Insurable interest and package limitation under marine insurance and carriage law shape liability in FOB cargo disputes.

In FOB sales, the seller ordinarily loses insurable interest once goods are delivered to the carrier without reservation of title or lien, so a marine policy taken on a CIF basis despite an FOB transaction was treated as materially misrepresented and the insurance claim was rejected. For carrier liability, misdelivery of consolidated cargo remained actionable, but compensation was confined to the statutory package-based limit under the bill of lading and carriage regime; in the absence of declared nature and value in the bill of lading, the full value of the goods could not be recovered and the Special Drawing Rights limit applied.

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Issues: (i) whether the exporter had an insurable interest under a marine insurance policy when the goods were sold on FOB basis but the policy was taken on the footing of CIF shipment; (ii) whether the carrier's liability for misdelivery was limited by the bill of lading and the statutory regime governing carriage of goods by sea.

Issue (i): Whether the exporter had an insurable interest under a marine insurance policy when the goods were sold on FOB basis but the policy was taken on the footing of CIF shipment.

Analysis: A marine insurance contract is one of utmost good faith, and material non-disclosure or misstatement entitles the insurer to avoid liability. In an FOB contract, once the goods are delivered to the carrier without any reservation of title or lien, property and risk pass to the buyer and the seller ordinarily ceases to retain an insurable interest. The policy in question was obtained on the representation that the shipment was on CIF terms, whereas the transaction was in fact on FOB terms, which was a material departure from the disclosed basis of cover.

Conclusion: The insurance claim was rightly rejected and the insurer was not liable.

Issue (ii): Whether the carrier's liability for misdelivery was limited by the bill of lading and the statutory regime governing carriage of goods by sea.

Analysis: The carrier was found liable for misdelivery of the carton meant for the consignee, but compensation had to be determined strictly by the bill of lading and the limitation provisions in the carriage statute and its Schedule. Where goods are consolidated in a container, the relevant unit for limitation purposes is the package or unit enumerated in the bill of lading, not the packing list. In the absence of declaration of nature and value in the bill of lading, compensation could not be awarded on the basis of the full value of the lost goods, and the amended limitation figure in Special Drawing Rights had to be applied.

Conclusion: The carrier's liability was upheld, but the compensation was reduced to the statutory limit of 666.67 Special Drawing Rights for the single package.

Final Conclusion: The insurer escaped liability, while the carrier remained liable only to the extent of the statutory limitation, resulting in a partial modification of the compensation awarded by the National Commission.

Ratio Decidendi: In FOB sales, title and risk pass to the buyer on shipment absent contrary stipulation, so the seller lacks insurable interest; and carrier liability for consolidated cargo is limited by the bill of lading and the statutory package-based limitation unless nature and value are declared in the bill of lading.

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