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Marine Insurance Law (The ingredients of a valid insurance claim (The…

- - - - (Promet Engineering (Singapore) Pte Ltd v Sturge (The Nukila) [1997] ;Schramm [2002]).
    - - Post Office v Norwich Union Fire Insurance Society Ltd [1967]
        Bradley v Eagle Star Insurance CoLtd [1989]
        compare
        Lumbermens Mutual Casualty Company v Bovis Lend Lease Limited [2004]
        Enterprise Oil Limited v Strand Insurance Company Limited [2006]
  - - - the loss was not inevitable or certain to happen
        
        The requirement of a fortuity will often be found to exist even if the language of the policy does not expressly require it
        
        (see, for example, CA Blackwell (Contracts) Ltd v Gerling General Insurance Co [2007
        
        A peril or risk, however, will not be inevitable merely because it is foreseeable
        
        NE Neter & Co Ltd v Licenses & General Insurance Co Ltd (1944), The Miss Jay Jay [1987]
        
        Whether or not an event is uncertain is to be determined at the time of the making of the insurance contract
        
        (Department of Trade and Industry v St hristopher Motorists’ Association Ltd [1974]
        
        Soya GmbH v White [1982] , affirmed on other grounds [1983]; Shell UK Ltd v CLM Engineering Ltd [2000]).
      - A loss was not caused by ‘inherent vice’ or ‘wear and tear’ or wilful misconduct on the part of the assured (s.55(2)).
        
        (See, for example, The Caribbean Sea [1980], Soya GmbH v White [1983], Noten BV v Harding 1990], Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004])
  - - - Institute War and Strikes Clauses – Hulls – Time (1/11/95)).
    - - ‘all risks’ cover all fortuitous risks
        
        clause 6 of the Institute Time Clause – Hulls (1/11/95).
        
        The ‘traditional’ perils in clause 6.1 (i.e. the perils which had been insured against since the time of the SG form of policy).
        
        Perils of the sea
        
        Examples
        
        • A storm at sea (Canada Rice Mills Ltd v Union Marine & General Insurance Co Ltd [1941], The Miss Jay Jay [1987]
        • The vessel striking a rock, iceberg, shipwreck or other object at sea.
        • A collision with another vessel or possibly with a wharf, etc. (Buller v Fisher (1800) 3 Esp 67). However, clause 6.1.6 of the Institute Time Clauses – Hulls (1/11/95) provides cover against collision (‘contact’) with ‘land conveyance, dock or harbour equipment or installation’. (Note clause 8 of the Institute Time Clauses – Hulls, which insures against the assured’s liability to the owner of the vessel with which the insured vessel has collided).
        • The entry of sea water (The Hellenic Dolphin [1978], The La Pointe [1991] (Sup Ct Canada)).
        • Listing during loading (The Stranna [1938]; see clause 6.1.8 of the Institute Time Clauses – Hulls (1/11/95)).
        
        By contrast, if a ship sinks because of its old age or general condition, that will not be a peril of the sea.
        
        (causation) - there will be no cover under the marine policy for loss or damage caused by perils of the seas unless the entry of seawater has itself been caused by a fortuity. If the water enters because of the poor condition of the vessel, there will have been no peril of the seas: 566935 BC Ltd v Allianz Insurance Co of Canada [2006] (British Columbia CA). The assured bears the burden of proving that his or her vessel was lost by perils of the sea. If the vessel sinks and neither the assured nor the insurer can put forward a cogent explanation for the sinking, the assured will be unable to demonstrate loss by an insured peril. However, there may be a rebuttable presumption of law that the loss was caused by perils of the sea if it can be demonstrated that the vessel was seaworthy when the vessel left port and the circumstances of the loss cannot be explained
        
        Peril’ connotes a risk, fortuity or casualty (see above; see also rule 7 of the Rules of Construction scheduled to the Marine Insurance Act 1906). The difficulty arises with the words ‘of the sea’. A ‘peril of the sea’ is a peril which arises by reason of the vessel or cargo being at sea (for example, because of the action of the wind or waves). Just because the peril occurs while the vessel is at sea does not mean that it is a peril of the sea,
        it has been said that if a rat eats a cargo of cheese on board the vessel, that is not a peril of the sea; but if a rat eats through a pipe allowing seawater to enter the vessel, that is a peril of the sea (see Hamilton, Fraser & Co v Pandorf & Co (1887)).
        
        Fire and explosion
        
        ‘Fire’ means visible heat and light caused by ignition or combustion. The mere apprehension of fire is not sufficient. It does not matter what causes the fire, provided that the cause of the fire was fortuitous. Therefore, fire caused by lightning, negligence or even arson (except of course the arson of the assured) will come within the meaning of ‘fire’. (Lightning is also insured under clause 6.1.7 of the Institute Time Clauses – Hulls (1/11/95).)
        If the fire arises by reason of the assured’s own misconduct or by inherent vice, then there is no peril insured against.
        ‘Fire’ also includes the immediate consequences of fire, including damage caused by smoke and the water used in firefighting or rain entering the burnt property. If the ‘fire’ leads to an explosion, then any damage caused by that explosion will be covered. If, however, the fire was caused by an explosion, then that is not a ‘fire’. However, clause 6.1 of the Institute Time Clauses – Hulls (1/11/95) covers loss by ‘fire and explosion’. Accordingly, if there is an explosion, whether coming before or after the fire or occurring without any fire, there will be cover. An explosion involves a violent nuclear or chemical reaction or a violent escape of gas or vapour. A volcanic explosion is within ‘explosion’ (note clause 6.1.7 of the Institute Time Clauses – Hulls).
        Depending on the policy, it may be that ‘fire’ will not include loss arising from a fire which had been deliberately lit for an industrial process or for heating, etc. – a so-called ‘friendly fire’. Even in cases of ‘friendly fires’, the recoverability of a claim may turn on whether the subject-matter insured was intended to be affected by the fire.
        
        Piracy
        
        A ‘pirate’ is a person who robs or attempts to rob by violent, not clandestine, means for private, and not political, gain. Piracy must take place on the high seas, tidal waters or in a port or harbour, but not on an inland waterway. However, this is subject to the true construction of the policy; given clause 6.1.1 of the Institute Time Clauses – Hulls (1/11/95), it is possible that piracy might extend to navigable inland waterways. Attacking the vessel from the shore (rather than from another ship) may be a pirate. A passenger or a member of the crew may be a pirate (see rule 8 of the Rules of Construction, Schedule 1 to the Marine Insurance Act 1906
        
        Other perils
        
        Other perils insured under clause 6.1 of the Institute Time Clauses – Hulls (1/11/95) include:
        • Violent theft by persons from outside the vessel (see rule 9 of the Rules of Construction, Schedule 1 to the Marine Insurance Act 1906; La Fabrique de Produits Chimiques SA v Large [1923], Nishina
        Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd [1969], Dino Services Ltd v Prudential Assurance Co Ltd [1989]).
        • Jettison, namely throwing property from the ship into the sea (see Butler v Wildman (1830), Symington v Union Insurance Society of Canton (1928)).
        
        The Inchmaree clause
        
        The Inchmaree clause in clause 6.2. The Inchmaree clause was introduced in 1888 and provided an extension of the indemnity traditionally available against ordinary maritime perils. (This cover can itself be extended by the Liner Negligence Clause or the Institute Additional Perils Clause; see, for example, clause 41 of the International Hull Clauses 2003.) The assured is entitled to be indemnified under the Inchmaree clause only if the loss was itself not caused by a ‘want of due diligence’ on the part of the ‘Assured, Owners, Managers or Superintendents’.
      - specified perils
    - - Becker, Gray and Co v London Assurance Co [1918]).
- - - - Payment of Premium
        
        Maybe Innominate term
        
        Expressed term
        
        s. 53(1) “unless otherwise agreed (e.g. the parties are the assured and insurer, exclude broker”)
        
        Non-payment by Assured (if assured is liable)
        
        non-payment amounts to a repudiatory breach (but this is unlikely on just on non-payment itself) , unless #
        
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        Express termination clause
        
        Premium Warranty
        
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        Agreement between broker and underwriters (at Lloyd’s) to displace broker from the liability of premium non-payment
        
        such market agreement may not be effective unless the assured also agrees to the change, because the agreement contemplated by s.53(1)is probably a tripartite agreement between insurer, broker and assured
        
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        Prentis Donegan & Partners Ltd v Leeds & Leeds Inc [1998] ;Lloyd’s Market Handbook, 1996
        
        Premium warranty and/or broker’s cancellation clause
        
        the court of Appeal (from which case? :question:) held that
        
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        Implied term from MIA 1906 & Express terms
        
        s. 53(1) The broker (not the assured) is liable to the insurer for the premium.
        
        This is based on the fiction that the premium is deemed paid as between the assured and the insurer
        and the premium is a deemed loan from insurer to the broker :!!:
        
        Non-payment by broker #
        
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        s52 is contradicting to this fiction of “deemed” payment – s.52 states the insurer is not obliged to issue the policy unless and until the premium has been paid or tendered
        
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        this custom does not apply in the modern non-marine insurance market
        
        s. 53(1) the insurer is liable to the assured (not the broker) for the indemnity or returnable premium.
        
        Return of premium
        
        the assured has no insurable interest without the policy being a gaming or wagering contract (s 84(3)(c))
        
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        over insured under an unvalued policy or by double insurance (s 84(3)(3) and (f))
        
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        Total failure of consideration without fraud or illegality
        
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        Policy is void without fraud or illegality (s84(3)(a)) #
        
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        Terms in the contract
        
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        where the assured has a defeasible interest, which is terminated during the currency of the risk, the premium is not returnable (s. 84(3)(d))
        
        compare Figre Ltd v Mander [1999] - non-payment is a repudiatory breach
        
        Maybe Warranty - Premium Warranty
        
        Waiver by estoppel - Under Held Covered clauses #
        
        Where an additional premium has to be agreed, if there is no agreement, the premium payable will be a reasonable premium (s.31(2))
      - a new type of innominate term ?? Or Condition Precedent :question:
        
        Alfred McAlpine plc v BAI (Run-off) Ltd [2000] #
        (Court of Appeal)
        
        Remedy
        
        the insurer was entitled to decline a claim, rather than terminate the entire contract
        
        Construction
        
        example:
        
        notify the insurer as soon as practicable if the insured vessel is damaged – the serious and irremediable prejudice to the insurer is to deprive the insurer of an opportunity to investigate the cause of the damage
        
        notify the insurer of any legal proceedings – the serious and irremediable prejudice to the insurer is being deprived of an opportunity to defend the proceedings on behalf of the assured.
        
        breach of the term either intimated an intention on the part of the assured not to pursue the claim or produced serious and irremediable prejudice to the insurer.
        
        :warning: i t is unlikely that the parties intended such a term should exist (it is more likely that the parties intended that the provision be a condition precedent);
        it gives the insurer an advantage over the assured, for whom no such innominate term exists.
        Accordingly, it is likely that the Court of Appeal in Friends Provident Life & Pensions Ltd v Sirius International Insurance Corporation [2005] EWCA Civ 601, [2005] 2 Lloyd’s Rep 517 was justified in coming to the conclusion it came to. However, in doing so, it may have overridden the ordinary rules of precedent :warning: :warning:
        
        Sirius International Insurance Corporation v Friends Provident Life & Pensions Ltd [2005] (Court of Appeal)
      - Warantty
        
        Promissory warranties
        
        33 Nature of warranty.
        (1) A warranty, in the following sections relating to warranties, means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.
        (2) A warranty may be express or implied.
        (3 )A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not
        
        Express warranties.
        
        35 Express warranties.
        (1)An express warranty may be in any form of words from which the intention to warrant is to be inferred.
        (2)An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy.
        (3)An express warranty does not exclude an implied warranty, unless it be inconsistent therewith.
        
        Construction
        
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        Implied warranty
        
        implied by law
        
        no implied warranty as to the followings :!:
        
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        39 Warranty of seaworthiness of ship.
        (1)In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.
        (2)Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.
        (3)Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.
        (4)A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.
        
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        40(2)In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.
        
        41 Warranty of legality.
        There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.
        
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        implied by reason of the parties’ agreement s.33(2)
        
        A warranty may be implied by reason of the parties’ agreement if the implied warranty is necessary (not merely desirable) for the business efficacy of the operation of the insurance contract, or if it is so obvious that any third party if asked about whether the term should be included would say ‘of course, it should’. There is no authority providing for such implied warranties.
        
        compare to duty of Utmost good faith
        
        Disclosure
        
        If the policy contains a promissory warranty, any circumstance which is covered by the warranty need not be disclosed, because such disclosure would be ‘superfluous’ (s.18(3)(d)
        
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        Representation
        
        it is a warranty: a representation of fact incorporated into the contract by way of a ‘basis clause’
        
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        it is a pre-contracutal duty of good faith: a representation of fact not been incorporated into the contract
        
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        (s. 33(1)) 'future’ or ‘continuing’ warranties
        Where the assured undertakes that a particular thing will or will not be done
        
        eg. vessel survey will be completed
        
        Consequence of breach
        
        A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not (s.33(3))
        Where a warranty has been breached, ‘the assured cannot avail himself of the defence that the breach has been remedied, and the warranty complied with, before loss’ (s.34(2)). The consequences therefore may be summarised as follows:
        
        The insurer remains liable for any losses incurred by him or her
        before the date of the breach of warranty.
        
        The insurer bears the burden of proving unseaworthiness However, the assured must be able to prove that an insured peril caused the loss
        
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        The warranty (e.g. of seaworthiness) must be exactly complied with
        
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        A breach may occur and thereby discharge the insurer even if the breach was not causative of the loss
        
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        Any breach cannot be remedied so as to reinstate the insurer’s liability
        
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        The breach of warranty does not bring the contract to an end; it merely brings the insurer’s liability to an end; it does not bring the assured’s obligations to an end. #
        
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        the insurer will be discharged automatically from liability as from the date of the breach, whether or not the insurer is aware of the breach.
        
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        Defences to a breach (abolished??)
        
        waived by the insurer (s.34(3))
        
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        when compliance with the warranty is rendered unlawful by any subsequent law (s.34(1)). - depend on the nature of the warranty and the illegality
        
        by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract (s.34(1)).
        
        (s. 33(1)) Where the assured affirms or negates the existence of a particular state of facts
        
        e.g. survey has already taken place
        
        (s. 33(1)) the assured undertakes that some condition shall be fulfilled.
        
        Condition Precedent?? :question: #
        
        Descriptive or suspensive warranties,
        
        delimit / define the scope of the risk
        
        Gross J expressed the tentative view that the policy provision ‘warranted vessel fully crewed at all times’ was a suspensive (or ‘delimiting’) warranty.
        
        'warranted free from capture or seizure’, meaning that capture and seizure are not insured perils under the policy.
        
        GE Frankona Reinsurance Ltd v CMM Trust No. 1,400 (The Newfoundland Explorer) [2006]
        
        the breach of which will merely suspend the insurance cover while the assured remains in breach.
    - - compliance with the provision is important
        Can it be said that the insurer’s position is dependent on the provision (e.g.prompt notification)?
        
        condition precedent to the whole contract vs. specific liability/all liability
        
        (more likely for insurance contract) insurer’s liability - all liability or specific liability of particular claim(not the contract)
        
        George Hunt Cranes Ltd v Scottish Boiler and General Insurance Co Ltd [2001];
        HLB Kidsons v Lloyd’s Underwriters [2007]
        
        specific liability, if a condition precedent concerned with a particular claim
        
        in many cases, a notification provision might be important particularly if the insurer seeks to investigate the cause of the damage. Accordingly, it may be said it is a condition precedent.
        #
        
        However
        
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        all liability, If the condition precedent is concerned with the risk being insured (such as effected by a ‘basis clause’)
        
        the whole contract (as opposed to the insurer’s liability) depends on the condition being fulfilled
        
        e.g. Zeus Tradition Marine Ltd v Bell (The Zeus) [2000] .
    - - Condition precedent - automatically discharge the insurer's liability
        vs.
        condition - by election?? :question:
      - Condition precedent - generally no damages for breach, only termination. :warning:
        vs.
        condition - grant both damages and termination :!:
  - - - against the insurer if
        
        the insurer seeks to rely on a condition precedent, warranty or an exclusion to extinguish or reduce his or her basic obligations of indemnity, unless the contractual terms are clear.
        
        the insurer has produced the wording.
- - - - Pre-contractual duty
        
        Non -disclosure
        
        Knowledge of Circumstances
        
        Materiality + Inducement #
        
        Materiality
        
        test
        
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        examples
        
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        Burden of proof
        
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        Insurer's duty
        
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        Inducement
        
        Inducement means that the misrepresentation or non-disclosure must make an effective or material contribution to the underwriter’s decision to agree to enter into the insurance contract on the terms actually agreed.
        
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        Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995]
        
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        Burden of proof
        
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        Exceptions #
        
        s. 18(3)
        
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        Other statutory exceptions
        
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        Insurer's exceptions:
        
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        Remedy
        
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        Circumstances
        
        s. 18(5) "includes any communication made to, or information received by, the assured"
        
        fact
        
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        belief
        
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        3 type of knowledge
        
        actual knowledge
        
        includes “shut eye” knowledge
        
        deemed/ constructive knowledge
        
        s.18(1) "deemed to know every circumstance which in the ordinary course of business, ought to be known by him"
        
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        imputed/ attributed knowledge
        
        agency
        
        only need to disclose ‘material’ circumstances #
        
        the duty only exist in insurance contract #
        
        reflected in s.18 which was made by Lord Mansfield in Carter v Boehm (1766) #
        
        Misrepresentation
        
        Falsity (Ture or Untrue) of Circumstances
        
        Fact #
        
        objective test
        
        Under s.20(4), a representation is substantially correct ‘if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer’.
        
        Belief #
        
        subjective – good faith
        
        Under s.20(5), a representation of expectation or belief is not true if the representation was not made in good faith (i.e. honestly).
        
        Fraudulent Misrep
        
        It is settled that There is no separate requirement of inducement in respect of a fraudulent claim; the presentation of the fraudulent claim without more is sufficient to constitute a breach of the duty of good faith
        
        Royal Boskalis Westminster NV v Mountain [1997]
        The Aegeon [2002]
        
        There are obiter (i.e. non-binding) authorities suggesting that in the case of fraudulent misrepresentation,there is no need to prove materiality, although this line of authority is open to question
        
        vs. s.20:
        s.20 states that the insurer may avoid the insurance contract if the representation was material and that therefore there is no exception in the case of fraud.
        
        see the obiter remarks made in Sibbald v Hill (1814)
        The Bedouin [1894]
        Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995]
        
        However, there is no authority suggesting that there is such an exception in the case of fraudulent non-disclosure.
        
        Materiality + Inducement #
        
        :warning:No Exceptions
        
        Remedy
        
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        reflected in s.20
        
        the duty only exist in all contracts
        
        only if the disparity is ‘material’
      - Post-contractual duty
        
        non-claims
        
        Fraudulent Non-Claim
        
        Materiality
        
        there is a separate requirement of materiality
        
        However, the Court of Appeal suggested a twofold test of materiality in the context of post-contractual fraud, namely that:
        (a) the fraud is relevant to the insurer’s liability or defence to liability under the policy; and (b) the fraud is sufficiently serious to permit the insurer to terminate the insurance contract for a repudiatory breach of contract.
        
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        Remedy
        
        Maybe Avoidance (Debate)
        
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        Damages
        
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        examples:
        
        if the assured declared values inaccurately and fraudulently, that may constitute a breach of the post-contractual duty of good faith.
        
        An insurer may have a contractual right of inspection of the property insured or the assured’s records even when no claim is being presented under the policy. If the insurer exercises a right of inspection and the assured fraudulently misrepresents the condition of the property or the records available, that misrepresentation may amount to a breach of the post-contractual duty of good faith
        
        The assured may be obliged to notify certain circumstances to the insurer pursuant to the terms of the insurance contract. If the assured fraudulent misinforms the insurer, that may amount to a breach of the duty of good faith.
        
        Insurer's duty:
        
        :warning:if the insurer acts fraudulently in respect of the performance of the contract unconnected with an assured’s claim, the insurer will likewise be in breach of the duty of good faith.
        
        claims
        
        examples
        
        The loss may be genuine and may be covered by the policy, but the assured may lie to exaggerate the extent or nature of his or her loss.
        
        :!?: how about the case of valued policy?
        
        a separate requirement of materiality is not needed :warning:
        
        The assured may deliberately procure the loss and present a claim under the insurance policy.
        
        Such a loss would in any event be excluded from cover pursuant to s.55(2)(a) of the Marine Insurance Act 1906.
        
        a separate requirement of materiality is not needed :warning:
        
        The loss may be genuine and may be covered by the policy, but the assured may employ a fraudulent device in order to attempt to induce the insurer to accept the claim, even though the insurer would be liable to pay the claim in any event.
        
        a separate requirement of materiality is needed :warning:
        
        The loss may be genuine, but the assured may lie about the circumstances of the loss in order to attempt to prevent the insurer relying on a particular policy term or exclusion in defence to the assured’s claim.
        
        a separate requirement of materiality is not needed :warning:
        
        Fraudulent Claim # #
        
        Materiality #
        
        There is an open question whether or not the fraudulent claim must be ‘material’ # #
        
        Mance, LJ (now Lord Mance) doubted whether there was such a requirement of materiality in respect of fraudulent claims generally, but accepted that there was a requirement of materiality in respect of the use of fraudulent devices :warning: Mance, LJ said (para. 38) that the device is material if it ‘would, if believed, have tended, objectively but prior to any final determination at trial of the parties’ rights, to yield a not insignificant improvement in the insured’s prospects…’
        
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        However, the Court of Appeal suggested a twofold test of materiality in the context of post-contractual fraud, namely that:
        (a) the fraud is relevant to the insurer’s liability or defence to liability under the policy; and (b) the fraud is sufficiently serious to permit the insurer to terminate the insurance contract for a repudiatory breach of contract.
        
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        There is a view that if the claim is fraudulent, it is automatically ‘material’
        
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        Remedy
        
        Maybe Avoidance (Debate) #
        
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        Damages #
        
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        Forfeiture
        
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        Insurer's duty
        
        :warning:the insurer is under a duty to abstain from fraud. There is no duty of utmost good faith requiring the insurer to handle and consider claims fairly and reasonably. Therefore, any wrongful conduct of the insurer in handling an insurance claim will not constitute a breach of the duty of good faith, unless the insurer has acted fraudulently. #
      - the Court of Appeal held that the duty of good faith is one which is imposed by the general law (which is a common law duty not an equity duty, but this is detabed) and not by reason of an implied term
      - Modification of duty of utmost good faith by contract (how does it work before contract even come into existence???) :!?:
    - - the law as set out in ss.17–20 is not only the law applicable to marine insurance but also applicable to all non-marine insurance contracts