The Superhulls Cover Case (No. 2)

In order to persuade an insurance underwriter to subscribe to a particular risk, it may be necessary for the broker to offer reinsurance. What, however, is the position where the risk covered by the reinsurance does not match that covered by the original insurance, but the insurer is not informed by the broker of the discrepancy? That was the issue for the Commercial Court in Youell v. Bland Welch & Co. Ltd. (The Superhulls Cover case) (No. 2).1

A “superhull”, for the purpose of this case, is a vessel under construction with a completion value in excess of $60 million. In 1973, a shipyard secured an order for the construction of three liquid natural gas carriers, all superhulls. Sedgwicks were the London brokers entrusted with obtaining insurance covering building risks and ancillary purchasers’ interests. Appreciating that it would be necessary to offer insurers excess of loss reinsurance, Sedgwicks engaged Bland Welch, specialist reinsurance brokers. The “superhulls cover” was the reinsurance subsequently