This blog is written by Bhavana Ashok, a Third-Year Law student of The National University of Advanced Legal Studies, Kochi

In maritime law, the concept of “perils of the sea” plays a crucial role in determining liability and insurance coverage for losses or damages occurring during sea voyages.

Definition and Scope

Marine insurance is a type of insurance where any peril or risk can be insured against when agreed upon by the parties for an insurance contract. Therefore, as long as any peril is expressly covered by the contract, then any such loss can be indemnified against the loss. The term “perils of the sea” generally refers to natural accidents or disasters peculiar to the sea, which do not result from the ordinary action of the elements or from circumstances that could have been reasonably anticipated or guarded against. “Peril” or “Risk” is one of the key parts of marine insurance.[1] That describes a collection of facts rather than a strict definition. There is no law expressly specifying the scope of a peril. It often depends on what the parties agreed to in the contracts and decisions by courts of law.

Features

Unforeseeable

It must be distinct from the natural and ordinary operation of the forces of the sea or the air[2]. Yet ultimately, more often than not, it is decided on a case-to-case basis. In Magnus v Bettemer, the court decided that the ship sustained damages due to being grounded at low tide is not a peril of the sea[3]. Therefore, it must be unforeseeable and extraordinary. However, as explained by the House of Lords in British and Foreign Marine Insurance Co. Ltd. v. Gaunt[4], the phrase does not cover all eventualities and damage due to wear and tear. In addition to this, inevitable deprecation would not be included in its ambit for purposes of insurance. Some of the marine accidents often associated with perils include Collision, Foundering, and Grounding despite including an element of negligence by the master or crew. Normally, even when the underwriter assumes to indemnify the owner against all perils, they do not assume to indemnify against the negligence of the crew or captain unless barratry[5]. This is where the rules originated to assist the courts in gauging the responsibility of the insurer to indemnify the loss based on the proximity.

Accident

Additionally, not every accident is considered to be a “peril” as clarified by Lord Bramwell that a peril on the ship is different from a peril of the ship and hence would not constitute a peril[6]. Subsequently, in the landmark case of Thomas Wilson, Sons & Co v Owners of Cargo per The Xantho or popularly known as The Xantho[7], Lord Herschell defined perils of the sea as, all perils, losses, and misfortunes of a marine character, or of a character incident to a ship as such. This case reinforces the fact that what might happen must be an accident in order to classify as a peril. This definition has been widely accepted and applied in subsequent cases across various jurisdictions.

Proximate

The peril must be the proximate cause of the loss. This is in line with the principle of Causa proxima non remota spectator. Although perils depend on the facts and circumstances of a case, 2 Rules would be applied to identify whether the underwriter must indemnify for the peril. Firstly, the courts look into where the loss is not proximately caused by the perils of sea, but is directly referable to the negligence or misconduct of the master or other agents of the assured, not amounting to barratry. Secondly, the loss ought to be assigned to the immediate cause[8]. We see this approach being used in the case of Laho Ltd v QBE Insurance (Vanuatu) Ltd[9], where it was held that if it was known that the vessel was seaworthy and she disappeared with the crew, then on the balance of probabilities she must have sunk as the most proximate cause must have been due to the perils of the sea.

Therefore, it is only through a myriad of decisions and research academic has the law of this scope has been addressed by the courts which have been applied to the law till day.

Interpretations by the Courts in Different Jurisdictions

As this concept is one that is primarily developed through the courts, it is integral to understand the differences in how the courts of various states interpret it.

United States of America

In the U.S., the interpretation of perils of the sea has been influenced by the Carriage of Goods by Sea Act (COGSA). In J. Gerber & Co. v. S.S. Sabine Howaldt[10], the court held that weather conditions must be “catastrophic” to qualify as a peril of the sea. In an instance where negligence has been established, the defense of “peril of the sea” is unavailable.

United Kingdom

UK courts have generally adopted a more flexible approach by recognising even foreseeable events as perils of the sea if their specific occurrence or intensity was extraordinary in line with the Hague-Visby Rules. Some of the most important precedents have been churned out of the English Courts. One of the key criteria considered by English courts are foreseeability being a supervening event[11].

Australia

In contrast to these states, the Australian courts have emphasized the importance of context. In Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad[12], the High Court of Australia held that what constitutes a peril of the sea depends on the nature of the voyage, the vessel, and the cargo. It must be read as a whole with the Hague Rules and not divorced from its context.

India

A Peril of the sea is considered to be whatever is an insured peril in the contract, often read with Section 55 of the Marine Insurance Act. It is often the courts that look into which instances not specifically mentioned fall under the scope of peril as seen in the case of New India Assurance Co.Ltd vs Priya Blue Industries Pvt. Ltd[13].

Conclusion

The concept of “perils of the sea” remains a complex and evolving area of maritime law and as global trade continues to grow and face new challenges accelerated by climate change and technological advancements, the interpretation and application of this concept are likely to change over the course of time.

References

[1] Robert Merkin, Colinvaux’s Law of Insurance, (first published 1997) 89

[2] Everett V. Abbot, Perils of the Seas. A Study in Marine Insurance, HLR, Nov. 25, 1893, Vol. 7, No. 4 (Nov. 25, 1893), pp. 221-230

[3] Magnus v. Buttemer, i i C. B. 876 [1852] Maule, J., at p. 882.

[4] (1921) 2 AC 41.

[5] 2 Arn. on Inis. (6th ed., London, I887; I Pars. on Ins. (Boston, 1868)

[6] Thames, &c. Ins. Co. v. Hamilton, L. R. I2 App. Cas. 484, 495 (I887).

[7] The Xantho [1887] 12 App Cas 503

[8] 2 Hlodgson v. Malcolm [1806] 2 Bos. & P. N. R. 366

[9] Laho Ltd v QBE Insurance (Vanuatu) Ltd [2001] VUSC 130; Civil Case 24 of 2000 (2 April 2001)

[10] J. Gerber & Co. v. S.S. Sabine Howaldt, 437 F.2d 580 (2d Cir. 1971)

[11] Marel Katsivela, The treatment of the sea peril exception of the Hague-Visby Rules in common law and civil law jurisdictions, WMU J Marit Affairs (2017) 16:19–36

[12] Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad [1998] HCA 65

[13] New India Assurance Co.Ltd vs Priya Blue Industries Pvt. Ltd 2011 (4) SCC 231