Insurance & Reinsurance
In recent years, cargo theft in ports and warehouses has been reported to be on the increase, causing much concern amongst cargo interests and their insurers. More recently, the supply chain disruptions caused by the Covid-19 pandemic have resulted in non-essential cargo accumulating in many ports and warehouses worldwide, including in China, the Philippines, and Malaysia. The resulting cargo congestion is most likely to lead to an increased risk of cargo theft – 49% of cargo theft in Asia occurred in warehouses.
Cargo Theft Claims – Payable by insurers?
Typically, cargo thieves cannot be traced and, if they are apprehended, they usually possess no valuable assets. As such, insureds often claim for their losses under their cargo insurance policy.
Cargo insurers will naturally check if the claim is covered under the insured's policy: for example, cargo theft claims are covered under the Institute Cargo Clauses (“ICC”) (A) but not included as one of the specified risks under ICC (B) and (C).
That said, for cargo insured under ICC (B) and (C), additional cover may have been purchased under the Institute Theft, Pilferage and Non-Delivery Clause, which states:-
"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."
It is important to note that the Institute Theft, Pilferage and Non-Delivery Clause is generally used for the theft of cargo during transit. For insurance clauses focused on cover during the storage of cargo, the Misappropriation Inclusion or Misappropriation Exclusion Clauses (2017) would be more appropriate.
Recovery – Factual basis
In order to maximise their chances of recovery from third parties following payment of an insured claim, time is often of the essence for insurers, especially as cargo claims arising from sea shipment incidents often come with a one year time bar for commencing proceedings. As such, cargo insurers seeking to pursue a recovery are advised to gather the following evidence to maximise their recovery prospects:
Recovery – legal basis
The insurer may pursue a claim against a cargo thief based on, inter alia, the tort of conversion (i.e. the interference with another’s property). However, pursuing the thief for recovery may not be a realistic option, and insurers would be advised to consider alternative targets, which could include:
The recovery claims could be based on contract, or alternatively, in tort; for instance, negligence or breach of the duty of bailment may be considered where the bailor failed to take reasonable care of the cargo while in their possession.
The outbreak of COVID-19 is likely to cause an increase in cargo theft in ports and warehouses. Cargo insurers called upon to cover the resulting losses will need to carefully explore their options when considering a recovery against a third party.
If you require clarification or assistance on any of the points discussed in this article, at Clyde & Co we have extensive experience in marine cargo recoveries, and will be happy to assist you.