West Law Report

Giving insurance warrant reasonable interpretation

Posted in Times Law Report by mrkooenglish on December 5, 2008

From The Times
December 3, 2008
Giving insurance warrant reasonable interpretation

Court of Appeal

Published December 3, 2008

Pratt v Aigaion Insurance Co SA

Before Sir Anthony Clarke, Master of the Rolls, Lord Justice Maurice Kay and Lord Justice Stanley Burnton

Judgment November 27, 2008

A marine insurance term requiring the warranted owner and/or his experienced skipper to be on board and in charge at all times with one experienced crew member, was not to be read literally but construed in the context of the policy as a whole and the surrounding circumstances; so construed, it applied when the vessel was being navigated or manoeuvred but not when it was tied up in dock.

It followed that the insured was entitled to recover under the policy for damage caused by fire breaking out on the vessel while she was made fast alongside the quay with no crew on board.

The Court of Appeal so held, allowing the appeal of the insured, John Thomas Pratt, against the dismissal by Judge Mackie, QC, sitting as a judge of the Admiralty Court ([2008] 2 All ER (Comm) 574) of his claim against the insurer, Aigaion Insurance Co SA, under a policy of marine insurance.

Mr Michael Nolan for Mr Pratt; Mr David Bailey, QC, for Aigaion.

THE MASTER OF THE ROLLS said that any clause in a contract had to be construed having regard to its context within the contract, which had in turn to be set in its surrounding circumstances: see Investors Compensation Scheme Ltd v West Bromwich Building Society ([1998] 1 WLR 896, 912-913).

In relation to warranties there were two broad principles: First, the apparently literal meaning of words had to be restricted if they produced a result inconsistent with a reasonable and businesslike interpretation. Second, any ambiguity in the terms had to be construed against the insurer.

His Lordship distinguished Brownsville Holdings Ltd v Adamjee Insurance Co Ltd ([2000] 2 Lloyd’s Rep 458) and GE Frankona Reinsurance Ltd v CMM Trust No 1400 ([2006] 1 All ER (Comm) 665), in which the terms of the warranties were given their natural meaning.

In circumstances where the policy wording was significantly different, the principle that the court should be consistent in its approach to policy wording was of no assistance.

The present warranty required that the owner or his skipper be on board and in charge. The natural inference from that was that an experienced skipper was to be on board because the underwriters wanted protection from risks which a skipper would be needed to guard against. That suggested that the primary purpose of the warranty was to protect the vessel against navigational hazards.

The principal time when at least two members of the crew including the skipper would be required was when the vessel was being navigated, including when she was manoeuvring. It would probably apply when the vessel was landing her catch.

The question was how far “at all times” should be qualified. It was conceded that the expression could not be given its ordinary and natural meaning. The clause seemed to be ambiguous because it did not make clear what the extent of the qualification should be.

In those circumstances, the clause should be construed against the insurer. At the time the crew left, the vessel was safely tied up alongside. If the insurer wanted the owner or skipper and an experienced crew member on board whenever the vessel was left, it should clearly have so stipulated. It did not.

His Lordship held that the insurer had not established that there was a breach of the warranty.

Lord Justice Maurice Kay agreed; Lord Justice Stanley Burnton delivered a concurring judgment.

Solicitors: Hill Dickinson LLP, Liverpool; Marine Law, Newcastle upon Tyne.

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