The Court was asked as to the construction of the phrase ‘constructive total loss’, and in particular the calculation the expenditure to be taken into account in computing the cost of recovery and or repair, where notice of loss had been served before some of the losses were incurred. Questions were asked as to the costs of environmental repair liabilities (SCOPIC).
Held: The ‘cost of repairing the damage’ for the purpose of determining whether the vessel was a constructive total loss included all the reasonable costs of salving and safeguarding the ‘RENOS’ from the time of the casualty onwards, together with the prospective cost of repairing her. The cost of repairing the damage was in no way ‘adeemed’ because part of it had already been incurred at the time when notice of abandonment was given and action brought on the policy. These costs are therefore to be taken into account for the purposes of section 60(2)(ii) of the Act.
As to SCOPIC costs, especially where a casualty involves an oil or chemical tanker, SCOPIC charges may be many times the remuneration attributable to the ‘classic’ salvage services directed at saving the property.
However: ‘ it is necessary to identify the purpose of the expenditure which it is proposed to take into account, and to apply the prudent uninsured owner test only to expenditure for the purpose of repairing the ship in the larger sense which I indicated above. The fact that a prudent uninsured owner might have contracted with the same contractors for both the protection of the property and the prevention of environmental pollution does not show that both are part of the cost of repairing the damage. Neither does the fact that the charges under both heads are secured on the ship. The two heads of expenditure have quite different purposes, only one of which is related to the reinstatement of the vessel. If they were truly indivisible, this might not matter. But the whole scheme of the SCOPIC clause depends on their being separately identifiable, and the very fact that one is for the hull underwriter’s account and the other for the P and I insurers shows that they cannot be indivisible. In my opinion, SCOPIC charges are not part of the ‘cost of repairing the damage’ for the purpose of section 60(2)(ii) of the Act or the ‘cost of recovery and/or repair’ for the purpose of clause 19.2 of the Institute Clauses, because their purpose is unconnected with the damage to the hull or its hypothetical reinstatement. ‘
Judges:
Lord Reed, Deputy President, Lord Hodge, Lord Lloyd-Jones, Lord Kitchin, Lord Sumption
Citations:
UKSC 2018/0054, [2019] UKSC 29
Links:
Bailii, Bailii Summary, SC, SC Summary, SC Summary Video, SC 2019 Apr 10 am Video, SC 2019 Aor 10 pm Video, SC 2019 Apr 11 am Video
Statutes:
Marine Insurance Act 1906 60(2)
Jurisdiction:
England and Wales
Citing:
Appeal from – Sveriges Angfartygs Assurans Forening (The Swedish Club) and Others v Connect Shipping Inc and Another, Re Renos CA 19-Feb-2018
The court considered what expenses were to be taken into account in assessing whether there had been a total loss of a ship. . .
Cited – Holdsworth and Another v Wise And Others 1828
. .
Cited – Rosetto And Others v Gurney, Chairman Of The Alliance Marine Assurance Company 30-May-1851
. .
Cited – Kemp v Halliday (2) 1-Feb-1866
. .
Cited – Helmville Ltd v Yorkshire Insurance Co Ltd (The ‘MEDINA PRINCESS’) 1965
Roskill J accepted without discussion a submission in relation to one of a large number of disputed items of expenditure that it was ‘inadmissible for the purposes of the constructive total loss claim because the work was done before the date of . .
Cited – National Grid Co Plc v Mayes and Others; International Power Plc (Formerly National Power Plc) v Healy and Others HL 7-Jun-2001
The release by the trustees of a sum due to the pension scheme from the employers, did not make funds payable to the employer, so as to trigger the clause within the scheme trust deed which would restrain such a payment. Where an actuarial surplus . .
Cited – Chandris v Argo Insurance Ltd 1963
Terms of an insurance policy for the very nature of the loss may require a particular method of computation or process of quantification of loss before payment is due. Ordinarily, the right to the indemnity accrues as soon as the loss has been . .
Cited – Firma C-Trade SA v Newcastle Protection and Indemnity Association (‘The FANTI’) HL 1991
. .
Cited – Knight v Faith 1850
. .
Cited – Hamilton v Mendes 8-Jun-1761
The ‘SELBY’ was captured by a French privateer in the Atlantic during the Seven Years War, and then recaptured from her French prize crew a few weeks later by a British man-of-war. News of the capture and recapture reached the assured . .
Cited – Bainbridge And Another v Neilson 27-Feb-1808
during the Napoleonic wars, a ship was taken and then retaken. News of the recapture arrived between the tender of notice of abandonment and the commencement of the action.
Held: Lord Ellenborough said: ‘The effect of an offer to abandon is . .
Cited – Robertson v Nomikos HL 1939
The ship suffered a constructive total loss under the terms of their freight insurance policy, which stipulated that the value when repaired was to be taken as the insured value. The cost of repairs was greater than the insured value, but less than . .
Cited – Polurrian Steamship Co Ltd v Young CA 1915
The Marine Insurance Act 1906 did not alter the position on notice of abandonment . .
Cited – Roura and Forgas v Townend 1919
The plaintiffs were the voyage charterers of the ‘IGOTZ MENDI’. They insured their anticipated profit on the voyage against the actual or constructive total loss of the vessel. The vessel was captured by a German cruiser in the Indian Ocean, as a . .
Cited – Sailing Ship ‘ Blairmore ‘ Company v Macredie HL 11-Jul-1898
The ‘BLAIRMORE’ was sunk by a storm while moored in San Francisco Bay and abandoned to the insurers by her owner. The assured pleaded that the cost of raising and repairing the ship was such as to make her a constructive total loss at the time of . .
Cited – Roux v Salvador 15-Nov-1836
The court set down the prudent uninsured owner test for determining whether the subject-matter insured is a constructive total loss in circumstances where the relevant facts are hypothetical or cannot be known. As applied to a damaged ship, the test . .
Cited – Irving v Manning HL 1847
. .
Cited – Angel v Merchants’ Marine Insurance Co CA 9-Apr-1903
. .
Cited – Macbeth and Co, Ld v Maritime Insurance Company HL 6-Mar-1908
. .
Lists of cited by and citing cases may be incomplete.
Transport, Insurance
Updated: 06 April 2022; Ref: scu.638235
