Lloyd's Maritime and Commercial Law Quarterly
English Marine Insurance and General Average Law
James Davey*
CASES
106. Involnert Management Inc v Aprilgrange Ltd (The Galatea) 1
Yacht insurance—(over)valuation—non-disclosure and misrepresentation—claims conditions—broker’s duties
The insured purchased a newly built yacht in 2007 at a cost of €13m. It was insured at the purchase price from 2008–2011 with Allianz Suisse. In November 2009, it was valued professionally at around €7m and at a similar figure estimated by the manager of the vessel in March 2011. From 13 May 2011 it was covered at Lloyd’s for one year, the policy incorporating the American Yacht Form (R12), for €9.75m, with a further €3.25m insured on the relevant “increased value” clauses. Cover was arranged by AIS as the Greek producing broker and OAMPS as London placing broker. The vessel was seriously damaged by fire caused by an electrical fault in December 2011 while moored in Athens Marina. At the time of the loss the vessel was on the market for sale for around €8m.
The insured claimed for a constructive total loss against the underwriters, who denied liability on the basis that the insured had failed to comply with claims conditions, both in the policy and within the statutory framework established for constructive total losses. Moreover, the underwriter later asserted a defence to the claim arising from non-disclosure or misrepresentation related to the overvaluation of the vessel. To the extent that its claim against the underwriter was ineffective, the insured claimed against AIS and/or OAMPS for breach of broker’s duties.
Decision: The policies were voidable for non-disclosure for the failure properly to disclose the professional valuation in 2009 and valuation for sale in 2011. The producing broker, AIS, was in breach of contractual and tortious duties of care. The placing broker, OAMPS, owed no duty to the insured. AIS was liable to the insured for €2m.
Held: (1) The professional valuation of the vessel, and the specific valuation of the vessel prior to advertising for sale, were material facts. (2) The standard practice for commercial vessels of permitting an insured value to reflect the potential to earn freight did not apply to a pleasure craft such as this. (3) The misrepresentation of the value of the vessel in the proposal form (estimated by the producing broker at €13m) was
* Professor of Insurance & Commercial Law, University of Southampton.
1. [2015] EWHC 2225 (Comm); [2015] 2 Lloyd’s Rep 289; [2015] Lloyd’s Rep IR 661 (Leggatt J).
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