In the case of Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, the Supreme Court was asked to consider whether the proximate cause of a loss was the perils of the sea or the inherent vice.

Global Process Systems (“GPS”) purchased an oil rig which they required to be towed from Texas to Malaysia. During the course of the voyage, three of the rig’s legs broke. The experts agreed that the loss occurred as a result of fatigue cracking which had developed as a result of the motion of the sea in addition to a final “leg-breaking” wave. However, it was common ground that there had been nothing unusual about the weather conditions during the voyage.

The marine cargo policy in question covered “all risks of loss and damage to the subject matter insured” but excluded “loss, damage or expense caused by inherent vice or nature of the subject matter insured.” At first instance it was held that there was an inherent inability of the legs to withstand the normal incidents of the voyage and so the proximate cause of the loss was inherent vice. This decision was overturned by the Court of Appeal. The Supreme Court dismissed the insurers’ appeal from the Court of Appeal’s decision and held that the proximate cause of the loss was a question of fact to be determined applying the common sense of a business or sea-faring man. The exceptional set of circumstances combined with the “leg-breaking” wave in this case was held to be sufficiently external and fortuitous to support a finding that inherent vice was not the proximate cause of the loss.

Although this decision specifically concerned marine cargo insurance, it has a wider interest in the context of property insurance and reinsurance, as it may be inferred that, where an accident or casualty which is sufficiently external and fortuitous acts to cause a loss, inherent vice will not be the proximate cause of that loss.