ESTABLISHING ‘LOSS OF POSSESSION’ IN MARINE INSURANCE CLAIMS

Abstract

To what extent should insureds expect compensation on interruption to their voyage by loss of possession or free use or disposal of their property where it remains undamaged? Marine insurance does not compensate for partial losses occasioned by delay. Recent authority (Masefield v Amlin Corporate Member) confirmed an insured could not recover for an actual total loss following capture where pirates would accept ransom then release the property. Property was not an actual total loss even after condemnation by a foreign tribunal (Panamanian Oriental Steamship Corporation v Wright), although condemnation might establish constructive total loss.
Where the voyage becomes impossible by detention or embargo, the insured’s right to abandon to insurers for constructive total loss may be unpredictable (eg after one year’s duration in The Bamburi). In each scenario, insurers are excused making prompt payments, and from dealing themselves with the consequences of the peril. In each the insured is either uncompensated, or at best must wait.

These authorities document an evolution; historically, English and American laws allowed the insured to abandon and recover for a total loss while these perils lasted, ignoring ongoing hopes of recovery. This thesis argues that a presumption of total loss still applies to all perils causing loss of possession. This appeared first in Continental treatises and was later applied in English law. No universal test of total loss applies equally to all marine perils. Instead, situations of loss of possession should be governed by peril-specific rules, including the presumption of total loss for perils causing loss of possession.