Inherent Vice Exclusion

What Does Inherent Vice Exclusion Mean?

An inherent vice exclusion is a provision typically found in marine insurance policies that excludes coverage for damage to property caused by a characteristic or defect inherent in the property itself. This type of exclusion applies when the damage results from the property’s natural properties or weaknesses. It may also be referred to as a latent defect exclusion.

Insuranceopedia Explains Inherent Vice Exclusion

Examples of situations where an inherent vice exclusion would apply include books that deteriorate due to acid in the paper from the manufacturing process; film that degrades over time due to the chemical instability of its components; food that spoils from improper temperature storage; and spontaneous fermentation or combustion of improperly dried grain. Buyers shopping for commercial marine insurance should read this exclusion carefully, since the wording can vary between carriers and affect what kinds of cargo damage are actually covered.

A specific case example is from T.M. Noten B.V. v. Harding (1990) 2 Lloyd’s Rep. 283 (Eng. C.A.), where a shipment of gloves absorbed moisture before transit. When the container entered a much colder environment, the moisture condensed and caused stains. The court ruled that the loss resulted from the natural behavior of the goods during the normal course of the voyage from Calcutta to Rotterdam, and therefore, the insurer was justified in denying the claim under the inherent vice exclusion. This is also why freight insurance policies often require shippers to follow specific packaging and pre-shipment condition standards before a loss will be paid.