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Carrier liable for damages worth 1,3 million dollars after stormy weather

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Legal news
calendar 8 April 2015
globus Denmark

A contracting carrier and a shipping company were liable for damages that arose when 30 trailers were carried by sea on deck during stormy weather. The Danish Maritime and Commercial High Court found that there were no grounds for exemption of liability in spite of the weather. Further, the contracting carrier was found liable for the cargo insurance company’s additional loss as the trailers had been carried on deck.

A contracting carrier had been given the task to transport 30 trailers from Poland to Venezuela and subcontracted the carriage by sea to a shipping company. On request from the shipper, the contracting carrier took out a cargo insurance. In the insurance offer it was specified that goods were to be transported under deck. The contracting carrier accepted the offer on behalf of the shipper and requested a certificate. The purpose of the certificate was to ensure the possessor a right for insurance coverage and payout.

On the North Atlantic Sea the ship was struck by bad weather with winds reaching storm strength (9-10 bf). Eight trailers fell overboard, while the rest were damaged severely. A survey report stated that the trailers had been stowed in stacks with only 2-3 straps holding them together. In the surveyor’s opinion, it was necessary to secure each trailer with 6-10 straps. The cargo insurance company paid out compensation to the consignee for the lost and damaged trailers according to the insurance certificate.

However, the insurance company then claimed that both the contracting carrier and the shipping company were liable for the damages according to the Danish Merchant Shipping Act, Art. 275 (and Art. 286). According to these provisions, a carrier is liable for damages that occur while the goods are in his care. A carrier will however often be able to limit liability.

Furthermore, the insurance company claimed that the contracting carrier was additionally liable for not observing the insurance terms, seeing that the trailers had been transported on deck. In relation to this type of liability there is no limitation.

The Maritime and Commercial High Court: liability for the carriage …

In relation to the assessment of the carrier’s and the shipping company’s liability, the Court attached importance to the expert opinion, which stated that storms are not unusual in the wintertime in the North Atlantic Sea. Due to this and the survey report, which specified that the trailers had not been secured sufficiently, the Court found that the carriers had not been able to prove that they were not liable for the damages.

Because of this, the Court imposed joint and several liability on the contracting carrier and the shipping company for the damages up to the limitation amount of 456,000 SDR according to article 280 of the Danish Merchant Shipping Act.

… and the contracting carrier had to cover the cargo insurance company’s loss

In addition, the Court imposed liability on the contracting carrier for not having observed the insurance terms. The Court found it proven, that the insurance company would not have taken out the insurance if it had been informed of the fact that the goods were to be transported on deck.

The contracting carrier had to cover the insurance company’s total loss of approximately 1,3 million USD, as the carrier was responsible for providing correct information and as the information had been available to the carrier from the beginning.

IUNO’s opinion

This judgment illustrates that bad weather with winds reaching storm strength does not entail exemption from liability, especially not if the bad weather is predictable.

When a carrier takes out insurance, it is important to make sure that the insurance company receives the correct information and to be attentive to the terms in the insurance policy, as it may be expensive to overlook an insurance term.

The judgment has been appealed to the High Court of Western Denmark and we will return when the High Court has handed down the judgment.

[Judgment of the Maritime and Commercial High Court, 20 January 2015, case no. S-27-12]

A contracting carrier had been given the task to transport 30 trailers from Poland to Venezuela and subcontracted the carriage by sea to a shipping company. On request from the shipper, the contracting carrier took out a cargo insurance. In the insurance offer it was specified that goods were to be transported under deck. The contracting carrier accepted the offer on behalf of the shipper and requested a certificate. The purpose of the certificate was to ensure the possessor a right for insurance coverage and payout.

On the North Atlantic Sea the ship was struck by bad weather with winds reaching storm strength (9-10 bf). Eight trailers fell overboard, while the rest were damaged severely. A survey report stated that the trailers had been stowed in stacks with only 2-3 straps holding them together. In the surveyor’s opinion, it was necessary to secure each trailer with 6-10 straps. The cargo insurance company paid out compensation to the consignee for the lost and damaged trailers according to the insurance certificate.

However, the insurance company then claimed that both the contracting carrier and the shipping company were liable for the damages according to the Danish Merchant Shipping Act, Art. 275 (and Art. 286). According to these provisions, a carrier is liable for damages that occur while the goods are in his care. A carrier will however often be able to limit liability.

Furthermore, the insurance company claimed that the contracting carrier was additionally liable for not observing the insurance terms, seeing that the trailers had been transported on deck. In relation to this type of liability there is no limitation.

The Maritime and Commercial High Court: liability for the carriage …

In relation to the assessment of the carrier’s and the shipping company’s liability, the Court attached importance to the expert opinion, which stated that storms are not unusual in the wintertime in the North Atlantic Sea. Due to this and the survey report, which specified that the trailers had not been secured sufficiently, the Court found that the carriers had not been able to prove that they were not liable for the damages.

Because of this, the Court imposed joint and several liability on the contracting carrier and the shipping company for the damages up to the limitation amount of 456,000 SDR according to article 280 of the Danish Merchant Shipping Act.

… and the contracting carrier had to cover the cargo insurance company’s loss

In addition, the Court imposed liability on the contracting carrier for not having observed the insurance terms. The Court found it proven, that the insurance company would not have taken out the insurance if it had been informed of the fact that the goods were to be transported on deck.

The contracting carrier had to cover the insurance company’s total loss of approximately 1,3 million USD, as the carrier was responsible for providing correct information and as the information had been available to the carrier from the beginning.

IUNO’s opinion

This judgment illustrates that bad weather with winds reaching storm strength does not entail exemption from liability, especially not if the bad weather is predictable.

When a carrier takes out insurance, it is important to make sure that the insurance company receives the correct information and to be attentive to the terms in the insurance policy, as it may be expensive to overlook an insurance term.

The judgment has been appealed to the High Court of Western Denmark and we will return when the High Court has handed down the judgment.

[Judgment of the Maritime and Commercial High Court, 20 January 2015, case no. S-27-12]

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Aage

Krogh

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Thune Ikkala

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Joachim

Sieverts Nielsen

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Lars

Rosenberg Overby

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Mads

Poulsen

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