Valiant Insurance Company v Sealion Shipping Ltd & Toisa Horizon Inc

A loss-of-hire policy responds according to its wording. Once an initial machinery breakdown has prevented the vessel from earning hire beyond the contractual excess, later excesses are not automatically aggregated merely because further incidents contribute to the continuing loss. A later failure will not necessarily break causation where it results from work reasonably and closely related to mitigation of the initial breakdown. Causation remains fact-sensitive, and both incidents may remain operative causes. Where the policy is framed by prevention of earning hire, it addresses the period of prevention rather than an ultimate-net-loss calculation. Without express wording, the insured need not credit time saved by carrying out owners’ work concurrently with casualty repairs.

The respondents, owners and managers of the vessel TOISA PISCES, claimed an indemnity under a loss-of-hire marine insurance policy after three machinery-related incidents caused a prolonged period off hire. Blair J awarded the full policy indemnity of US$2,100,000 plus interest.

The insurers appealed on aggregation, causation and the operation of the policy excess clause. They argued that the later hydraulic failure broke the causal chain and that separate excess periods applied to each occurrence. They also argued, in relation to the second occurrence, that concurrent intermediate survey and owners’ work meant that no insured loss of hire had been suffered. Permission was refused on a further backburner ground.

Gross LJ gave the leading judgment. Tomlinson LJ and Pill LJ agreed, and the appeal was unanimously dismissed.

1. Causation. The port motor breakdown remained an operative cause of the entire period of delay. The hydraulic failure could not properly be characterised as mitigation itself, but the work leading to it was closely and reasonably related to the owners’ efforts to mitigate. It was reasonable to use the opportunity presented by removal of the motors to undertake maintenance work. The hydraulic failure was therefore an incidental vicissitude and not a novus actus interveniens breaking the chain of causation. The question whether causation has been broken is fact-sensitive: see Borealis v Geogas Trading [2010] EWHC 2789 (Comm); [2011] Lloyd’s Rep. 482. From the second occurrence, both the port motor breakdown and the hydraulic failure were operative causes of the loss.
2. Construction and excess. Under the loss-of-hire wording, the first machinery breakdown had prevented the vessel from earning hire for more than the 21-day machinery excess. The owners were therefore entitled to the indemnity, subject to the policy limits. The wording neither permitted nor required the excesses applicable to the second and third occurrences to be added. Any question of multiple excesses would arise from the facts or causation, rather than construction of the policy.
3. Concurrent owners’ work. Ground 4 was academic because the claim succeeded on the first occurrence, but it would also have failed. The policy addressed whether the vessel was prevented from earning hire during the relevant period. It contained no requirement to calculate ultimate net loss or to credit time saved by undertaking an intermediate general survey and owners’ work concurrently with casualty repairs. There was no basis for implying such a term. The distinction from The “Capricorn” [1995] 1 Lloyd’s Rep. 622 was that the vessel there would have been laid up anyway. The approach was supported by Ruabon Steamship Company v London Assurance [1900] AC 6, The “Ferdinand Retzlaff” [1972] 2 Lloyd’s Rep. 120 and The “Oinoussian Friendship” [1987] 1 Lloyd’s Rep. 258.

• Court of Appeal (Civil Division): In [2012] EWCA Civ 1625, the appeal was dismissed. The full indemnity awarded at first instance stood.
• Blair J: On 20 January 2012, awarded the owners and managers US$2,100,000 plus interest under the loss-of-hire policy.