In Global Process Systems Inc & Anor v Syarikat Takaful Malaysia Berhad [2009] EWCA Civ 1398, the Court of Appeal overturned the first instance judgment of the Commercial Court (previously reported here), and found that the cause of the loss was not ‘inherent vice’ (a risk excluded under the claimant insured’s ‘all risks’ policy) but ‘perils of the sea’, a covered risk.

The insured’s claim was for the loss it incurred when three legs from one of its oil rigs fell off whilst being towed from Texas to Malaysia. The insurer claimed the loss of the legs was due to inherent vice, whilst the insured submitted that the immediate cause of loss was a leg-breaking wave (a peril of the sea). The insured accepted that the weather experienced during the tow was within the range that could reasonably have been contemplated.

The Court at first instance said that the test for inherent vice was whether the cause of the loss was an inability to withstand the ordinary incidents of the voyage, including the weather reasonably expected. On appeal, the test was narrowed. The Court considered the test to be not whether the weather could reasonably be anticipated, but whether it would be bound to occur as a usual incident of the type of voyage being undertaken.

On the facts before the court, the damage was found to have been caused by the perils of the sea, not inherent vice, and was, as a result, not excluded under the insurance.

The court conducted a detailed examination of previous cases and provided useful commentary on the principle of inherent vice. Our full analysis of the court’s decision will be set out in our March issue of Insurance & Reinsurance Review.