IMSML Web Article 29/2026: Sing Young Steel Sdn Bhd v MSIG Insurance (M) Bhd and Others [2025] MLJU 1926 (High Court, Kota Kinabalu) - The ‘Rust, Oxidation and Discolouration’ (ROD) Exclusion Clause in an All Risk Marine Policy

The subject-matter of the policy was steel bars. In a nutshell, under an ‘all risk’ policy, the insurer would cover all risk, unless there was a clause in the policy which excluded losses from that right. Hence, all risks policies are considered the ‘Rolls Royce’ of marine insurance policies and of course, command a high premium. In the Sin Young Steel case, the dispute centred on the application of the ‘Rust, Oxidation and Discolouration’ (ROD) exclusion clause.

The mate’s receipt, a precursor document to the bill of lading, said that the goods were rusty. When the bill of lading was issued, it stated that the goods were in apparent good order and condition. If the mate’s receipt was accurate, those details should have been transferred to the bill of lading. Therefore a clean bill of lading could not be issued, as a clause describing the rust should have been included.

However, photographs at the load port, ie Port Klang, showed that most of the steel bars were not rusty. This raised concerns whether the mate’s receipt was accurate in the first place. Instead, photographs showed that the goods were mostly rusty and severely corroded only at the discharge port, ie Kota Kinabalu.

After a surveyor had a look at the goods, it was concluded that the probable cause of the rust was ingress of seawater when encountering bad weather , strong winds, heavy swell and waves on the voyage to Kota Kinabalu. There was also further evidence that the damage to the steel bars were not confined to just rust, but also extended to discolouration.

Just to recap. The policy in covering the steel bars was in the form of an ‘all risks’ marine policy. This means that the insurer was meant to cover all damage incurred under the policy, unless the insurer is able to show that the loss and/or damage is excluded by a clause in the policy. It is trite law that any exclusion clause is subject to the ‘contra preferentem’ rule. This means that ambiguity in the exclusion clause will be resolved against the insurer. In order for an insurer to successfully rely on the exclusion clause, the insurer would have to show that it was clear, explicit and unambiguous.

During the course of the trial, the insurer’s witness testified that an all risk policy does not cover seawater damage. This made no sense and the High Court held that if what this witness said was true, it would defeat the very purpose of an ‘all risk’ policy. This interpretation of an ‘all risk’ policy lacked commercial sense. The High Court therefore held that the ROD exclusion clause should be given an interpretation that was consistent with business sense. This means that a meaning favourable to the insured (as opposed to the insurer) should be adopted. Therefore the ROD exclusion could not function to exclude any rust that arose out of the ingress of seawater into the ship as found by the surveyor.

Thank you for reading IMSML Web Article 29/2026

Stay tuned for the next IMSML Web Article 30/2026: Kejora Resources Sdn Bhd v Chubb Insurance Malaysia Bhd [2025] MLJU 1417 (High Court, Kuala Lumpur) - Engine Trouble and a Warranty for a Tug to be Properly and Reasonably Maintained, Equipped, Kept Up, Officered and Manned.

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Tuesday,  18 August 2026

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my