When the Ever Given cargo ship was finally refloated on 29 March 2021 the spokesperson for the Suez Canal Authority was jubilant. It had been estimated that for every day the ship blocked the Suez a $6 billion hit to global trade resulted. While the full implications of the blockade for the global supply chain are only beginning to become apparent, there’s no doubt that insurance claims will come thick and fast – relating not just to cargo on board the Ever Given itself but also to cargo on all those ships that were delayed because of the canal’s closure. The specialist shipping and maritime litigation lawyers at ParrisWhittaker in the Bahamas advise on all aspects of shipping law. Here we look at some of the insurance questions raised by the Suez blockade, and consider generally the issues ship owners and businesses that transport goods by sea should bear in mind.
Can I Claim For Losses Caused By Delay?
It wasn’t just the goods in containers on board the Ever Given whose transit was severely delayed in March 2021. Hundreds of other vessels were held up at the entrance to the canal as attempts were made to re float the distressed ship. Many of these vessels waited until the blockage was cleared before proceeding through the canal. Many others sought alternative, longer routes to get to their destination.
In all cases goods faced significant delays. For the owners of these goods the question of making a successful claim is clouded somewhat by the fact that the majority of marine cargo insurance excludes or limits losses caused by delays. The widely used Institute Cargo Clauses (ICC) derive from English law, specifically the UK’s Marine Insurance Act, 1906. Policies tend exclude:
‘…loss damage or expense caused by delay, even though the delay be caused by a risk insured against..’
It will be necessary to check the precise wording of policies to see if this exclusion has been removed. (In the context of Covid19 which had already led to widespread transport delays in 2020-2021, and the anticipation of claims arising from these delays it may well be that many policies covering Ever Given cargo had been appropriately endorsed to include claims for delay.)
General Average
The ability of cargo owners to claim for losses arising from the Ever Given blockage has been complicated by the declaration by the vessel owners of ‘general average’. This is a widely recognised principle of international shipping law under which every cargo owner helps cover the losses of all – even if their own cargo is undamaged. In the context of the Ever Given accident the owner’s reliance on the general average rule will have the net effect of delaying recovery of freight from the vessel and lengthening the time it will take to conclude settlement of claims. That’s because once general average has been declared loss adjusters are required to assess the value of each batch of cargo before calculating the liability of each cargo owner under the general average scheme
Was There Due Diligence?
The whole Ever Given debacle is a timely reminder of the perils of shipping generally and the need for ship and cargo owners to exercise due diligence ahead of any voyage. Of course an exercise of due diligence is advisable before entering any commercial transaction but it’s essential in shipping and maritime transactions where the value of goods involved is so significant.
From a ship owner’s perspective carrying out due diligence to ensure a vessel is seaworthy before a voyage can provide protection against claims. That’s because under the US Carriage of Goods by Sea Act, recovery of damages against a ship carrier or owner is limited in the event of navigational errors so long as due diligence was performed ahead of the voyage.
Does Force Majeure Apply?
Some reports suggest that the Ever Given ran aground as a result of a sudden sandstorm. If this is the case it may be possible for the ship owner to seek to avoid any liability by relying on the concept of force majeure. However it’s not always easy to rely on force majeure clauses – everything comes down to the skill of the lawyer drafting the clause and the circumstances of the particular case.
How We Can Help
The Ever Given incident is a remarkable, almost unique case with multiple jurisdictions and sometimes contradictory international legal rules at play. It’s clear that the ramifications of the debacle will be felt for years to come, and be of interest even to those ship owners and cargo interests not directly affected.
We believe the outcome of the various claims and disputes resulting from the Ever Given grounding in March 2021 will have a general application to anyone engaged in international shipping and transportation. It’s crucial to get legal advice on details of your insurance polices and due diligence procedures for example. Schedule a meeting with a lawyer at ParrisWhittaker today to discuss any of the issues we have raised.
