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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> American International Marine Agency of New York Inc & Anor v Dandridge [2005] EWHC 829 (Comm) (05 May 2005) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2005/829.html Cite as: [2005] EWHC 829 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice Strand, London, WC2A 2LL |
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B e f o r e :
____________________
Claimant AMERICAN INTERNATIONAL MARINE AGENCY OF NEW YORK INC. AMERICAN HOME ASSURANCE COMPANY |
Claimants |
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- and - |
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CHRISTINE E. DANDRIDGE (sued on her own behalf and on behalf of all other underwriters subscribing to the contract of insurance evidenced by SBJ cover note TT 2201870T) |
Defendant |
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Mr Charles Kimmins (instructed by Clyde & Co) for the Defendant
Hearing date: 17th March 2005
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Crown Copyright ©
Introduction
"a reinsurance and subject to the same clauses and conditions and against the same perils as in the original policy or policies but only against the Risks of Total and/or Constructive Total and/or Arranged Total and/or Compromised Total Loss of vessel",
and as to whether that provision was effective to incorporate the follow the leader clause in question. If it was, further issues arise as to the effect, upon the Reinsurance, of the expiry of the Vessel's classification with Det Norske Veritas ("DNV"), and of the agreement of the leading underwriter under the underlying H&M insurance, both to the Vessel's reclassification with INSB, and to a reduction in the Vessel's insured value, from US$2.5million to US$1.5million.
The Agreed Facts and Issues
"1. The mv "AVON" ("the Vessel") was insured for 12 months from 30 March 2000 under a hull and machinery policy incorporating the Institute Time Clauses (Hulls) CL. 280 dated 1/10/83 ("the Insurance").
2. It was a term of the Insurance that the Vessel was classed with DNV and had a H&M value of US$2.5million.
3. The Vessel was originally classed with DNV.
4. The lead underwriters of the Insurance were Axa Global Risks ("Axa").
5. The First and/or Second Claimants (collectively "the Claimants") had a 15% participation in the Insurance.
6. The terms of the Claimants' participation in the Insurance are evidenced by the binder dated 18 April 2000 bearing reference number 20734.
7. The Vessel's Class with DNV expired on 31st August 2000. The Vessel was reclassed with INSB as from 6th September 2000. The Vessel was out of Class between 31st August 2000 and 6th September 2000.
8. Axa had orally agreed with the Owners (or their agents) prior to the casualty to cover the vessel on the terms that its class had been changed, and its value was reduced from US$2.5million to US$1.5million.
9. On 13th September 2000, Axa agreed in writing (by an endorsement no.10) to cover the Vessel on the terms that its class had been changed, and its value was reduced from US$2.5 million to US$1.5million.
10. The Claimants issued an endorsement no.7 to the Binder in respect of the Vessel's change in class and noted in writing the change in the Vessel's value.
11. Each of the changes referred to in paragraphs 8 to 9 above (i) amounted to material changes to the terms of the Insurance, and to the risk, (ii) were potentially prejudicial to the rights and obligations of the Defendant, and (iii) were never agreed to by the Defendant, nor would the Defendant have agreed to the same if they [sic] had been asked to do so at the time.
12. The Vessel ran aground on 9 September 2000 and was thereafter declared a total loss.
13. At the time of the casualty, Axa and the Owners (or their agents) were in the process of negotiating cover for a scrap voyage. At the time of the casualty, the Vessel had not embarked on the scrap voyage, and any cover for the scrap voyage had not yet incepted.
14. By reason (in particular) of the facts and matters set out at paragraph 8 above, the Vessel was covered by the insurance provided by Axa at the time of the casualty and Axa was legally obliged to pay the claim arising out of the casualty (and did so).
15. The Claimants paid US$225,000 in respect of a claim for constructive total loss of the Vessel.
16. When the Claimants settled the Owners' claim under the Insurance:
(1) the Claimants believed that they were liable to do so; and
(2) the Claimants acted honestly and took all proper and business like steps in making the settlement.
17. Various London reinsurers including the Defendant ("the Reinsurers") agreed to reinsure the Claimants' participation in the Insurance against risks of total loss ("the Reinsurance").
18. The terms of the Reinsurance are evidenced by cover note no. TT201870T.
19. For the avoidance of doubt:
(1) The above paragraphs are without prejudice to the following questions:
(a) whether the changes agreed by Axa in paragraphs 8 to 9 above amounted to amendments to an existing policy of insurance, or to a new policy of insurance; and
(b) whether Reinsurers were bound by Axa's decision to hold the Vessel covered despite the change in Class in circumstances when Axa did not agree to do so in writing before the casualty."
"Was the claim recognised and paid by the Claimants not within the risks covered by the Reinsurance as a matter of law, which raises the following issues:
(1) Without prejudice to sub-paragraph (2) below:
(a) whether any amendment to the Insurance in respect of the Vessel's class and/or insured value was binding upon the Reinsurers by virtue of the express terms of the Reinsurance.
(b) Whether the Claimants were in breach of classification warranties in the Reinsurance, and if so what is the effect thereof.
(c) Whether the Claimants were in breach of the Reinsurance by virtue of the amendments to the Insurance in respect of the Vessel's class and/or insured value, and if so what is the effect thereof.
(2) Whether:
(a) on a true construction of the Reinsurance, the "follow the leader" provision …. was incorporated into and/or to be given effect in the Reinsurance such that the Reinsurers were precluded from contending that a claim recognised by the Claimants did not fall within the risks covered by the Reinsurance as a matter of law if the Claimants were bound to pay the claim by virtue of the operation of the "follow the leader" provision.
(b) by virtue of the operation of the "follow the leader" provision the Claimants were bound by Axa's decisions on the change in the Vessel's class and the reduction in the insured value of the Vessel and/or bound to pay the claim."
"Unless the claim recognised and paid by the Claimants was not within the risks covered by the Reinsurance as a matter of law on the basis of one of the matters referred to in [the Agreed Issues], it is common ground that the Reinsurers are liable to the Claimants."
The evidence
The Insurance
"TERMINATION
This Clause 4 shall prevail notwithstanding any provision whether written typed or printed in this insurance inconsistent therewith.
Unless the Underwriters agree to the contrary in writing, this insurance shall terminate automatically at the time of
4.1 change of the Classification Society of the Vessel, or change, suspension, discontinuance, withdrawal or expiry of her Class therein, provided that if the Vessel is at sea such automatic termination shall be deferred until arrival at her next port. However where such change, suspension, discontinuance or withdrawal of her Class has resulted from loss or damage covered by Clause 6 of this insurance or which would be covered by an insurance of the Vessel subject to current Institute War and Strikes Clauses Hulls-Time such automatic termination shall only operate should the Vessel sail from her next port without the prior approval of the Classification Society.
………
A pro rata daily net return of premium shall be made."
"1. Warranted that :
1.1 The vessel is classed with Classification Society as mentioned in the policy.
1.2 The class is not suspended, discontinued, or withdrawn.
1.3 the existing rating class is maintained.
………
1.5 Any changes to the above warranties is subject to prior agreement of Underwriters who are entitled to cancel this insurance or to review the conditions of the contract. But if the vessel is at sea, such cancellation shall be deferred until arrival of her next port of call.
Should the Assured and/or his Representative fail to comply with any of the above warranties, then the insurance cover is cancelled as from the date the failure took place."
"Following French Market Leaders (Axa Global Risks) in all respects, including rates and claims but excluding 'ex gratia' " (my emphasis).
It was not in dispute that this was a widely-worded follow the leader clause, which, potentially at least, gave Axa a more extensive role than that provided for in the leading underwriter provisions in the French Market Slip (see para 8 above). As some reliance was placed by Reinsurers on the position of this clause, I should record that it was printed at the foot of the page on which the 'Terms and Conditions' and 'Trading Warranties' were set out, but as a separate provision.
The Reinsurance
"TYPE: TLO Reinsurance
FORM: Mar. 91 Slip Policy
REASSURED:
ORIGINAL
ASSURED: SEASCOT SHIPMANAGEMENT
VESSEL: 1) "AVON"
2) "LESZECK G"
Including new and/or acquired and/or added as original h/c [held covered – the abbreviation 'h/c' was added in manuscript].
PERIOD: 12 months at 30th March, 2000 and/or as original.
INTEREST: Hull, Machinery and everything connected therewith.
Valued at 1) US$2,500,000 2) US$2,500,000 or as valued in original policy or policies and/or Interest as original.
SUM REINSURED:
CONDITIONS: Being a reinsurance and subject to the same clauses and conditions and against the same perils as in the original policy or policies but only against the Risks of Total and/or Constructive Total and/or Arranged Total and/or Compromised Total Loss of vessel.
To follow the settlements of original Underwriters but only as far as applicable to this Reinsurance.
No Claims in respect of Salvage, Salvage charges or Sue and Labour.
Continuations and/or Deviations and/or Extensions as original policy or policies whether notice be given or not.
Valuation Clause as and/or if in original policy.
Class Warranties if and/or as in original.
Trading and other Warranties as original but half additional premiums or as Institute or other scale, if paid on original.
……..
Premium in full to be presented to LPSO and/or LPC on or before 60 days of original payment date.
RATE: 1) 1.50% C.R.O. [cancelling returns only]
2) 0.375% C.R.0.
U.S.
CLASSIFICATION: U.S. Reinsurance."
The Claimants' submissions
Reinsurers' submissions
"Hull, Machinery and everything connected therewith.
Valued at 1) US$2,500,000 2) US$2,500,000 or as valued in original policy or policies and/or Interest as original" (emphasis added),
Reinsurers submitted, in reliance on the Norwich Union case (supra), that this did not mean that Reinsurers agreed to cover the Vessel for their respective proportions of its value as amended from time to time by and between Insurers and the assured. In that case, the equivalent words were "valued at £313,050 or valued as original policy or policies….subject to valuation clause as and if in original". McCardie J held (following the decision of the Court of Appeal in Lower Rhine and Wurtemburg Insurance Association v. Sedgwick [1899] 1 QB 179) that by reason of the reduction in the insured value of the vessel in question to £225,000, by way of variation of the original policy, "it cannot possibly be said that the policy as altered was the same as the original policy" (p. 467), and that as this variation was made without the consent of the defendant reinsurers, the reinsurers were discharged.
Discussion
"Following French Market Leaders (Axa Global Risks) in all respects, including rates and claims but excluding 'ex gratia' ".
Conclusions
Was the claim recognised and paid by the Claimants not within the risks covered by the Reinsurance as a matter of law? – Answer: the claim was not within the risks covered by the Reinsurance as a matter of law.
1 (a) Was any amendment to the Insurance in respect of the Vessel's class and/or insured value binding upon the Reinsurers by virtue of the express terms of the Reinsurance? Answer: the amendments in question were not binding upon Reinsurers.
(b) Were the Claimants in breach of classification warranties in the Reinsurance, and if so what is the effect thereof? Answer: Yes, with the result that Reinsurers were discharged from liability under the Reinsurance.
(c) Were the Claimants in breach of the Reinsurance by virtue of the amendments to the Insurance in respect of the Vessel's class and/or insured value, and if so what is the effect thereof? Answer: Yes, with the result that Reinsurers were discharged from liability under the Reinsurance.
(2) (a) On a true construction of the Reinsurance, was the "follow the leader" provision incorporated into and/or to be given effect in the Reinsurance such that the Reinsurers were precluded from contending that a claim recognised by the Claimants did not fall within the risks covered by the Reinsurance as a mater of law if the Claimants were bound to pay the claim by virtue of the operation of the "follow the leader" provision? Answer: No.
(b) By virtue of the operation of the "follow the leader" provision, were the Claimants bound by Axa's decisions on the change in the Vessel's class and the reduction in the insured value of the Vessel and/or bound to pay the claim? Answer: In view of my conclusions in respect of the Reinsurance, it is not necessary to answer this question.