Insurers defences Flashcards
Insurers’ defences
Insurers could also rely as against the third party upon breaches of duty by the assured, including non disclosure or misrepresentation, breach of warranty, breach of policy conditions, wilful misconduct, 318 late notification of claims, failure to co-operate with the defence of the third party’s claim and admissions of liability.
Want of due diligence by the assured, owners or managers
MIA17. Insurance is uberrimæ fidei.
A contract of marine insurance is a contract based upon the utmost good faith
CL 6.2.Inchmaree clause.
“Eurysthenes”, The [1976]
Whilst on a voyage from the United States to the Philippines, the vessel grounded. The cargo interests claimed against the shipowners for the loss sustained by their cargo and the ship owners sought indemnity from their P&I insurers. The defendant P & I Club alleged that, at the time of her sailing, the Eurysthenes had knowingly be sent to sea in an unseaworthy state for not having a sufficient number of crew members, proper charts, a serviceable echo sounder and an operative boiler. The question of what constitutes “privity” within the meaning of s. xx of the Marine Insurance Act 1906 came before the Court. The Court of Appeal found that privity Means ‘knowledge and consent’, and that it is not necessarily the same as wilful misconduct. Further, ‘Knowledge’ not just positive knowledge, but also the knowledge implied by phrase “turn a blind eye” i.e. if one suspects the truth but turns a blind eye so as to not know it for certain, one should be deemed to know the truth and thus be privy to the unseaworthiness. However, negligence in not knowing the truth at all is not considered to be as equivalent of turning the blind eye.
MIA s.33 Nature of warranty
- 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.
- A warranty may be express or implied.
- A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not.
MIA s.35 Express warranties
- An express warranty may be in any form of words from which the intention to warrant is to be inferred.
- 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.
- An express warranty does not exclude an implied warranty, unless it be inconsistent therewith.
MIA s.39 Warranty of seaworthiness of ship
- 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.
- 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.
- 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.
- 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.
- In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
MIA s.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.
MIA s.42 Implied condition as to commencement of risk
- Where the subject-matter is insured by a voyage policy “at and from” or “from” a particular place, it is not necessary that the ship should be at that place when the contract is concluded, but there is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract.
- The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that he waived the condition.
Effect of breach of warranty, IA 10(2)
An insurer has no liability under a contract of insurance in respect of any loss occurring, or attributable to something happening, after a warranty (express or implied) in the contract has been breached but before the breach has been remedied.
When a breach is excused, IA 10(3) and (4)
(3)But subsection (2) does not apply if—
(a)because of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract,
(b)compliance with the warranty is rendered unlawful by any subsequent law, or
(c)the insurer waives the breach of warranty.
(4)Subsection (2) does not affect the liability of the insurer in respect of losses occurring, or attributable to something happening—
(a)before the breach of warranty, or
(b)if the breach can be remedied, after it has been remedied.
Quebec Marine insurance v Commercial maritime
Voyage policy – implied warranty of seaworthiness. A defective boiler broke down and was fixed. Later on in the voyage the vessel was lost during heavy weather – claim was declined because the unseaworthiness of the vessel even though it was fixed prior to the accident (old rules, now with IA 2015, if the breach is remedied before the accident there can still be a claim
Dudgeon v pembroke
Time policy – after an extensive overhaul in Millwall, the vessel made a ballast trip to Gothenburg where she was noted to be taking in some water. On her return loaded passage, she hit heavy weather and became water logged, eventually grounding and becoming a TL. It was admitted that the vessel was unseaworthy but as the assured was not privy to it he was still entitled to recover for the loss due to perils of the seas – main cause of the loss. a “long course of decisions in the courts of this country have established that causa proxima non remota spectator is the maxim by which these contracts of insurance are to be construed and that any loss caused immediately by the perils of the sea is within the policy, though it would not have occurred but for the concurrent actions of some other cause which is not within it.”
Hamilton v pandorf
Contract of carriage, with exceptions clause in respect of dangers and accidents of the seas. Rats had gnawed through the lead pipe allowing the inlet of seawater, damaging the cargo. It was held that the exceptions clause would still apply as the damage to cargo was proximately caused by the water, and the rats were only the remote cause (the rats themselves caused no damage to the cargo.
Reischer v borwick
Tug insured against collision and contact damage, but not in respect of perils of the seas. The tug made contact with a floating object, causing damage and allowing ingress of water. Whilst proceeding under tow to a nearby dock, a temporary repair failed and the vessel had to be beached, and became a TL. It was argued that insurers were only liable for the initial contact damage, but it was ruled that the initial contact was the proximate cause of the TL – the tug” continuously in danger from the time the condenser was broken”, and the Assured’s claim should succeed.
MIA s.78 Suing and labouring clause
- Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.
- (General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.
- Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.
- It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.
