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"AT ALL TIMES" CREWING WARRANTIES
PRATT v AIGAION INSURANCE CO SA : COURT OF APPEAL DECISION
The decision of H H Judge Mackie QC in John Pratt v Aigaion Insurance Co SA [2008] Lloyd's Rep IR 610 has been considered by the Court of Appeal. (The judge's decision was reviewed in our Bulletin of July 2008 and crew warranty issues were also examined in our Bulletin of September 2006.)
Judge Mackie had decided that the words "Warranted Owner and/or Owner's experienced Skipper on board and in charge at all times and one experienced crew member" had to be given their natural and literal meaning - subject only to the qualification that the warranty was not breached by absence due to an emergency or a requirement of crewing duties. However, the Court of Appeal considered the wording to be ambiguous and concluded that insurers had not established any breach of the warranty.
To recap the facts, a 21m 117 tonne trawler, the "RESOLUTE", was taken to fish for the day by its owner Mr Pratt and its three crew and returned to North Shields. The catch landed and the vessel having been moored and readied for the next day, one crew member who lived locally went home at 2200 hrs and another went to the pub. Shortly afterwards he was joined by Mr Pratt and the remaining crew member. At 2220 hrs Mr Pratt was notified that the vessel was on fire. (It was later determined that the cause was probably operation of the fat fryer or the fridge.) The vessel was considerably damaged and the estimates for repair significantly exceeded the ?120,000 insured value of the vessel.
Before Judge Mackie, it was accepted by both parties that the warranty was not a "promissory warranty", breach of which would automatically discharge the insurers prospectively (see s 33 Marine Insurance Act 1906 and the "GOOD LUCK" [1992] 1 AC 233), but a "delimiting" warranty whereby the insurers were not automatically discharged of liability but merely "off-risk" for the period of any non-compliance.
Various arguments were advanced for Mr Pratt to the ultimate effect that, in the factual context in which this policy was to be construed, the "at all times" warranty did not require an owner/skipper together with one crew member to be on board 24 hours, seven days a week, even when in port - in particular that a temporary stay ashore to have a meal or a drink would not amount to a breach of warranty. It was in this respect said to be ambiguous and therefore should be construed contra proferentem the insurers.
The judge, however, found no ambiguity except as to whether the "one experienced crew member" must also be on board and in charge at all times, a consideration he found irrelevant to this dispute. Subject to the exception mentioned above he upheld its natural and literal meaning that the owner or his experienced skipper must be on board and in charge at all times. However, the possible ambiguity noted in passing by the judge was considered by the Court of Appeal to be all important. It accepted that the court should not invent a new bargain for the parties. Nevertheless, it concluded that the requirement for the owner/his skipper and at least one experienced crew member to be on board indicated that the warranty was directed to protection against navigational hazards. The warranty therefore had to be qualified in some way, but the Court of Appeal found that, since it was not clear as to how far it should be clarified, the warranty was ambiguous. It should therefore be construed contra proferentem the insurers (the makers of the document) who, as a result, had not proved a breach of the warranty. (One of the judges in the Court of Appeal also considered that the general standard wording of the policy showed that the vessel was intended to be covered in circumstances when no one could sensibly have thought that any crew could or should be on board. In such circumstances the warranty could not have been intended to be read literally. Moreover, if it was, a warranty in the standard wording that the vessel should not be navigated unless manned by at least two medically fit persons, one of whom was competent to be in command, would be virtually otiose. )
The scope of similar "at all times" crewing warranties had been examined in both the "NEWFOUNDLAND EXPLORER" [2006] 1 Lloyd's Rep IR 704 and the "MILASAN" [2000] 2 Lloyd's Rep 458. As explained in our Bulletin of September 2006 the decisions in those cases went against the assured. The approach taken by the Court of Appeal in the present case sits very uneasily with those decisions.
We believe this case is a movement away from a consistent approach to the construction of such marine warranties. Nevertheless, our previous comments continue to apply: should insurers wish to rely upon a breach of warranty they should ensure that their policy terms are clear and unambiguous as to the precise circumstances to which the warranty is intended to apply.
We suggest that the nub of the concern in this particular case was expressed most clearly by Judge Mackie. He made clear his view that the warranty was particularly unsuitable in the case of a "smaller vessel" such as the trawler in question and warned that: ""at all times" requires, at least in some cases, qualification in the interests of common sense and no underwriter should assume that this wording has somehow received judicial blessing". In addition, he highlighted Mr Pratt's brokers' duty to their client to take reasonable care in the placing of insurance and the choice of policy wording. (Whilst not pre-judging any issue between them and their client, he observed they may have questions to answer about the service provided.)
In short, both the assured's brokers and the underwriters must address what express qualifications may need to be made to an "at all times" crewing warranty in the light of the particular nature and circumstances of the vessel concerned so as to make the clause both clear as to the scope of its application and enforceable within that scope.
If you have any queries, please do not hesitate to contact either Mark Lloyd or Kish Sharma.
April 2009
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