Groupama Navigation et Transports v Catatumbo C.A. Seguros (Guasare)

JurisdictionEngland & Wales
JudgeDavid Steel J.
Judgment Date04 November 1999
Date04 November 1999
CourtQueen's Bench Division (Commercial Court)

Queen's Bench Division (Commercial Court).

David Steel J.

Groupama Navigation et Transports & Ors
and
Catatumbo CA Seguros.

A Green (instructed by Stephenson Harwood) for the claimant.

R Lord (instructed by Norton Rose) for the defendant.

The following cases were referred to in the judgment:

Forsikringsaktieselskapet Vesta v ButcherELR[1989] AC 852.

Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co LtdUNK[1987] 1 Ll Rep 476.

Shipping Insurance Reinsurance Maintenance of class Whether insurance and reinsurance back to back Whether reinsurer could rely on maintenance of class warranty in reinsurance when insurers could not rely on warranty in insurance under proper law.

This was the trial of a preliminary issue as to whether a maintenance of class warranty in a reinsurance contract was free-standing or whether it had an equivalent effect to the maintenance of class warranty in the underlying insurance.

The defendant insurer provided hull and machinery cover to a Venezuelan company in respect of a fleet of vessels. The policy contained a guarantee of maintenance of class and incorporated the American Institute Hull Clauses which provided for automatic termination of the policy on a change of classification unless the underwriters agreed to it in writing. The claimant reinsurers agreed to provide 50 per cent facultative reinsurance cover to the defendant in respect of its liability under the insurance contract. The reinsurance slip policy contained the words warranted existing class maintained as well as all terms, conditions, warranties as original and to follow settlements. Two vessels covered by the insurance were heavily damaged in a storm and it was subsequently discovered that the vessels were not classed. The defendant was minded to pay the claim despite that fact because any breach of warranty was not causative and thus might not terminate the cover as a matter of Venezuelan law. The claimants sought a declaration that they were discharged from liability by the owners' failure to maintain the vessels in class in breach of the warranty in the reinsurance on the basis that the insurance and reinsurance were not back to back and the warranty in the reinsurance was free-standing. The defendant argued that the reinsurance warranty was to be treated as equivalent to the warranty in the underlying cover and that if the defendant was liable to the owners, despite the fact that the vessels were not classed, the claimants were liable to indemnify the defendant. The effect of the reinsurance warranty was tried as a preliminary issue.

Held, deciding the preliminary issue in favour of the defendant:

The reinsurance was intended to be back to back with the original. The other terms contained in the reinsurance slip in addition to the as original wording did not manifest an intention that the cover should not be back to back. Nor was there any conflict or inconsistency between the existing class maintained warranty in the reinsurance and the guarantee of maintenance in the underlying cover. The reinsurance warranty was not to be regarded as free-standing but was to be construed so as to produce the same result as the underlying guarantee as to class. (Forsikringsaktieselskapet Vesta v ButcherELR[1989] AC 852 applied.)

JUDGMENT

David Steel J: By a consent order made on 20 May 1999, the parties agreed to the determination of various preliminary issues in this action. The agreed or assumed facts for the purposes of the issues are as follows.

By contract of insurance dated 25 June 1996, the defendant provided hull and machinery cover to a Venezuelan company, Empresa Carbones Del Guasare, in respect of a fleet of vessels including the Guasare XI and Guasare XII for the period of one year from 20 June 1996. This was subsequently extended for three months until 20 December 1997.

Addendum No. 003 to the policy contains the following provisions:

3. Clauses and Conditions

a. American...

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