In October 1996, X, an importer of pharmaceuticals, asked insurance company Z for a proposal for carrier liability insurance (open policy). It was requested that the proposal provide cover similar to Institute Cargo Clauses A. The matter was conducted through insurance broker Y.

The policy was to cover the import and domestic sale of pharmaceuticals that were to be carried by road, rail, sea and air. On that basis, an insurance contract was made with Z in March 1997. The open policy was written by Z on the basis of Institute Cargo Clauses A. The policy appeared to cover "any carriage of goods falling within the business areas of X". The products were described as "drugs (primarily tablets)".

At the time when the policy was written, X had marketing authorization for the import of various medicinal products. According to the directions of the Danish Medicines Agency, these products had to be kept in cold storage (ie, between two and eight degrees celsius) or cool storage (ie, between eight and 15 degrees celsius). The products were carried in special refrigerated boxes, but without any other special storage.

In early 1998 X was also granted a marketing authorization for the import of insulin. According to the medicines agency this must be stored in a refrigerator, at between two and eight degrees celsius.

On February 6 1998 Y informed Z that X would begin to import insulin, and that it would be carried in cold storage from Spain. Y inquired about the premium for insurance cover for this type of carriage. Z then made a proposal for cover of refrigerated carriages from Spain, stating that the insurance policy should be subject to domestic cold storage conditions and extended cover for refrigerated carriages. Z also specified certain precautions that should be taken in order to obtain insurance cover. Y presented the proposal to X, who found it unacceptable. Y asked for the insulin to be covered by the existing open policy instead.

On July 13 1998 Z sent a new open policy to X, excluding any damage to temperature-sensitive goods from insurance cover. Y informed Z on July 16 that the exclusion was not acceptable. Z sent another open policy to X on July 22, based on Institute Cargo Clauses A, without the temperature-sensitive goods exclusion. In the meantime, on February 28 1998, X had begun a carriage of insulin from Spain, and had entered into an agreement with Z concerning distribution of the insulin to wholesalers and chemists in Denmark.

The insulin was in Z's keeping during carriage on March 5 and 6 1998. It was exposed to frost and X had to recall the insulin from its customers. Z acknowledged liability and paid damages of Dkr29,917. However, the entire damage was assessed at around Dkr600,000. Z denied liability for this sum, stating that the damage was not covered by the insurance based on Institute Cargo Clauses A.

The Maritime and Commercial Court found for Z on the ground that, in light of Article 185(2) of the Convention of Danish Marine Insurance, X's open policy (which was based on Institute Cargo Clauses A) only covered damage caused by temperature change if the change was caused by an 'accident'. As there was no evidence of the cause of the temperature change, the open policy based on Institute Cargo Clauses A did not cover the damage.

For further information on this topic please contact Jesper Windahl at Bech-Bruun Dragsted by telephone (+45 7733 7733) or by fax (+45 7733 7744) or by e-mail ([email protected]).

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