximate cause of the loss - he would be unable to satisfy the due diligence provisio requirement, clause 6.2. The cargo policies exclude under clause 4 of all I.C.C. various act of negligence of the assured as insufficient or unsuitable packing. Therefore, negligence of the assured is not a peril insured against and is not recoverable. This is in accordance with the traditional doctrinal view that one should not benefit from the consequences of his own negligence. In other words, the negligent act from the assured is analysed as a want of ordinary prudence and honesty in the conduct of the insured adventure.
Finally, there is the unlikely situation in modern times, where the assured, acting as master, officer, crew or pilot on board his own vessel, commits an act of neglect. Here, it seems that two conflicting provisions adjoin in the policy. On the one hand, clause 6.3 states "masters officers crew or pilots not to be considered owners within the meaning of this clause 6 should they hold shares in the vessel." On the other hand, the provisio of clause 6.2 directly target the shipowner and barred recovery in the case of want of due diligence. It is submitted that, the two clauses aim at providing part-owners with recovery in case of negligence of one of them acting as master, etc. Objectively, the shipowner who is either sole or co-owner cannot recover for a loss proximately caused by his own negligence on board the ship. However, Dr. Hodges expressed the view that:
"There is (…) no reason why judges should not be able to differentiate between an act committed by the master qua master and qua owner."
French doctrine of the early years declared that underwriters were not liable for losses directly caused by any act or fault of the assured himself. Emerigon affirmed:
"Il est (…) certain que les assureurs ne répondent jamais des dommages et pertes qui arrivent directement par le fait ou la faute de l’assuré lui-même."
And Pothier confirmed:
"Il est évident que je ne peux pas valablement convenir avec quelqu’un qu’il se chargera des fautes que je commettrai".
Consequently, article 351 of the commercial code of 1807 provided that:
"Toutes pertes et dommages provenant du fait de l’assuré ne sont point à la charge de l’assureur".
The strong vocabulary used at that time has disappeared and article L. 172-13(1) C. Ass. now provides with the general rule that the risks remain covered even in the case of fault from the assured.
"Les risques assurés demeurent couverts, même en cas de faute de l'assuré (…), à moins que l'assureur n'établisse que le dommage est dû à un manque de soins raisonnables de la part de l'assuré pour mettre les objets à l'abri des risques survenus."
However, the second part of the sentence provides the underwriter with a defence in case of want of due diligence. The statutory provision is a bit contradictory in itself. Literally, once the assured has demonstrated his prima facie claim for a peril insured against, his own fault does not matter. Then, it is for the insurer to prove that the assured has failed to exercise due diligence to shelter the subject-matters from the arisen risks. Similarly to the English warranties, such a provision denotes a fundamental contractual obligation. Indeed, derived from the aleatory nature of the contract of insurance, the provision is a condition precedent remaining throughout the contractual period. In practice, the due diligence provisio bars recovery in case of a fault from the assured anywhere in the chain of causation. A pre-1967 case ruled that the assured being effectively master of his own ship could not recover for negligent navigation. In modern law, the issue before the court regards whether the assured exercised due diligence. Did he carefully and skilfully navigate his ship?
2 – The special risk of barratry
The approach towards barratry varies widely according to the form of policy. While the British underwriters were willing to cover expressly the peril since the eighteenth century - providing adequate premium -, the French were reticent to accept it. Indeed, it was thought that the lack of possible control on the master and crew, effectively leading the marine adventure, was increasing the risk to an unacceptable limit. Eventually, after some contradictory customs, the commercial code of Napoléon, formally excludes barratry, unless the policy otherwise provides.
In fact, the concept of barratry is used in all maritime jurisdictions. However, the Anglo-Saxon narrow construction of the term contrasts with the broad use that continental lawyers make of it.
2.1 - The extent of the peril of barratry
The risk of barratry ranges from mere employment duty disobedience to complete embezzlement of contractual obligation. According to Lord Mansfield in Vallejo v. Wheeler, the origins of the word barratry would come from the Italian word "barratrare", meaning "a cheat, a fraud, a cozening or a trick". It is observed that the Latin root of the word has not survived in the French modern language. At the contrary, the French phrase "baraterie du patron" includes all kind of neglect of duty – even simple fault and negligence -, fraud and criminal conduct. Indeed, the exclusion of article 353 of the commercial code of 1807 already accepted the extensive meaning of the word.
Over the years, the courts of England have construed the peril of barratry. The definition of marine barratry by Lord Ellenborough in Earle v Rowcroft is traditionally accepted:
"(…) A fraudulent breach of duty by master, in respect of his owner (…) with a criminal intent, or ex malefico, is barratry".
This definition calls for detailed analysis of its various implications. In the modern Institute Clauses for Hull, barratry amounts to fraud, neglect of duty and criminal conduct. Indeed, the peril of "barratry of the master officers or crew" is a special risk insured under clause 6.2.4 of the I.T.C.H.(95) and clause 4.2.4 of the I.V.C.H.(95). It is obviously subject to the provisio of due diligence clause 6.2. I.T.C.H.(95). Barratry of the master is only an insured peril if the master and the assured are two separate persons. The case of the shipowner taking the commands of the ship for the insured voyage is of course outside of the provision. Indeed, the justification of the indemnification of loss or damage by barratry is only possible if it is outside the control of the assured. The crux hinges upon the labour law concept of subordination, i.e. that the assured necessarily entrusts somebody to carry out part of his business.
Modern French law of marine insurance recognises the peril of barratry to be part of marine perils. It is covered under article L.172-14 C. Ass., that provides:
"Les risques demeurent couverts dans les mêmes conditions en cas de faute du capitaine ou de l’équipage, sauf ce qui est dit à l’article L. 173-5."
Article L. 173-5 C. Ass. reads:
"L'assureur ne garantit pas les dommages et pertes causés par la faute intentionnelle du capitaine."
The two articles really need to be read together since the law distinguishes between the acts of the master and the crew. The master of the ship had always been given a special status under French maritime law. Historically, it certainly comes from the times when nothing was known from a vessel before she safely return to port. If this is not the case anymore, the shipowner is nevertheless deemed to choose carefully and skilfully the master of his vessel. The acts of the master fall, then, indirectly under the responsibility of the shipowner. The distinction between master and mariners is relevant as regards the seriousness of the fault committed. While simple fault does not bar recovery in any case, intentional fault of the master does (article L. 173-5). According to the Cour de Cassation the concept of "faute intentionnelle" was held to include both intentional misconduct – involving will to cause the damage – and fraudulent neglect of duty ("faute dolosive") – involving the breach of contractual obligation -.
The 1967 Act officially excluded the intentional fault of the master from every French policy of marine insurance by a non-derogable provision. The peril of barratry was irrecoverable, since it necessarily requires an intentional act of misconduct, that otherwise would only amount to negligence. Through a reform of the Act in 1984, barratry of the master could be expressly insured against according to the will of the parties. However, French policies do not generally extend the cover. At the contrary, article 3 of the hull policy form specifically excludes "breach of blockade, smuggling, illegal or clandestine commerce, fines, seizures, confiscation, and requisition". However, it is observed that cargo policies systematically include the entire peril of barratry, since the cargo owner has no contractual relationship with the master and mariners.

2.2 - Causation and barratry
If barratry is a peril insured against, the recovery for losses that it causes is subject to the proximate cause doctrine. Practically the issue arises naturally in the context of multiple causes of the loss, one of them being barratry and the other an excluded peril. In Cory v. Burr the barratrous act of smuggling by the master of the insured vessel caused it to be seized by the Spanish Autoridades Aduaneras. The particular hull policy covered marine risks - in which barratry – but specifically excluded losses caused by seizure. The claim for recovery of expenses caused by barratry was rejected by the underwriters. Eventually, the House of Lords decided that the assured was barred from recovery by application of the exclusion clause. The rationale of the case does not really depart from the causation approach settled in The Leyland case. In fact, the perils of barratry and seizure were both equally operative in this case. The express exclusion shall then prevail following the maxim: lex specialis derogat generalis.
The peril of barratry is indirectly covered under French law. Indeed, article L. 172-14 C. Ass. starts by the phrase "the risks remain covered". In fact, barratry does not bar recovery unless the barratrous act in question is expressly excluded by the policy, as all illegal ventures. Causation is therefore vital to the claim of the assured under article L.172-14. Fire and cast away of the ship as causes of the loss brought up by barratry of the crew - or of the master, in case of specific insurance of it - is recoverable. However, all the excluded circumstances or activities by the policy will definitely bar indemnity.



2.3 - Evidence and practice of barratry
The recovery upon the peril of barratry in French law is subject to the exercise of due diligence from the assured (article L. 172-13 (1)). Indeed, article L. 172-14 C. Ass. applies "in the same conditions" as the previous provision and a want of diligence from the shipowner inevitably brings the claim to an end. Once the prima facie claim for a loss caused by barratry is made in the conditions described above, the burden of proving a lack of due diligence from the assured shifts on the underwriter. The insurer has a defence if the shipowner failed to have carefully and skilfully employed the crew.
Here, the underlying principle is that the contract of insurance covers risks, because it is an aleatory contract. In case of privity of the owner, he, himself party to the contract, changes the rule of the game by erasing the fortuity data. The absence of fraud on the owner is equivalent to the absence of barratry as such and consequently nobody can rely on this specified peril. Systematically, the innocent mortgagee will not be allowed to recover in such circumstances. Similarly, the I.C.C. (B) and (C) exclude in clause 4.7 "deliberate damage or destruction of the subject-matter insured". However, the today Institute Cargo Clauses (A) entitle the cargo owner to recover for scuttling with the shipowner’s privity, since it is not specifically excluded of the "all risks" policy.
As expressed by Lord Ellenborough in the case of Earle v. Rowcroft, shipowners may be tempted to shift the risks arising out of illegal conducts, secretly contrived with the master and mariners. The avoiding formula is to require the prejudicial character of barratry as a constitutive element of the peril.
"Barratry necessarily involves a damnification of the shipowner whether he or someone else is the person insured under the policy sued upon."
Hence, both the Act and the policies provide safeguards against fraudulent claim on the insurance. Schedule 1 of the Marine Insurance Act, rule 11 defines barratry as:
"(…) Every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer".
Therefore, the shipowner who is privy to the fraud will not recover, as there is no barratry. Similarly, the Inchmaree clause covers any fraudulent or criminal conduct by the specified persons subject to the due diligence provisio. It is particularly designed to impinge the case of the scuttling of the vessel.
The twofold definition of barratry raised a major judicial debate on evidential issue in the case of losses caused by barratry. Indeed, in The Michael Kerr J. construed the phrase "to the prejudice of the owner" as a constitutive element of the peril of barratry. As a result, the claimant shipowner who wishes to recover for a loss caused by barratry must prove (a) the barratrous act – particularly the deliberate cast away of the ship – and (b) without his consent or privity. To that burden of proof, Kerr J. applied the balance of probabilities standard used in civil cases. The Court of Appeal did not support the evidential approach taken at first instance. Indeed the law in this area is a bit confused and there is no House of Lords decision to settle the issue. In 1923, two Courts of Appeal differently constituted ruled opposite decisions on the question of connivance of the assured. In Compania Martiartu v. Royal Exchange Assurance Corp the Court indicated the onus to be fully on the plaintiffs to prove that the loss was due to the peril insured against, without them being privy. However, in Issaias v. Marine Insurance Co judges were concerned by the fact that barratry was a serious crime and that complicity of it should be proved "beyond reasonable doubt". Mr Justice Atkin employed purposively the criminal law standard of proof in a case where he felt that the assured should be granted the presumption of innocence. In The Captain Panagos D.P. the court chose a middle way approach. In any event, the court should look at the particular facts of each case and possibly draw inferences.
In conclusion, the case law has brought the law of barratry and the defence of wilful misconduct to become inextricably inter-related.



Chapter 2 – The limit of the insurable human intervention in marine risks:
Wilful misconduct
Principles of equity prohibit the insured to be indemnified for a loss that he voluntarily caused. Salmon J. said in Slattery v Mance:
"No man can take advantage of his own wrong."
French academics, like Pothier and Emerigon have tried to advocate the same idea, although equity does not exist in civil law. Article 351 of the commercial code used to provide that the principle of indemnity does not play in case of loss or damage due to the act of the assured. The insurance only indemnified the assured from the loss or damage due to the fortune de mer.
1 – Wilful misconduct as an absolute excluded peril
Sometimes there is only a fine line between wilful misconduct and negligence. However, wilful misconduct is not concerned with mere want of due diligent. The absolute exclusion requires a deliberate act by the assured, which is designed to cause the loss, or which is recklessly committed, and in respects of which he intends to make an insurance claim.

- Statutory and policy exclusions

Section 55(2)(a) of the Marine Insurance Act first exclusion, for which the insurer is not liable, is wilful misconduct of the assured.
"The insurer is not liable for any loss attributable to the wilful misconduct of the assured (…)"
Hull underwriters rely directly on this non-derogable statutory provision, while cargo insurers can also rely on special exclusions in the policy.
The non-derogable article L. 172-13(2) C. Ass. bars recovery of all losses caused by the intentional or inexcusable faults of the assured.
"L’assureur ne répond pas des fautes intentionnelles ou inexcusables de l’assuré."
The French legislator has adopted the concept of inexcusable fault in line with international conventions on transportation law. It can be described as a reckless fault with conscious that a damage will probably result of it.
Furthermore, article 3 of the French hull policy , reads:
"The insurance excludes:
1- Loss, damage, liability or expenses caused by:
(…) Wilful misconduct or gross negligence of the assured or his senior officers, viz, directors and officers, agency managers, superintendents or head of technical departments."

- Judicial definition

It should be noted that "wilful misconduct" is not defined in the Act but is a plain and well-established common law concept. As early observed by the Exchequer Chamber, the defence of wilful misconduct finds its origins in the maxim dolus circutu non purgatur.
Actually, it is not so much the practical conduct of the assured, but the fact that it is wilfully committed, which matters. Indeed, the improper conduct can range from qualified negligence, indifference, and recklessness to active misconduct. The assured may actively take part in the scuttling of the ship, but more generally connives with the master and mariners, in order to be able to found a claim. Yet, the courts real focus is on the deliberate or intentional character of wilful misconduct. The "dolus" reflects both the concepts of fraud – "violation of some legal duty" - and of wilfulness – "a conscious determination to bring about a loss, and a design to achieve a certain result". Lord Loreburn noted that the term "wilful" "imports that the misconduct was deliberate, not merely a thoughtless act on the spur of the moment". A recent case, N.O.L. v. D.O.L., provides a comprehensive definition of the constitutive elements of wilful misconduct.
"The assured intended to achieve a loss or a damage or that he was recklessly indifferent whether such a loss or damage was caused and that his immediate purpose was to claim on his insurers or that he subsequently advanced such a claim."
In Papadimitriou v. Henderson the court rejected the argument of the insurers that sending the insured ship on a voyage where capture was imminent amounted to wilful misconduct. The shipowner had merely tried to proceed on a lawful voyage. In the old case of Thompson v Hopper, the shipowner had "knowingly, wilfully and wrongfully" sent the insured vessel to sea in an unseaworthy state. It was held that in this case reckless disregard was equivalent to wilful misconduct. The facts of this case remind of a recent French case.
Nine days before the loss the stem of the "Irrintzina" collided with the port quay. "Contact with dock, quay or harbour equipment or installation" was not covered under the particular policy. In spite of the damaged hull the assured recklessly took her to sea, using two electric pumps to pump out the water. A sudden power failure caused the pumps to stop working and the ship flooded with water to sink. Although the intention to loose the ship was not demonstrated, the fact of recklessly sending the unseaworthy ship to sea amounted to an inexcusable fault excluded under L. 172-13(2) C. Ass.
In an Australian case, the court held that, taking into account the particular circumstances of the case, the shipowner’s act of reckless indifference and extreme carelessness could amount to wilful misconduct. For public policy reason, the court was not prepared to allow the assured to recover on his insurers, despite the "total disregard for safety of lives of those on board".
2 – Legal safeguards against wilful misconduct
The defence of wilful misconduct is a way for the insurer to rebut positively the claim of the assured for a loss short of fortuity, in case of perils of the sea, or with his connivance, in the case of barratry.
2.1 - Causation and wilful misconduct
Not subject to the contrary intention of the parties, wilful misconduct is a special exclusion also as regards application of the law of causation. A pre-1906 case held that the proximate cause rule did not apply to wilful misconduct. The significance of the non-derogable exclusion of section 55(2)(a) was back by the use of the causal phrase "attributable to". The evidence of wilful misconduct anywhere within the chain of causation systematically bared recovery. The proximity in time was overridden by the operative effect of wilful misconduct, from which the loss is necessarily arising. However, it is suggested that the phrase "attributable to" in section 55(2)(a) has lost its significance in the modern law of insurance. Following The Salem wilful misconduct of the assured is always a proximate cause, i.e. dominant cause, of the loss.
The general practice of French courts is not to search for one cause of the loss, but to analyse the network of causation trying to apportion respective consequences of each cause. Indeed, French marine insurance law assumes that fortuitous loss at sea is always recoverable. The insurer may raise a defence of excluded peril. Still in this event, the court is to investigate the practical effect of each factor contributing to the loss, in order to grant the claim. However, in cases where there is evidence of wilful misconduct courts are not allowed to apply this general principle of insurance law. The insurer is automatically discharged of liability for damage of or loss to the subject-matter causally linked to the wilful misconduct of the assured.
2.2 - Evidence and wilful misconduct
Most of the cases on wilful misconduct involve the deliberate scuttling of the ship by or with the privity of the assured. The obvious aim of scuttling is to recover for the loss of the subject-matter under a contract of marine insurance. The assured is to establish a prima facie case of loss by a peril insured against. Naturally, claims that come before the courts rely preferably on two risks: "barratry" and "perils of the seas". To plead "perils of the seas" requires to prove that a fortuitous casualty have happened at sea. Indeed, rule 7, Schedule 1 of the Marine Insurance Act reads:
"The term ‘perils of the seas’ refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves."
The plea of unexplained losses used to be very useful to an unscrupulous shipowner. In Anghelatos v. Northern Assurance, the stranding on rocks in the middle of the ocean was held to be caused by the insured risk of perils of the seas, since "nothing more could be ascertained". In cases of unexplained losses, the burden of proof was clearly on the underwriter to remove any doubts as to the actual cause of the loss. However, the House of Lords decided otherwise in Samuel v. Dumas. Perils of the seas and scuttling are opposite risks, one being legitimately insured and the other outside the very purpose of the contract of insurance. Hence, it became material to show that the proximate cause of the loss is a fortuitous casualty. In La compania Martiartu, the insured vessel had sunk in a smooth sea with little wind blowing. The assured claimed for loss by perils of the seas, alleging the loss to have been caused by the contact with a floating mass of wreckage. Scrutton L.J. held that the plaintiff failed to give evidence of fortuitousness on the balance of probabilities.
French underwriters preferably rely on the inexcusable fault than on the intentional fault defence of article L. 172-13 (2) C. Ass. Indeed, intentional fault cannot be presumed for it is an offence under criminal law. The standard of proof is therefore higher than what an insurer is actually able to prove. Conversely, the standard of proof of inexcusable fault is the one of the prudent uninsured shipowner. The later allows court inferences, which eases the burden of proof of the insurer. The requirement on the plaintiff assured to adduce some evidence of fortuity or the absence of his privity to the scuttling of his ship is a safeguard to avoid unfair recovery for loss attributable to wilful misconduct. Unfortunately, it seems that accomplished scuttler may still find malicious strategy.
Although negligence or misconduct do not preclude recovery by the assured, it may be otherwise if the conduct in question falls in the ambit of the defences provided to the underwriter by section 39 of the Marine Insurance Act.






Part 3:
Indirect human intervention in marine risks:
The question of seaworthiness of ship
Chapter 1 – Unseaworthiness as a fault of the assured
1 – The positive obligation of the assured:
The warranty of seaworthiness in English law and the duty to exercise due diligence in French law
1.1 - Unseaworthiness in marine insurance law
1.2 - Unseaworthiness in voyage and time policies
2 – The breach of the obligation
2.1 - Unseaworthiness, privity and fault
2.2 - Necessary compliance with the warranty and exercise of due diligence obligation?

Chapter 2 –Unseaworthiness as a defence of the insurer
1 – Evidence of unseaworthiness
1.1 - Burden of proof
1.2 - Standard of proof
1.3 - Unexplained losses, a comparison of two cases
2 – Causation and unseaworthiness
2.1 - Causation and implied warranty of seaworthiness
2.2 - Concept of causation in time policies
2.3 - Multiplicity of causes of the loss
Shall the initial unseaworthiness of a ship - its unfitness to encounter ordinary perils of the seas - be covered by the policy of insurance? By exception, policies on goods may have admitted such a clause of insured peril, but insurers are very reluctant to introduce a similar clause in hull policies. The truth is that unseaworthiness is generally not an underwritten peril for various reasons. The first reason is to be found in the heart of marine insurance that covers a risk not a certainty. The second may be the likelihood of human intervention in the marine insurance risk.
English and French law have a totally different approach towards the uninsurability of unseaworthiness. Historically, neither system of law was considering formally unseaworthiness as a risk. The early times of maritime business was imprinted of self-insurance, hence no shipowner would have let his vessel going at sea in an unseaworthy state. With the development of the Lloyd’s market and the loss of interest in the success of the adventure by the shipowners, the courts have supported the insurers in making seaworthiness a warranty of the contract of insurance. However, French marine insurance companies traditionally favour the concept of fraud or fault of the assured to avoid the contract in case of unseaworthiness of ship before the attachment of risk. The contemporaneous law, embodied in the 1967 Act, imposes the assured to use due diligence in preventing the risks, but courts still refer to the notion of misconduct of the assured.
On the one hand, the codifying Act of 1906 devotes a heading to the consequential warranties, whose breach automatically discharges the insurer from the date of the breach. Amongst them, section 39 refers to the warranty of seaworthiness of ship. Marine insurance warranties are employed to ensure the assured maintains the risk as it was agreed upon conclusion of the contract. On the other hand, the 1967 Act allows the underwriter to walk away from the contract of marine insurance in case of "manque de soins raisonnables", i.e. want of due diligence, article L. 172-13(1) C. ass. This is only unless the insurance otherwise provides. This provision imposes on the assured an obligation of due diligence to exercise due care of the subject matter of insurance for the purpose of the maritime adventure.
Chapter 1 – Unseaworthiness as a fault of the assured
Initial unseaworthiness is admittedly a physical defect of the ship, however it is indirectly a fault from the assured to ensure his ship is reasonably fit in all respects for the purpose of the particular adventure insured.
In French law, the obligation of due diligence was introduced by the 1967 Act by the convergence of two influential texts of law. The first source of inspiration was the Hague-Visby Rules. For safety reasons, the shipowner shall exercise due care when sending is ship at sea, the non-compliance with this rule resulting in his liability being engaged as a carrier (under the Hague-Visby Rules) reinforced by the exclusion of insurance recovery (article L. 172-13(1) C. Ass.). The Marine Insurance Act warranties were the other source, pointed out and promoted by Pierre Lureau in the parliamentary commission. The obligation of due diligence of article L. 172-13(1) C. Ass. and the warranty of seaworthiness in section 39 M.I.A. impose positive undertakings on the assured, subject to compliance in order to bring a claim under the policy.
1 – The Positive obligation of the assured:
The warranty of seaworthiness in English law and the duty to exercise due diligence in French law
Seaworthiness is a concept primarily related to the liability of the shipowner as a carrier. At common law, derived from the law of merchant, there is an implied obligation of seaworthiness in every contract of affreightment in the absence of agreement to the contrary. The obligation of the shipowner to provide a seaworthy ship is absolute and, in the event of breach, his liability is engaged irrespective of fault. In English marine insurance law the reality of the concept of seaworthiness does not differ greatly from its understanding in carriage of goods by sea law.
By contrast, continental law of carriage of goods is governed by international set of rules like The Hague Rules or The Hamburg Rules, where the shipowner is not facing a strict liability but a due diligence liability. Article III rule 1 of the Hague-Visby Rules provides that the carrier is under an obligation to use due diligence to make the ship seaworthy. The meaning of due diligence is said to be close to the common law duty of care. In marine insurance law, the wording of article L. 172-13(1) does not refer directly to unseaworthiness but to the obligation of due diligence in avoiding the peril. The direct mention that seaworthiness is warranted by the Marine Insurance Act, 1906, contrasts with the indirect obligation to make a ship seaworthy using the duty of due diligence by the French insurance code. Pierre Lureau in his Commentary on the 1967 Act expresses the view that hazard is the core of marine insurance contracts. Consequently, "it is essential that the assured keep a positive action, that he undertakes to do all what is reasonable in order that all go well, after that the insurance field opens" he says.

- Unseaworthiness in marine insurance law

The Marine Insurance Act, in section 33(1), defines a warranty.
"[It] means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts."
Marine insurance warranties are confined to common law and their strictness as no counterpart in civil law. Whether or not it is material to the risk the assured must comply exactly with the terms of the warranty. In the event of a breach of warranty the underwriter is discharged form all liability as form the date of the breach. The Act goes on to say "a warranty may be express or implied". Implied warranties are peculiar to marine insurance law and are set out in sections 39-41. Probably the most important implied warranty appears in section 39, the warranty of seaworthiness.
English and French marine insurance law are comparable, at least, on the contents of the notion of seaworthiness. Unseaworthiness may relate to the condition of the vessel, the vessel’s failure to comply with the servicing requirements of its classification society, the number and competence of the crew, etc. Indeed, the vastness of factual situations of unseaworthiness is acknowledged in Section 39(4) M.I.A., which provides a very wide definition of seaworthiness:
"A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured."
According to article L. 172-19(2) C. Ass., the assured is obliged to use due diligence in everything related to the insured property, and especially in making the ship seaworthy. The Act really imposes an implied obligation of due diligence in all the contracts of marine insurance. The duty of due diligence can be analysed as a condition precedent to any recovery under the policy, unless expressly waived by it. The content of this primary obligation is clearly to make the ship seaworthy before sending it at sea. The idea of article L. 172-19(2) is corresponding to the one in section 78(4) of the Marine Insurance Act, in the context of sue and labour obligation. This formal obligation is sanctioned indirectly by the defence available to the underwriter under article L. 172-13(1) C. Ass. The underwriter will not be liable if he can prove the want of due diligence from the assured to prevent the subject matter of the risk.
"Les risques assurés demeurent couverts (…) à moins que l'assureur n'établisse que le dommage est dû à un manque de soins raisonnables de la part de l'assuré pour mettre les objets à l'abri des risques survenus."
Unseaworthiness has been described as being "the state of the vessel not fit to render the service that was required". The concept of unseaworthiness is sub-divided in French law, which uses two legal phrases to reflect both the physical state of the vessel and the state of mind of the shipowner. The unseaworthiness of a ship may result of either a "vice propre" excluded peril by law (L. 172-18(a) C. Ass.) and under the policy (article 3(1) of the hull policy form (98)) or a "vice caché" insurable. The later is either a latent or inherent defect not discoverable upon reasonable inspection. Hence, the element of fortuity required to recover from the "fortunes de mer" general peril is preserved and the loss is recoverable. At the contrary, vice propre (that traditionally goes with wear and tear, for the same reason) is a defect that is or should be known of the insured. There is an obvious lack of fortuity in this foreseeable peril. The Cour d'appel de Paris gave a comprehensive definition of the vice propre in The trawler "Smap". "The vice propre of the vessel is any cause of the loss or damage that is due to its condition or equipment, as building defect, defective installations, insufficient fitting out."
It should be noted that the underwriter challenging a claim less and less uses this excluded peril as a defence, for two reasons. First, the evidence of unseaworthiness is difficult to bring, while the vessel set sails with adequate navigation and safety certificates delivered by classification societies. Secondly, underwriters are more likely to plead the defence of want of due diligence provided by article L. 172-13(1) C. Ass.

- Unseaworthiness in voyage and time policies


First, it must be noted that, in English law, there is no continuing warranty of seaworthiness in either time or voyage policies. English shipowners are only required to make the ship seaworthy when sending her at sea, at the inception of the risk, while their French counterparts are to be careful at all stages of the voyage.

The Marine Insurance Act 1906, which codifies the common law principles about unseaworthiness in policies of marine insurance, draws a distinction between voyage and time policy. Section 39(1) imposes an implied warranty of seaworthiness in every voyage policy, whereas section 39(5) stipulates that there is no such implied warranty applicable at any stage of the adventure in a time policy.

Under a voyage policy there is a full warranty of seaworthiness of the vessel (section 39(1)-(4)). In all voyage policies there is an implied warranty that the ship be seaworthy at the commencement of the voyage, i.e. when the risk attaches. The ship must be "reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured". It may be argued that the origins and justifications of the warranty of seaworthiness in voyage policies are twofold. First, it may be seen as a disciplinary rule designed to protect other interests, as the safety of the crew and the commercial interests of the cargo owners or charterers. Secondly, it is the core rule of insurance law that the insurer should have all the necessary information on risks when underwriting them. It would be completely illogical to accept that the agreed risk could change before the inception of the cover period, i.e. the attachment of the risk to the voyage policy.

By contrast, the statutory exception of section 39(5) informs us that "in a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure". Indeed, in Gibson v. Small the House of Lords was not prepared to recognise such an easy defence to the underwriter while the assured as no means to ascertain the condition of his ship at the time when the risk attaches to the policy. "[The assured] may not necessarily know the position of his vessel at the commencement of the term (…). The ship may have lost anchor, or sails, rudder; part of the crew may have deserted, or be dead of malignant fever". The dramatic circumstances envisaged by Parke B. in his judgement may be outdated in the state of nowadays communication technologies, but the idea was convincing in equity. According to Gow, "there is nothing to prevent a time policy lapsing and a new one beginning when the ship is at sea, beyond the knowledge and control of her owner or manager as respects unseaworthiness ; that consequently insistence on this warranty in such a case might become inequitable."

Yet, the statement that there is no warranty of seaworthiness in time policies needs to be qualified. Indeed, the Act goes on to say that "where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness". Truly, there is no absolute warranty of seaworthiness in time policies, but 39(5) provides the underwriter with a defence in case of loss due to unseaworthiness with the privity of the assured.

Under French law, there is no need for distinction between the types of policy since the due diligence provisio applies at any stage of the adventure. Moreover, the due diligence obligation is considered relatively in the context of each particular adventure.

In conclusion, both sets of law tend to protect the underwriter from an unfair growth of the risk due to unseaworthiness, imposing on the assured a positive duty to make the ship seaworthy.


2 – The Breach of the obligation

Certainly, if a ship is unseaworthy, somebody will usually have been at fault, but not always. An assured that send an unseaworthy ship at sea is not complying faithfully with the contract of insurance, which aleatory character requires the risk to be fortuitous. Originally, the warranty of seaworthiness in marine insurance was recognised to deal with this unfair situation. However, when the assured has no means to know what is the condition of his vessel at the time of attachment of risk, the House of Lords, in Gibson v. Small decided that it should not be subject to the implied warranty of seaworthiness.



2.1 - Unseaworthiness, privity and fault

The idea of fault is embodied in the expression "manque de soins raisonnables", inasmuch as the want of due diligence is a breach of the assured’s primary obligation. It is interesting to note that, article L. 172-19 C. Ass. is entitled "obligations de l’assuré" and article 172-13 C. Ass. "faute de l’assuré", which means that the 1967 Act treats the breach of one of the principal contractual obligation of the assured - the exercise of due diligence – as a fault. The correlation between seaworthiness and fault is also supported by the case law that uses indistinctly the concepts of fault and of want of due diligence. More exactly, the courts find that a want of due diligence such as sending an unseaworthy ship to sea constitutes a fault leading to the discharge of the insurer’s liability under article L. 172-13(1) C. Ass. An early case ruled that the absence of the loading mark on the hull of the insured vessel amounted to a fault of the assured resulting in the unseaworthiness of the ship. Therefore, the insurer was relieved of liability for the consequential loss.

Section 39(1) imposing the positive obligation to make the ship seaworthy is the mirror image of the due diligence obligation in French law. While the implied warranty of section 39(1) is qualified with the standard of due diligence, section 39(5) sets the standard of privity describing rather a mental state than tangible acts. An assured may be guilty of negligence without being privy to the unseaworthy condition of the ship, as noted in The "Star Sea":

"Negligence there may have been in failing to ensure that the master was instructed, but "suspicion" in the minds of any of the relevant individuals that an incompetent master might have been used was simply not established."

Section 39(5) is a defence based on both the absence of risk and the misconduct of the assured. However, the English courts do not use the word fault to describe the conduct of the assured that warps the contract of insurance. The blameworthy conduct to send a ship at sea knowing her unseaworthy condition does not amount to wilful misconduct. The degree of fault required in order for an insurer to have a defence is fixed by the notion of "privity". Privity is a lesser degree of misconduct that does not require the responsibility for the unseaworthiness, but denotes knowledge thereof, including turning a blind eye. The conduct of the assured may be everything from negligence, to knowledge, to deliberate and reckless misconduct in sending the ship to sea in an unseaworthy state. Lord Denning M.R. analysed the meaning of privity in The Eurysthenes case asking for proof of "knowledge and concurrence" and Geoffrey Lane L.J. "knowledge and consent". Basically, the conduct of the assured is a link in the chain of causation leading to the eventual loss.


2.2 - Necessary compliance with the warranty and exercise of due diligence obligation?

The House of Lords in The "Good Luck" formally found that a promissory warranty in marine insurance is a condition precedent. The breach of such a contractual term discharges automatically the underwriter from his obligation and precludes recovery for any loss occurring after the date of the breach. In a voyage policy (whether on ship, goods or freight), independently of any decision of the insurer to treat the policy as terminated, a breach of warranty automatically discharges him from liability. Can a policy possibly depart from the warranty of seaworthiness?

The alteration of risk does not inevitably lead to the discharge of the insurer’s liability. In fact, the implied warranty of seaworthiness of section 39 M.I.A. may be avoided. Ultimately, the choice is on the insurer to decide whether seaworthiness is warranted or whether he accepts to underwrite an increased risk. In these circumstances the fault of the assured is not considered as a matter of public order. In order to avoid the application of the implied warranty of seaworthiness the parties to the contract of marine insurance may either waive the breach as allowed by section 34(3) but more likely use an exception clause. The parties can negative the implied warranty by the terms of the policy. In the past, some policy forms used to rule out the warranty by clauses such as "unseaworthiness and unfitness exclusion clause". The current Institute Cargo Clauses, which exclude the unseaworthiness and unfitness of the carrying vessel, cover the loss in the case of absence of privity from the assured.

On the other hand, insurance practice makes extensive use of the held covered clause in the event of a breach of warranty. The Institute Clauses for hull contain a provision, which hold the assured covered in the event of a breach of warranty at an additional premium to be arranged. Although the warranty of seaworthiness may be subject to a held cover clause, clause 3 I.T.C.H.(95) and clause 2 I.V.C.H.(95) does not allow such an interpretation. Indeed, the held covered clauses in the present policy forms for hulls are of limited application and do not consider the implied warranty of seaworthiness. Truly, the justification of the clause is to adapt the terms of the policy to the new practical reality of the risk in the course of the policy, and the warranty of seaworthiness plays only at the inception of the risk.

Article L. 172-13(1) C. Ass. is also an opt-out provision and the freedom of contract may deny the defence based on want of due diligence. In practice, the French policies of marine insurance neither displace this right of the insurer nor reinforce the provision in an express clause. Yet, the preamble of French policy for hulls refers to the application to the contract of French law and especially the provisions of the Code des assurances. Hence, Art L. 172-13(1) C. Ass. applies automatically. Moreover, the hull policies expressly exclude unseaworthiness from cover (article 3 (1)).

"Sont exclus de la garantie:

Les dommages, les pertes, les recours de tiers et les dépenses résultant de:

(…) vice propre, vétusté; (…)"

Chapter 2 –Unseaworthiness as a defence of the insurer

As a general rule, the onus of proving the defence lies on the party pleading it. The unseaworthy condition of the insured vessel provides the insurer with a defence, which varies widely according to the type of policy and the risks pertaining thereto.

The distinction between time and voyage policies becomes crucial when it comes to plead unseaworthiness in order for the underwritter to avoid liability. An English underwriter will always have to prove a minimum (section 39(1)) - the unseaworthiness of the ship – to a maximum (section 39(5)) the privity of the assured to the unseaworthiness of the ship that cause her loss.

Under French law, a breach of article L. 172-13(1) C. Ass. involves a dissimilar burden of proof. Indeed, it imposes a heavier evidential onus on the insurer that seeks a defence. Consequently, from the insurer’s point of view warranties are more protective of his liability. The French underwriter must show that (a) the loss was the result of a foreseeable risk in respect of the condition of the ship and (b) the loss was directly caused by the want of due diligence of the assured in preventing the subject-matter from the risk. Practically, the first part of the twofold evidence test requires the assured to have acted as a prudent uninsured shipowner, the lack of ordinary care barring recovery. The insurer is protected if he is able to show that the risk was foreseeable and that the assured failed to prevent it, through the exercise of due diligence. In The "Scravick" the negligence of the assured failing to control the condition of the propeller shaft, despite the recommendations of the Bureau Véritas, amounted to a want of due diligence. Consequently, the assured failed the claim.

1 – Evidence of unseaworthiness

Evidence of seaworthiness is not easily available to the underwriter, who seeks to establish a defence under section 39 M.I.A. Despite the general principles of the law of evidence, the courts are likely to draw inferences in favour of the insurer. Moreover, the case law has built a significant network of presumptions. The breach of article L. 172-18(a) and the defence of article L. 172-13(1) C. Ass. require that the insurer proves positively that the assured did not exercised due diligence in order to prevent the loss. However, in certain circumstances French courts have also established presumption of unseaworthiness.

- Burden of proof

It is long established that the burden of proving unseaworthiness ordinary rests on the insurer (Pickup v. Thames and Mersey Insurance Co Ltd). Mason J. acknowledged that: "It is universally stated that the onus of proof of unseaworthiness is on the insurer". However, in some cases the general principle of "he who alleges must prove" may be set aside and replaced by the maxim res ipsa loquitur.
The mere fact that the insured vessel is lost in unexplained circumstances (in favourable weather condition or shortly after sailing) may be prima facie evidence of her unseaworthiness. Yet, the defence of the underwriter must fail unless supported by sufficient weight of evidence in its favour (Anderson v. Morice). It is possible for the assured to succeed in rebutting the presumption of unseaworthiness (Ajum Goolam Hossen case).
French courts may also draw inferences and raise presumption of unseaworthiness in unclear circumstances of loss. In The "Arno" case, despite the fact that the ship’s documentation was in order, the sinking of the ship in good navigation conditions could not result from anything else than unseaworthiness. In The "Adrien-Pla" case, shortly after sailing from a Mauritanian port and in calm seas conditions, the trawler shipped a significant amount of water, resulting in her total loss. The court was ready to draw a presumption of unseaworthiness from the facts that the ship was neither respecting the legal requisites on safety nor the recommendations of the classification society (Bureau Véritas). Moreover, a survey asserted that the loss was likely to be due to improper repairs. In fact, a couple of months before, insufficient repairs were carried out making the ship unseaworthy at the commencement of the voyage.

- Standard of proof

In cargo policies, the implied warranty of seaworthiness declared in section 39(1) has been expressly waived by the "unseaworthiness and unfitness exclusion clause". But this is unless "the assured or their servants are privy to such unseaworthiness or unfitness at that time the subject-matter insured is loaded therein". Hence, to succeed with the defence under a cargo policy the underwriter must show (a) the unseaworthiness or unfitness of the vessel and (b) the privity of the assured or their servants at the time of loading. In international trade practice, it is unlikely for the cargo interest to have any idea of the condition of the ship. This may explain the extension of the privity-based exclusion to the servants of the assured that are carrying out the loading process. However, the defence may play in regard to regional trade where shipowners and cargo owners deal with one another on a regular basis. Nevertheless, clause 5 I.C.C. is an exclusion clause that favours the cargo interest in most cases. A French case, ruled that the "unseaworthiness admitted clause" did not provide the assured cargo owner with a cover in the event of his privity to the unseaworthy condition of the vessel at the inception of the voyage.
In voyage policies on hull the assured is to comply with the warranty of seaworthiness, condition precedent to the underwriter’s liability. There is no prerequisite to prove that the unseaworthiness is due to the fault of the assured, or that the loss was not fortuitous. Nor does it matter that unseaworthiness was the cause of the loss. The insurer is automatically discharged as from the date of the breach. The warranty of seaworthiness – as the duty of due diligence - enjoins the assured not to send the insured ship at sea unless she is fit to encounter the ordinary perils of the seas. The standard of care required from the shipowner fixes the standard of proof of the underwriter. The practical evidential test of seaworthiness is twofold. The first is described in section 39(4), which defines the seaworthiness of a ship by her ability to encounter the ordinary perils of the sea.

The second criterion refers to the standard of the ordinary, careful and prudent shipowner
In French law, the standard of due diligence required is the one of the reasonable prudent owner: le bon père de famille. However, courts are aware that they should not demand a very high standard of exercise of due diligence and that the general rule of article L. 172-13 C. Ass. is that the fault of the assured is covered. The insurer is to prove on the balance of probabilities that the loss was foreseeable and that the assured failed to be prudent or turned a blind eye to the potential unseaworthiness of the ship. A similar requirement may be found with the defence of unseaworthiness in time policies. To avoid liability by means of section 39(5) M.I.A. the underwriter must, inter alia, demonstrate the privity of the assured to the unseaworthy condition of the ship he sent at sea.
The warranty of seaworthiness in voyage policies is absolute as regards the strict compliance of it, but relative as regards the standard of seaworthiness required. The ship must be reasonably fit in all respects for the purpose of the particular voyage insured. In like manner, French authors acknowledge that seaworthiness is relative, i.e. it ought to be analysed in the context of the adventure insured and perils related to it. In practice, a trawler employed in regional fishing will not have to meet the same standard of fitness than a scientific expedition craft in the Arctic.
Furthermore, a warranty in English law enables, once its breach is evidenced, the insurer to be automatically discharged of his obligation to indemnified the assured as from the date of the breach, without any further step to be taken. Conversely, the legal obligation in article L. 172-13(1) C. Ass. comes into effect with litigation. The underwriter will have to prove, before the court, that the loss was caused by the want of due diligence from the part of the assured.
In time policies, the burden of proof on the insurer goes one step further. In order to defend successfully his case, the insurer must show that (a) the ship was sent to sea in an unseaworthy state with the privity of her owner and (b) that the loss was attributable to the initial unseaworthiness.

- Unexplained losses, a comparison of two cases


In The "Popi M", the vessel had sunk in good weather and calm seas conditions and the assured sought to recover on a time policy either under "perils of the seas" or "negligence of the master and crew" headings. Although various explanations on the cause of the loss emerged in the pleas, none of them was satisfactory. Left in doubt, the court found for the underwriter. The House of Lords’ reasoning breaks down the evidential burden borne by the claimant. The assured who tries to recover for a loss caused by perils of the seas must show fortuity plus a causal link between the loss and the insured peril. Since the court does not look at the immediate cause of the loss but at the proximate cause of the loss, an assured who is unable to make the proof of the later inevitably fails his case. In French law, unless the underwriter could prove that the proximate cause of the loss was an excluded peril the unascertained losses are presumably covered.

Further, while causation is irrelevant in the context of English marine insurance warranties, French underwriters – and time policy underwriters - need to show a causal link between the want of due diligence and the loss. Under article L. 172-13(1), the insurer is clearly liable to indemnify the assured unless he can prove that the damage was caused by a want of due diligence from the assured.


2 – Causation and unseaworthiness

A plea based on the defence of unseaworthiness will vary considerably according to the nature of the policy. The automatic discharge of liability following a breach of the warranty of unseaworthiness in a voyage policy contrasts with the causative evidence that the insurer must bring under section 39(5) M.I.A. Causation is obviously highly relevant in the context of time policies.


2.1 - Causation and implied warranty of seaworthiness

Inasmuch the voyage policies are concerned the whole doctrine of causation and the rule of causa proxima, non remota, spectatur does not ordinarily apply. In fact, for a ship to be unseaworthy at the commencement of the voyage constitute a breach of the implied warranty of seaworthiness for which the insurer is automatically discharged as from the date of the breach. The underwriter does not need to show that unseaworthiness was a cause of the loss. The defence merely lies with the warranty and the legal effect of its breach, as Mr Mustill J. brilliantly analysed in The "Miss Jay Jay" case .

"Under a voyage policy, the assured warrants that the vessel will be seaworthy at the commencement of the voyage. If the warranty is broken, any claim in respect of a casualty occurring during the voyage will inevitably fail without the need for any complex analysis of the nature of the peril of the sea, or the doctrine of causation."

Nevertheless, causation may be vital in a voyage policy when the loss is due to unseaworthiness. In fact, where the unseaworthy condition of the vessel only arises after the commencement of the voyage, the insurer can only rely on section 55 of the M.I.A. in order to exclude his liability. Consequently, it would be for the court to decide what was the proximate cause of the loss in order to determinate whether it was an insured peril. Indeed, the gist of section 55 is that the insurer is only liable for losses proximately caused by a peril insured against.


2.2 - Concept of causation in time policies

The underwriter is protected under section 39(5) in the situation where the loss was attributable to unseaworthiness to which the assured was privy. The use of the expression "attributable to" is directly connected with the linear causation approach characteristic to the pre-1906 law of marine insurance. Historically, the adoption of the phrase "attributable to" was the result of the linear causation perspective used in the pre-1906 authorities. In Dudgeon v. Pembroke the insured vessel was sent to sea despite the fact that she was shipping a significant amount of water. In Lord Penzance’s opinion peril of the sea was the immediate, i.e. proximate cause of the loss and unseaworthiness a remote although "substantial" cause that must be disregarded. In other words, peril of the sea was the proximate cause of the loss in time, which relegates the unseaworthiness to the causally remote category of causes. In this respect the use of the phrase "attributable to" aimed to enable the courts to free the insurer from liability whatever the place of unseaworthiness in the arrangement of causes.

It should be noted that the drafting technique used in section 39(5) is no longer justified since The Leyland case and the recognition of the dominant cause approach.


2.3 - Multiplicity of causes of the loss

Casualty at sea is likely to result from a combination of factors constituting a causation net. In the event of only one being the dominant or proximate cause, the question is whether such a loss is covered by the contract of insurance. However, it can happen that the loss was precipitated by two or more proximate causes of equal or nearly equal efficiency. Lord Dunedin noted accurately in The Leyland case that unseaworthiness "which may assume according to the circumstances an almost infinite variety, can never be the sole cause of the loss". Since, the insurer has agreed to indemnify the assured for a loss caused by an insured peril under the policy, common law accepts that if one of these causes is insured against and none of the others is expressly excluded the insurer is liable.

Unseaworthiness as a proximate cause of the loss is illustrated by three judgements of the Court of Appeal regarding time policies. On one hand, in Thomas and Son Shipping, the ship was lost after having set sails in an unseaworthy condition because of insufficient crew. However, peril of the sea, an insured risk, was also a proximate cause of the loss. The underwriter refused to indemnify the assured, arguing that the loss was proximately caused by the unseaworthiness of the ship to which the assured was privy (section 39(5)). The insured peril was of no help for recovery, because the assured had by his own blameworthy conduct brought the loss under an excluded peril. In Wayne Tank & Pump Co the court decided that where there are two concurrent causes of loss one of which is excluded, the excluded peril is presumed to override the other. Consequently, the insurer can avoid liability. On the other hand, when there are two concurrent causes of loss, none of which being expressly excluded under the policy, the assured is able to recover. In The "Miss Jay Jay" case, the absence of privity of the assured to a defect making the ship unseaworthy enabled him to recover on the insurance from a loss caused by perils of the sea. On the issue of fortuity of peril of the sea, the Court of Appeal held that considering the size and configuration of the new-built yacht, a careful shipowner could not have reasonably foreseen the defect in the hull. Although the weather was unexceptional, the cause of the loss was unexpected, and the fortuity criterion met.

In The "Adrien-Pla" case, the court end up finding that the sinking was resulting from the combination of two causes, one of them insured (peril of the sea) and the other excluded (unseaworthiness). The immediate cause of the loss was the entry of seawater in the hull, but another cause was the unseaworthiness of the vessel. Eventually, the court decided the duality of causes ought to allow an apportionment of liabilities. The assured could recover an indemnity of 50% of the insured value of the ship.
Conclusion

The English and French approach towards the determination of risk in marine insurance law definitely differentiates the two systems of indemnity. Indeed, the English named perils policies are favoured by the insurers who avoid surprises once a loss has occurred. The ascertainment of the cause of the loss must reveal a peril insured under the policy to allow recovery. However, the English restrictive basis for indemnity underwent the competition of the continental underwriters who were providing all risks policies. Consequently, the Institute of London Underwriters drafted an all risks form of policy in 1982, the I.C.C. (A). Still, the cargo owner contracting such a policy is not covered against all misfortunes, and indeed there are some exclusion clauses. The reason being that underwriters' liability is never infinite.

The boundaries of the general liability of insurers in the United-Kingdom like in France are remarkably set on the idea of the uninsurable fault of the assured. In the past, the fault, negligence or barratry of the servants or agents of the assured used to discharge the insurer of his liability. The assured undertook a non-delegable duty to carry the marine adventure carefully and skilfully. However, the insurance markets under the pressure of shipowners decided at an early stage to insure such risks. Indeed, the Marine Insurance Act 1906 and the Institute Clauses like the French Act of 1967 specifically insure the negligence of the master and mariners. Barratry is still problematic especially for evidential reason, which makes it an excluded peril under the I.C.C. (B) and (C). However, it is expressly insured against under the other English policies and article L.172-13(1) and L.172-14 C. Ass.

The insurance of the fault of the assured is an interesting issue. First, it was strongly denied any kind of cover. Indeed, it was apprehended as against the purpose of the contract of insurance, since it was unbalancing the contractual obligations at the disadvantage of the underwriter. Nowadays, the fault of the assured may incidentally be covered if it is not the proximate cause of the loss and if it does not breach the obligation of due diligence.

Moreover, some actions of the assured are definitely outside the scope of insurance. The failure by a shipowner to send a seaworthy ship at sea is a gross or even culpable fault, totally against the basic principles of safety. Therefore, unseaworthiness is never a peril insured against, even if in some cases it does not actually bar recovery. Surely, the case of wilful misconduct precludes any right to indemnity. Indeed, to scuttle deliberately one's ship in order to found a claim on the insurance is more than a breach of the contractual obligation is a criminal offence. These two legal exclusions of unseaworthiness of the ship and wilful misconduct of the assured are justified by the policy reason not to endanger other people's interests and lives, in order to claim on the insurance.

Finally, the supposedly "certainty of the civil law" and the "flexibility of the common law" are not so obvious in the law of marine insurance. Both sets of rules are settled and based on recognised principles. Moreover, practitioners regularly incorporate new wording to the standard forms of policy in order to enable accuracy of the law. Although based on different legal regimes, both English and French marine insurance laws define clearly the limits of the insurance. While the legal tools to protect the insurer vary, the excluded perils remain the same.





Appendices

Appendix 1: Marine Insurance Act 1906

Extracts

Appendix 2: Titre VII, Code des Assurances

Extracts

Appendix 3: Included and Excluded Losses in the Institute Cargo Clauses (1982)


By Sophia J. Quentin

Appendix 4: Institute Time Clauses Hulls (1995)

Extracts

Appendix 5: Police Française d’Assurance Maritime sur Corps de Tous Navires, à l’exclusion des navires de pêche, de plaisance, des voiliers et des navires à moteur auxiliaire (Imprimé du 1er janvier 1998)

Extracts