The English High Court held that an all-risks marine cargo and storage insurance policy did not cover a loss of copper ingots which were never shipped to the claimant who had in good faith paid for and taken up fraudulent bills of lading.

The claimant bought 7 000mt of copper ingots for shipment to China. The first shipment arrived without incident. The second shipment consisted of containers containing slag of nominal commercial value. The bills of lading, packing lists and quality certificates were fraudulent.

The policy covered ‘goods and/or merchandise and/or cargo and/or interests of all descriptions, that being the property of the assured or for which they are responsible’ whilst in transit. The all-risks wording covered ‘all risks of physical loss or damage to the subject matter insured from any external cause’.

The claimant alleged that all-risks cover provided cover of the very broadest kind and would include this kind of loss by fraud.

The court held that the starting point is that all-risks cover is for loss of or damage to property. No copper was ever shipped and there was never any cargo of copper ingots.

Something must exist to be physically lost.

All-risks marine cargo policies are generally construed as covering only losses flowing from physical loss of or damage to goods. There would have to be clear words indicating a broader intention. The court found there was nothing in the policy to show such a broader intention.

Even the Fraudulent Documents Clause provided cover for ‘physical’ loss of goods through acceptance of fraudulent documents of title, not only acceptance of fraudulent shipping documents. The word ‘physical’ cannot be brushed aside and must be given its natural meaning. The claim failed.

The same conclusion is likely to be reached in a South African court.

The case is Engelhart CTP (US) LLC v Lloyd’s Syndicate.