As the saga of Ever Given and the salvage efforts continue to unfold, the longer term effects bear examining.
The fragility of trade routes – which have been sorely tested by disruptions caused by Covid-19 and a shortage of containers – were once again exposed when the large container ship Ever Given ran aground while transiting the Suez Canal on March 23, lodging herself against both banks.
The ship is about 400 meters in length, roughly equal to the height of the Empire State Building, and she is capable of carrying about 20,000 TEU. She is owned by Shoei Kisen Kaisha (a subsidiary of Imabari Shipbuilding) and time chartered and operated by Taiwanese container line Evergreen Marine. Ever Given is registered in Panama and technically managed by the German ship management company Bernhard Schulte Ship management.
The ship’s large size has covered the entire width of the canal, holding up vessel traffic for days. This is causing knock-on effects on the movement of cargoes globally, as 12 percent of global trade is carried on board ships using the canal.
The blockage has caused vessels backed up in the Mediterranean to the north and the Red Sea to the south. It is estimated that the costs to global trade is estimated to be about $400 million per hour, based on the approximate value of goods that move through every day, according to Lloyd’s List.
The effect on the global supply chain due to the incident will also result in insurance claims. The claims will not come only from cargo on board the Ever Given but from cargoes on ships which will be delayed due to the inability to transit the canal. Many of these ships face a difficult decision over whether to wait or to divert around the Cape of GoodHope, which is a longer and costlier voyage.
Cargo insurance
The availability of recourse against marine cargo insurance policies is also not a given as most marine cargo insurance does not cover losses due to delays. Delay will arise for vessels already near the entrances to the canal where the vessels decide to wait for the blockage to clear. Vessels that decide to divert from their planned voyage to take the longer route through the Cape of Good Hope will arrive later than their planned schedules.
Most cargo insurance policies adopt the Institute Cargo Clauses issued by the Institute of London Underwriters Wordings. These wordings adopt the choice of English law and practice. This means that the terms of the UK Marine Insurance Act 1906 will apply. Most of these policies are of the all risks type, and delay is excluded, per Cls 4.5
4.5: loss damage or expense caused by delay, even though the delay be caused by a risk insured against
This would apply unless the policy is amended by endorsement to remove this exclusion, which would be the reasonable and prudent action for the assured to take.
