Elafonissos Fishing and Shipping Company v Aigaion Insurance Company SA

Promissory warranties in marine insurance policies are construed narrowly because breach may discharge the insurer regardless of causation. A warranty that a vessel is laid up in a named port does not, without clear words, incorporate alleged port regulations or operational requirements. The assured must prove the insured loss, the reasonableness of repair costs and any settlement said to be recoverable under the policy. Documentary and hearsay evidence may receive limited weight but is not thereby excluded. A jurisdiction-clause counterclaim fails where the insurer cannot prove resulting loss.

The claimant, owner of the fishing vessel AGIOS SPYRIDON, claimed indemnity under a marine policy for cyclone damage sustained in Mahajanga, Madagascar. The insurer disputed causation, quantum and a salvage payment, relied on an alleged breach of the lay-up warranty, and counterclaimed for breach of the policy’s exclusive English jurisdiction clause after being joined to related proceedings in Greece.

The court determined the insured damage and repair costs, the evidential basis for the salvage claim, the construction and alleged breach of the warranty, and whether loss had been proved on the counterclaim.

1. Insured damage and repairs. The claimant proved on the balance of probabilities that the vessel’s hull, rudder, tailshaft and propeller damage resulted from contact with the quayside during cyclone Bondo and constituted damage caused by insured perils. The repair figures were reasonable and the relevant sums had been paid or incurred. The court treated the adjuster’s report as opinion and evidence, not as conclusive proof: The Zeus [1993] 2 Ll. Rep. 497.
2. Salvage claim. A salvage claim could in principle be recoverable under the policy or the sue-and-labour clause. The claimant nevertheless had to prove the alleged agreement and payment or liability. The unparticularised witness statement, statement of account and surrounding circumstances did not establish the asserted settlement. The salvage claim therefore failed.
3. Warranty. The pleaded reference to port regulations meant written regulations, and could not be expanded into uncertain oral requirements. The defendant failed factually to prove the alleged crew and engine requirements or the vessel’s breach. Independently, the express warranty required only that the vessel be laid up in Mahajanga. Because promissory warranties have potentially draconian consequences, they are construed narrowly. No further requirement to comply with port regulations could be implied. The court relied on Hussain v Brown [1996] 1 Ll. Rep. 627 at 630 and The “Resolute” [2009] 1 Ll. Rep. 225 at 229.
4. Reasonableness of settlement. The court observed that a settlement of up to €80,000 would not have been reasonable, having regard to the evidence of Greek maritime law and likely awards. The issue did not strictly arise because the underlying agreement had not been proved. The applicable test was referred to as The Krapanj [1999] 1 Ll.Rep. 688 at 692.
5. Counterclaim. The claimant may have breached the exclusive jurisdiction clause by joining the insurer to the Piraeus proceedings, but the insurer proved neither the alleged legal costs nor any other loss. The counterclaim was dismissed.
6. Disposition. The claimant succeeded on the insurance claim except for the salvage claim. The counterclaim was dismissed.