Cargo surveyors see a lot of damage from mould and its companion, corrosion. Both involve wetting, the source of which is crucial to policy response. Both can cause dismay as consignees face the unwelcome need to seek recovery from their suppliers, and brokers are called upon to assist a disgruntled client.
Insured risks
Insured marine losses are those from an insured peril, a fortuitous and harmful event that occurs during the period of cover. It is a loss that stems from something other than the ordinary and expected forces and the environment during transit.
Marine policies and the laws that govern them refer to Perils of the Seas. Long before cover notes were written in the coffee house of Edward Lloyd during the 17th and 18th centuries, risks of the seas have been a significant cause of loss that have been shared by the parties to a maritime adventure. Most marine hull insurance policies have been reduced to a list of specified perils that underwriters agree to cover, with all else excluded.
Marine cargo policies go beyond perils of the seas because goods are handled before and after shipment. In most cases, these policies are written to cover all risks unless excluded. Some exclusions such as inadequate packaging or inherent vice are specified to avoid doubt, although they would also be excluded if they are not from an insured peril.
Mould and condensation
Mould is a fungus that grows from spores in the air into a microbial network on a product. It plays a major role in decomposition and is a common cause of damage to cargo. It is moisture that causes most of the unwelcome mould damage to cargo.
A common source of water and moisture during carriage is from condensation. Ships have historically experienced this by what was called ship or cargo sweat. That is where condensation occurs on the ship and runs on to the cargo or into the cargo itself and managed by controlling ventilation during the voyage.
There has been a great deal of research and trial and error to find ways to avoid condensation damage within containers. Some containers have a controlled atmosphere for transporting foods such as when onions and squash are shipped and doors are left open to help reduce condensation. Other containers have a desiccant included and some have layers of Kraft paper or board over the cargo. The jury is out on its effectiveness as sometimes it works and sometimes it does not.
The most common place that condensation occurs is on the roof and walls of the container. Most cargo surveyors have seen water droplets inside a container when the door is opened in the morning. This is as normal as dew on grass or fog on car windows.
Insured loss due to mould
A loss is recoverable under a marine policy when it is caused by an insured peril. Wetting to cargo from exposure to rain or sea water from a damaged ship or container does not need mention here as the damage will form an insured peril. Mould that is caused by moisture from condensation is not considered to come from an insured peril unless there has been a fortuitous event. Fortuitous means accidental and beyond reasonable expectations.
Condensation in containers is a known risk that is to be expected. It will probably occur when a particular product, temperature and moisture transit together within the enclosure of a container. When this occurs without any event external to the shipped unit, it is not from an insured peril.
It is the task of the shipper to prepare cargo for transit with all the protection necessary for the environment it will experience. This includes taking steps to avoid or control condensation damage to their product. Cargo should not be shipped if unable to survive, without damage; the ordinary environment of transit.
All movement of cargo involves risk. Goods must be prepared and packed to withstand the ordinary forces of transit but they may still be lost or damaged from wetting, dropping, fire, flood and stranding or other hazards. These are known risks that may occasionally happen but are unusual and beyond reasonable expectation.
What should insurers and brokers be doing?
Marine surveyors understand the importance to cargo owners and insurers of the need to carefully identify the source of wetting or moisture that has led to the discovery of mould on a product. If the investigation finds that the proximate cause is from an insured peril, a claim is established and if not, a claim will most likely fail.
When the above principles are applied and the policy document scrutinised there should be less room for error when establishing whether or not a valid claim exists.
In order to ensure that both the insurer and the insured remain happy with their relationship, a cooperative and consistent approach needs to be adopted throughout the marine transportation ecosystem. The high seas are unpredictable and carry risk but understanding those risks and taking steps to minimise damage by foreseeable perils will help reduce damage to cargo and ultimately insurance claims.
