THE INCHMAREE CLAUSE
The ‘Inchmaree’ or ‘Negligence’ Clause was introduced as a direct result of the case of Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser and Co, ‘Inchmaree’ (1887) 12 AC 484, HL, which drew attention to the problems that could arise with some claims made under the auspices of ‘perils of the seas’. Often referred to also as the ‘additional perils clause’,1 the Clause is now contained within cl 6.2 of the ITCH(95) and cl 4.2 of the IVCH(95).2 Particular attention is drawn to the due diligence proviso, which applies to the whole of this Clause on additional perils. Should a claim be brought under any one of these perils, the conduct of the ‘Assured, Owners, Managers or Superintendents or any of their onshore management’ will be called into question.
Noteworthy, also, are the words ‘caused by’ contained in the Clause. These words ensure that any claim made, for example, under ‘bursting of boilers’ or ‘breakage of shafts’, may only be successfully pursued for losses caused by or brought about by such mishaps, and not for any of the damage sustained by the boilers or shafts themselves. The same principle applies to the phrase ‘latent defect in the machinery or hull’ (cl 6.2.1 of the ITCH(95), and cl 4.2.1 of the IVCH(95)). A claim, for example, for the expenses incurred to replace a specific item of machinery found damaged due to the latent defect within itself would not be recoverable: the underwriter is an insurer, not a guarantor. Such losses would, unless the policy otherwise provides, fall within the exception contained in s 55(2)(c) of the Marine Insurance Act 1906, which states that ‘the insurer is not liable for…inherent vice or nature of the subject matter insured…or for any injury to machinery not proximately caused by maritime perils’. Clause 6.2 of the ITCH(95) and cl 4.2 of the IVCH(95) have, however, provided otherwise.
A latent defect in hull or machinery could well render a ship unseaworthy, if the extent of the defect was such as to cause her to be incapable of combating the ordinary perils of the seas. In such an event, the Clause will have to be read with s 39 of the Marine Insurance Act 1906. With a voyage policy, s 39(1) clearly states that there is an implied warranty of seaworthiness which is applicable at the commencement of the insured voyage. Whether the insured peril of latent defect may, therefore, be taken as subordinate to that warranty of seaworthiness, the breach of which will automatically discharge the insurer from liability as from the date of breach,3 is an interesting question which has yet to be determined by the courts.4
There is, however, no such warranty in a time policy: s 39(5) states that ‘…where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to seaworthiness’. The very nature of a latent defect is such that it is one not discoverable by the exercise of due diligence. Thus, if the assured were aware of the existence of the defect (rendering the ship unseaworthy) to which the loss is attributable, that defect would not be latent. In such a case, he would not only be unable to rely on the cover for latent defect, but would also fall foul of s 39(5).5
The assured is also provided with cover for the ‘negligence of Master Officers Crew or Pilots’ (under cl 6.2.2 of the ITCH(95) and cl 4.2.2 of the IVCH(95)), which is not incompatible with s 55(2)(a) of the Marine Insurance Act 1906. However, such negligence must be proved to be the proximate cause, or one of the proximate causes, of the loss, for the claim to be successful. Furthermore, the due diligence proviso may also be relevant to a claim for negligence, in so far as it is the responsibility of the assured to ensure that the ship is properly equipped and manned in the broadest sense, so as to ensure that such negligence is minimised.
As would be expected, the Clause does not cover negligence committed by the assured himself. However, the Institute Hull Clauses make specific provision for owners who may also be employed in a seafaring role. To this end, cl 6.3 of the ITCH(95) and cl 4.3 of the IVCH(95) state that ‘Masters Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 6 should they hold shares in the vessel’.6 This allows for an owner or a part owner acting as master (a common occurrence in the coastal trade) to have the protection of the additional perils clause.
The ‘negligence of repairers or charterers’ is, provided they are not the assured, protected by cl 6.2.3 of the ITCH(95) and cl 4.2.3 of the IVCH(95). Provision is also made for damage caused by aerial objects: ‘contact with aircraft, helicopters or similar objects, or objects falling therefrom’ is covered by cl 6.2.5 of the ITCH(95) and cl 4.2.4 of the IVCH(95).
Clause 6.2.4 of the ITCH(95) and cl 4.24 of the IVCH(95) insure against the ‘barratry of Master Officers or Crew’. This a major topic within the Inchmaree Clause, and is examined in depth later in the chapter.’ The ‘additional perils’ clause is based upon, and drew its name from, the well known case of Inchmaree, below. At the time, a marine policy only provided cover for losses of a ‘marine character’; damage or loss caused by the explosion of a boiler, which was not a risk peculiar to the sea, was not covered.
Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser and Co, ‘Inchmaree’ (1887) 12 AC 484, HL
Though a circumstance such as that arising in this case is now an insured peril under the Inchmaree Clause, nevertheless, the case is included, for it provides one with a better insight into the nature of the problem, as it sets the historical background of the Clause and highlights the limitations of the cover of ‘perils of the seas’.
Inchmaree was a steamship insured under a time policy, wherein the risks insured against included perils of the seas and ‘…all other perils, losses and misfortunes that have or shall come to the hurt, detriment, or damage thereof of the aforesaid subject matter of this insurance, or any part thereof. Whilst lying at anchor awaiting orders, it became necessary to pump up the main boilers by means of the donkey engine. However, a valve in the pipeline between the donkey engine and one of the boilers was closed, due, it was admitted, to the negligence of the engineers, or because it had salted up, even though reasonable care had been taken by the engineers. The result was that the donkey engine became over-pressurised and was damaged. The shipowner claimed on the policy of insurance for the cost of replacing the donkey engine.
The House of Lords, in reversing the decision of the Court of Appeal, ruled that such a loss was not covered by ‘perils of the seas’ or ‘all other perils’, and that it was of no account whether the damage was caused accidentally.
Lord Bramwell: [p 491] …The donkey engine was insured. The adventures and perils which the defendants were to make good, specified a great many particular perils, and ‘all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the aforesaid subject matter of insurance, or any part thereof. Words could hardly be more extensive, and if the question, I ought to say a question on them, arose for the first time, I might perhaps give them their natural meaning, and say they included this case. But the question does not arise for the first time. It has arisen from time to time for centuries, and a limitation has always been put on the words in question.
Definitions are most difficult, but Lord Ellenborough’s seems right: ‘all cases of marine damage of the like kind with those specifically enumerated, and occasioned by similar causes.’ I have had given to me the following definition or description of what would be included in the general words: ‘Every accidental circumstance not the result of ordinary wear and tear, delay, or of the act of the assured, happening in the course of the navigation of the ship, and incidental to the navigation, and causing loss to the subject matter of insurance.’ Probably, a severe criticism might detect some faults in this. I think the definition of Lopes LJ, in Pandorf v Hamilton, very good: ‘In a seaworthy ship, damage to goods caused by the action of the sea during transit not attributable to the fault of anybody’, is a damage from a peril of the sea.
I have thought that the following might suffice: ‘All perils, losses and misfortunes of a marine character, or of a character incident to a ship as such.’
…The damage to the donkey engine was not through it being in a ship or at sea…The same thing would have happened had the boilers and engines been on land, if the same mismanagement had taken place. The sea, waves and winds had nothing to do with it.
The words ‘caused by’ infer damage brought about or resulting from ‘the bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull’ and not the damage sustained by the machinery or the hull itself. The following three cases: Oceanic Steamship Co v Faber; Hutchins Brothers v Royal Exchange Assurance Corporation; and Scindia Steamships Ltd v London Assurance, provide an insight into the meaning of the words ‘caused by’.
Oceanic Steamship Co v Faber (1907) 13 Com Cas 28, CA
After a voyage from Honolulu, the steamship Zealandia dry-docked in San Francisco for maintenance. The vessel was insured under a one year time policy which included ‘cover for loss of and/or damage to hull and machinery through…bursting of boilers, breakage of shafts, or through any latent defect in the machinery or hull…’. On removing the propeller, a serious crack was detected in the shaft caused by faulty welding some years previously. The shaft was condemned, and the owners claimed on their policy of insurance for a loss caused by a latent defect.
The Court of Appeal ruled that the policy of insurance did not cover the actual machinery within which the latent defect lay, but only losses suffered as a result of (or ‘through’) the latent defect. This important distinction is emphasised by Fletcher Moulton LJ.
Fletcher Moulton LJ: [p 34] …Then we come to the words ‘or through any latent defect in the machinery or hull’. I am satisfied that that means only actual loss to the machinery or hull, or actual damage to the machinery or hull caused by a latent defect, and that it does not mean condemnation by reason of a patent defect, which is what the plaintiffs contend for. A defect initially latent, but spreading until it becomes a patent defect, is an ordinary incident in all machinery. A person may carefully examine a cylinder cover on one day and find no trace of any defect in it. A week later, he may find a trace of a crack. It is his duty, of course, then to replace it if he can do so. He may be perfectly certain in his mind that the reason that the economic life of that cylinder cover has come to an end is because there was initially something weak in it, and, as is always the case, the weak point is the first to give in. That is a case of a latent defect developing into a patent defect. But it is so ordinary an instance that it is one of the commonest forms in which the economic wearing out of a part of the machinery occurs. I do not believe for one moment that this clause means that the machinery is insured against the existence of latent defects. It only means that, if through their latency those defects have not been guarded against, and actual loss of the hull or machinery, or damage to the hull or machinery, arises from those defects, the insurers will bear the burden of that loss. For these reasons, I think that in the present case there was no loss of shaft or machinery or any other portion of the machinery or of the hull by reason of a latent defect, but that there was simply a condemnation of a shaft, which had shown that it was no longer fit to be used.
Hutchins Brothers v Royal Exchange Assurance Corporation  2 KB 398, CA
After a voyage to the Black Sea, the vessel Ellaline returned to Britain for drydocking and painting. On inspection of the stern frame, a crack was identified, which was later confirmed as a cooling crack caused by faulty workmanship during the casting process. A claim was made by the shipowner for a replacement stern frame. The vessel was insured under a policy which included the Inchmaree Clause.
The court ruled that the cost of a new stern frame was not recoverable, on the basis that the only damage sustained was to the stern frame itself. The damage had been caused by a latent defect during manufacture, and had only been discovered as a result of it being exposed by ordinary wear and tear during the lifetime of the ship.
Scrutton LJ: [p 405] …In the present case, has any damage to the hull occurred during the currency of the policy through latent defect? The only damage is, in my view, the latent defect itself, which by wear and tear has become patent. But the latent defect did not arrive during the currency of the policy; it existed in 1906, and the underwriter does not insure against wear and tear and its consequences. Has any part of the hull been lost in fact during the currency of the policy? The stern frame has not been lost in fact; it is there as it was before the policy began; the only change is that a previous latent defect has, by wear and tear, become patent.
Fletcher Moulton LJ: [p 410] …It is suggested that this was a ‘loss of or damage to hull through a latent defect in the hull’ within the meaning of the Inchmaree Clause. It was, in my opinion, nothing of the kind. It was not loss or damage caused by a latent defect but a latent defect itself. To hold that the clause covers it would be to make the underwriters not insurers, but guarantors, and to turn the clause into a warranty that the hull and machinery are free from latent defects, and, consequently, to make all such defects repairable at the expense of the underwriters. There are no words in the clause which warrant such an interpretation. The fact that it begins with the word ‘insurance’ negatives, in my opinion, the possibility of its being so interpreted.
BREAKAGE OF SHAFTS
Traditionally, the Inchmaree Clause has always included as covered loss or damage, not only caused by the bursting of boilers, but also by ‘the breakage of shafts’. Notably, as with the bursting of boilers, in the event of a shaft breaking, only the loss or damage ‘caused by’ the breakage of the shaft is covered; damage to the shaft itself does not fall within the liability of the insurer. This was particularly well illustrated in the Scindia case, below.
Scindia Steamships Ltd v London Assurance  1 KB 639
The plaintiff owners of the steamship Jalavijaya put her in dry-dock in Bombay to renew some of the wooden lining around the tail end shaft. The vessel was covered by a time policy of insurance, which included an Inchmaree Clause which, in itself, was complicated in its construction. Whilst attempting to remove the propeller, the end of the shaft broke owing to a latent defect, and both the propeller and the end of the shaft fell into the dock and one blade of the propeller was broken off. The owners claimed for both the propeller and the shaft. The defendant underwriters admitted liability for the propeller, but not for the shaft.
The court ruled that the underwriters were not liable for the damage to the shaft; they were only liable for damage caused ‘through’ the breakage of the shaft, such as the damage sustained by the propeller, and not for damage to the shaft itself.
Branson J: [p 648] …The facts with regard to the breakage seem to be plain enough. During the operation of wedging off the propeller, the shaft was being subjected to an ordinary operation of repair which any shaft of proper strength and construction would be able to sustain without any difficulty, but, owing to what is described as a ‘smooth flaw extending downwards from the top as the shaft then lay’ deep into the metal, involving about one-half of the material, the other half of the shaft remained and was broken. It is said on the part of the defendants that that is a latent defect, and, except under those words of this clause which deal with latent defects, damage caused by latent defects is excluded from this clause by virtue of s 55(2)(c) of the Marine Insurance Act 1906. That seems to me to be a sound proposition.
…It is said that ‘shafts’ are a portion of hull or machinery, being a portion of the machinery, and that loss of or damage to machinery caused through breakage of shafts includes the actual breaking of the shaft itself. That, it seems to me, is a forced construction of the language, and not the ordinary meaning which, reading the clause as a piece of English prose, one would be inclined to put upon it. It follows other clauses in which, obviously, the loss or damage happens to something different from the thing by which the damage is said to be caused. The first clause is ‘caused by accidents in loading’, and so forth; the next is ‘caused through the negligence of master, mariners’, and so forth. Both of those clauses obviously envisage, as it seems to me, a state of affairs in which the main cause produces damage which has an effect on something else; and I see no reason why, when after those two clauses, one comes down to the one with which I have particularly to deal, one should read it in any other way. It seems to me, therefore, that the proper reading is that the breakage of the shaft is a loss of or damage to machinery caused by the breakage of the shaft. The breakage of the shaft is the breakage of the shaft, and if, by reason of the breakage of the shaft, the machine is torn to pieces, then one would get damage caused by the breakage of the shaft. But, in this case, the only damage beyond the damage of the propeller, which has been paid for, is the actual damage which happened to the shaft itself, to wit, the breakage of the shaft. To speak of that as damage to the machinery which the breakage of the shaft has caused, seems to me to produce a confusion both of thought and language, which I think should not be introduced into the construction of a clause of this kind.
I therefore think the plaintiffs fail to establish a right to recover under that part of the clause which relates to the breakage of shafts.
LATENT DEFECT IN THE MACHINERY OR HULL
As opposed to normal wear and tear, a latent defect is a flaw in machinery or hull which has not resulted from the want of due diligence by the shipowner or his managers. In the Wills case, below, the flaw was in the link of a chain used by a bucket dredger.
Wills and Sons v World Marine Insurance Company Ltd, ‘Mermaid’ (1911) The Times, 14 March (reported as a note in  1 Lloyd’s Rep 350)
Mermaid was a bucket dredger operated by the plaintiff owners at the port of Aden, and insured by the defendant underwriters; the policy of insurance included an Inchmaree Clause. Whilst the dredger was in motion, a large chain, which controlled the raising and lowering of the bucket ladder, broke, and the dredger was badly damaged. On inspection of the broken link in the chain, it was found to have a defect in the weld. The owners claimed for the cost of repairs to the hull and machinery, the salvage operation in Aden and the cost of the voyage home for those repairs. The underwriters accepted the cost of the salvage operation, but refused to pay the cost of the repairs and the voyage home, on the basis that a prudent owner would have discarded the chain as being unfit for use.
Scrutton J: [p 351] …Turning now to the Inchmaree Clause, it enables the assured to recover damage to hull or machinery through any latent defect in the machinery, provided such loss or damage has not resulted from want of due diligence by the owners of the ship or by the manager. It was admitted that there was, here, a latent defect in the chain. I find that damage to hull and machinery was caused by this latent defect, and that if the weld had been sound and without defect the link, though worn, would have been of ample strength to stand the strain. I further find that the loss or damage did not result from want of due diligence by the owners or the manager, who were justified in thinking that the chain was sound and of sufficient strength for ordinary perils, and who used all proper care to examine it, and by annealing to keep it in good order. This case appears to me to afford a good example of the legitimate claims which the Inchmaree Clause was intended to cover.
Similarly, in the Nukila case, below, the damage to the legs of an accommodation platform were also held to have been caused by latent defects, viz, faulty welds.
Promet Engineering (Singapore) Pte Ltd v Sturge and Others, ‘Nukila’  2 Lloyd’s Rep 146, CA
Nukila was an accommodation platform operating in the Java Sea. On a routine inspection, divers found cracks, caused by faulty welding, at the base of all three telescopic legs. It became evident that there were serious fatigue cracks in the feet (spud cans) and also in the legs where they were joined to the spud cans. The platform had to be returned to Singapore, where it had been built, and repair costs amounted to more than S$ 900,000. The owners, Promet Engineering, had insured the platform on the London market under a time policy which incorporated the ITCH(83), including the Inchmaree Clause. The owners claimed for the cost of repairs on the basis of ‘damage to the subject matter insured by latent defects in the hull’. The underwriters denied liability, stating that the owners had merely discovered latent defects in the platform legs.
The Court of Appeal, in reversing the decision of the trial judge, ruled that the faulty welds were latent defects which had, in fact, caused damage to the subject matter insured.
Hobhouse LJ: [p 151] …Insurance covers fortuities, not losses which have occurred through the ordinary incidents of the operation of the vessel. Similarly, the insurance does not cover the cost of maintaining the vessel or running it. As the judge held to be the case in the present action, the cracking occurred as a result of the ordinary working of the platform at sea and the presence of the latent defects in the welds. There was no external accident or cause.
…However, there are further difficulties. A policy of insurance does not cover matters which already exist at the date when the policy attaches. The assured, if he is to recover an indemnity, has to show that some loss or damage has occurred during the period covered by the policy. If a latent defect has existed at the commencement of the period and all that has happened is that the assured has discovered the existence of that latent defect, then there has been no loss under the policy. The vessel is in the same condition as it was at the commencement of the period. Therefore, in any claim under the Inchmaree Clause or any similar clause, the assured has to prove some change in the physical state of the vessel. If he cannot do so, he cannot show any loss under a policy on hull.
[p 152] …In my judgment, the application of the language of the Inchmaree clause to the facts of the present case is straightforward. At the commencement of the period of cover, there was a latent defect in the welds joining the underside of the top plate of each spud can to the external surface of the leg tube. By that time, that latent defect had also given rise to minute fatigue cracks in the surface of the tube in the way of the weld which could also properly be described as latent defects. Those features during the period of cover caused extensive fractures in the full thickness of the tube extending in places both above and below the defective weld, extensive fractures in the metal of the top plating and bulkheads of the spud cans and other fractures at other locations. This was, on any use of language, damage to the subject matter insured, the hull, etc, of Nukila. It was, as the judge found, caused by the condition of Nukila at the commencement of the period, that is to say, by the latent defects I have identified. Therefore, subject to authority, the arguments of the owner should be accepted and the claim should succeed.
Meaning of latent defect
In the Green Lion case, below, a ‘latent defect’ was defined as ‘one that could not be discovered by any known or customary test’.
Sipowicz v Wimble and Others, ‘Green Lion’  1 Lloyd’s Rep 593
In this case from the USA, the plaintiff insured the wooden cutter Green Lion with the defendants under a policy of insurance which included an Inchmaree Clause. The vessel sank at her dock in calm weather conditions, and it was subsequently found that the keel and keelson had separated from the hull due to serious corrosion in the fastenings which secured these items in place. The plaintiff owner claimed under the policy, on the grounds that the loss was caused by perils of the seas or by a latent defect.
The court ruled against the plaintiff on both points. It could not be a peril of the sea as the deteriorated state of the fastenings made the loss inevitable, rather than fortuitous. Nor could it be a loss by latent defect, as such a defect is, by definition, one which could not be revealed by a reasonably careful inspection. The plaintiff had been aware of the poor state of the fastenings for some time, including a report made after a condition survey. District Judge Cannella clarified the meaning of ‘latent defect’.
District Judge Cannella: [p 598] …Green Lion sank as the result of the incursion of water into her hull. Water was allowed to enter the vessel because the deteriorated metal fastenings which secured the keel and keelson to the hull had weakened and had allowed the separation to occur. These fastenings and the metal assisting frames had deteriorated from age, wear and lack of maintenance, and were not shown to be inherently defective in their original construction. Plaintiff had knowledge of the condition of these metal supports by virtue of the specific recommendations for their repair, reconditioning or replacement contained in the 1966 condition survey report. Plaintiff was further aware of their condition because, as he testified at trial, he had performed certain work in an effort to restore the fastenings. In view of this proof, the loss of Green Lion cannot, as a matter of law, be said to have resulted from a latent defect.
A latent defect is a defect which a reasonably careful inspection would not reveal (Reisman v New Hampshire Fire Insurance Co). It is not a gradual deterioration, but rather, a defect in the metal itself (Waterman SS Corporation v United States SR and M Co). In Tropical Marine…, the court stated that the classic meaning of the term ‘latent defect’ was as follows:
A latent defect is one that could not be discovered by any known or customary test… [and] …is a hidden defect and generally involves the material out of which the thing is constructed as distinguished from the results of wear and tear… [It is] a hidden defect…not manifest, but hidden or concealed, and not visible or apparent; a defect hidden from knowledge as well as from sight…a defect which reasonably careful inspection, will not reveal; one which could not have been discovered by inspection…by any known and customary test.
…Green Lion’s defective and deteriorated metal fastenings were not, under the above definitions, latent in nature; they were clearly patent. They were observable and had been observed. They were accessible, and access to them had been obtained by the plaintiff, who had made an attempt to restore them. They were not hidden or unknown, but rather, were fully revealed in the 1966 condition survey report. They were not defects inherent in the metal, but were, rather, the result of 27 years of use. As such, the court concludes that the vessel did not sink as the result of a latent defect as that term is employed in the Inchmaree Clause of the instant policies.
And, in the Caribbean Sea case, below, a latent defect was considered to include a defect in design which could, in fact, be the proximate cause of a loss.
Prudent Tankers Ltd SA v The Dominion Insurance Co Ltd, ‘Caribbean Sea’  1 Lloyd’s Rep 338
The 18,372 ton tanker Caribbean Sea was owned by the plaintiffs and insured with the defendants under a hull policy which incorporated the American Institute Hull Clauses, including an Inchmaree Clause. The tanker was employed on a voyage carrying crude oil from Venezuela to Tacoma in the United States via the Panama Canal. On leaving Maracaibo, the tanker grounded lightly whilst avoiding a dredger; the master later lodged a protest at Balboa on the Panama Canal. After leaving the Panama Canal, in fair weather conditions, the tanker started taking in water into the engine room through a damaged main sea suction valve and eventually sank. The owners claimed on their policy of insurance for a total loss, on the grounds that the loss was the result of: (a) the grounding; (b) metal fatigue around the valve; and (c) the negligent navigation of the master. The underwriters resisted the claim citing unseaworthiness and wear and tear as the causes of loss.
The court ruled in favour of the plaintiff owners. It was held that the grounding had been a trivial matter, but the defect in the suction valve constituted a latent defect, and any design faults did not preclude recovery under the policy.
Robert Goff J: [p 345] …I take first Mr Kentridge’s submission [for the insurers] that a defect in design is excluded from the cover provided by the Inchmaree Clause. In considering this question, it is important to appreciate that a defect of design may be relevant in more than one way. It may, for example, in due time result in a defect (for example, a crack) in the material from which the hull or machinery is constructed, which, in its turn, may cause a casualty. On the other hand, it may, because the ship is subjected to work for which it is (by reason of the defect in design) inadequate, result in a casualty without any determinate intermediate defect developing in the material, to which the casualty can be attributed as the proximate cause. Furthermore, in considering whether there was a defect in the hull or machinery which directly caused the loss of or damage to the ship, one is concerned with the actual state of the hull or machinery and not with the historical reason why it has come about that the hull or machinery is in that state. If the hull or machinery is in such a state that there can properly be said to be a defect in it, and such a defect is the proximate cause of the casualty, it would seem to matter not that it had come into existence by virtue of (for example) poor design, or poor construction, or poor repair, unless a casualty so caused is excluded from the cover.
[p 346] …At all events, however this case is to be interpreted, neither the decision, nor the dictum on which Mr Kentridge relied, has, in my judgment, the effect of excluding a defect in hull or machinery from the cover provided by the Inchmaree Clause merely because the historical reason for such defect was defect in design.
[p 347] …In the present case, however, the casualty is not simply to be attributed to ordinary wear and tear. The defect upon which the owners rely consisted of the fatigue cracks in the wedge-shaped nozzle; and the presence of these cracks is to be attributed to two factors—the manner in which the ship was designed (viz, the welding of the gussets to the nozzle with fillet welds in proximity to the circumferential weld between the nozzle and the spool piece) and the effect upon the nozzle, in these circumstances, of the ordinary working of the ship. The result of this combination of circumstances was that the fracture opened up a significant period of time before the end of the natural life of this ship.
…The present case is one where defective (though not negligent) design has had the effect that defects would inevitably develop in the ship as she traded; if such defects develop and have the result that a fracture occurs and the ship sinks, such a loss is not, in my judgment, caused by ordinary wear and tear, and so is not excluded by s 55(2) (c) of the Act.
I am also satisfied that the defect in the present case, consisting as it did of the fatigue cracks in the wedge-shaped nozzle, constituted a latent defect. There was, in fact, no discussion before me of the meaning of the word ‘latent’ in this context. In contracts of affreightment, a latent defect has been held to be a defect which could not be discovered on such an examination as a reasonably careful skilled man would make: see Brown v Nitrate Producers SS Co (1937) 58 LlL Rep 188. In the American cases cited to me, a latent defect has been said to be one which cannot be discovered by any known and customary test: see the dictum from Parente v Bayville  1 Lloyd’s Rep 333, which I have already quoted. I prefer the former of these two tests, which appears to me to be more in accordance with commercial sense, taking into account as it does the possibility that a ship may be properly and carefully maintained and yet a defect may not be discovered, although a more meticulous examination would have revealed its existence: a casualty caused by such a defect is surely covered by the Inchmaree Clause. I therefore conclude, on that test, that the loss of the ship in the present case was directly caused by a latent defect in the hull, within the cover provided by the Inchmaree Clause…
Latent defect and unseaworthiness
A latent defect may cause a vessel to become unseaworthy by rendering her incapable of encountering the ordinary perils of the seas. Whether insurance cover for such a defect would override the implied warranty of seaworthiness in a voyage policy, or an express warranty in a time policy, is not clear.8
Both a latent defect in design and unseaworthiness were the issues in the Miss Jay Jay case, below. However, in this instance, both were held to be concurrent and effective causes of the loss.
Lloyd (JJ) Instruments Ltd v Northern Star Insurance Co Ltd, ‘Miss Jay Jay’  1 Lloyd’s Rep 32, CA
The yacht Miss Jay Jay was insured by the owner with the defendants on a 12 month time policy which included cover for ‘…latent defects in the hull or machinery…’. In July 1980, the owner took the yacht on a round trip to Deauville in France from Hamble; the weather conditions were generally moderate. On her return to Hamble, it was discovered that she had suffered some damage to her hull; the bonding between the plastic layers of the hull had separated in places. The owner claimed on his insurance policy; the insurers denied liability, citing defective design and manufacture.
The Court of Appeal upheld the decision of the trial judge, who found in favour of the plaintiff owner; the damage was judged to have been sustained by a combination of adverse weather and defective design. Both were concurrent and effective causes of the loss, and Lawton LJ elaborates on the law in such circumstances, in particular, the right of recovery under a time policy where there are two proximate causes of loss, an included loss (adverse weather), and a loss (unseaworthiness) which has not been expressly excluded by the policy.
Lawton LJ: [p 36] …The fact, as the judge found, that the sea was not exceptional and could have been anticipated, does not stop the loss from being adjudged to have been caused by ‘external accidental means’. It was not caused by ‘the ordinary action of the wind and waves’ (see r 7 of the Construction Rules in the First Schedule to the Marine Insurance Act 1906), but by the frequent and violent impacts of a badly designed hull upon an adverse sea.
…If the defects in design and construction had been the sole cause of the loss, then the plaintiff would not have been entitled to claim either at common law (see Ballantyne v Mackinnon  2 QB 455) or because of an express exclusion in the policy. On the facts, as the judge found, the unseaworthiness due to design defects was not the sole cause of the loss. It now seems to be settled law, at least as far as this court is concerned, that, if there are two concurrent and effective causes of a marine loss, and one comes within the terms of the policy and the other does not, the insurers must pay.
…The plaintiffs were not privy to the defects in design (see s 39(5) of the 1906 Act), nor to the fact that, at the material time, the cruiser was not seaworthy. They had not impliedly warranted that it was (see the same subsection of the 1906 Act), nor had they failed to take reasonable steps to maintain and keep the cruiser in a proper state of seaworthiness as they were required to do under the policy. The loss was not caused by wear or tear so as to cause ‘debility’. Since the defendants did not exclude unseaworthiness or design defects which contributed to the loss without being the sole cause (as they could have done), the plaintiffs’ claim falls within the policy, provided that what happened in the sea conditions was a proximate cause of the loss.
If the ship had, in this case, been insured under a voyage policy, and had suffered from a defect existing at the commencement of the voyage rendering her unseaworthy, the insurer could simply have pleaded a breach of the implied warranty of seaworthiness as his defence. In such an event, there would have been no need for the insurer to involve itself with the legal niceties pertaining to the meaning of the term ‘latent defect’. For a case illustrating the interaction between negligence and unseaworthiness (and the due diligence proviso), reference should be made to the American case of Lemar Towing Co v Fireman’s Fund Insurance Co  AMC 1843, which is discussed later.9
NEGLIGENCE OF MASTER OFFICERS CREW OR PILOTS
It is emphasised that this part of the Inchmaree Clause covers a loss proximately caused by ‘negligence of Master Officers Crew or Pilots’; whereas the last limb of s 55(2)(a) of the Marine Insurance Act 1906 is only relevant to a case where the loss is ‘proximately caused by a peril insured against’, but remotely caused by the ‘negligence of the master or crew’.
Lind v Mitchell (1928) 45 TLR 54, CA
The plaintiff was the mortgagee of a sailing vessel operating in the area of eastern Canada. On sailing towards Burgeo in Newfoundland, she encountered bad weather and ice, and her side was damaged to such an extent that she started to leak. The captain anticipated a worsening of the weather, and abandoned ship while the conditions were still favourable, and the crew rowed the 15 miles to shore. Before leaving, the captain set fire to the vessel to avoid her becoming a floating derelict and a danger to navigation. She was later found by another ship, still well afloat and not seriously damaged. The mortgagee claimed under the time policy of insurance, which included cover for fire and perils of the seas. There was further cover, under cl 8 of the Institute Time Clauses, for loss of the vessel ‘caused’ (not ‘directly caused’) through the negligence of master, mariners, engineers or pilots. Owing to the suspicious circumstances surrounding the loss, the insurers resisted the claim.
The Court of Appeal upheld the decision of the trial judge and ruled that, though the master’s abandonment had been unreasonable, it still constituted negligence and the plaintiff mortgagee could recover.
Scrutton LJ: [p 56] …But in this case, the matter goes higher, I desire to say that I entirely agree with the view of the learned judge below that, suspicious as the case may be, there is no evidence on which one would be justified in finding intentional casting away of the ship, wilful and deliberate misconduct, conduct akin to scuttling by the master. Wilful casting away is a criminal offence and the man who alleges it must prove it, and he must prove it by evidence as if he were alleging a criminal offence.
[p 57] …Then we have this: there has been negligence of the master, not negligence of the assured. There has been negligence of the master which has resulted in the continuing action of a previously existing peril of the sea. Now, in my view, that is covered, if it were necessary to cover it, by cl 8 of the Institute Time Clauses. The word ‘directly’ is left out, and the underwriter insures against loss of the vessel ‘caused through the negligence of master, mariners, engineers or pilots’. Now if it were true—and I do not think it is— that, under the existing law, but for that clause you would treat the direct cause of the loss as being the premature abandonment and not the entry of seawater from a previously existing peril, in my view, that clause requires the underwriters to pay where the negligence of the master has caused the loss of the ship.
Sankey LJ: [p 57] …I think the master was undoubtedly negligent. I think he abandoned the ship prematurely and unreasonably, but I cannot think that those findings amount to something which comes between the negligence for which the insurers are responsible and the criminal negligence for which they are not.
Similarly, in the Lapwing case, below, an Inchmaree Clause, covering the ‘negligence of Master Officers Crew or Pilots’ proved effective. In this instance, even the manager of a boatyard, who acted as master during a drydocking, was considered to fall within the meaning of ‘master’ as defined by s 742 of the Merchant Shipping Act 1894, which states: ‘“Master” includes every person (except a pilot) having command or charge of any ship.’
Baxendale v Fane, ‘Lapwing’ (1940) 66 LlL Rep 174
The plaintiff, owner of the large yacht Lapwing, contracted with a local boatyard to have her dry-docked for cleaning and painting. The boat was insured with the defendants under a time policy which included an Inchmaree Clause. The plaintiff informed their insurers of the intended drydocking, and was assured that the policy would remain valid. During the dry-docking, the manager of the boatyard, Mr O’Connor, negligently placed her in the dock straddling a large baulk of timber so that when the dock was drained, the yacht strained herself and started to leak badly. Lapwing was refloated and repositioned in the dry-dock, but was still inadequately supported. The owner claimed on his policy of insurance for damage caused by a peril of the sea and also relied upon the Inchmaree Clause: ‘…negligence of Master…’ The insurers refused payment because, they contended, they only insured against ‘events that might happen, not events that must happen’.
The court held that the underwriters were liable under the policy on two counts. The yacht had effectively been damaged by stranding during the first attempt to dry-dock her. The negligence of those carrying out the drydocking provided the fortuitous circumstance necessary to make the damage suffered by the yacht a loss caused by a peril of the sea. Furthermore, as the boatyard manager was acting as ‘master’ within the meaning of s 742 of the Merchant Shipping Act 1894, the loss was also covered by the Inchmaree Clause under the head of claim which provided cover for a loss ‘caused by negligence of Master…’.
Hodson J: [p 181] …It is true that it was intended that the vessel should be docked, but not that she should be so negligently docked as to be allowed to sit on a dangerous bottom, and I think that the intervention of the negligence of those responsible for the docking provides the fortuitous circumstances which entitles the plaintiff to recover under the terms of the policy.
…‘Master’ has been defined in many statutes. In s 742 of the Merchant Shipping Act 1894, ‘Master’ includes every person (except a pilot) having command or charge of any ship. I have no doubt that O’Connor was the master of the vessel at the time of the first docking. He was still in charge of her. The fact that he was, at the same time, manager of the yacht works and was the servant of the yacht works, not of the plaintiff, seems to me to make no difference. Indeed, his dual position enables his negligence to be the more clearly established, because he was in a position to know what was the nature of the bottom of the dock in which he was placing the vessel.
…The allegation of negligence against the master was made in the pleadings, and I find that the plaintiff has established that the ship was negligently docked on both occasions. It was not incumbent on him to call the masters or either of them to establish this negligence. The master being in charge of the ship is prima facie responsible for the docking of the ship in the proper manner. I have therefore come to the conclusion that the plaintiff is covered under cl 5 of the Institute Yacht Clauses in respect of loss of or damage to hull caused by negligence of the master, whether or not the damage was due to a marine peril.
It is emphasised that the scope of an Inchmaree Clause could be widened, as it was in the American case of Rosa and Others v Insurance Company of the State of Pennsylvania, ‘Belle of Portugal’, below, to include the negligence of ‘mariners’.
Rosa and Others v Insurance Company of the State of Pennsylvania, ‘Belle of Portugal’  2 Lloyd’s Rep 386
The owners insured with the defendants (appellants) the hull of the fishing vessel Belle of Portugal and the skiff carried aboard her. The policy included an Inchmaree Clause which stated, inter alia, ‘This insurance also specially to cover…loss of or damage to hull or machinery directly caused by the following: …Negligence of master, charterers, mariners, engineers or pilots’; Belle of Portugal sailed from San Diego and was lost at sea due to an electrical fire. The crew took to the skiff and were later picked up by Port Adelaide. The crew of ‘Port Adelaide’ tried to hoist the skiff aboard, but it was lost. The owners duly claimed for a total loss by fire for Belle of Portugal herself, and also for the skiff, due to the negligence of ‘mariners’.
The Appeal Court upheld the decision of the trial judge, and ruled for the owners on both issues. Circuit Judge Merrill’s observations on the loss of the skiff were brief, but pertinent.