American International Marine Agency of New York Inc. v Dandridge [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | RICHARD SIBERRY QC |
| Judgment Date | 05 May 2005 |
| Neutral Citation | [2005] EWHC 829 (Comm) |
| Docket Number | Case No: 2003 Folio No. 764 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 May 2005 |
[2005] EWHC 829 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Richard Siberry QC
Sitting as a Deputy High Court Judge
Case No: 2003 Folio No. 764
Mr Michael Collett (instructed by Waltons & Morse) for the Claimants
Mr Charles Kimmins (instructed by Clyde & Co) for the Defendant
Hearing date: 17 th March 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This judgment follows a trial, on agreed facts, of the Claimants' claim for US$225,000 (plus interest and costs) under a "Total Loss Only" ("TLO") reinsurance ("the Reinsurance") subscribed to by the Defendant (sued as representative underwriter) and other underwriters (together "Reinsurers"). Reinsurers thereby reinsured the Claimants in respect of the Claimants' participation in a hull and machinery ("H&M") insurance of the MV Avon ("the Vessel"), for a twelve month period commencing on 30th March 2000. The Claimants had participated in this H&M insurance as following insurers, on terms which included a widely-worded "follow the leader" clause (set out in para 12 below). The Vessel ran aground on 9 th September 2000, and was thereafter declared a total loss.
The case raises issues as to the proper construction and effect of various terms of theReinsurance, in particular the provision whereby it was expressed to be
"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 theVessel's insured value, from US$2.5million to US$1.5million.
The Agreed Facts and Issues
It is convenient first to set out the agreed facts, which were recorded in Schedule 1 to the Claimants' Outline Submissions for the trial ("the Agreed Facts"). These were as follows:
"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.
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 6 th September 2000. The Vessel was out of Class between 31 st 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."
The parties also agreed upon the following formulation of the issues for trial ("the Agreed Issues"), as set out in Schedule 1 to the Claimants' Outline Submissions:
"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 theclaim 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."
Schedule 1 further recorded the parties' agreement that:
"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 agreed trial bundles included, at Bundle B tabs 1–4, various contractual documents which were incorporated by reference into Schedule 1, and to some of
which it will be necessary to refer by way of elaboration of the Agreed Facts as set out above. Bundle B tab 5 contained various other contemporaneous documents which were made available to the Court by way of background, but which were not intended by the parties to form the basis for any additional findings of fact.
Because the trial was conducted on agreed facts, no witness evidence was led. The parties supplemented their written Outline Submissions/Skeleton Arguments with oral submissions, and the hearing was concluded within a day. However, following the hearing I invited further submissions on the issue as to the proper construction of the provision of the Reinsurance which I have set out in paragraph 2 above, and on related matters. The parties responded by way of further written submissions, and following service of the Claimant's Reply Submissions, I was invited to proceed to judgment without any further oral hearing.
The Insurance
The Agreed Facts state that the Vessel was insured under a H&M policy defined therein as "the Insurance" (a definition which I adopt), of which the lead underwriters were Axa, and in which the Claimants had a 15% participation evidenced by a binder dated 18th April 2000 bearing reference number 207354 (paras 1, 4–6). In fact, no single policy document appears to have been issued. A document entitled "Insurance Slip H-2131–00", and bearing the date 3rd April 2000, was issued by Cap-Marine Assurances & Reassurances SA, evidencing the insurance of the Vessel, and...
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