Legal position under the insurance policy

The consignment in this case was insured by the seller, Sweet, to Floyd’s Insurance Plc under a voyage policy in accordance with Institute Cargo Clauses B. In CIF, the seller is required to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage thereof. Thus, Sweet, the seller, acted properly in contracting for the voyage policy insurance with Floyd’s Insurance Plc and in paying for the insurance premium.

However, the seller in CIF is only required to obtain insurance on a minimum cover (price provided in the contract plus ten percent – 110%), if the buyer Baxwell wanted greater coverage, an express agreement must be made between him and the seller, Sweet, or Baxwell should have undertaken his own additional insurance arrangements. When the buyer so requires, the seller would have the obligation to provide war, strikes, riots, and civil commotion risk insurances if procurable, albeit at the buyer’s expense.

The contract on insurance, as assigned by the seller to Baxwell, entitles the latter to claim directly from the insurer, Floyd’s Insurance Plc. The seller may assign the insurance policy to the buyer, Baxwell, or to the bank, Westland Bank. Thus, while the insurance policy was initially in the name of the seller, Sweet, pursuant to the CIF terms, the policy is then transferred to the buyer, Baxwell, and the seller loses the right to claim under the policy. Sweet should have taken out additional insurance to cover for its own risks since the insurance he took out was for Baxwell’s benefit as required by Incoterms.

In this case, the policy taken out by Sweet was in accordance with Institute Cargo Clauses B. This includes coverage for loss or damages to goods as provided in Institute Cargo Clauses C attributable to the following instances: ?    accident to the conveyance (such as fire, explosion, stranding, grounding, sinking, capsizing, overturning or derailment), ?    collision of vessel, ?    discharge of cargo at port of distress, ?    loss or damage to goods caused by jettison and general average sacrifice, ?    general average and salvage charges.

In addition to those risk covered by Clauses C listed above, Clauses B also provides for coverage for the following instances: ?    loss or damages to goods attributable to earthquakes, volcanic eruptions or lightning, ?    washing overboard, entry of water into the vessel, hold, conveyance, container or place of storage, and ?    total loss of any pack lost overboard or dropped while loading or unloading the cargo. Pursuant to Institute Cargo Clauses B, Floyd’s Insurance Plc then becomes liable for any loss or damage to the cargo caused by fire and total loss of any pack lost overboard or dropped while loading or unloading the cargo.

In the instant case, Baxwell, the buyer, has a right of recourse against Floyd’s Insurance Plc for the destruction of the 5000 books due to the fire in the ship. Floyd’s Insurance Plc would be liable under the voyage policy, with right of reimbursement from the carrier whose negligence was the cause of the fire. Baxwell can also claim for the value of the goods which were completely destroyed upon the dropping thereof into the water while loading of the cargo in England, due to the negligence of the carrier’s crane driver, is not within the insurance coverage.

Even though Floyd’s Insurance Plc can argue that the goods were not lost, but were irreparably damaged, such damage rendered the cargo, which were books, useless. Under the voyage policy, Floyd’s Insurance Plc would still be liable, but again, it has the right to seek reimbursement from the carrier since the damage to the goods was, again, due to the negligent acts of an employee of the carrier, Cargolines.

As the employer, Cargolines should have exercised diligence in the selection and supervision of its employees, and it is liable for loss and damage to goods caused by the negligence of its employees. Thus, the buyer Baxwell has a right of recourse against the insurer, Floyd’s Insurance Plc, under the insurance policy. Upon assignment of the policy to Baxwell, the seller Sweet no longer has a right to claim against Floyd’s Insurance Plc under the same policy unless Sweet took out additional insurance coverage to protect his own interests.