Page 21 - Insurance Times July 2024
P. 21
Drilling Oil Rig Cendor
Mopu, Marine
Insurance Inherent
Vice - A Boon or Loss
Dr. Soumi Mukherjee
- Historical Maritime Fraud M.A., PH.D
Causation is a very important part in marine insurance law. The general principle in English Law
is that the insurer will only be liable for any loss, which is proximately caused by a peril insured
against. (Marine Insurance Act, 1906, section 55). At the beginning of last century, the
determination of the proximate cause in common law was considered to be the nearest in time.
Inherent vice excluded the ordinary wear and tear that could be expected to occur as a result of
the ordinary action of wind and waves.
I t is not uncommon for hull and cargo underwriters to clause 4.4 which excludes loss, damage or expense caused
reject claims by relying on excluded perils in their
by inherent vice or nature of the subject matter insured
Clause 4.4 excluded loss, damage or expense caused by
standard forms.
inherent vice or nature of the subject matter insured from
Causation is a very important part in marine insurance law. the cover provided by the policy.
The general principle in English Law is that the insurer will
only be liable for any loss, which is proximately caused by a The subject matter of the insurance was the DRILLING oil
peril insured against. (Marine Insurance Act, 1906, section rig Cendor MOPU. This oil rig had been laid up in
55). At the beginning of last century, the determination of Galveston, Texas. In May 2005 it was purchased by the
the proximate cause in common law was considered to be respondents (the assured under the policy) for conversion
the nearest in time. Inherent vice excluded the ordinary into a mobile offshore production (MOPU) unit for use in the
wear and tear that could be expected to occur as a result Cendor Field off the coast of East Malaysia. The insurance
of the ordinary action of wind and waves. covered the loading, carriage and discharge of the oil rig
on the towed barge Boabarge 8 from Galveston in the
This case is concerned with a marine insurance policy on United States to Lumut in Malaysia. The total sum covered
cargo dated 5 July 2005, which incorporated the Institute was Malaysian Ringgits 38m (US$10m) with a deductible of
Cargo Clauses (A) of 1 January 1982. In 2005, Global Process US$1m. The premium was US$378,000.
Systems (the assured) purchased the oil rig, Cendor Mopu,
and arranged for her to be transported from Texas to The oil rig, originally called the Odin Liberty, was built in
Malaysia on a barge with her three massive tubular legs in Singapore in 1978. It is what is called a self-elevating mat
place above the platform so that they extended some 300 supported jack-up rig, consisting of a watertight working
feet into the air. Global placed insurance with Syarikat platform called the jack house, which can be moved (jacked)
Takaful Malaysia Berhad (the Insurer), on terms which up and down three legs extending to the seabed, according
incorporated the Institute Cargo Clauses, and, in particular, to the sea depth at the drilling location. There is a mat at
The Insurance Times July 2024 19
