PT Buana Samudra Pratama v Maritime Mutual Insurance Association (NZ) Ltd

A marine insurance follow clause requiring following underwriters to follow the lead underwriter’s decisions, surveys and settlements regarding claims within the policy may extend to liability as well as quantum. It may include a decision to reject an alleged breach of warranty occurring before settlement. Clearer words are required to restrict the clause to quantum alone.

Whether a tug has undertaken towage is fact-sensitive. Agreement to provide towage is insufficient, and physical connection with the tow is not always necessary. Where material facts remain disputed, summary judgment is inappropriate. A fraudulent device may provide an independent defence, and its effect should generally be determined at trial where the relevant facts and legal principles remain developing.

The claimant sought summary judgment for its share of a marine insurance claim after the lead underwriter, Axa, and another following underwriter paid their shares. The defendant disputed liability, relying on an alleged breach of a towage warranty and alleged fraudulent misrepresentations made after Axa’s settlement.

The policy contained a clause requiring the defendant to follow Axa in decisions, surveys and settlements regarding claims within the policy, subject to stated exceptions. The central issues were the scope of that clause, whether the towage warranty had been breached, whether held-covered protection applied, and whether the alleged fraudulent device defence could be determined summarily.

1. Follow clause. The clause required the defendant to follow Axa’s decisions, surveys and settlements concerning claims within the policy. Its wording referred to all settlements and to the whole claims process, including liability and quantum. The phrase “regarding claims within the terms of the policy” encompassed decisions on whether a claim was within the policy. A restriction to quantum would have required clearer language. The clause also applied where the alleged breach of warranty occurred before Axa’s decision or settlement.
2. Warranty. The Additional Perils Clause did not displace the towage warranty because it made the additional cover subject to the other policy terms. The warranty did not require the tanker to be in distress before it could be engaged; towage or assistance to a vessel in distress was an exception. Agreement to provide towage did not itself amount to undertaking towage. Nor was towage necessarily commenced only when the tug was made fast. Manoeuvring to approach and connect with a disabled vessel might form part of the towage service, while merely setting off might not. The evidence was insufficient to resolve when the service began.
3. Held covered. Notice concerned facts amounting to breach of warranty, and the assured’s lack of appreciation that those facts constituted a breach was irrelevant. Whether notice was given immediately after receipt of advices depended partly on when the breach occurred and therefore required trial evidence.
4. Fraudulent device. The defendant had a real, rather than fanciful, prospect of establishing that the claimant used a fraudulent device and that the claim was forfeited. The issue involved an alleged fraudulent device before litigation, unlike the circumstances considered in The Star Sea. The competing arguments should not be determined on assumed facts before trial.
5. The construction issue was decided for the claimant, but summary judgment was refused because the fraudulent misrepresentation defence had to be determined at trial.

First-instance decision in the Commercial Court. No appellate history was stated in the judgment.