Singaporean bank OCBC has secured a $56m insurance payout following a court ruling over the capsizing of an oil and gas liftboat in 2018.
The judgment from the country’s High Court also clarified some points of English insurance law.
The case related to the loss of the unmanned 50-loa Teras Lyza (built 2014), which was being towed from Vietnam to Taiwan.
The lender held the mortgage on the Ezion Holdings ship, which was insured by defendant ArgoGlobal Underwriting Asia Pacific.
TradeWinds reported at the time that the Teras Lyza developed a sudden list to the stern before capsizing.
The owner tendered notice of abandonment and claimed a constructive total loss.
OCBC’s claim for an insured value of $56m was allowed by the judge, who ruled the vessel was lost by “perils of the sea”.
Robert Ward, a barrister at London’s Quadrant Chambers, said the judgment affirmed the continuing validity of an earlier casualty decision that found perils of the sea applied as long as a ship is shown to be seaworthy and sinks in unexplained circumstances.
The insurer argued that the bank had to prove how the vessel capsized, but this was rejected.
The court also considered the effect of a breach of warranty by the assured in reference to the Insurance Act 2015.
ArgoGlobal alleged unsuccessfully that the lender had breached a requirement of the policy to comply with certain statutory and regulatory requirements and operational procedures concerning the tow.
The act precludes an insurer from relying on non-compliance with warranties to discharge its liability, save where the relevant term is one “defining the risk as a whole”.
“This phrase has yet to be interpreted in English case law,” according to Ward.
“The judge accepted the claimant’s evidence that terms defining the risk as a whole were those which were so fundamental and extensive that they delimit the risk that the insurer is underwriting, such as, for example, geographical usage restrictions in this case,” the barrister said.
The decision touched on several issues of English law that are of importance in the marine insurance context, he explained.
The discussion of the scope of section 11 of the Insurance Act will be of “particular interest given the present lack of English authority on this point”, Ward said.
