ABN Amro Bank was insured under a marine policy placed with 14 subscribing underwriters led by Royal & Sun Alliance Insurance Plc for the period of 1 February 2016 to 21 January 2017. Two of the assured’s customers defaulted on a series of “repo” financing deals over cacao and cacao products. Senior executives of both of these companies were convicted and imprisoned in the USA for fraud. These companies ultimately became insolvent and the goods held by way of security by the assured proved to be substandard and of little resale value. The assured sought to recover its losses under the marine insurance contract, which contained a bespoke clause (the Transaction Premium Clause (TPC)) stipulating that cover was available for amounts “that the Insured would otherwise would have received and/or earned in the absence of a default by a customer”. The underwriters denied liability under the policy.

Decision: Most of the underwriters were liable under the policy on true construction of the TPC. Various defences raised by most underwriters were rejected. However, the claim of the assured against two underwriters (Ark and Advent) failed. Also the brokers were liable to the assured in respect of the indemnity the assured would have received from Ark and Advent under the policy.

Held: (1) The TPC provided stand-alone financial loss coverage and applied where there was no physical loss and damage to the insured cargo.2

(2) The insurance policy could not be rectified so as to give effect to what was said in conversations and the mutual intentions of the leading underwriter and the brokers. There was also no estoppel or collateral contract affecting the operation of the TPC.