Eurodale v. Ecclesiastical
This case demonstrates how clauses in an insurance contract that are specifically added in by the parties will generally override standard terms with which they conflict, especially where the standard terms are incorporated into the contract only by reference.
This case note is based on an Article in the May 2002 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website.
DMC Rating Category: Confirmed
Eurodale Manufacturing bought and sold mobile phones wholesale, supplying stock against orders from customers. Its suppliers would let it know what phones were available, and Eurodale would arrange for them to be held for a short period while it obtained orders. The phones were delivered to and despatched from warehouses run by warehousing companies. Eurodale instructed the warehouse about sales, usually by faxing to them copies of invoices to their customers, and the warehouse allocated the stock and arranged delivery. The nature of the business meant that goods would often be received and shipped out in a matter of a few hours.
Eurodale's standard arrangement with its suppliers was that property and risk in the goods passed to Eurodale when the good were delivered to a designated warehouse and were accepted after inspection. Under its terms with its customers, the goods were released on receipt of payment. Title therefore remained with Eurodale until payment was received.
On the evening of 26 May 2000, the Friday before a bank holiday weekend, one of Eurodale's suppliers delivered two consignments of mobile phones to a warehouse operated by Hawk Precision Logistics Limited. Eurodale had advised Hawk to expect the deliveries and subsequently faxed copies of invoices to instruct Hawk to whom the goods were to be despatched. But the instructions arrived after work had finished for the day, so the phones remained in the warehouse over the bank holiday weekend. On the Tuesday, it was discovered that 1400 of them had been stolen during a ram-raid.
Eurodale had open cover with Ecclesiastical Insurance described
as "transit insurance". The policy incorporated various Institute
clauses by reference, including the Institute Cargo Clauses (A) 1/1/82)
("the ICC"). The ICC include a transit clause which provides:
The specific typed provisions of the cover, however,
included the following:
Eurodale argued that, under this clause, the phones were insured when they were in Hawk's warehouse since it had, through Hawk, accepted delivery and had not yet transferred title to its customers. Ecclesiastical, however, argued that the risk could not be characterised as a transit risk and that the terms of the open cover (which incorporated the ICC terms) showed that the parties intended that only losses in the "ordinary course of transit" should be covered.
The judge agreed with Eurodale.
Generally the court will be inclined to interpret contracts of insurance so that the insured has continuous cover during the period he is at risk (Cornfoot v Royal Exchange Assurance Co  1 KB 20). It will try to give effect to both written and standard printed clauses, but if there is plainly a contradiction between the two, the written clause will override the printed clause because the written words have been specifically chosen and agreed by the parties for the particular risk (MacGillivray on Insurance Law  9th ed. para 11.30). The judge considered this principle applied with equal if not greater force where, as in this case, the standard terms are not printed as part of the contract but are incorporated only by reference.
The judge accepted that storage of the goods in circumstances entirely unassociated with their transport would not have been covered, but "transit insurance" does not necessarily mean cover will only attach during their actual transportation (Crows Transport v Phoenix Assurance Co Limited  1 WLR 33).
In this case, Eurodale had arranged for delivery of the phones to the warehouse for the purpose of having them dispatched to customers, usually within a very short timeframe. In the absence of the express Voyages clause, the goods would not have been regarded as being "in transit" under the terms of the ICC while they were held at the warehouse, but the effect of the clause was that the goods were covered. There was no specific evidence as to what the underwriter knew of the nature of Eurodale's business, but it could be inferred from the specific clause that Ecclesiastical could be taken to have known how their insured operated and that the parties had drafted the cover to reflect the pattern of Eurodale's business.
In the circumstances, the fact that the goods were held for longer than was normal made no difference, since the delay was readily understandable in view of the bank holiday weekend and did not change the essential nature of the arrangement. Nor did the fact that the instructions about the allocation of the goods and their despatch arrived after delivery. The goods had been delivered to Hawk for the purpose of their onward transportation in circumstances covered by the express Voyages clause of the transit cover.
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