Amlin Corporate Member Ltd & Ors v Oriental Assurance Corp

A continuing warranty making insurance cover void upon breach must be construed by its ordinary and natural meaning, informed by the contractual background and the warranty’s commercial purpose. Where the language is unambiguous, it must be applied even if the result appears commercially severe. A warranty directed to the danger of typhoons was not limited by maritime guidelines unless the contract clearly incorporated them. A vessel breached the warranty by sailing while a public storm warning existed at the port. It also breached the warranty where its intended route, including a route subject to alteration if conditions worsened, might be within a possible or forecast path of the typhoon.

The claimants, reinsurers of Oriental Assurance Corporation, sought a declaration that the Princess of the Stars had breached a typhoon warranty when it departed Manila for Cebu before capsizing during Typhoon Frank. The warranty provided that a vessel should not sail from a sheltered port when a typhoon or storm warning existed there, or when its destination or intended route might be within the possible path of the typhoon. The principal issues were the meaning of the two limbs, the relevance of Philippine Coast Guard guidelines, and whether the usual or an alternative route was intended.

1. The court preferred the claimants’ construction of limb 1. The public storm warning at Manila was a typhoon or storm warning within the ordinary meaning of the warranty. The Philippine Coast Guard Circular formed part of the background but was not the contractual touchstone. The warranty’s object was safety in circumstances where typhoons could change speed and direction unpredictably.
2. The warranty was also breached under limb 2. The evidence established that the master intended to follow the usual route, subject only to changing course if the weather became sufficiently severe. That remained the intended route for the purposes of the warranty. Both the usual and alternative routes were within the possible path and the Danger Sector of the typhoon.
3. The court rejected the argument that limb 2 was confined to the officially predicted path. The wording referred to a possible path, and the announcement contained both West Northwest and Northwest forecasts. On either forecast, the intended route might be within the relevant path.
4. Even if the warranty were construed in the context of the Circular as Oriental contended, it would still have been breached because relevant storm warnings had been hoisted or expected on the origin, route or destination, and both routes were within the Danger Sector.
5. The court declined to decide the further alternative question whether sailing was imprudent or unreasonable, as that issue was unnecessary and lacked sufficient expert evidence on local maritime practice. The reinsurance contract was avoided and the claimants were entitled to a declaration, with the precise wording to be settled after further submissions.

This was a first-instance decision in the Commercial Court. The judgment records that an earlier case-management stay decision was upheld by the Court of Appeal in [2012] EWCA Civ 1341, but the merits decision itself was determined at first instance.