Thor Navigation Inc. v Ingosstrakh Insurance Company Ltd. & Anor

A marine insurance policy is valued only where it specifies the parties’ agreed value of the subject matter. The words “sum insured”, used without wording of valuation, ordinarily state the insurer’s maximum liability and do not themselves create a valued policy. That conclusion is not displaced by market practice, incorporated Institute clauses, or the commercial usefulness of valued cover where the policy’s express language points the other way. Rectification requires convincing evidence that the written policy fails to record the parties’ true agreement. Unilateral rectification requires actual knowledge of the mistake, or equivalent unconscionable conduct. For hull-and-machinery cover under an unvalued policy, the insurable value may be the vessel’s market value at the time and place of loss where the policy excludes the wider matters listed in the statutory definition.

Thor Navigation Inc., owner of the vessel THOR II, claimed under two hull-and-machinery fleet policies issued by Ingosstrakh Insurance Company Ltd. and Schwarzmeer und Ostsee Versicherungs-Aktiengesellschaft. The vessel suffered serious engine damage and was later sold for scrap. The court was asked to determine preliminary issues concerning whether the policies were valued or unvalued, whether the insurers were estopped from relying on an unvalued construction, whether rectification was available, and, if the policies were unvalued, the proper measure of indemnity.

The parties agreed the vessel’s repaired value for constructive-total-loss purposes. The remaining central questions were the construction of “sum insured”, the requirements for rectification and estoppel, and the statutory measure of insurable value.

1. Construction. The policies were unvalued. Under sections 27 and 28 of the Marine Insurance Act 1906, a valued policy must specify the agreed value. A stated “sum insured”, without more, ordinarily identifies the ceiling of recovery rather than the insurable value. The court followed the general principles stated in Kyzuna Investments Ltd v Ocean Marine Mutual Insurance Association (Europe) [2000] 1 Lloyd’s 505, which applied generally to marine insurance, and rejected distinctions based on the vessel being a commercial hull rather than a yacht.
2. The references in the Institute Time Clauses—Hulls to “insured value” did not make the policies valued. The clauses were subject to English law and were drafted against a statutory scheme that accommodates both valued and unvalued policies. Market practice, commercial utility, and the incorporation of the clauses could not contradict the express policy wording. Nor could a term be implied which contradicted that wording.
3. Rectification. Owners’ brokers intended valued cover, but the insurers intended unvalued cover. The claim for common mistake therefore failed because there was no continuing common intention with outward expression of accord. Unilateral rectification also failed. The insurers did not have actual knowledge of the mistake, did not wilfully shut their eyes to it, and had not engaged in unconscionable conduct of the kind considered in Commissioner for the New Towns v Cooper (Great Britain) Ltd [1995] Ch. 259.
4. Estoppel. Estoppel by convention failed because the insurers did not share or acquiesce in the mistaken assumption and did not conduct themselves on that basis. Estoppel by representation failed because the insurers had made no clear and unequivocal representation that “sum insured” meant an agreed value.
5. Insurable value. Applying the reasoning in The Captain Panagos DP [1985] 1 Lloyd’s 625, sections 16(1) and 68 of the Marine Insurance Act 1906 did not require valuation by reference to the wider statutory list where the cover was expressly confined to hull and machinery. The appropriate insurable value was the agreed market value of the vessel at the time and place of loss, namely US$800,000.

The preliminary issues were determined accordingly. The claim for rectification and the claim based on estoppel were rejected.

This was a first-instance trial of preliminary issues ordered at a case management conference. No appellate history is stated in the judgment.