29 February 2012

Trade and Transport Insurance 2011

This report discusses developments in marine and aviation insurance in Australia in 2011.
Australia Insurance
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2011 was a relatively quiet year in the courts for Australian marine insurers, with no significant decisions to be reported. However, the decision in the UK Supreme Court in Global Process Systems Inc v Syarikat Takaful Malaysia Berhad [2011] UKSC 5 was noted by the local market with considerable interest. That decision further explored the meaning of "inherent vice", supporting the conclusion in Soya GmbH v White [1983] 1 Lloyd's Rep 122. The UK Supreme Court agreed that "inherent vice" meant the risk of deterioration of goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without intervention of any fortuitous accident or casualty. However, the complex judgments overlayed this definition with findings that the "ordinary course of the voyage" did not encompass all weather conditions that the ship could forseeably encounter and that there should be no limitation applied to the requirement of a fortuitous external accident. The consequence is that loss will not be attributable to inherent vice if there was any fortuitous external causal event.

The litigation over the APL Sydney and the damage it caused to a submarine pipeline in Port Phillip Bay was successfully resolved.


There was more activity in aviation litigation, with the Queensland Court of Appeal reviewing the first instance decision in QBE Insurance (Australia) Limited v Cape York Airlines Pty Ltd [2011] QCA 6. In dismissing the appeal, the court reiterated the requirement that the insurer make a "valid election" to pay for damage to an aircraft or to pay the cost to repair it. However, there was a small amount of good news for the insurer, because the claim for loss of use of the aircraft was reduced as it amounted to a double recovery.

QBE Insurance has also found itself embroiled in an ongoing battle of jurisdictions with litigation in both Australia and the US in relation to claims arising from the 2005 accident at Lockhart River, which killed 13 passengers and two pilots. A limited anti-suit injunction was granted by Bergin CJ in the New South Wales Supreme Court in favour of the insurer in QBE Insurance (Australia) Limited v Hotchin & Ors [2011] NSWSC 68. Bergin CJ found that litigation in Cook County, California, was "unconscionable, vexatious and oppressive", noting that the choice of law clause in the policy provided for Australian law and the geographical cover of the policy was Australia and surrounding countries.

In Rosengarten v American Airlines Inc [2011] VCA 1535, the Victorian Civil and Administrative Tribunal dismissed an application from a passenger on an American Airlines flight whose baggage was lost. The tribunal itself lacked jurisdiction for the claim as it was not a "court", as required under Article 33 paragraph 1 of the Montreal Convention 1999.


We expect 2012 to be generally one of "plain sailing" in the marine sector, with no sign of implementation of the long talked about amendments to the Marine Insurance Act 1909 (Cth).

In aviation insurance we continue to keep an eye on the outcome of the review of carriers' liability and insurance conducted by the Department of Infrastructure, Transport, Regional Development and Local Government.

The issue of whether third-party surface damage insurance should be made mandatory will no doubt be an area of interest to insurers. The preliminary findings of the review suggested that a compulsory third-party scheme should be implemented, although government was seeking additional data from industry before a decision is made on whether to proceed with that proposal.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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