“MV EVER GIVEN”: Insurances and General Average

On 23 March 2021, the vessel “MV EVER GIVEN”, one of the largest container ships in the world with a capacity of 20,000 TEUs, was grounded in the Suez Canal (Egypt). From then on and for the following six days, until the ship could finally be towed, an immense traffic jam was generated in the area, blocking the passage of thousands of goods transported daily by this waterway.

To date, there have been countless delays, because, in addition to those suffered by the cargo carried by the “MV EVER GIVEN”, there have also been delays suffered by all the ships and their cargoes that were trapped on one side of the canal or the other during this time. This has affected a significant number of shipowners and shippers worldwide.

Over time, all the details of this event will become clearer, and responsibilities will be clarified, but what can be said is that the insurance coverages of the affected operators and agents will have to be activated in order to be able to face the many costly claims that will be filed.

In this case, the directly affected insurance policies would be:

– Hull & Machinery Insurance, for damage to the proper vessel and    salvage costs.

– Protection and Indemnity Insurance (P&I), for shipowners and charterers, with civil liability cover.

– Cargo insurance for shippers, for possible damage to cargo.

The “MV EVER GIVEN” has been arrested since 13 April, at the request of the Suez Canal Authority (hereinafter SCA). SCA originally claimed $916 million for the non-payment of the ship’s refloating and maintenance costs but decided to reduce the claim by almost a third part, filing a final claim for $600 million in order to find a quick solution for the matter.

In view of this situation, several relevant questions arise.

 

  • Do shippers have the right to claim against the carrier for the delay?

Spanish law provides some protection in this respect, obliging the shipper to prove that the delay suffered was not “reasonable”. However, after analysing the standard contracts of carriage generally used by maritime carriers, it is very unlikely that the applicable law be Spanish law, as English law usually dominates these agreements.

At the same time, it is important to bear in mind that losses arising from delay are usually excluded from cargo insurance policies for maritime transport, as is the case in the most common clauses, the English clauses (ICCA).

 

  • Why does the ship’s operator, Taiwan’s Evergreen Marine CORP (EMC), not transfer the cargo to other vessels so that it can reach its destination?

The answer to this question is not simple.

Although the operator’s legal representatives are struggling to obtain the necessary permits and transhipments, at present the vessel and the cargo transported are understood to be a single entity and indivisible unit affecting the expenses claimed by SCA. This means that as long as the vessel is detained in Egypt, so are its goods.

Furthermore, to be able to carry out the transhipment, the vessel “MV EVER GIVEN” would have to move from the lake where it is berthed and detained (Great Bitter Lake) to the nearest port.

Finally, it cannot be overlooked that the shipowner has declared the figure of “general average”, so that the cargo transported is affected by the costs of the general average.

 

  • What is “General Average”?

It is understood as any expense or sacrifice reasonably and intentionally incurred by the shipowner, the purpose of which is to preserve the maritime adventure, the voyage and the goods involved in a maritime expedition, avoiding greater damage.

Once the general average is declared, all the interests involved (the ship, the cargo, the freight, etc.) have the legal obligation to contribute proportionally to the payment of those damages or expenses generated to save the voyage and the rest of the cargo. Therefore, this is a figure that is usually present in the ICC coverage agreed by shippers.

Shippers who do not have the goods insured under these clauses will have to provide personally the guarantees required by the shipowner to ensure their subsequent contribution to the general average. As long as such guarantees are not provided, the goods will continue retained by the shipowner.

In summary, in view of the fact that the vessel continues detained while waiting for the evaluation of the possible transhipment of the cargo to other vessels, we recommend that those affected receive specialised and appropriate legal advice to deal with the damages that they may have suffered due to this situation with all the guarantees.