Insect infestation during transit

This post is on an interesting marine claim I had come across. The admissibility or denial of the claim is not the main subject of discussion but the manner in which the conclusion about the loss was arrived at by the loss assessor/settling agent and faithfully accepted by the insurer.

Assured was an exporter of packaged snacks & mouth-fresheners. They had taken a specific marine policy covering a shipment from Mumbai to Montreal for an insured value of US $60,000 on ICC-A terms. Cargo was stuffed in a high-cube container which had been duly fumigated, sealed and then dispatched. The cargo was such that controlled temperature during transit was not required. The voyage took over two months with an extended transshipment at a Turkish port. After reaching Montreal, the container was shifted to buyer’s premises inland by rail. On opening the container, it was found fully infested with bugs. Buyer carried out two rounds of fumigation, as recommended by the loss assessor to see if some of the cargo could be salvaged. This did not meet with success as the insect infestation was widespread. Some photographs showed that many carboard cartons were eaten away by the insects. The cardboard cartons containing the packaged foodstuff/ mouth-fresheners were placed on wooden pallets and wrapped tightly with polythene sheets, but insect-infestation was severe in some of the cartons. In addition, a few cartons showed water stains. Silver-nitrate tests were carried out and since they returned negative, the surveyors/ loss assessors attributed this to condensation.

The buyer stated his intent to destroy the entire cargo as it was unfit for human consumption, which was agreed to by the loss assessors. Now, they had to finalize the report on the probable cause of loss and quantification of the same. So what was written? — ‘Condensation inside the container which caused heavy infestation and bugs development inside the container.’

It was a weak and irresponsible statement coming from a surveyor/loss assessor appointed by one of the renowned settling agents in the world. The insurer neither looked beyond the survey report nor questioned the surveyor on his comments about the probable cause of loss. In fact, while declining the claim they invoked Exclusions 4.3 ( unsuitability or insufficiency of packing) & 4.4 ( inherent vice or nature of the subject-matter).

I reiterate that the admissibility or denial of the claim is not being discussed here. One possibility could well have been that the wood used for making the pallets was green ( not fully dried) and carried eggs of the insects which hatched during the long voyage leading to a massive infestation. The fumigation of the container before loading could have been unsatisfactory. Another possibility could have been that during the voyage, some insects could have entered the container through the vents, laid eggs which hatched during the voyage and hence the infestation. Both of these are conjectures based on a viewing of the photographs and reading the report about the extent of loss caused by insect infestation, which appears. to be the proximate cause of loss/damage. How did the surveyor/loss assessor arrive at the bizarre conclusion that condensation caused bug development and infestation inside the container without submitting a logical, scientific explanation? Can condensation lead to bug development inside a container? Condensation is known to produce wet damages and development of mold/fungus infestations but never heard of bugs being produced.

The surveyor should have ideally called for a report from an entomologist to figure out the type of insects ( dead and alive) found inside the container and also their nativity. If the insects would have been found to be of Indian origin, the high possibility of green wood/ improper fumigation/ eggs being present and the long voyage which could well have led to their hatching and infestation could be indicated. However if the insects found were non-Indian in origin, the possibility of them entering through the container vents anytime during the transit or during customs examination at Montreal (from where it took sixteen days before the cargo was handed over to the buyer after an inland rail movement of over 500 kilometers) cannot be ruled out. A one-liner attributing insect infestation to condensation coming from a reputed surveyor/ settling agent is no doubt shocking. The insurer accepting this without murmur is a second shock.