Based on the ruling of 3 November 2010
- Risks covered by the marine insurance “sur facultés” (cargo insurance)
- Seller’s interest clause
- The behaviour of the subscriber
Marine Insurance “Sur Facultés” (Cargo Insurance)
This type of marine insurance is aimed to guarantee the risks to which goods are exposed during their transport by water, land, or air.
French marine insurances are governed by the provisions of Title VII of Book I of the Insurance Code.
- They cover damages caused to the goods and do not apply, unless specified otherwise, to commercial risk (indirect commercial or financial damages).
- Regarding conditions to claim compensation: The subscriber of a marine insurance can require the execution of the insurance contract.
Moreover, the interest to act is a necessary condition laid down in Article L.171-3, paragraph 2 of the French Insurance Code which provides that
“No one can claim the benefit of insurance if he has not proven damage”.
This is a rule regularly recalled in the polices françaises d’assurance maritimes sur facultés.
1) Risks Covered by the Marine Insurance “Sur Facultés” (Cargo Insurance)
a) The Failure to Pay the Sale Price of the Goods
Marine insurance does not cover the risk of non-payment of the sale price of the goods because it is a pecuniary risk and not a “damage caused to insured objects”
(according to Article L.172-11 of the French Insurance Code).
In the reported judgment, goods were delivered to the recipient in good condition and there were no damages “caused to the insured objects” as defined by the Article.
Furthermore, there were no “loss or damages caused to the insured objects” in the sense of Article 5 of the imprimé of 16 February 1990, which was applicable in that case.
Thus, the loss was not covered by the marine insurance.
b) The Incorrect Delivery
An irregular delivery does not constitute either a loss or disappearance and cannot be assimilated to the losses of weight or quantities under Article 5 of the French insurance policy.
Moreover, theft of the goods would only be covered if there are traces of break-in or breakages.
In conclusion, unless specifically provided, incorrect delivery is not a risk covered by marine insurance “sur facultés” even if in some cases judges have held otherwise under Article 5 of the French insurance policy.
However, in the ruling of 3 November 2010, trial judges held that incorrect delivery could, in the meaning of the insured risk (subject to interpretation), be equivalent to a material loss for the subscriber.
The Court of Cassation confirmed this, affirming that trial judges did not refuse to give effect to the traditional rule
(that damages caused to the commercial exploitation of the subscriber are not insured).
2) “Seller’s Interest” Clause
Other risks can be guaranteed by specific agreements such as the “seller’s interest” clause or the “contingency” clause.
Most of these clauses require the existence of a physical loss or damage, but they can provide broader protection.
In the ruling of 3 November 2010, there was a “seller’s interest” clause specifying:
“when the subscriber sells a good without the obligation to insure it, the good is automatically guaranteed against damages and losses the seller could suffer from.”
As the meaning of “damages and losses” was not defined, pecuniary losses were deemed covered by virtue of the sale contract.
3) The Behaviour of the Subscriber
a) Gross Negligence or Intentional Misconduct
These faults cannot be insured and no derogation is possible between the parties to a marine insurance contract governed by French law.
Judgments defining gross negligence in marine insurance are rare. According to broader case law, gross negligence is a boldly committed fault with awareness that it would result in the realization of a risk.
Intentional misconduct involves committing the fault with the intention to cause the risk.
The ruling confirms that fraudulent use of bills of lading cannot be assimilated to gross negligence or intentional misconduct if the insured neither intended to cause the risk nor was aware of its likelihood.
b) Lack of Reasonable Care
Insured risks are covered even if the insured party is at fault (except in the cases mentioned above),
“unless the insurer establishes that the damage is due to a lack of reasonable care on behalf of the insured person to avoid the risks.”
This aspect considers the behavior of the insured person. Unlike gross negligence or intentional misconduct, derogations are permitted under Article L.171-2 of the French Insurance Code.
Additionally, Article 15 of the French insurance policy obliges the insured person to take all provisional measures to prevent or limit possible damages and losses.
In the ruling of 3 November 2010, a company was accused of failing to interrupt an ongoing shipment despite having received warnings about a possible diversion of containers.
This omission aggravated the damage. However, the Court of Cassation held that there was no significant delivery delay that would confirm the existence of a fraud.