Beware of Time Differences
One of the advantages of travel between Australia and Japan is the lack of a significant time difference. Sure, it is a long flight and the seasons are the opposite, but once you arrive there is no need to worry about suffering from the effects of jetlag. The same convenience applies to conducting business too. There is no need to think about what time of day it is on the other side when making a call or sending an email.
Unfortunately, such convenience is not always true in the world of international business, as demonstrated in a recent case from Australia’s Federal Court.
The decision in the case of Swashplate Pty Ltd v Liberty Mutual Insurance Company  FCA 15, delivered by Allsop CJ on 16 January 2020, concerns an insurance policy that covered the transport of two helicopters from Mississippi, USA to Queensland, Australia. The plaintiff company Swashplate had purchased the helicopters and had them transported to Australia in containers. The skids on each helicopter were replaced with wheels, so that they could be wheeled into the container. However, the straps used to hold the helicopters in place were insufficient and the wheels were not chocked, so the helicopters moved within the containers and suffered damage during transport.
The plaintiff had taken out a separate Aviation Helicopter Single Transit Policy of Insurance for each helicopter, with the defendant as the insurer. The placement slips for each policy simply stated that coverage was to commence on 19 May 2018.
Loading of one of the damaged helicopters into its container began at 8am Mississippi time on 19 May, which was 11pm on May 19 in Queensland. The insurance company admitted that the damage to this helicopter was covered by the insurance policy. However, the dispute between the parties arose because the loading of the other helicopter into its container was finished by 5pm Mississippi time on May 18, which was 8am on May 19 in Queensland. Therefore, the insurance company argued that the cause of the damage to this helicopter (the insufficient packing) occurred prior to the insurance policy taking effect.
On the other hand, the plaintiff presented three different arguments for why the damage should be covered by the policy:
- The contract was for a voyage, not a period of time, so the date in the placement slip was not contractually binding
- The date should be understood as a reference to the time in Queensland, not in Mississippi
- The effect of the Static Cover extension under the policy documents meant that the policy attached five days earlier, that is, on 14 May in Queensland (or 13 May in Mississippi)
After considering the various contractual documents as a whole, the Judge ultimately agreed with the insurance company and rejected the plaintiff’s arguments for the following reasons:
- To say that the insurance contract was for a voyage would mean ignoring the words “Period of Insurance: From 19 May 2018” in the Placement Slip
- The Master Slip expressly referred to LST (local standard time), so because the act of loading was occurring in Mississippi, the date must refer to the date/time in Mississippi
- This interpretation would mean that the insurance company would be unaware of when the coverage commenced until after it was informed by the Plaintiff when loading occurred.
The Judge instead adopted an interpretation of the documents that allowed all of the interacting provisions to be applied consistently. This resulted in the finding that the insurance coverage did not commence until 12am Mississippi time on 19 May 2018. Therefore, the damage to the helicopter which was packed on 18 May was subject to an exclusion and the insurance company was not liable.
Although there were facts that were peculiar to this case, I think it serves as a timely reminder to be careful of time zones when dealing with parties in other countries, particularly Europe and the Americas.
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