Marine Insurance Policy: limits to claims

Marine Insurance Policy: limits to claims

When is a sales agent entitled to indemnity under a marine insurance policy? The courts have indicated that an alleged liability fell outside the scope of a policy.  The expert maritime and shipping lawyers at top Bahamas law firm ParrisWhittaker have many years’ experience advising clients on shipping disputes.

What was the case about?

At issue in the Marco Polo case1 was the liability of insurance underwriters for the amount payable by a cruise company after an outbreak of the norovirus bug on a cruise ship which brought the cruise to an early halt.  The cruise ship had been chartered, then sub-chartered to a company that entered into a sales agency agreement with the claimant company which, in turn, contracted with various tour operators.

The passengers were assured they would receive payment from their respective tour operators to cover the cost of the cruise, along with other sums.  The claimant cruise company duly paid out the compensation sums, then sought indemnity against the liabilities from the marine liability policy purchased by the head charterer (under which the claimant was co-insured). 

The claimant claimed to have incurred the costs as the ‘contracting carrier’ under the Athens Convention 1974.   Under the Athens Convention, only claims made by passengers against entities with whom the passengers had entered into a contract of carriage (carriers) were covered.

The claimant also claimed that liability fell within the covered category under the insurance contract of ‘losses, costs and expenses incurred as Charterers’. 

Was the claimant a contracting carrier?

No, said the UK’s High Court: the passengers had contracted with their respective tour operators and not with the claimant itself, and the contract was to provide the cruise itself – not ‘booking contracts’ for the purposes of the Athens Convention.  In addition, it was found that the claimant had not considered itself to have a direct contractual relationship with the passengers at the time of the outbreak.

Furthermore, as the claimant was not the charterer of the vessel but rather a general sales agent, its name had been added to the policy without any real thought.  For instance, no additional premium was charged and there was no indication of what might be covered.  Therefore, its addition ‘did not add anything material, at least in the circumstances of this case.’ 

What was the outcome?

The passengers’ claims lay with their respective tour operators.  Even though the claimant had released some sums for the affected passengers (including future discounts), the court was not satisfied the money had been made directly available to the passengers.  Instead, it had been made to the tour operators to be passed onto them – a commercial decision rather than a decision based on its potential liability to the passengers themselves.

What does this mean?

Businesses should always ensure their policies of insurance cover all risks they may be exposed to.  Importantly, if your business is named as a co-insured, or you are about to be named as a co-insured, exercise caution as to whether your interests are protected.  You do need to make sure the policy provides for types of risk and loss you may suffer in future, paying additional premiums if required.  Simply relying on the fact that you are co-insured may be insufficient to claim indemnity under the policy.

How can we help?

We advise and represent shipping and maritime clients with their commercial contracts, including their rights and liabilities under contracts of insurance.  If you have a shipping dispute involving an insurance policy, contact the expert shipping lawyers at ParrisWhittaker for urgent advice and representation.

1 Cruise and Maritime Services International Limited v Navigators Underwriting Agency Limited [2017] EWHC 843