Talbot Underwriting Ltd. v Nausch Hogan & Murray

An insurance broker must obtain cover which clearly and indisputably meets the client’s requirements. Where a policy is framed as group cover, broad references to associated companies, joint ventures or additional assureds do not ordinarily permit the insured unilaterally to add an arm’s-length contractor outside those categories. An undisclosed principal may enforce a marine insurance contract only where the policy and circumstances do not show that the insurers were unwilling to contract with that principal. Material facts concerning the principal’s identity, role and the possible loss of subrogation rights may require disclosure. Whether non-disclosure induced avoidance generally requires evidence and cannot be resolved summarily. A repairer’s liability under its contract is not displaced merely because the contract also requires insurance. Repair-management and yard-service costs may be recoverable repair costs rather than losses proximately caused by delay.

The London insurers brought assigned claims against insurance brokers arising from the placement of builders’ all-risks insurance for the vessel Jascon 5. The policy named members of the Sea Trucks group and referred to associated companies, joint ventures, additional assureds and related interests, but did not name Sembawang, the shipyard carrying out completion and outfitting work.

After flooding damaged the vessel, Sembawang’s claim was refused on the basis that it was not an assured. The court tried preliminary issues concerning Sembawang’s status as co-assured, additional assured, undisclosed principal or trust beneficiary; non-disclosure and avoidance; the brokers’ duty; loss; and whether repair-related costs were excluded as losses caused by delay under the Marine Insurance Act 1906.

1. Co-assured and additional assured status. Sembawang was not within the policy’s reference to associated or interrelated companies or joint ventures. Those expressions indicated a familial relationship, common ownership, control or common enterprise. An arm’s-length shipbuilding or outfitting contract did not suffice. The additional-assured wording had to be read with the defined assured clause and did not give the named assureds carte blanche to add strangers to the insurance without the insurers’ agreement.
2. Undisclosed principal. The general rule that an undisclosed principal may enforce a contract made by an authorised agent applied in principle to marine insurance. However, the terms and circumstances of this policy showed that the insurers were unwilling to insure Sembawang, whose inclusion could deprive them of valuable subrogation rights. Sembawang therefore could not intervene as an undisclosed principal.
3. Trust. No trust arose because the policy contained no promise in Sembawang’s favour. CPL’s claim was for its own insured interest, not for a promise held on trust for Sembawang.
4. Non-disclosure and avoidance. If Sembawang could have intervened, its identity, role as builder and the possible impact on subrogation rights were capable of being material facts. The issues of fair presentation, waiver, materiality and inducement required investigation. The insurers had realistic prospects of establishing avoidance, but the issues were unsuitable for summary determination. The Assignment Agreement contractually waived any right to avoid from 26 July 2004; the proceedings and pleadings did not otherwise affirm the insurance.
5. Brokers’ duty and loss. There was a real prospect that the brokers had acted negligently by failing to procure a policy expressly naming Sembawang or identifying it with sufficient clarity. Sembawang could suffer loss because its contractual duty to repair damage caused by its negligence was not displaced by the insurance provisions. CPL could suffer loss through its settlement of Sembawang’s claim for failure to obtain the required insurance.
6. Delay. Under section 55(2)(b) of the Marine Insurance Act 1906, whether project-management and yard-service costs were losses proximately caused by delay was fact-sensitive. The evidence gave the insurers a realistic, and probably stronger, prospect of showing that the costs were costs of repairing the vessel rather than excluded delay losses.
7. The preliminary issues were answered accordingly. The London insurers succeeded on the central and most issues and were presently entitled to an order in their favour, subject to submissions on costs.