Involnert Management Inc v Aprilgrange Ltd & Ors

In yacht insurance, the agreed insured value will generally reflect estimated market value, but a prudent underwriter may accept the purchase price of a relatively new yacht where no better valuation is available. A professional valuation, informed market advice, or a substantially lower asking price is material where it creates a significant discrepancy with the proposed insured value. Materiality is a question of fact. A misrepresentation claim asks whether the insurer would have contracted without the representation, rather than what it would have done if told the truth. A subjectivity requiring a satisfactory proposal form is fulfilled when the underwriter accepts the form as satisfactory. Contractual requirements for a sworn proof of loss and suit may bar recovery under one section of a policy, while separate increased-value cover remains available where its wording creates a separate insurance.

The claimant’s yacht was insured under a lineslip for an agreed value of €13 million. After the yacht became a constructive total loss, the insurers relied on non-disclosure, misrepresentation, non-compliance with policy requirements, and failure to give timely notice of abandonment. The claimant also claimed against AIS Insurance Services Ltd, the producing broker, and OAMPS Special Risks Ltd, the placing sub-broker.

The central issues were whether information indicating a substantially lower market value had to be disclosed; whether the proposal form contained a material and inducing misrepresentation; whether failures to provide a sworn proof of loss and documents barred suit; whether notice of abandonment was necessary and timely; and whether either broker was liable in contract or tort.

1. Non-disclosure. Under sections 18(1), 18(2) and 18(4) of the Marine Insurance Act 1906, materiality was a question of fact assessed in the light of the evidence. The MTC valuation, the manager’s March 2011 market advice, and the decision to market the yacht at €8 million were material circumstances. They would have affected a prudent underwriter’s assessment of insuring the yacht for €13 million. The insurers proved inducement and were entitled to avoid the policy. They had not waived that right because, when the Defence was served, they lacked sufficient knowledge and had reserved their rights.
2. Misrepresentation. The words “hull market value” objectively represented that the manager believed the yacht’s market value to be €13 million. The representation was false and material. However, the insurers failed to prove inducement. The relevant counterfactual under section 20 of the Act was whether they would have accepted the proposal form if the representation had not been made. They probably would have done so.
3. Policy conditions. “Subject to satisfactory proposal form” meant a form which the underwriter accepted as satisfactory. The scratching of the form fulfilled the subjectivity. The claimant’s failure to provide a sworn proof of loss within 90 days engaged the “Time for Suit” clause and barred recovery under Section A. The requests for documents did not establish non-compliance because no time and place for production had been designated.
4. The R12 Clauses were substituted by the IV Clauses for the increased-value cover in Section B. The contractual bar to suit therefore did not apply to Section B. The claim-settlement provisions did not make recovery under Section B dependent on a successful claim under Section A.
5. Abandonment. Notice was required for the Section A claim and was given too late. Section 62(7) did not excuse notice for Section A, since the insurers had to decide whether to accept the abandonment. It was unnecessary for Section B because the IV Clauses waived the insurers’ interest in wreck proceeds and the two sections constituted separate and severable contracts.
6. Brokers. AIS owed concurrent contractual and tortious duties and was negligent in adding €13 million as the market value without obtaining the manager’s confirmation. Proper performance would probably have produced valid €8 million cover, including €2 million under Section B. OAMPS owed no direct duty of care to the claimant and was not negligent.
7. The claims against the insurers and OAMPS were dismissed. AIS was ordered to pay €2 million damages.