Case law - loss of hire Flashcards
- Capricorn, The [1995]
The plaintiffs, owners of the reefer vessel Capricorn, effected a ‘loss of hire’ policy insurance, covering six vessels for differing six month periods at agreed daily rates. The policy ‘interest’ was described as: ‘Loss of earnings and/or expenses and/or hire and was…to pay up to 60 days each accident or occurrence…whether vessel chartered or unchartered.’ Capricorn had been chartered to the Blue Star Line, but, by May 1986, she had been released from the charter. One week after coming off charter, it was discovered that one of Capricorn’s generators had been damaged by an insured peril, the negligence of the crew in using an incorrect spanner. Capricorn sailed to Falmouth, where the generator was repaired, and the plaintiffs then claimed on their insurers for 60 days’ loss of time, on the basis that the policy was simply on the vessel’s earning capacity, regardless of her actual or prospective engagements. The insurer’s defence, inter alia, was that the plaintiffs had no insurable interest at the time of loss. The court ruled that the plaintiffs could not recover under their policy of insurance covering loss of hire. Besides the matter of causation, Mance J also ruled in favour of the insurer on the point that the interest of the plaintiffs was too tenuous and speculative in nature to be capable of supporting an ‘insurable interest’ as understood by the Act.
Turns out the vessel would have been laid up during this period anyway, as she was a reefer vessel and it was the off-season. Claim was rejected and it was held that the policy’s aim was to indemnify against loss of trading income, not the loss of the capacity to earn trading income. To allow a claim in this case would conflict with the underlying principle of indemnity in insurance.
- Toisa Pisces, The [2012]
- V suffered series of machinery breakdowns (3 occurrences of mechanical failure) during 2009 and placed off-hire for substantial periods.
- The assured claimed the entire loss was caused by the original failure. This was upheld at first instance.
- Insurers appealed that 2nd occurrence broke the chain of causation and that each period of off hire should be subject to the deductible, also that the period in drydock where owners brought forward a general survey and owner’s repairs did not constitute a loss on LOH
- Ruled that the Proximate cause was the first breakdown, this cause persisted through off-hire periods arising from subsequent breakdowns
- The advanced survey and repairs were irrelevant to the insurance claim. The policy asked only whether the assured was “prevented from earning hire” by an insured peril. There was no express restriction to the assured’s “ultimate net loss” and none could be implied.
- Owners were not required to give credit under their loss of hire policy for time in drydock spent carrying out their own work, since (unlike the Capricorn, which would have been laid up in any event) the vessel would have been trading but for the operation of the insured peril. - in relation to a period of drydocking simultaneously used for the casualty repairs and for carrying out the vessel’s Intermediate General Survey and owners’ repairs that had been scheduled for a later date. (i) owners’ work did not extend the cost or period of repairs; and (ii) owners’ work was not immediately necessary;
- Wondrous, The [1992]
The plaintiffs chartered their vessel Wondrous to an Iranian company to carry a full cargo of 30,000 tons of molasses from Bandar Abbas in Iran to North European or Mediterranean ports. The plaintiffs then effected insurance policies with the defendants including loss of hire; the loss of hire policy incorporated war risks. On arriving at Bandar Abbas, Wondrous was delayed from sailing for 18 months because the charterers were unable to pay the port dues and freight tax. When Wondrous did eventually sail with her cargo for Denmark, she first had to be towed to another port to repair her engines, which had become inoperable; the overall losses were considerable. The plaintiffs claimed on their policy for loss of hire, but the underwriters refused payment, arguing there must be loss or damage to the vessel in order to claim for loss of hire (this was a customs issue). The Court of Appeal affirmed the decision of the lower court and ruled that the insurers were not liable under the loss of hire policy. However, at first instance, Hobhouse J analysed the function of the ‘loss of hire’ policy; in particular, the judge pointed out that, although the insurable property at risk was the ship itself (s 3(2)(b) of the Marine Insurance Act 1906), it was not necessary for that property at risk, the ship, to be damaged for the insurers to be liable under the loss of hire policy. The subject matter of insurance remained the ‘earning capacity’ of the vessel.
