All-Risks Marine Policies – Key Points for Businesses in Malaysia

Q: What is an ‘all-risks’ marine policy? 

An ‘all-risks’ marine policy, as the name denotes, is an all-encompassing insurance contract that provides cover against all losses and perils, except those that are specifically excluded from the policy. Such losses or perils may be caused by a myriad of reasons, such as ship collision or sinking, ship leakage, ship’s sweat etc.  The scope of insurance coverage under an “all-risks” marine policy is normally very broad. Hence, it will not come as a surprise if the premium charged is priced proportionately higher than other types of insurance policies.

Q: What should I do before procuring an “all-risks” marine policy?

Before accepting the terms of an “all-risks” marine policy, you should read the fine-print of the policy wordings to ensure that you understand the scope of the coverage. Having the phrase “all-risks” labelled at the forefront of policy (or included amongst the policy wordings) does not necessarily mean that it covers each and every risk and peril. As such – be sure to check out whether there is any exclusion clause.

If there exists an exclusion clause, it will likely list out the nature of loss or perils that are not covered under the policy. You will then have to determine whether your interests are sufficiently protected for matters that are excluded under the policy. You may want to discuss with your prospective insurers to include those excluded matters, or request that an endorsement be passed on the insurance policy to enlarge the scope of coverage.

Q: I intend to submit a claim to my insurers under an “all-risks” marine policy. How do I determine whether my claim is actually covered under the policy? 

The answer to this question depends on the policy wordings. Try approaching this question in the following manner –

• First, check whether your policy contains an exclusion clause. If your loss (or subject matter of loss) falls within the purview of an exclusion clause, then your loss may not be covered under the policy. When faced with this issue, you should also seek legal advice on whether the exclusion clause is applicable. This is because there may be instances where reliance on an exclusion clause is waived by the insurer either expressly or by conduct. In those instances, you may be able to argue that the exclusion clause is no longer applicable to your situation.
• Second, if your loss (or subject matter of loss) does not fall within the exclusion clause, then under Malaysian Law, all you need to do is to adduce evidence to show that your loss was due to a ‘casualty or fortuitous event’. You need not to prove the actual cause of the ‘casualty or fortuitous event’. [See Steel Industries (Sabah) Sdn Bhd v Chong Fui Shipping and Forwarding Sdn Bhd & Anor [2018] 1 LNS 948]

Q: What amounts to a ‘casualty or fortuitous event’?

A “fortuitous event” is “an event of natural or human origin that could not have been reasonably foreseen or expected and is out of the control of the persons concerned (as parties to a contract)”.

For example, in the case of Steel Industries (Sabah) Sdn Bhd (supra), the Plaintiff claimed that the rusting on the steel bar purchased by them was a fortuitous event. The Court agreed, as neither the Plaintiff nor the Defendant could say with certainty what had caused the rust to form on the steel bars.

In another case of CMS Clinker Sdn Bhd v Allianz General Insurance Co (M) Bhd [2014] 6 MLJ 397, the insured claimed that the change in quality of the coal was a fortuitous event, casualty and/or accident. The Court held that, since the insurer had failed to adduce any evidence to rebut the insured’s contention of a fortuitous event, the insured is entitled to compensation from the insurer.

Q: What about loss resulting from theft or pilferage? Are they considered as a ‘casualty or fortuitous event’?

Yes. Although there is a reasonable argument that there is nothing fortuitous or accidental about theft or pilferage (which are conscious and wilful acts of other persons), such loss is nevertheless fortuitous in so far as your rights are concerned, as you are being deprived of your goods by some unexpected act. [Leong Brothers Industries v Jerneh Insurance Corp. Sdn Bhd [1991] 3 CLJ Rep 152. Obiter]

Q: Are there any defences available to an insurer when dealing with a claim made for loss suffered due to a ‘casualty or fortuitous event’?

Yes. To disprove an allegation of ‘casualty or fortuitous event’, an insurer bears the burden of proving that the loss was due to one the following –

• a certainty, and not a casualty;
• inherent vice;
• wear and tear;
• wilful misconduct on the insured’s part.

There are also other defences available to insurers under general principles of insurance law, such as material pre-contractual non-disclosures, fraud and etc. However, these defences must be assessed on a case-to-case basis.

Q: What should I do if my claim is rejected?

If your claim was rejected by an insurer, it is advisable that you seek legal advice to determine whether such rejection has any basis under law. You should also take note that the 6-year limitation period may start to run from the date of the claim rejection.

If you have any queries on the above, please feel free to contact the authors of the article via enquiry@jasperhee.com.

Published by JHP Publications.