INSTITUTE MALICIOUS DAMAGE CLAUSE (01/08/1983)
In consideration of an additional premium it is hereby agreed that the exclusion ‘deliberate damage to or deliberate destruction of the subject – matter insured or nay part thereof by the wrongful act of any person or persons” is deemed to be deleted and further that this insurance covers loss of or damage to the subject – matter acts vandalism or sabotage, subject always to the other exclusions contained in this insurance.
The cover granted by this clause falls into two parts:
a) The exclusion (by Clause 4.7 in Institute Cargo Clauses (B) and (‘C) of ‘deliberate damage to or deliberate destruction of the subject matter insured or any part thereof by the wrongful act of any person or persons” is deleted and
b) Positive cover is granted against loss or damage caused by ‘malicious acts, vandalism or sabotage”.
It will be appreciated that the extension of the cover granted by this clause will benefit an assured whose goods are covered under restricted conditions but such extension will not be required when the goods are insured under “all risks” conditions.
A malicious act is one performed out of spite or ill –will, or something of the like. By that definition, vandalism and sabotage are merely examples of malicious acts.
Coverage against loss or damage caused by persons action maliciously used to be provided by the Institute Strikes Clauses, but this now not the case so far as cargo is concerned. Instead, the current Institute Strikes Clauses (Cargo) provides cover for loss or damage caused by “any terrorist or any person acting from a political motive”, but this is not the same thing at all. Consequently, unless the assured has an “all risks” marine policy, he will need, in addition to the Institute War Clauses (Cargo) and the Institute Strikes Clauses (Cargo) the Institute Malicious Damage Clause to provide himself with all – round cover.
B. INSTITUTE THEFT, PILFERAGE AND NON – DELIVERY CLAUSE
(For use only with Institute Clauses) (01/12/1983)
In consideration of an additional premium, it is hereby agreed that this insurance covers loss of or damage to the subject – matter insured caused by theft or pilferage, or by non – delivery of an entire package, subject always to the exclusions contained in this insurance.
Once again, this additional clause will not be required by an assured who has taken out a policy on “all risks” conditions.
It is something of an open question whether three separate risks covered by this clause, or whether they are merely three different species of the same genus. In Middows Ltd., V. Robertson, Helbery J. was invited at first instance to consider the non – delivery of a full cargo by reason of the carrying ship being diverted by order of the government in time of war. The insurance included a typed clause covering “damage by hook, oil, sweat, heat, fresh water and other cargo (liquid or solid), theft, pilferage and non – delivery”. The judge said “These general word ‘non – delivery’ following enumerated perils insured against cannot be divorced from what has gone before and treated as intended to denominate an entirely new risk. They are limited by the context in which they are found. Such words in such context are to be construed not as creating a new or further risk but affecting the burden of proof. Where such words occur in such a context the insured need not prove loss by theft or pilferage, it is enough if he proves non – delivery and gives prima facie proof that the goods were not lost in any other way than by theft or pilferage……. The case I m deciding …… is not a case which on its facts has anything to do with non – delivery when those words are applied in the context in which they occur”.
In the opinion of the authors, the context of the words “by theft or pilferage, or by non – delivery of an entire package” do not by their context, have to be construed ejusdem generis. On the contrary, it is considered that there are really two separate perils insured :
1. Theft or pilferage, and Quite separately.
2. Non – delivery of an entire package. This construction is supported by the comma which appears after the word ‘pilferage”, and by the repetition of the words “or by” before “non – delivery”, “theft or pilferage”.
In Nishna Trading Co. V. Chiyoda Fire and Marine Insurance Co., Shipowners, in the erroneous belief that they had a valid lien on the cargo for arrears of time –charter hire due to them form the time charters, landed the good at an intermediate port on the voyage and sold them there, Lord Denning M.R. said “Was there a ‘theft’ of cargo by the master? The word ‘theft’ is not used here in the strict sense of the criminal law. It does not bring in all the eccentricities of the law of larceny. It means only what an ordinary commercial man would consider to be theft and before finding theft, the Court should be satisfied that it is an appropriate description of what took place. The Court should be satisfied beyond reasonable doubt (as in the criminal law) but it should find on balance that there is sufficient to warrant the serious imputation to ‘theft’.
It was held by the Court of Appeal that the shipowner’s action did not amount to theft. “Pilferage” is a species of theft performed surreptitiously.
Nishina Trading Co., V. Chiyoda Fire and Marine Insurance Co. (1996) Lloyd’s Rep. 293 per Lord Denning M.R. at P. 298 “non – delivery of an entire package”.
Many cargo assured are under the impression that the inclusion that the inclusion of this risk entities them to claim for any loss (of an entire package) which has occurred at any time, and from any cause, during the voyage. This is not so as the following examples should make clear;
a) A case of fireworks is short delivered at destination, and the carrier explains that it was seized by the Customs authorities at an intermediate port, as they considered it to be hazardous cargo. This is not loss by non – delivery ; it is loss by ‘Seizure’ which is excluded peril (Clause 6.2. of Institute Cargo Clauses).
b) A case of fireworks is short delivered, but this time the carrier explains that the master ordered the case to be thrown overboard the case to be thrown overboard, since he considered it to be danger to the other cargo on board. This is not a loss by non – delivery, it is a loss by non – delivery, it is a loss by jettison, an unless there was willful misconduct on the part of the assured in shipping the fireworks, or in misdescribing them, there will be a claim under Institute Cargo Clauses without the addition of Theft. Pilferage and Non – Delivery Clause.
c) One package is shore delivered and, after inquiry, the carrier “regrets that it may have been delivered to another consignee by mistake”. This is non – delivery as regards the bill of lading holder and, subject to his holding the carrier responsible as he is required to do by clause 16.2 of the Institute Cargo Clause, he will have a valid claim under the Institute Theft. Pilferage and Non – Delivery Clause.
d) A case is short delivery and, after inquiry, it appears to have been over carried to another port, and the ship’s agent claims that he does not know what to do with it. In case, although there has been a ‘non – delivery in the ordinary sense of that word, there is no loss to the subject matter insured, which is perfectly safe an sound. In fact it is carrier’s duty to ship it back at his own expense to the port to which it was consigned and there tender it to the bill of lading holder.
e) A case is short delivered and, after inquiry, no one can offer any plausible explanation for its disappearance. This is loss by non – delivery, in circumstances which suggest that the package may have been stolen, although there is insufficient evidence to prove it. This is the case where the cause of the loss is ejusdem generis with theft or pilferage, so whatever construction might be required of the words in the clause, the loss will be paid for by the underwriters.