The Court of Appeal was recently faced with issues involving pleasure craft insurance in J. J. Lloyd Instruments Ltd. v. Northern Star Insurance Co. Ltd. (The Miss Jay Jay)1. The owner of a pleasure boat had taken out a time policy which covered him “against all loss of or damage to the insured craft … which is directly caused by external accidental means”. It excluded recovery for loss or expenditure incurred solely in the event of damage resulting from faulty design, or in the event of the replacement or repair of any part condemned solely in consequence of a latent defect or fault or error in design and construction. Thus, the policy excluded losses that should be indemnified by the manufacturers rather than by the insurers.

The vessel was taken on a cross-Channel voyage. On the return journey, it was damaged in a rough sea, in circumstances where a better designed and constructed vessel of the same class should not have experienced difficulties. The assured went to considerable expense to repair the vessel and claimed under the policy. The insurers argued that the loss was not caused by “accidental external means” and that the design defects, and not the adverse sea, were the dominant and effective cause of the loss. At first instance, Mustill, J., found for the assured2. The Court of Appeal upheld his judgment on substantially the same grounds.

The court first considered whether this was a case of loss by “external accidental means”. That phrase was held to be wider than “loss by perils of the sea” but to be capable of including such a loss within its terms. On the facts a loss within the meaning of the clause had occurred. Their Lordships stressed that an accidental loss could occur even in relatively foreseeable circumstances. Thus, even though the sea was not unexpectedly rough, such a sea was “by no means bound to occur”. Furthermore, according to Lawton, L.J., the fact that a better designed and built vessel could have withstood the effect of the adverse sea was itself sufficient proof of an accidental loss. Finally, the loss was held to have been caused by external means, since the vessel was damaged “by the frequent and violent impacts of a badly designed hull upon an adverse sea”.

Having found that the loss was prima facie recoverable under the policy, the court turned to the decisive issue of causation. The insurers argued that the loss was not proximately caused by the bad weather but by the unseaworthiness of the vessel. They relied on the causation aspect of unseaworthiness as there was no express warranty of seaworthiness in the policy and the vessel was not sent to sea in