Europe

Marine disputes to increase

Disputes between marine insurers as to which policy year should pay for long term damages are likely to increase, if the market’s consensus on how to deal with such claims is allowed to break down. Assureds will be caught in the cross-fire as they wait for valid claims to be settled, according to Richard Cornah, vice-chairman of the Association of Average Adjusters (AAA). Mr Cornah was speaking at a seminar organised in London recently by the AAA. The examples cited by Mr Cornah include mystery damage which is discovered only when a ship is dry docked, or during other routine inspections and progressive damage which develops over time until it results in a loss. Mr Cornah explained that in the absence of legal authority on the subject, the market had developed a pragmatic approach to such claims by apportioning losses over the relevant policy years on the basis of a technical analysis of how the damage progressed. However, some insurers were arguing that the claim should only attach to the policy when the damage started or to the policy when it was discovered, according to their position in the policy “chain”. This was most often the case when an insurer was in runoff or when the business had changed markets, thus breaking the commercial relationships. “Apportionment with an eye to how the damage progresses remains the best response to these difficult issues. It has the flexibility to mirror the particular circumstances and the lack of litigation indicates that this approach has succeeded fairly well. In the current circumstances, we need to maintain a consensus on methods. This means paying attention to the wordings and their plain sense and to the facts of each case, to minimise the number of disputes,” Mr Cornah concluded.