ABS Company Ltd v Pantaenius UK Ltd & Ors

Under a marine insurance policy covering reasonable repair or replacement costs, recoverability is assessed objectively in the factual and commercial context known when the policy was agreed. The insured may recover costs reasonably necessary to restore the vessel to its pre-accident condition and enable it to be used as before. Where an insurer alleges that post-accident use caused additional damage, the insurer bears the evidential burden of proving both the additional damage and its material effect on repair costs. For specialist, safety-critical equipment, repair by the manufacturer may be reasonable where there is no reliable evidence of a competent local alternative. The reasonableness of repairs is objective and is not defeated by the insured’s motives.

The claimant owned a high-performance motor yacht insured under a policy underwritten by the second to fourth defendants and marketed by the first defendant. The yacht’s starboard engine initially shut down after contact with an unidentified object in the Bosporus Strait. The yacht then made a brief grounding while operating on one engine.

The claimant claimed the reasonable costs of repairing the yacht. The defendants disputed whether all the damage resulted from the incident and contended that repairs should have been undertaken more cheaply in Turkey. The central issues were causation, the reasonableness of replacing the propellers, the reasonableness of returning specialist drive units to their manufacturer in Italy, and the recoverability of ancillary repair costs.

1. Claim substantially succeeded. The claimant was entitled to recover the reasonable costs of repairing damage caused by the grounding incident, subject to reductions for excessive anti-fouling and tenting costs.
2. The policy was construed in its documentary, factual and commercial context, applying Arnold v Britton [2015] AC 1619. The relevant question was objectively whether the repairs were reasonable and necessary to restore the yacht as nearly as reasonably possible to its pre-accident condition, including enabling it to be used in the same way as before. This was assessed in light of the yacht’s high-value, high-performance design.
3. The defendants bore the evidential burden of proving any positive case that damage occurred after the incident. Speculation that continued use might have worsened the drive units was insufficient. Expert evidence was required to establish both additional damage and any consequential increase in repair costs.
4. The whole of the damage to both drive units was treated as caused by the incident. Given the specialist and safety-critical nature of the equipment, removal, disassembly and repair by the manufacturer was reasonable. There was no direct evidence that a Turkish repairer was ready, willing and able to undertake the necessary work to the required standard.
5. Replacement of both surface-piercing propellers, rather than local repair, was reasonable. The evidence showed that failed weld repairs could cause catastrophic damage, and the defendants’ unsupported personal rule concerning repairability was rejected. The claimant’s motives did not affect objective reasonableness, applying The DC Merwestone [2013] 2 Lloyd's Rep 131.
6. The court accepted the GRP repair costs, applying the general principle stated by Lord Blackburn in Aitchison v Lowe [1879] 4 AC 775. It allowed only the reasonable cost of anti-fouling the damaged areas and 50 per cent of the tenting cost.

Not stated in the judgment.