Goods in transport insurance and inherent vice (Court of Appeal The Hague, 15 July 2025[1])

In a recent decision the Court of Appeal has overruled the Commercial Court of Rotterdam in a coverage dispute under a goods in transport insurance policy. The inherent vice defence of the insurer succeeded in appeal.
 
Introduction
Perhaps one of the most confounding issues in marine insurance law involves the inherent vice exclusion. When goods are insured on all-risks bases the usual terms exclude loss, damage or expense caused by inherent vice or nature of the subject matter insured. This means that damage or loss caused by the nature of the thing itself, as opposed to damage from an external occurrence, is not covered. There have been a lot of cases involving cargo interests suing underwriters who have declined coverage on the grounds that the loss occurred due to inherent vice. The most complicated cases involve moisture condensation resulting in wetting damage. One such case involved a shipment of soya beans from Brazil to Finland. 

Background of the case
X has taken out a goods in transport insurance policy with insurer on all-risks conditions exclusive of inherent vice. Dutch law is applicable. X is claiming compensation under the policy for damage caused to consignments of soya beans that it had purchased in Brazil and that had arrived with mould damage in Finland. The soya beans were shipped in four non-ventilated containers. Insurer refuses to provide cover because it considers that the mould damage is not the result of an uncertain event within the meaning of the policy. Moreover, insurer invokes the policy exclusion of inherent vice (Article 7:951 DCC). This Article reads as follows:

“The insurer shall not indemnify a loss of or damage caused to the insured thing when caused by the nature of, or by a defect in that thing.”

The Commercial Court of Rotterdam considered the refusal of cover to be unjustified and upheld X’s claim.[2] 

The Court of Appeal has a different view and dismisses the claim. The Court of Appeal is of the opinion that X has not proven that the damage has been caused by an external cause as for instance water that would have entered into the containers. The Court of Appeal is of the opinion that the soya beans were not in a condition suitable for transport at the time the insured risk attached. The mould damage must be attributed to moisture from the beans itself and because of a lack of ventilation within the containers and varying temperatures during the voyage the damage has been caused by an inherent vice of the soya beans. Therefore, the claim of X is dismissed. 

The decision of the Court of Appeal is in line with previous decisions of Dutch Courts in comparable cases.[3] However, the decision shows that it is very important that all the facts with regard to the circumstances before and during the voyage are investigated and disclosed. The role of the specialist surveyor is crucial for insurers in case of an inherent vice defense.