Clothing Management Technology Ltd v Beazley Solutions Ltd (t/a Beazley Marine UK)

Constructive total loss may arise where insured goods remain physically in existence but recovery within a reasonable time has become unlikely. The assessment is objective and must reflect the commercial life of the goods and the surrounding circumstances. Section 60(2) of the Marine Insurance Act 1906 supplements, rather than merely illustrates, section 60(1); abandonment of hope of recovery is not an additional requirement under section 60(2). Notice of abandonment is unnecessary where the insurer has no possibility of benefit from receiving it. A claims-notification clause requiring immediate notice and notice within seven working days must be construed together. “Invoice Value” may, depending on the policy wording and commercial context, mean the assured’s retail selling price, making the policy a valued policy under section 27.

The claimant, a British clothing manufacturer, insured fabric and garments stored at a Moroccan supplier’s factory. After the factory owners disappeared, workers withheld production and retained the goods while demanding payment of unpaid wages. The claimant recovered some goods but, following a deterioration in relations, concluded that the remaining goods were unlikely to be recovered within a commercially reasonable time.

The insurers denied liability on several grounds, including absence of an actual or constructive total loss, failure to give timely notice, exclusions concerning theft, labour disturbances and detention, breach of the duty to minimise loss, lapse of cover under a storage questionnaire condition, and valuation. The central issues were whether the claimant suffered a constructive total loss and what “Invoice Value” meant under the policy.

1. Constructive total loss. The claim succeeded on the basis of a constructive total loss. Although the goods had not been destroyed, from about 5 November 2008 it was unlikely that the claimant could recover possession within a reasonable time. The reasonable period was relatively short because the goods were fashion garments with a limited commercial life. The test was satisfied under section 60(2) of the Marine Insurance Act 1906.
2. Section 60(2) supplements section 60(1). It does not require the assured to establish abandonment of hope of recovery in addition to showing that recovery was unlikely. The claimant’s continuing efforts to monitor events, obtain legal advice and preserve the insurance did not prevent a constructive total loss under section 60(2).
3. Notice of abandonment. No notice of abandonment had been given, but section 62(7) applied. The insurers knew the relevant circumstances, had the opportunity to intervene and had no realistic prospect of obtaining a benefit from formal notice. The purpose of notice, including enabling underwriters to protect salvage and guard against market fluctuation, was not engaged on these facts.
4. Other liability defences. The notification requirement did not defeat the claim. Notice given on 8 October was sufficient in the fluid circumstances, and the claimant had not known before 29 September of an event likely to give rise to a claim. The insurers failed to prove theft, forcible seizure, riot or civil commotion. The claimant’s conduct did not breach section 78(4) or the policy’s duty to minimise loss, since its decisions were reasonable and informed at the time. Cover had not lapsed: any loss occurred before the storage-questionnaire deadline, and there had in any event been a waiver.
5. Valuation. “Invoice Value” meant the retail price which the claimant expected its customers to pay. The policy was therefore a valued policy under section 27 of the Marine Insurance Act 1906, and detailed proof of loss was unnecessary in principle. Goods made speculatively for Debenhams lacked an agreed invoice value and required separate consideration.

The claim succeeded and the defences failed.