Lloyd's Maritime and Commercial Law Quarterly
English Marine Insurance and General Average Law
Howard Bennett *
CASES
89. Dornoch Ltd v. Westminster International BV (The WD Fairway) (No 2)1
Constructive total loss—election by insurers to take over assured’s interest in insured property—notice of abandonment—rights of insurers having paid for total loss— unauthorised sale by assured of insured property
The insured vessel, owned by a company in the Boskalis group, was involved in a collision. Notice of abandonment was tendered and refused. Subsequently, all the insurers that had subscribed to the hull and machinery insurers paid the amount due in respect of a total loss and satisfied a salvage claim in their respective proportions. In was common ground that the insurers were then entitled to the residual open market value of the wreck, but an irreconcilable dispute between insurers and assured arose as to what that value was (â75 million as opposed to only about â25 million). Moreover, the assured refused to co-operate in effecting an open market sale of the vessel on the ground that allowing competitors access to the vessel would result in disclosure of confidential information. At this stage (December 2008), most of the hull and machinery insurers expressly elected to take over the assured’s rights in the vessel. The following month, however, the assured, without consulting the insurers, sold the vessel to another company within the Boskalis group for a nominal sum, admittedly to frustrate any open market sale by the insurers. The remaining insurers then elected to take over the assured’s rights in the insured vessel. The insurers then sought resolution of several preliminary issues.
Decision: The various questions would be resolved as follows.
Held: (1) It was clear from the Marine Insurance Act 1906, ss 63(1) and 79(1) that, by virtue of the doctrine of abandonment, any transfer of the assured’s interest in the insured property was not automatic but depended on the exercise by insurers of a right of election, in contrast to the automatic generation of subrogation rights. (2) The assured’s right to treat a constructive total loss (CTL) as a total loss depended on its preparedness to abandon the insured subject matter to the insurer. (3) The argument advanced by the claimant insurers, that acceptance of a notice of abandonment was not, of itself, to be equated with exercising a right of election under s 63(1) in favour of taking over the assured’s interest, was to be rejected. Acceptance indicated that the insurers were assuming responsibility for the wreck. If it connoted merely admission of liability to pay for a total loss, the reference in s 62(6) to admission of the validity of the notice of
* Hind Professor of Commercial Law, University of Nottingham.
1. [2009] EWHC 889 (Admlty); [2009] 2 Lloyd’s Rep 191; [2009] Lloyd’s Rep IR 573 (Tomlinson J).
ENGLISH MARINE INSURANCE AND GENERAL AVERAGE LAW
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