If P&C Insurance Ltd v Silversea Cruises Ltd. & Ors

Insurance cover for loss of income caused by interference with a vessel’s scheduled itinerary requires actual interference with the vessel’s operation, ordinarily producing measurable loss of time. Passenger cancellations, reduced demand and commercially motivated cancellation of voyages do not themselves satisfy that requirement.

Where cover for anticipated income is separately provided, losses from cancelled or unmade bookings may fall within that section, subject to its causal requirements, proof of an ascertained net loss and the agreed recovery period. A fleet-wide policy limit applies across all insured vessels where the wording contains no clear separate limit for each vessel.

The claimant insured Silversea and the owning companies of its cruise vessels under a policy covering loss of income, extraordinary expenditure, anticipated income and cruise credits. Following the terrorist attacks of 11 September 2001 and subsequent United States Government warnings, passengers cancelled bookings, itineraries were altered, and certain voyages were cancelled or transferred between vessels.

Silversea claimed under sections A.i, A.ii and B of the policy. The principal issues were whether passenger cancellations or commercially decided cancellations amounted to interference with a vessel’s scheduled itinerary, whether section B was available, whether the section A.ii limit was applicable per vessel or across the fleet, and how any net loss should be calculated.

1. Section A.i. The claim under section A.i, apart from the separate claim concerning the Silver Cloud’s mechanical breakdown and the pleaded claim for extraordinary expenditure, was misconceived. The operative trigger was interference with the scheduled itinerary of the insured vessel. That required an impediment to the vessel’s intended operation, not merely economic interference, passenger cancellations or reduced support for a cruise.
2. Voyages performed as scheduled were not subject to the necessary interference. Voyages cancelled or transferred for commercial reasons could have been performed and therefore did not qualify. The reference to loss of income, the per diem sums insured and the deductible expressed in days showed that section A.i was concerned with loss of time. The cover did not extend to the loss of anticipated income arising from future bookings, which belonged, if at all, under section A.ii.
3. Section B. Section B was parasitic upon section A.i. It required an insured peril causing the relevant cancellation or interruption. Customer cancellation alone was insufficient. The section B claim therefore failed, subject to a possible issue concerning whether the substitution of Philadelphia for New York on one Silver Whisper voyage amounted in substance to cancellation by Silversea.
4. Section A.ii. The US$5 million limit was a single annual aggregate limit applying across the fleet. The wording contained no provision making the limit applicable separately to each vessel. The reference to each vessel being a separate insurance addressed matters such as set-off, disclosure and warranties, rather than limits of indemnity.
5. The deductible applied by reference to the occurrence. Multiple warnings arising from the single defining event of 11 September 2001 were to be treated as one occurrence for the relevant six-month period. The events and warnings were concurrent causes of the downturn in bookings, and the court applied the principle in Wayne Tank and Pump Company Ltd v Employers Liability Assurance Corporation Ltd 1974 1 QB 57.
6. Silversea’s primary A.ii calculation was defective. An ascertained net loss meant the difference between expected net income and actual net income over the agreed six-month period, allowing for relevant savings. The alternative claim for cancelled bookings on cruises due to depart within that period was sound in principle. The court reserved consequential applications and directions.