Frankona Re v. CMM Trust
In a contract of marine insurance the express term "Warranted vessel fully crewed at all times" was a warranty which obliged the insured to keep at least one crew member on board the vessel 24 hours a day, subject to (i) emergencies rendering crew departure necessary or (ii) necessary temporary departures for the purposes of performing crewing duties or other related activities
Obiter dicta, (a comment by way of aside) the express term was a "delimiting" warranty (delimiting or describing the risk) not a "promissory" warranty (breach of which entitles the insurer to terminate the risk)
DMC Category Rating: Developed
This case note was prepared by Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant
By a contract of insurance, the Claimant insured a US$3 million motor yacht ("the vessel") with effect from 5 November 2003 up to either 4 or 5 May 2004. The contract, which incorporated the Institute Time Clauses Hulls Port Risks including Limited Navigation (20/7/87) CL.312, included the express term "Warranted vessel fully crewed at all times" and was governed by English law.
The Defendant was initially the mortgagee of the vessel, later becoming the legal and beneficial owner of the vessel following a judicial sale.
The following facts were agreed:
The following facts were not agreed:
The trial was to decide the following preliminary issues:
(2) On the proper construction of the contract of insurance, do the words "at all times" in the warranty mean 24 hours per day, and, if not, what do they mean?
(3) On the proper construction of the contract of insurance, what was required in order to comply with the warranty "Warranted vessel fully crewed at all times" when the yacht was laid up alongside a berth with the generator running?
Whether a vessel was "fully crewed" or not depended upon what she was doing; a vessel undertaking an ocean voyage would have different crewing requirements to a vessel laid up alongside a berth. Accordingly, "fully crewed" meant at least one crew member on board the vessel, whatever she was doing.
To be "fully crewed at all times" while laid up alongside a berth, there needed to be at least one crew member on board the vessel 24 hours a day; "at all times" meant what it said – the whole time, not some of the time.
The judge deemed this to be the correct interpretation of the warranty as a matter of first impression. However, questions of context and practicalities required careful reflection and some qualification.
Context and Practicalities
The judge’s considerations of commercial commonsense also
pointed to the need for some qualification of the literal meaning of the wording
"at all times":
On this basis, it could not realistically make all the difference to insurance cover if the chandlery was in one part of the marina or another. The judge was inclined to focus on the purpose of the departure, rather than the distance travelled from the vessel, as the critical factor.
The judge dismissed the Defendant’s ‘employment of sufficient crew’ approach. To confine the warranty to matters of employment, rather than the location of the crew, would be unreal – this did not begin to meet the commercial purpose of the crewing warranty. The construction (outlined above) made good practical sense, whether the vessel was laid up alongside a berth or undertaking the other limited activities contemplated by the contract of insurance. It was also difficult to see how the vessel could be "fully crewed at all times" when at sea if the crew were anywhere other than on board the vessel.
Secondly, as to the issue of the nature of the warranty, the judge indicated that it was not necessary to decide whether the express term was a "delimiting" or "promissory" warranty. With reference to Arnould’s Law of Marine Insurance and Average (vol II, 16th ed, para 680), the judge indicated that he would be inclined to hold that the warranty was "delimiting" (delimiting or describing the risk) not "promissory" (breach of which entitles the insurer to terminate the risk). The delimiting interpretation met with the commercial purpose of the warranty, as the insurer would be off-risk in the event that a casualty occurred at a time of non-compliance with the warranty.
Although not necessary for the purposes of deciding the case, the indication that the judge would have found the warranty to be of a "delimiting" nature, rather than of a "promissory" nature, continues the judicial trend (pioneered by the Canadian Court in The Bamcell II  2 Lloyd’s Rep 528) of limiting otherwise draconian insurance warranties with a dash of commonsense, where the wording of the warranty does not clearly define its own nature or effect: cf Hussain v Brown  1 Lloyd’s Rep 627 (CA) and Kler Knitwear Ltd v Lombard General Insurance Co Ltd  Lloyd’s Rep IR 47 (Comm Ct).
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