Sun Alliance v. PT ADM
In this action, an Indonesian insurer sought a declaration that it was not liable to its Indonesian insured for the total loss of a vessel. The proper law and jurisdiction of the insurance contract was English. On the basis of the evidence and arguments presented in relation to multiple breaches of warranty committed by the insured, and with due regard to the criteria to which the court must refer when exercising its discretion, the court held that the insurer was entitled to the declaration of non-liability claimed.
DMC Category Rating: Confirmed
This case note was prepared by Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant
The Policy covered three risks: Hulls, Increased Value and War Risks, written on Institute of London Underwriters’ standard clauses with some specific variations. The Policy coverage was on the Lloyd’s Marine Policy Form ("MAR 91"). An Endorsement to the Policy was agreed to provide time and voyage cover, during the Policy term, to the "No 1 Dae Bu" ("the Vessel"), following her purchase by Pelumin. The Vessel’s Class was stated to be "KR", referring to the Korean Registry of Shipping. The time cover, on the "Institute Time Clauses – Hulls" ("the ITCH"), was limited to "trading" in "Indonesian waters only". Clause 4.1 ITCH provided for the automatic termination of cover at the time of "any change of the Class Society of the Vessel, or change, suspension, discontinuance, withdrawal or expiry of her Class therein". The delivery voyage cover was "from" Yeo Su Port in Korea "to" Batam in Indonesia and was "subject to vessel being in class". "All other terms and conditions" were as provided by the Policy.
The Vessel was struck by a typhoon when she was anchored half-a-mile offshore at Yeo Su. Work was being carried out on her engine in preparation for the voyage to Indonesia. The vessel was out of Class with KR, having lost her KR Class following previous typhoon damage, though she had interim Class certificates from the International Maritime Bureau Inc of Panama. The anchor dragged and the Vessel went aground on a breakwater just offshore.
ADM submitted that they were not liable to indemnify Pelumin for five reasons:
The Warranty Issue
The Voyage Cover Issue
The Clause 4.1 ITCH Issue
The Coverage Issue
The Seaworthiness Issue
The Relief Claimed
The lesson to be learnt, from the perspective of insureds, is that the information given to insurers, when obtaining cover, must accurately reflect the factual situation at hand, to avoid breach of warranty. The insured must also ensure that the terms and conditions of the policy selected and/or drafted will attach cover as soon as is reasonably practicably, to guard against relevant risks.
2 "2. Where the subject-matter is insured "from" a particular place, the risk does not attach until the ship starts on the voyage insured.
3.– (a) Where a ship is insured "at and from" a particular place, and she is at that place in good safety when the contract is concluded, the risk attaches immediately."
3The case of New Hampshire Insurance Co. v. Phillips Electronics set out the factors to be considered in granting a negative declaration, as follows:
"1. There is power to grant a negative declaration in an appropriate case, the fundamental test being whether it would be useful.
2. However, careful scrutiny will be exercised not only to test the utility or, on the other hand, the futility, of seeking to determine the claim by means of a negative declaration in England, but also to ensure that inappropriate forum shopping is not allowed, let alone encouraged.
3. A negative declaration will not be appropriate where it is premature or hypothetical, such as where no claim has been made or threatened against the [claimant].
4. The existence of imminent or, more particularly, current foreign proceedings is always a highly relevant consideration, not only for the purpose of testing the utility of the English claim, but also so as to have in mind the need to avoid the twin dangers of forum shopping and of the vices of concurrent proceedings."
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