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Bluebook 20th ed.

J. E. Bannister, Containerisation and Marine Insurance, 5 J. Mar. L. & Com. 463
(1974).

ALWD 6th ed.

J. E. Bannister, Containerisation and Marine Insurance, 5 J. Mar. L. & Com. 463
(1974).

APA 7th ed.

Bannister, J. J. (1974). Containerisation and marine insurance. Journal of Maritime
Law and Commerce, 5(3), 463-482.

Chicago 7th ed.

J. E. Bannister, "Containerisation and Marine Insurance," Journal of Maritime Law and
Commerce 5, no. 3 (April 1974): 463-482

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J E Bannister, "Containerisation and Marine Insurance" (1974) 5:3 J Mar L & Com 463.

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Commerce, vol. 5, no. 3, April 1974, p. 463-482. HeinOnline.

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Containerisation and Marine Insurance*

J. E. BANNISTER**

INTRODUCTION

It is not generally realised how many different organisations are

concerned in the movement of cargo, whether import or export. Most
of the activities result in liabilities notably for loss or damage to the
goods or other property.
The various liabilities are affected by statute and case-law,
commercial practice and regulations of the different interests. Needless
to say, there is little uniformity either in type of liability or financial
limitation of liability. Insurers are particularly interested as their rights
of recovery by subrogation are directly affected. At any point several
insurers may be interested in the cargo either by direct or liability
insurance.
Should there be a loss of or damage to cargo shipped by breakbulk
means, it may be possible to pin-point the particular part of the transit
where damage occurred by means of claused receipts or claused bills of
lading, but the number of parties involved can lead to arguments,
unproductive work, and expense in trying to enforce the liability for
loss or damage of one party in a chain.
Trying to evade or restrict liability often has the reverse of the
intended effect as few organisations examine the real cost of staff time
in following these procedures. The position as to liability is regulated in
part by the application to some transits of conventions dealing with the
international carriage of goods. These conventions govern the liability -
of carriers and overrule any inconsistent printed conditions of carriage.
Due to variations in the defined liabilities in these conventions, it is
possible for certain types of losses to be the accepted responsibility of
some carriers but not of others. With containerised shipments, where
the condition of contents is not externally apparent the cause and
places where loss occurred, and consequently the appropriate conven-
tion, can prove difficult to establish.
* Summary of the report of Advanced Study Group 196 of the Insurance Institute of
London.
** Director, C. T. Bowring (London) Ltd., The Bowring Building, Tower Place, London,
EC3P 3BE, England.
463
464 JournalofMaritimeLaw and Commerce Vol. 5, No. 3

INSURANCE IMPLICATIONS

Each of the various parties concerned in carriage has an insurable

interest either by reason of a direct interest in the cargo or a liability to
take care of the cargo.
Traditionally, the cargo owner insures the cargo on terms and
conditions appropriate to the nature of the cargo and the shipowner
(and others) insure their liabilities. The terms of contracts for the
carriage of goods by sea provide shipowners with very considerable
exemptions from liability for loss of and damage to cargo which can be
proved to have occurred in their custody and the rates of premium for
shipowners to insure their liabilities are calculated accordingly.
The speed with which containerised cargo reaches destination
particularly in respect of European transits, combined with the higher
limits and more onerous nature of carriers liability, had led to
reductions in demand, in some quarters, for "in transit", cargo cover.
Cargo owners have to some extent been relying less on the banks to
finance their business transactions as a result of this speed in delivery.
Unfortunately, many cargo owners who do not insure their goods do
not appreciate that they may not obtain sufficient protection and often
there are significant differences in interpretation of the convention
wordings, under which the goods are carried, in the Courts of various
countries.
Conventional cargo insurance policies clearly indicate the cover
provided and only in exceptional instances has it been necessary for
cargo owners to seek the interpretation of the Courts.
In current practice at least six different liability situations can be
found:

(i) ordinary bills of lading for port-to-port transit and subject to

one of the Acts generally based on the Hague Rules;
(ii) ordinary bills of lading for interior-to-interior transit, with the
Hague Rules applying to the period from loading on the ship to
unloading from the ship and restricted liability applying during
the land transit;
(iii) the so-called "network" contract of carriage where the
appropriate convention applies (i.e. Hague Rules, C.M.R.,
C.I.M.); when the place and cause of the loss and damage cannot
be established the Hague Rules limits are deemed to apply;
(iv) "strict liability" where the issuer of the bill of lading (shipowner
or container operator or groupage cargo consolidator) accepts
liability for loss of or damage to the cargo wherever it occurs in
April 1974 Containerisationand Insurance 465

the through transit, but with a number of exclusions such as

delay, loss of market, war, strikes, inherent vice, acts or
ommissions of the shipper or his agents;
(v) "restricted liability" plus an optional scheme of insurance of the
shippers' interest in the goods, the issuer of the bill of lading
acting as agent for the insurer;
(vi) insured bill of lading which gives mandatory insurance on cargo
as part of the contract of carriage.

Today the insurance market for handling these various combinations

consists of:
-marine insurers underwriting cargo insurance and to a limited
extent liability insurance;
-non-marine insurers underwriting goods in transit risk;
-mutual insurance associations covering liability of their members.

There is freedom of choice for cargo-owners and insurers and each

party undertakes arrangements to meet its particular needs.
There was some apprehension in the insurance market at the possible
loss of cargo insurance business to the shipowners' "clubs". Such
apprehension was increased by the formation in 1968 of a specialist
mutual association underwriting a wide range of liability and other
risks.

TECHNICAL CHANGE

The biggest underwriting problem with post-war shipping develop-

ment is the very rapid pace of technical change. New types of vessels
are brought into service much faster than previously-there is a
relentless increase in the size of ships which at certain points result in
qualitative as well as quantitative change in the risk. In recent years
container ships have been brought into large scale use with many
alterations in the risk.
The container ship is designed to cut time in port to hours rather
than weeks-it therefore has much greater exposure to the hazards of
the sea. The need for access to container cells along most of the length
of the ship has led to longer hatches. The potential reduction in hull
strength has been met by heavier scantlings. Hatch covers are much
stronger to carry the container deck load.
It is generally recognised that container ships need some sort of
stabilising system adding yet another item of specialised equipment.
Refrigeration, other than the on-deck plug-in variety, produces more
466 JournalofMaritimeLaw and Commerce Vol. 5, No. 3

sophisticated equipment and increases power needs. With fast turn-

round and in some ports shortage of container berths there is a
requirement for higher speeds and greater engine power.
In considering the development and utilisation of container ships and
their equipment, overall soundness of management assumes even greater
importance. Manning standards and skill affect operating efficiency and
the seriousness of incidents. The size of crews is being continually
reduced and some large ocean-going container ships have a total
complement of less than 30. When one takes account of catering and
other non-operational needs one is left with the bare minimum to keep
the ship going when all equipment is functioning properly. Any
emergency or trouble then places unreasonable demands on the crew.
When one considers these reduced crew numbers in relation to
frequent comment in shipping circles on inadequate standards of
experience and skill it would seem that far too much reliance is being
placed on machinery alone. A surplus over minimum needs gives a
margin of safety to deal with the unexpected.
Good management particularly in support services reduces the load
on crews and anticipates possible sources of trouble. The best operators
do in fact set high standards. They employ high quality planning and
technical staff who meticulously prepare for new services. They
consider all the possibilities, train and prepare crews to deal with the
problems and emergencies. They regularly review results in detail with
full examination of claims and other incidents to prevent repetition.
Above all, senior management and support staff maintain full working
relationships with operating crews at sea and in the terminals.
In practice it often seems that planning is not thorough enough, that
accidents are regarded as inevitable and senior management and support
staff neglect regular involvement in all aspects of operations. Such
neglect is dangerous commercially as well as being a danger to men,
equipment and cargoes.
Many of the above factors may be said to increase the risk. Container
fleets have, in some cases, been subject to higher rates of premium than
conventional vessels but the increase has not been as high as increased
exposure would apparently justify. Underwriters have suggested that
container operators on a regular port-to-port basis under good
management have all the characteristics of a first-class liner fleet.
Many of the comments on container ships apply also to roll-on/roll-
off ships. There are two additional hazards as demonstrated in losses
during recent years. Heavy vehicles and other trailer type loads need
skilled lashing as in heavy weather a loose vehicle can cause severe
April 1974 Containerisationand Insurance 467

damage and may even hazard the ship itself. Fast side and end loading
requires doors that are substantial in size and easy to open-characteris-
tics that may reduce the overall strength of the ship. This factor appears
to have been fully taken into consideration in the newer designs but
long trans-oceanic routes are still relatively new. L.A.S.H. ships also
have many of the basic features of container ships. It has been said that
in terms of plate thickness they are much heavier-the strength needed
to handle safely the large barges carried on these ships has meant very
heavy scantlings. The anchorages used for loading and unloading the
complete barges are more exposed than those used for cargo vessels on
regular routes.
It is now proposed to consider partially in theoretical terms the
changed character of hull casualties.

STRANDING

In the case of a major stranding, where the vessel is fast aground and
floating off is impossible or would result in severe bottom damage, it is
of course necessary to lighten the cargo.
It the ship has sufficient list it might be possible to remove the
containers by releasing the lashing or fastening rods. There has been a
great deal of discussion of other methods of removing containers from a
stranded vessel. Even a 20 ton container is beyond the lifting capacity
of any helicopter in normal everyday service, assuming that weather
conditions permitted the operation. Whilst one can envisage situations
where it was feasible to bring another ship alongside with sufficient
lifting capacity to remove loaded containers it is unlikely that they
could be loaded other than on deck. Also such equipment is not normal
equipment for salvage and other ships may not be at hand.
It is more difficult to unload containers from below deck. Container
loading and unloading under port conditions requires that the ship be
kept on a completely even trim, usually with the help of trimming
tanks. The normal restriction is that the list for successful loading/
unloading is no more than 5 degrees either way. Quite apart from such
limitations any damage to the ship such as a buckled plate could result
in the cell guides, which position the containers in the hold, being
damaged, thereby leaving the containers jammed in the hold.
A small number of container ships carry shipboard gantry cranes for
moving containers on and off the ships. Under calm weather conditions
it might be practicable to use such cranes to lighten the ship by
removing containers. In a major stranding there is the possibility of the
468 Journalof MaritineLaw and Commerce Vol. 5, No. 3

running rails for the crane (which under normal conditions permit it to
be moved fore and aft along the ship) being damaged thus preventing
movement of the gantry crane.

HEAVY WEATHER

There are many reports of the loss of on-deck containers in severe

weather conditions. During gales heavy cargo insecurely packed inside
containers may break adrift and cause damage to the ship itself. For
example welded brackets have failed and deck plates on which the
mountings were fitted have been torn out.
Under deck heavy weather damage in a container ship cannot be
rectified at sea. It is impossible to get at the containers themselves in
most purpose-built containers ships. The only solution in cases of severe
damage would be to put into port and unload part or all of the
containers. We were unable to find any instances of serious under deck
damage to-ship as well as cargo.
Fully loaded container ships with on-deck containers three or more
tiers high have totally different "sailing" characteristics to conventional
vessels.

COLLISION

In considering collision damage the absence of major casualty makes

any firm assessment impossible. Two factors have been put forward,
namely an increased risk of capsizing due to high centre of gravity, and'
the buoyancy of containers as helping to keep partially flooded ship
afloat.

FIRE

It is generally felt that the "boxed" character of containerised

cargoes reduces the possibility of fire damage. Should a fire break out it
is difficult to reach a fire in lower tiers below deck or inner tiers on
deck. Most purpose built container ships have only limited access to the
container holds.
General cargo ship fire-fighting practice has been continued with
container ships. Smoke detection equipment is standard but there are
doubts about its effectiveness with containerised cargo. Carbon dioxide
smothering is provided and there is provision for attacking fire below
deck from access points at each end of the hold and from above.
April 1974 Containerisationand Insurance 469

Several new methods are being experimented with, including sprinklers

and ionisation detection.
The collision in New York Harbour last June between the container
ship "Sea Witch" and the tanker "Esso Brussels" illustrates the practical
difficulty of fighting fires in loaded container ships. The on deck
containers prevented access by firemen to both on deck and below deck
containers. The ship was drenched with water and foam but the cargo
burnt out over a period of eight days. As a result the "Sea Witch"
became a constructive total loss and was beached.

INSURANCE OF CONTAINERS

Whilst some hull insurances include by specific reference cover for all
or some of the containers used in connection with the vessels and some
containers are insured with their contents as one risk, market practice
tends towards the insurance of the containers as a completely separate
risk.
The London market has two clauses for insurance of containers
covering respectively All Risks and limited conditions. Containers are
sometimes placed on a single voyage basis but cover is normal for 12
months. One of the largest leasing organisations advises that damage to
a container during its normal life of say 5 years was absolutely
inevitable. In fact most containers suffer at least slight damage each
year.
Large and efficient operators have their own repair teams who deal
with all small and straightforward repair jobs. This is very important
from the point of view of protecting the cargo as even a pinhole can
permit ingress of water.
It is usual for the insurance to include a deductible for each and
every claim. Even without the deductible it would hardly be
worthwhile for an owner or operator to press a claim for every small
incident. One underwriter has commented on the tendency towards
aggregation of small claims where damage was not promptly repaired;
this could lead to insurers paying claims which on a strict basis were
within the deductible.
This particular problem can be overcome by using a relatively high
deductible which probably best meets the needs of both insurer and
insured. It has been suggested that claims experience is better with
containers under the daily control of the owner than with leased
containers. The capital investment required and the effect of
competition on freight and leasing rates would indicate that the best
470 Journalof MaritimeLaw and Commerce Vol. 5, No. 3

solution would be insurance on relatively restricted terms as most of

the damage is small. Certainly it is within the control of the operator to
a large extent. Given bad operating practice there will be a high
incidence of small claims. An operator who studies the loss pattern
should be able to substantially reduce small losses.
The majority of containers are built and tested to high standards. It is
probably correct to say that when put into service they are completely
fit for the work expected of them but everyday use can soon change
this situation. Underwriters would like to see regular inspection and
testing of all containers in service but the cost of doing this
professionally would seem to be prohibitive.
Each time a container changes hands (e.g. when it is supplied by an
operator to a shipper for loading or it is returned) a docket is
exchanged and many operators retain these dockets as a record of use.
If the receiving party made a careful visual examination of the
container externally, and when empty, internally as well, and recorded
its condition this would meet the general need for inspection. Any
damage could be repaired promptly.

ON-DECK CONTAINERS

The use of containers permits fast loading and unloading. They do

however reduce flexibility in stowing. Variation in cube weight or
density between different cargoes means that there is a reduction in
payload compared with conventional stowage. Many shipowners have
balanced this loss of revenue by on-deck carriage of containers in some
cases stowed four high on deck.
Some cargoes are inherently unsuitable for carriage on deck in
containers particularly for climatic reasons-this can mean heat or cold
or condensation from change in temperature. Apart from such cargoes
shipowners have refused to guarantee under deck stowage. This is
understandable from their point of view as balanced stowage would be
difficult if not impossible to achieve under such circumstances.
It should be mentioned that some shipowners, notably Manchester
Liners, only carry containerised cargo under deck, on-deck carriage of
containers being non-existent or limited to empty containers.
Loss of on-deck containers overboard has occurred from time to time
and there have been many instances of subsequent recovery, sometimes
without loss or damage to contents. Such containers have been
recovered by other ships or washed ashore. Incidence of such loss has
been much higher from conventional vessels than from purpose-built
April 1974 Containerisationand Insurance 471
container ships. There has been a disproportionately large number of
losses from small feeder ships in North European waters.

CONTAINERS AND GENERAL AVERAGE

"All losses which arise in consequence of extraordinary sacrifice

made or expenses incurred for the preservation of the ship and cargo
comes within general average and must be borne proportionately by all
who are interested". This principle established under maritime law and
codified under the York/Antwerp Rules remains basically unaltered by
containerisation, but it is apparent that with the introduction of an
additional party i.e. the Combined Transport Operator with substantial
interest in the success of the adventure, certain aspects of general
average will be affected.
There have, of course been quite a number of casualties in which
container vessels have been involved, which have not presented
insurmountable problems to average adjusters. Shipping and insurance
interests are concerned, owing to the absence of cargo-handling
equipment on container vessels, over the possibility of a serious
casualty, particularly one involving difficulties in lightening a stranded
and listing container ship, necessitating extensive sacrifice or expendi-
ture for saving the venture. However, a mere discharge and reloading of
containers to right a listing vessel will not in itself be general average
expenditure; there must be either a common safety factor, or cargo
movements must be necessary for access to repairs.
Fires on board are hazards both to ship and cargo. A fire in a
container of inflammable goods may require drastic extinguishing
measures, should the fire be sited in one of the lower tiers of the hold
of the ship. Damage due to extinguishing fires is recoverable in general
average, provided the affected separate packages of cargo have not
themselves been on fire. Whilst there has not been any official
statement on the definition of a package within the context of
containerisation in relation to general average, the general practice has
been for the term "separate packages" to refer to the units of packing
within the container and not to the container itself.
Under the York/Antwerp Rules, jettison of cargo, carried in
accordance with recognised custom of trade, which would normally
include on-deck containers, is recoverable as a general average loss.
However, it is difficult without lifting equipment on board to jettison
containers. The cutting away of containers which have already shifted
and are hanging dangerously over the side might constitute jettison if it
472 JournalofMaritimeLaw and Commerce Vol. 5, No. 3

could reasonably be shown that the containers could have been

recovered by some means. There is often a substantial proportion of
cargo carried on deck of container vessels and the jettison rule is
therefore particularly relevant.
One of the most frequent causes of general average occurs where a
vessel puts into, or is towed to a part of refuge for common safety. It
may be necessary to discharge cargo in order to effect repairs, and
under the York/Antwerp Rules 1950, such charges together with
storage, insurance and reloading etc. are recoverable in general average.
If proper handling facilities are not available, damage to a container and
contents may be caused during these landing operations, again, it may
be necessary to move the vessels to ports with more sophisticated
equipment. Such damages and expenditure will enhance the general
average loss recoverable from the interests saved.
On the credit side however there may be savings with container
vessels, on cargo expenses for instance, which at a port of refuge may
be less than for break bulk cargo, which would require covered
warehouse space. Again if these vessels operate with smaller crews,
wages and maintenance as a G.A. expenditure may show some
reduction.

CONTRIBUTORY VALUES

In the assessment of contributory values, the values of containers

empty or full are an additional item to be calculated. Contribution will
be calculated on the actual net value at the termination of the
adventure but to arrive at the correct value, account must be taken not
only of the almost infinite variety of size and type of container but also
depreciation due to age, wear and tear. We understand that common
practice is to adopt insured value.
The net arrived value of cargo in the adjustment is the market value
at the termination of the adventure, less charges payable on delivery,
such as landing charges, duty etc. Freight costs are usually payable in
advance, vessel lost or not lost. Freight paid by the consignor on a door
to door container shipment would probably include some forwarding
charges to the destination named in the through Bill of Lading. Being
paid in advance and at the risk of cargo the proportion of freight from
discharging port to destination should be deducted from the market
value for G.A. purposes, and similarly it would be excluded in the
calculation of any allowance for G.A. sacrifice. In connection with
Cargo Contributory Values, there is a move towards the adoption of
April 1974 Containerisationand Insurance 473

C.I.F. or F.O.B. Values, which is being considered by the various

international bodies who are devoting considerable attention to the
revision of York/Antwerp Rules. Further, some shipowners in order to
reduce high administration cost in collecting security have, with the
agreement of their hull insurers, waived their right to collect G.A.
contributions from cargo for the smaller losses.

GENERAL AVERAGE SECURITY

Shipowners have a lien on cargo for its share of general average and
the contribution is normally secured by a bond, a G.A. deposit or an
underwriters guarantee. Where the C.T.O. arranges the entire shipment
from source to inland destination, he contracts with the Shipowners
and holds himself out as someone responsible for the goods throughout
the transit. Where he assumes liability for loss or damage to the
contents of the Container to various monetary limits, he may also
provide General Average Security and pay General Average Contribu-
tions.
When the security is obtained before release of the cargo, delays in
clearance and congestion at the terminal are frequently caused.
Shipowners are responsible for the declaration of general average, but
often the ship has been chartered to a container operator. The burden
of collecting the security from cargo will often inevitably be placed on
the charterer or container operator who, it has been found resent the
delays in their delivery schedules and vessel turn-rounds caused by the
performance of these duties. But they, rather than the shipowners, are
the only party with control of the cargo, and as a result become
directly involved in obtaining the security.

SALVAGE

Contribution to salvage is in a very similar manner to general average

affected by containerisation. In accordance with the Adjusters rule of
practice Salvage rendered under an agreement is treated as General
Average, and shipowners must consult cargo interests before agreeing to
an award. By virtue of the high values of container vessels, any award to
a salvage contractor will be enhanced.
Further, if the operation is difficult owing to problems mentioned
earlier in off loading part of the container cargo to lighten the ship,
again a higher award may be expected.
Usually shipowners will negotiate the award with the salvors on
474 Journalof MaritimeLaw and Commerce Vol. 5, No. 3

behalf of the cargo interests and incorporate the cost of the salvage
services in a statement prepared by average adjusters. At present it
appears unlikely that a salvor would negotiate separately with cargo
when so many individual interests are involved, particularly as at
present container ship services are primarily geared to the general needs
of shippers and cargo interests are unlikely to charter the entire ship.

ARE CONTAINERISED CARGOES A BETTER RISK?

Two views of the advantages and disadvantages of transporting goods

inside containers have prevailed. The optimists have pictured the cargo
packed into the container and to all intents and purposes protected
from every hazard. Not only would through transport be faster-it
would be completely safe. Many container operators' brochures
presented this rosy picture.
The pessimists have portrayed the opposite picture. Cargo was
packed into the container as though it was being carried by van from
one end of town to the other. Thus packed it was completely at the
mercy of land and marine hazards, arriving damaged. The impression
was given that the container provided many opportunities for
surreptitious theft and pilferage. Some marine underwriters have
spoken in this manner and some container operators thought that this
was the typical insurance reaction.
There is some basis for both these views. Many cargoes are shipped
more safely by container-in particular petty pilferage is much reduced.
On the other hand the closed nature of the container conceals some
damage until arrival at final inland destination. The container operator
will probably be unaware of such damage. In this case he will have one
view based on his experience and the marine underwriter will have
another derived from receiving the claims.
Some container losses have been spectactular-there is a rapidly
growing folk-lore of such losses which because of their novelty are soon
widely known. Through transit under controlled circumstances offers
the possibility of reducing loss and damage, delivering the goods in
good condition and faster than other methods. We would emphasise
"offers the possibility" of all these benefits. In practice these
advantages have in many cases not yet been realised.
When one studies the reasons why these benefits have not been
generally secured it seems that the causes lie more in management and
control than in the basic nature of containerisation. Inadequate
preparation, training and supervision have led to much unnecessary loss
April 1974 Containerisationand Insurance 475

and damage, goods have not been adequately packed to withstand the
hazards of the journey, terminals have lacked proper security,
containers have been shipped on unsuitable vessels, little consideration
has been given to the effect of breakdown in equipment. Such bad
practice is not typical of container operations but the many examples
that have occurred have led to some disillusion.

THEFT AND PILFERAGE

Use of containers has substantially reduced petty theft and pilferage.

It is not easy to appropriate and conceal goods that are firmly secured
in a large metal container. In the early days of containerisation there
were instances of containers being opened and some of the contents
removed, the container being re-closed to conceal the loss. Some
enterprising thieves even cut open the roofs of containers. Large
modern terminals with good overall vision and thorough gate security
have largely eliminated such losses.
Unfortunately putting goods of high value into a large box that can
be relatively easily moved has provided a new opportunity for criminal
profit. It would seem that there have been comparatively few examples
of "hi-jacking" but the values lost have been individually very high.
Some of the first losses occurred when containers were illegally
removed from terminals but subsequent improvements in terminal
security have meant that most hi-jacking now occurs in road transit.

WATER DAMAGE

Carrying goods, susceptible to damage by water, inside a watertight

container has reduced quayside and lighter-borne water damage. Goods
now have much better protection. The container itself is however
subject to a great deal of rough handling.
Underwriters have met many claims for water damage resulting from
water entering a nominally water-tight container. The main points of
entry are the doors and the roof. The door-securing mechanism often
slightly protrudes beyond the end of the container and is prone to
damage. Rough handling of the container may lead to the skin being
pierced and a small pin size hole will permit water entry. Some newer
types of container have internal drainage to allow sweat-water to drain
off into the bottom. Water entering the average container will stay
inside until the container is opened and these are cases of water
"rushing" out on opening.
476 JournalofMaritimeLaw and Commerce Vol. 5, No. 3

Containers should be inspected regularly for signs of damage, be this

internal or external, but often such inspections are not being carried
out as was intended. Sometimes this can be by design, for instance,
where a container must be filled and shipped as it is the only one
available, in which case there is an identifiable moral hazard existing.
Nevertheless when inspections do occur it can be difficult to
recognise that damage to a container can lead to deterioration of
contents due to, for instance, ingress of sea water. This is especially so
for damage under the floor of the container where light would not
normally reflect through, nor would water leak into it which has been
purposely projected against the outside of the container from a
hosepipe as a test for pierced panels or doors.

HANDLING DAMAGE

A container in transit is subject to many different stresses. As it has

no shock absorbing capability it must be strong enough to protect the
contents which must be stowed to prevent damage. Whilst being
conveyed by road it will be subject to braking and to a much less extent
acceleration stresses and the pendulum movement experienced in
negotiation of a corner or sharp turn. The extent of these forces will be
appreciated from incidents such as the crushing of a driver in his cab by
a container that slipped forward (being inadequately secured) when
braking at a crossing and several incidents where containers have
overturned on trailers.
Fully fitted brakes i.e. each wagon having a connection to the train's
braking system have somewhat reduced the jolting action when freight
trains are started and stopped but any rail movement will result in some
degree of jolting and irregular movement with sudden checks in two
planes. Higher operating speeds remove some of the advantages of
superior equipment.
At sea a properly secured container is to all intents and purposes part
of the structure of the ship. The ship will roll and yaw as well as turn.
In the first two cases the movement gains momentum and is then
checked as the ship begins to return to and past an even keel. In order
to prevent damage the cargo must be stowed in the container as
efficiently as a stevedore stows it in the ship's hold.
Any through transit may include several loadings or unloadings of the
container. Specialist container cranes have equipment to keep the
container straight and level. This purpose-built equipment helps to
prevent damage but some jolting is inevitable. Where ordinary cranes
April 1974 Con tainerisationandInsurance 477
and derricks are used there is far less protection against rough handling.
Straddle carriers are used to move containers within a large container
park. They hold the loaded container quite securely but any bumps
experienced by the carrier are also ,suffered by the container.
Handling damage can be much reduced by the use of the right
equipment and the exercise of reasonable care. by all involved in the
transit, but perhaps the biggest factor is competent stowage.

SWEAT DAMAGE

As containers have carried an increasing range of cargo in the past

few years there have been many cases of sweat damage to goods in
containers that were completely sealed. Goods that had to be kept dry
have been found on unloading to be wet and goods that did not
necessarily have to be kept completely dry have suffered from staining.
Many shippers assumed that the damage had been caused by water
entering from outside the container.
More detailed investigation showed that the damage was being
experienced even where the containers were in first-class condition on
arrival. The container in fact behaved just like the hold of the ship.
Climatic change in the atmosphere, and in some cases the difference in
temperature between quay and hold, caused change in relative
humidity. A complete temperature cycle was experienced. As the
container cooled condensation on the sides and any metal or similar
surface took place leading in many circumstances to a large amount of
water on the floor of the container. The second part of the cycle as the
container warmed up led to the re-absorbtion of the water into the
atmosphere in the container.
At first it was felt that the water originated from either packing in
wet or damp conditions but further experiments have shown that the
materials used for packing or dunnage, especially wood, could give up
as much as several cwts. of water in a 20 ft. container. Newer types of
container often include an internal drainage tank with one-way valve to
hold the surplus water.
Sweat damage has occurred with several types of goods where the
introduction of containers had sharply reduced or virtually eliminated
the damage experienced with traditional shipment. For example
shipments of sheet glass in containers showed sharply reduced breakage
but led to unsightly discolouration; shipments of tinned goods almost
eliminated denting but tins arrived stained.
478 Journalof MaritimeLaw and Commerce Vol. 5, No. 3

TAINT DAMAGE

Claims have arisen from cross-tainting as the result of the stowage of

incompatible cargoes within the same container or from failure to
ensure that a container is properly cleaned and where necessary
ozonated before being filled with cargo.
When a container is presented to a consignor for packing it is usual
for the appropriate contract to stipulate that no responsibility rests
with the owner of the container/or the carrier for any defects therein.
In practice a consignor may have inadequate time or facilities to carry
out a detailed inspection before he fills the container and instances have
occurred of the residue of chemicals or other matters, in say powder
form, being hidden behind the lining of a container or in crevices,
leading to contamination of the contents when the container is moved
or jolted in transit.
The carriage of citrus fruit has led to the tainting of goods later
placed in the same container and heavy claims have resulted from a
type of adhesive used to secure insulation within a batch of containers
built for the carriage of refrigerated food.

TEMPERATURE FLUCTUATION

A normal container is sealed and unventilated and is unsuitable for a

wide range of cargoes that require either ventilation or temperature
control. The type of cargo that is marked "stow away from boilers"
would not be suitable for an unventilated container standing on the
quayside as even in moderately sunny conditions the contents would
heat up. The range of cargo carried in refrigerated containers is much
wider than that previously carried in refrigerated holds.
Another new factor is the hazard to an otherwise safe on-deck
container cargo from freezing in say a winter North Atlantic voyage.
One example was the sad case of frozen beer which lost its taste on a
trip to Canada. This hazard was fairly easily removed by the operator
accepting such cargo for under-deck shipment.
There are many types of specialised container to meet climatic
problems:

1. With non-forced system of ventilation.

2. With mechancial system to drive air through the container.
3. Insulated container i.e. insulated walls, doors, floor and roof
designed to limit the exchange of heat between outside and inside.
They have no source of heating or cooling.
April 1974 ContainerisationandInsurance 479
4. Refrigerated container. This is insulated and provided with an
expendable refrigerant inside the container. They have not gained
wide popularity as they are more expensive to operate than
mechancial systems and it is necessary to know the likely length
of the transit to avoid the risk of running out of refrigerant.
5. Mechanically driven self-contained refrigerated container. These
units have their own refrigerating equipment similar in principle
to a domestic refrigerator. They can be powered by an external
electricity supply or if none is available by their own engines
which drive the compressors causing refrigeration. As a continu-
ous supply of air is required for cooling it is usual for them to be
carried on deck. With a large number of separate "reefer" or
refrigerated containers there is always the possibility of mechani-
cal breakdown leading to cargo deterioration. It is therefore
essential that these units are inspected at regular intervals so that
corrective action can be taken to avoid loss.
6. A newer development found in many modern container ships is
the refrigerated hold. Containers loaded in cells are fed from a
central refrigeration plant by ducts which blow cold air into the
bottom of each container. The air is pulled up through the
container by extraction from the top of each container. The
containers are connected to the system on loading into the ship.
There are many advantages to this system including overall
economy where many containers are used and central monitoring
of the equipment. However once the container is discharged,
unless delivery is made within two days, a refrigeration clip on
unit has to be attached to maintain the desired temperature. This
is normally a mechanical unit as described in 5 above.
7. Heated containers with own source of heat to maintain internal
temperature.

NON-DELIVERY

The loading of goods into a large box which has individual

identification must considerably reduce the risk of non-arrival of an
entire package and this seems to have been the general experience.
Many container operators have complicated systems to keep track of
individual containers in their care. Some are highly complex computer
control systems; others use a large number of wall charts in a manner
similar to factory systems of production control. Apart from losses due
to hi-jacking or loss overboard containers go astray presumably due to
incompetence or indifference. There are many stories told of such
480 Journalof MaritimeLaw and Commerce Vol. 5, No. 3

occurrences but it is not a very common happening and containers do

reduce non-delivery losses.

SHORTAGE

It is difficult to see how containers could permit shortage in the

normal sense but underwriters have met claims for shortage when the
out-turn showed a shortfall compared with the amount loaded
according to documents. Any error at time of original stowing is likely
to remain undetected as physical verification en route, at loading into
ship or when the container changes hands between one carrier and
another, is very uncommon.

LOSS PREVENTION

It has often been said that most road accidents are avoidable in the
sense that methods of driver training, vehicle and road design should be
primarily related to the need to prevent accidents happening. After
considering all that we have been told about container losses whether in
terms of hulls, cargoes or containers themselves it is impossible to avoid
the conclusion that the majority of losses are preventable but
insufficient time and trouble is taken in this area by the principal
parties involved.
There is good reason for more attention to be given to this area of
container operation. In terms of underwriting the rates of premium in
the long run will directly reflect claims experience providing there is a
reasonable measure of competition. Damaged goods reflect no credit on
the standing of either shipper or carrier. In fact they must damage their
commercial reputation.
Three factors predominate as basic rasons for loss:

(a) Poor Stowing. Perhaps the biggest single direct factor. Quite
simple measures can dramatically reduce loss and damage.
(b) Terminal control. The physical protection of the goods against
both criminals and the elements, and making sure that the
containers are forwarded to their correct destination in the best
manner.
(c) Management and training. One grows accustomed to manage-
ments who excuse their poor performance by blaming others
such as their work-people, the trade unions or the government.
This viewpoint should be categorically rejected. In every field of
April 1974 Containerisationand Insurance 481
commerce and industry including container operations there are
managements who rise to the challenge and see it as their job to
take responsibility and to find and implement solutions to all the
problems in their chosen area. Such leaders naturally accept the
need to understand the problems of others and search for means
of obtaining the cooperation of other groups of people to secure
their own objectives.

Marine underwriters perform a highly necessary function in helping

all those engaged in maritime commerce to manage the risks implicit in
"marine adventure". Earlier periods of technical development have
been manageable in terms of "wait and see". Claims experience has in
time shown whether the rates of premium initially charged were correct
or too high or too low. The breakneck increase in size of tankers has
resulted in new hazards and the size of risk does not permit an
underwriter to establish a rate by trial and error. This is true in a
different way with container development. If underwriters had
accepted the most optimistic estimates of container feasibility studies
then not only would they have lost money but they would also have
endangered the future provision of marine insurance facilities.
Many mistakes have been made in container development. More
fortunes have been lost than made but we are certain of their future
place in securing faster and safer transport of goods.