Insurable Interest in Marine Insurance- The Liberal Spirit Altering the Nature of the Doctrine?

Quadra Commodities SA v. XL Insurance and others [2023] EWCA Civ 432

The assured, a trader of agricultural commodities, entered into a series of contracts for the sale and purchase of grain with companies within the Agroinvest Group. On receipt of warehouse receipts confirming that the relevant quantities of grain were held in common bulk in stipulated warehouses or “Elevators”, the assured paid for the grain. However, it later transpired that a fraud was perpetuated by the Agrionvest Group whereby the commodities stored in warehouses in Ukraine were routinely sold and refinanced multiple times, and ultimately misappropriated via the issuance of fraudulent warehouse receipts. As a result, the goods purchased by the assured disappeared from the warehouses in which they were apparently stored. The assured sought to recover its losses under a marine cargo policy claiming that the insured goods were lost either because they had been misappropriated or because there was a loss by reason of the assured’s acceptance of fraudulent warehouse receipts.  There was no dispute that the loss was covered under the policy which provided cover for “loss of or damage to goods… through the acceptance by the Assured of… fraudulent shipping documents” and/or under a clause that provided cover for loss “directly caused by misappropriation”. The insurers sought to argue unsuccessfully before the High Court [2022] EWHC 431 (Comm) that the assured had no insurable interest in the goods (this was commented on by the author at this blog last year).

The insurers appealed against the decision essentially arguing:

(a) That the first instance judge’s finding that there were goods corresponding in quantity and quality to the purchased cargoes physically present in storage at the time when the warehouse receipts were issued could not be substantiated based on evidence.

(b) That there could be no insurable interest in the goods in circumstances where they did not form part of a bulk which was sufficiently identified (and this was the case here).

(c) That the first instance judge’s finding that the assured could also rely on insurable interest derived from its immediate right to possession of goods by way of warehouse receipts was wrong as this issue should be determined as a matter of English law not Ukrainian law.  

The Court of Appeal upheld the first instance judgment rejecting all the arguments put forward. On (a), the Court of Appeal found that there was “ample evidence” that goods corresponding to the sale contracts and warehouse receipts were physically present. It was appreciated that it was a part of the fraudulent scheme employed here that the same goods were sold to several buyers, but this did not change the fact that the goods corresponding to that amount specified in the sale contract was present as evidenced primarily by the assured’s contemporaneous inspection reports.  

On (b), stressing the fact that the law relating to property in goods is distinct from the question whether a person has an insurable interest in them, the assured relied on a US case from the Supreme Judicial Court of Maine, namely Cumberland Bone Co v. Andes Insurance Co (1874) 64 Me 466. The case was based on English authority and supported the proposition that an assured may have insurable interest in unascertained goods irrespective of whether they form part of an identified or unidentified bulk. The Court of Appeal endorsed the principle in Cumberland Bone stating that it should now be recognized as a principle of English law.   

On (c), the Court of Appeal held that the insurers had failed to call evidence of Ukrainian law on this issue, and it would be procedurally unfair to allow them to contend on appeal that the issue should be determined by reference to English law.


The outcome of the case did not come as a surprise to the author as it is in line with the recent trend in cases that courts will lean towards finding that an insurable interest exists. It is now clear that the insurable interest in goods will be found not only as a result of legal ownership/title to the goods, or as a result of possession of and a right to possession of the goods (at least when accompanied by an economic interest in the goods) but also when the assured makes payment or part-payment for the unascertained goods irrespective of whether they form part of an identified or unidentified bulk This is a new development and sets a new precedent in that regard in English law highlighting the fact that courts would be nowadays more liberal in finding insurable interest especially if they are convinced that the assured was pursuing a genuine economic interest in obtaining the insurance cover. A contrary outcome in this case would have entitled the insurers to exonerate themselves from liability for a risk they have assumed in the genuine belief that such goods existed even though they have charged the assured a premium for undertaking this potential liability. As Sir Julian Flaux C put it (at [108]) “it is unremarkable that the law should require [the insurers] to fulfil their contractual obligations”.

It is also worth pointing out that the assured’s success in the present case was based on its ability to convince the Court that the corresponding goods existed by providing contemporaneous reports. There is a lesson here for buyers that they should consider commissioning contemporaneous inspections of warehouses (especially when purchasing cargo in bulk from overseas) and also ensure that reports of such inspections are provided and recorded.     

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Professor Barış Soyer

Professor Soyer was appointed a lecturer at the School of Law, Swansea University in 2001 and was promoted to readership in 2006 and professorship in 2009. He was appointed Director of the Institute of Shipping and Trade Law at the School of Law, Swansea in October 2010. He was previously a lecturer at the University of Exeter. His postgraduate education was in the University of Southampton from where he obtained his Ph.D degree in 2000. Whilst at Southampton he was also a part-time lecturer and tutor. His principal research interest is in the field of insurance, particularly marine insurance, but his interests extend broadly throughout maritime law and contract law. He is the author of Warranties in Marine Insurance published by Cavendish Publishing (2001), and an impressive list of articles published in elite Journals such as Lloyd’s Maritime and Commercial Law Quarterly, Berkley Journal of International Law, Journal of Contract Law and Journal of Business Law. His first book was the joint winner of the Cavendish Book Prize 2001 and was awarded the British Insurance Law Association Charitable Trust Book Prize in 2002, for the best contribution to insurance literature. A new edition of this book was published in 2006. In 2008, he edited a collection of essays published by Informa evaluating the Law Commissions' Reform Proposals in Insurance Law: Reforming Commercial and Marine Insurance Law. This book has been cited on numerous occasions in the Consultation Reports published by English and Scottish Law Commissions and also by the Irish Law Reform Commission and has been instrumental in shaping the nature of law reform. In recent years, he edited several books in partnership with Professor Tettenborn: Pollution at Sea: Law and Liability, published by Informa in 2012; Carriage of Goods by Sea, Land and Air, published by Informa in 2013 and Offshore Contracts and Liabilities, published by Informa Law from Routledge in 2014. His most recent monograph, Marine Insurance Fraud, was published in 2014 by Informa Law from Routledge. His teaching experience extends to the under- and postgraduate levels, including postgraduate teaching of Carriage of Goods by Sea, Transnational Commercial Law, Marine Insurance, Admiralty Law and Oil and Gas Law. He is one of the editors of the Journal of International Maritime Law and is also on the editorial board of Shipping and Trade Law and Baltic Maritime Law Quarterly. He currently teaches Admiralty Law, Oil and Gas Law and Marine Insurance on the LLM programme and also is the Head of the Department of Postgraduate Legal Studies at Swansea.

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