Mr. Chan sold 10 cartons of plastic beads to Mr. Lee, a CD producer, and then shipped them to him by sea. On receipt of the goods, Mr. Lee found that the surface of one of the cartons was water-damaged and refused to accept receipt of that carton for the reason that the plastic beads inside may have become contaminated. Mr. Lee then made a claim for his loss with his marine cargo insurer.

Will Mr. Lee's claim be successful?

As the plastic beads that are used to produce CDs require a high degree of purity, the producer will not take the risk of using raw materials which may be contaminated. But the plastic beads may not, in fact, have been contaminated as only the carton was water-damaged. In Mr. Lee's case, according to the marine cargo insurance cover ICC (A), if wet was covered, such damage falls into the definition of constructive total loss and Mr. Lee could be entitled to compensation from his marine cargo insurer.

Damages caused by insured perils leading to constructive total loss, as discussed above, often provoke arguments. It takes time and effort for the insured to prove exactly why the goods are damaged or contaminated. Because of this, if the goods or raw materials required must be of only the highest quality, you are advised to inform your insurance company to take all necessary steps to avoid any arguments.

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