Burden of proof, period of cargo loss

Who has to prove that the loss has occurred within a period covered by the cargo insurance contract?

Cargo, Burden of proof, insurance, period of coverage Author: Aramayis Galichyan

The Institute Cargo Clauses (ICC) drafted by the Institute of London Underwriters (ILU) on the 1st January 1982 and amended by the International Underwriting Association of London (IUA) and Lloyds Market Association (LMA) on 1st January 2009, are widely applied by underwriters internationally.

The main difference between the Institute Cargo Clause (A) and the (B) and (C) clauses is that the Institute Cargo Clause (A) is written on an ‘all risks’ basis which essentially means that every peril is covered unless it is specifically excluded by the insurance policy.

Is there any provision in the ICC concerning the burden of proving that the cargo loss or damage has occurred during a period covered by the cargo insurance contract?

On the face of it, it appears that there is no express provision which would place a contractual duty on the insured to prove that the loss or damage has occurred during a period covered by the cargo insurance contract.

As it is in other circumstance in life, first impressions aren't always accurate.

Firstly, it is worth looking into the 1982 and 2009 versions of the ICC wordings pertinent to the duration of a marine insurance contract.

Duration of marine (cargo) insurance contracts

Institute Cargo Clauses (1982)

Transit Clause

This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either

  • on delivery to the Consignees' or other final warehouse or place of storage at the destination named herein,
  • on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the  Assured elect to use either
  • for storage other than in the ordinary course of transit or
  • for allocation or distribution, or
  • on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge, whichever shall first occur.

Institute Cargo Clauses (2009)

Transit Clause

Subject to Clause 11 below, this insurance attaches from the time the subject-matter insured is first moved in the warehouse or at the place of storage (at the place named in the contract of insurance) for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance for the commencement of transit, continues during the ordinary course of transit and terminates either

  • on completion of unloading from the carrying vehicle or other conveyance in or at the final warehouse or place of storage at the destination named in the contract of insurance,
  • on completion of unloading from the carrying vehicle or other conveyance in or at any other warehouse or place of storage, whether prior to or at the destination named in the contract of insurance, which the Assured or their employees elect to use either for storage other than in the ordinary course of transit or for allocation or distribution, or
  • when the Assured or their employees elect to use any carrying vehicle or other conveyance or any container for storage other than in the ordinary course of transit or
  • on the expiry of 60 days after completion of discharge overside of the subject-matter insured from the oversea vessel at the final port of discharge, whichever shall first occur.

The difference between the ICC 1982 and ICC 2009 pertinent to the duration of insurance contracts

From the above wordings of the ICC (A), (B) and (C) it is apparent that the ICC (2009) provides a wider coverage which starts not just when the goods leave the warehouse, but from the point they have started moving for the purpose of the immediate loading.

The ‘Transit Clauses’ also contain the phrases ‘this insurance attaches’, ‘continues’ and ‘terminates’. By applying the expressio unius doctrine we may conclude that the insurance doesn’t attach, continue or terminate at periods other than specified above.

Burden of proof in respect of insurable interest

It is also worth looking into the Insurable Interest Clauses of the ICC (A), (B) and (C) wordings which state the following:

Institute Cargo Clauses (1982)

CLAIMS

11. - Insurable Interest Clause

11.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss.

11.2 Subject to 11.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

Institute Cargo Clauses (2009)

CLAIMS

Insurable Interest

11. 11.1 In order to recover under this insurance the Assured must have an insurable interest in the subjectmatter insured at the time of the loss.

11.2 Subject to Clause 11.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

Analysis of the ICC terms

In my opinion the above terms already imply the understanding that the insured has to bring evidence supporting their right of making an insurance claim under the particular insurance contract. In my opinion it goes without saying that in order to be considered as having the right to claim under an insurance contract, both in ‘all risks’ and ‘named perils’ policies the insured is required to bring evidence that the fortuitous loss has taken place during the period covered by the insurance contract. When an insured brings a claim to the insurance company for the purpose of receiving insurance indemnity, it shall be the insured’s burden of proving that the fortuitous loss has occurred during the period covered by the insurance contract. This is because of the fact that an insurance claim is contractual by its nature in most cases, and in order to enforce an insurance contract, one is presumed to have the grounds for claiming under that contract. Although the claim wouldn’t usually be filed to the court in the first place, but rather would be submitted to the insurance company, insurance matters are primarily regulated by the legal norms of civil law and the burden of proof shall be e.g. ‘on the balance of probabilities’ in English law, or have other requirements pertinent to the extent and type of evidence supporting the claim under the auspices of other legal frameworks.

It is also the insured who has the burden of proving that it has an insurable interest in the subject-matter insured at the time of the loss, and the proof of insurable interest at the time of the loss in most cases would automatically prove that the loss has occurred during the period covered by the policy.

Legal requirements in respect of the burden to prove that the loss has occurred during a period in which the cargo had insurance coverage

Most of the legal frameworks place the initial duty on the claimant to bring evidence supporting the facts that form the grounds of their claims. It is therefore the insured who has to provide evidence of their loss being the subject-matter of the particular insurance contract.

For example, the Civil Procedure Code of the Republic of Armenia (s.62 (1)) (CPR) states that each participant of the case is obliged to prove the facts that are the grounds for its claims and disagreements and are essential for the resolution of the case unless otherwise provided by the CPR or other laws.

The ICC (A), (B) and (C) have originally been drafted subject to English law and practice, and insurers usually customise these in compliance with local regulations and trade customs.  Some insurers will specifically state whose duty it is to prove insurable interest and that the loss has occurred during the period covered by the policy. However, regardless of whether or not such a term is expressly stated, it would be reasonable to presume that at the every least it is not the insurer who has to bring evidence to support the insured’s claim being the subject-matter of the policy.

In AXL Resources Ltd v. Antares Underwriting Services Ltd (2010), where the insurer intended to rely on a ‘Mysterious Disappearance and Stocktaking Losses’ exclusion,  the Court held that the insured “bore the burden of proving a fortuitous loss, and thereafter the burden of proof switched to the insurers to prove that the loss was mysterious”, however, it didn’t specifically address the question of who bore the burden of proving that the loss had occurred during the period covered by the policy. This is probably due to the fact that in this case it was established that the fortuitous loss occurred sometime between October 2008 and January 2009 which was within the period covered by the policy, i.e. from July 2008 to July 2009.

In GREAT LAKES REINSURANCE (UK) PLC, v. BRETT SOVERAL (District Court, S.D. Florida Feb 27, 2007) it was stated by the court that “the insured must show that the loss occurred during the coverage period and that the contract encompasses the loss” in an all-risks policy.

In Richard W. Jones and Louise A. Kiernan, v. Federated National Insurance Company (District Court of Appeal F.D., Florida Jan 2018) the Court likewise concluded that “the insured has the initial burden of proof to establish that the damage at issue occurred during a period in which the damaged property had insurance coverage”.

There are several other United States of America court verdicts delivered in other States which adopt the same approach regarding the burden to prove that the loss or damage have occurred during a period covered by an insurance policy.

In many countries the standard of proof is considered to be the ‘balance of probabilities’ for civil cases, which means that there is no requirement to support a civil claim based on the ‘beyond a reasonable doubt’ standard applicable to criminal cases. This means that the insured would be able to discharge its duty of proving that the damage to the cargo has occurred within the insurance coverage period say by providing evidence that the cargo was in ‘an apparent good condition&’ at the time when a particular insurance policy attached, and provide evidence that it was received in a damaged condition before the policy terminated. Consignment notes, Bills of Lading, Air Waybills or other similar documents are examples of the possible evidence which could help the insured in discharging the mentioned burden of proof.

If we look at it from another viewpoint, we may confidently conclude that at the very least the insurer is not obliged to pay an insurance claim unless it is satisfied that the loss has occurred within the period covered by the policy.

Conclusion

  • The insured bears the initial burden of proving that the damage to or loss of cargo have occurred during a period in which the damaged cargo had insurance coverage.
  • The standard of proof would be ‘on the balance of probabilities’ under the auspices of many legal frameworks.
  • Consignment notes, Bills of Lading, Air Waybills or other similar documents are examples of the possible evidence which could help the insured in discharging the mentioned burden of proof.
  • Even if we assume for a moment that the insured doesn’t bear the burden to prove that the damage to or loss of cargo have occurred during a period in which it had insurance coverage, we may confidently conclude that at the very least the insurer is not obliged to pay an insurance claim unless it is satisfied that the loss has occurred within the period covered by the particular insurance policy.