IF P & C Insurance Ltd (Publ) v Silversea Cruises Ltd & Ors

A loss-of-income insurance policy must be construed as a coherent whole, including its distinct covers, measures of indemnity, deductibles and limits. Cover for interference with a vessel’s operations and consequent loss of time does not ordinarily extend to loss of market or passenger bookings.

A fleet-wide cover for ascertained net loss may carry a single aggregate limit despite a general term treating each vessel as a separate insurance. Where cover extends to anticipated income on all future cruises in a published programme, a six-month limit may define the period for measuring the effect on bookings rather than restrict recovery to cruises departing within that period.

Following the terrorist attacks of 11 September 2001, demand for the appellants’ luxury cruises fell substantially. They sought indemnities under three sections of a loss-of-income policy: section Ai for interference with vessel operations, section Aii for anticipated income lost following government warnings, and section B for passenger cruise credits.

Tomlinson J dismissed the claims under sections Ai and B, apart from an independently settled breakdown claim, but upheld liability under section Aii subject to a single US$5 million fleet-wide limit. The assured appealed, principally contending that the section Aii limit applied separately to each vessel and that passenger cancellations and cancelled voyages were recoverable under section Ai.

The central questions concerned the structure and construction of the three covers, the scope and temporal operation of section Aii, and whether section Ai extended beyond operational interference and loss of time to market losses.

1. Disposition. The appeal was dismissed except on the construction of section Aii’s six-month period, on which it was allowed. Rix LJ gave the leading judgment. Mummery LJ agreed, and Ward LJ agreed subject to tentative observations on whether the attacks constituted acts of war or armed conflict.

2. Section Aii limit. The US$5 million annual aggregate limit applied across the fleet. Section Aii insured an ascertained net loss concerning future cruises and contained no reference to individual vessels. Its fleet premium, the expression “in the annual aggregate and in all”, and the practical need to account for transferred business across vessels outweighed the general term that each vessel was a separate insurance.

3. Six-month period. Section Aii covered anticipated income on any future cruise in the current Cruise Atlas. The six-month provision therefore prescribed the period during which the event’s impact on bookings was to be identified and measured. It did not restrict the relevant cruises to those departing within six months.

4. Concurrent causes. The exclusion for market loss except where directly resulting from an insured event did not defeat section Aii cover merely because the underlying terrorist attacks and the government warnings concurrently caused the loss. Terrorist activity underlying a qualifying warning was not an excluded peril. It was a necessary premise of the warning-based cover. This conclusion was financially moot because the insurers accepted liability up to the fleet limit.

5. Sections Ai and B. Section Ai concerned operational interference with a particular vessel and resulting loss of time. Its incorporation of chapter 16 of the Norwegian Marine Insurance Plan, per diem insured sums and time-based deductibles were inconsistent with a claim measured by passenger cancellations. Commercial rescheduling in response to reduced demand was not “interference” with a scheduled itinerary. Market loss belonged under section Aii. Section B was linked to section Ai and could not support the parasitic cruise-credit claim without an insured cancellation or interruption under that cover.

6. Alternative claim and rectification. The original per diem claim had not formally been abandoned, although it could not succeed on the court’s construction. Rectification would also have been unavailable had the policy created vessel-specific limits: agreement on a single premium did not prove an antecedent agreement on a single limit.

1. Court of Appeal (Civil Division): In [2004] EWCA Civ 769, the court allowed the appeal on the construction of section Aii’s six-month measurement period but otherwise dismissed it, with costs.
2. Queen’s Bench Division, Commercial Court: Tomlinson J dismissed the claims under sections Ai and B, save for a separately settled mechanical-breakdown claim, and held that section Aii provided a maximum recovery of US$5 million across the fleet.