There is much in the press about the economic impact of the Coronavirus (CoVid19) outbreak on tourism and supply chain/trade disruption with China. The insurance industry is already affected for example by cruise line passengers, crew P&I and event cancellation claims; similarly marine business generally, for example, by the invocation of force majeure/delay clauses in relation to charterparties and newbuilding/scrubber refit contracts with Chinese yards.
The physical damage requirement
Less obvious is the potential impact on marine insurance. Marine policies are typically triggered by physical damage. One can foresee physical damage issues arising for example, from perishable cargoes being physically impacted by delay or cargoes more generally subject to an extension of the insured transit. However, the impact is more likely to be felt in terms of delay or disruption where no damage is suffered – with cargoes or vessels not being shipped, sailing empty, being delayed or refused entry at discharge port.
A key issue is the extent to which policies respond where there is no physical damage. With soft market conditions in recent times policy extensions affording non-physical loss cover have crept into policy wordings. By way of example (a) extra expense, forwarding charges or access to property clauses in a cargo policy may trigger coverage; (b) hull loss of hire policies may respond where a vessel is quarantined or denied port entry; (c) cruise line policies may respond where a cruise vessel’s scheduled itinerary is directly impacted (but query whether quarantine restrictions, as opposed to an actual port closure, is sufficient for this purpose). None of these necessarily depend on any physical loss occurring.
In assessing how such policy extensions respond, it will remain important to consider whether, in causation terms, the Coronavirus outbreak is the true cause of the loss rather than having an indirect effect, also whether insurers can establish that other policy exclusions apply. Whilst initial impressions are that the impact of the outbreak on marine insurance may be limited, careful consideration of policy wordings will still be required in the event of a claim.