When the owners of a Moroccan factory disappeared, leaving their workers unpaid, production ground to a halt. This left a UK-based customer facing a business emergency.

The company got in contact with the factory workers directly and made a payment to them to obtain the release of a consignment of clothing which was already contracted to be sold to UK retailers. However, the relationship between the customer and the workers broke down, at which point they ceased work and refused to allow further consignments to be sent.

The company then claimed on its insurance, which was a marine cargo policy that covered not only goods in transit but also those in store at the factory. The insurer disputed the claim. It was successful in its argument that the company had not suffered an ‘actual total loss’, as the goods still existed and could (in theory) be recovered by taking appropriate legal action in Morocco.

However, the alternative claim, that there was a ‘constructive total loss’ (the goods were irrecoverable at a cost that was less than the value of the goods) was successful.

The claim succeeded even though the company had not complied fully with all the policy terms regarding claims, because the court accepted that had it complied fully, the insurer would have been in no better position. The main argument in this instance was that the company had failed to notify the insurance company ‘within seven working days’ of the event.

A number of other defences were raised by the insurer but the court rejected them all.