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This case as well as the other well known cases dealing with latent defect in the context of hull insurance was considered much more recently by the Court of Appeal in The Nukila (1997) 2 Lloyd’s Rep. 146. The Nukila case involved very different facts. The policy was on a mobile accommodation platform. The coverage was on the Institute Time Clauses Hulls and the Institute Additional Perils Clause- Hulls. The importance of having the Additional Perils cover was that if it could be shown by the assured that there had been damage to the platform caused by a latent defect, then all of the repair costs, including those costs actually incurred in putting right the latent defect itself, would be recoverable. If there was no damage there would be no recovery. It followed that the court only had to decide if there was damage and that precisely defining as a matter of fact what was the damage and what was the defect was not necessary. The facts were that due to defective welds on one of the legs of the platform there was extensive fatigue cracking which extended into other areas of the structure and previously sound steelwork. The extensive cracking meant that that the platform was in danger of collapse at the time the cracking was discovered. However at the time of inception of the policy the exercise of due diligence by the owners would not have discovered the defect in the weld nor the minute cracking that existed at that time. The extensive cracking and fracturing of steel was accordingly the result of a latent defect in existence at the inception of the policy. The underwriters denied liability saying that there had been no damage. If there was a latent defect in the hull, then this was a defective part and no consequential damage had occurred. A latent defect had developed in ordinary use and had become patent.
Whether or not there was damage, was a matter of fact for the decision of the Court and not a matter of law. And the Court of Appeal had no difficulty in deciding that on any common sense view of the facts there was damage. This was sufficient to decide the case. In setting out the principles involved, Lord Justice Hobhouse said
“If a latent defect has existed at the commencement of the period (covered by the policy) and all that has happened is that the assured has discovered the existence of that latent defect then there has been no loss under the policy. The vessel is in the same condition as it was at the commencement of the period. Therefore, in any claim under the Inchmaree clause or any similar clause, the assured has to prove some change in the physical state of the vessel. If he cannot do so, he cannot show any loss under a policy on hull. …. If, however, damage has occurred, that does involve a physical change in the condition of the vessel and can be the subject of a claim under the policy.”
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