Oceanus Capital SARL v Lloyd's Insurance Company S.A.

Under the mortgagees’ interest wording considered, the insured loss was impairment of the mortgagees’ security interest, subject to the contractual limits. Cover depended on a composite sequence: damage to the vessel, prima facie cover under an existing owners’ policy, and non-payment because of an identified insured peril. Proximate causation applied to the constituent links, rather than requiring each component independently to cause the ultimate loss.

Privity required knowledge and concurrence or consent. Fraud could prevent consent from having the legal consequences necessary to establish privity where the deception was sufficiently closely connected to its subject matter. Deception about equivalent alternative insurance satisfied that requirement in the circumstances. A composite loss remained fortuitous where an essential component, such as the casualty, occurred by chance.

Oceanus Capital SARL lent money to Lyra Mare Limited, the owner of the vessel Vyssos. The loan was secured by a mortgage over the vessel and an assignment of its insurance proceeds. Oceanus also obtained mortgagees’ interest insurance from Lloyd's Insurance Company S.A.

The owners’ war risks policy prohibited trading in Ukrainian waters without the underwriters’ agreement. Oceanus knew that a proposed voyage would breach that warranty. It agreed that the vessel could proceed after receiving an apparently genuine cover note for separate additional war risks insurance. The cover note was forged. The vessel struck a mine in Ukrainian waters and became a constructive total loss. The owners’ war risks underwriters declined payment because of the trading warranty breach.

Sue Prevezer KC, sitting as a Deputy High Court Judge in the Commercial Court, rejected the mortgagees’ insurers’ defences and awarded Oceanus the agreed sum of US$3.6 million plus interest: [2025] EWHC 3293 (Comm). The insurers appealed with her permission. The issues concerned the insured loss and proximate causation, Oceanus’ privity to the warranty breach, and whether the loss was fortuitous.

Appeal dismissed. Popplewell LJ gave the judgment, with which Males and Newey LJJ agreed.

1. The insured interest, insured loss and insured perils were distinct concepts. The nature of the interest insured under mortgagees’ interest insurance depended on the particular policy wording. Here, the express indemnity provisions defined the insured loss as loss to Oceanus’ security interest in the vessel, after accounting for other recoverable security. It was capped by the unrecoverable claim under the relevant owners’ policy and the sum insured. The amount unavailable under the owners’ policy was a limit on recovery, rather than the insured loss itself (paras 33–44, 51).
2. The policy insured a composite sequence of contingencies. These comprised physical loss or damage, prima facie cover under an owners’ policy, and non-payment under that policy because of an identified insured peril. Proximate causation applied to the relevant constituent links. It was unnecessary for each component, considered independently, to be the proximate cause of the ultimate insured loss. That analysis accorded with FCA v Arch (paras 46–50).
3. Prima facie cover required an existing insurance contract. A forged document purporting to evidence insurance did not satisfy that requirement. Objectively, the actual war risks policy provided the relevant prima facie cover, and its non-response resulted from the insured trading warranty breach. Oceanus’ mistaken belief in additional insurance did not alter that position. Independently, the deception did not cause the loss: without it, the vessel would still have undertaken the voyage despite Oceanus’ objection (paras 54–60).
4. Privity bore the established meaning used in section 39(5) of the Marine Insurance Act 1906. It required knowledge and concurrence or consent. Fraud did not erase consent as a fact, but could prevent its legal consequences from establishing privity. The deception had to be sufficiently closely connected to the subject matter of privity. Here, the forged cover note induced the belief that equivalent alternative insurance existed. Ordinarily, that would have made the breached war risks policy irrelevant to a mortgagees’ insurance claim. The deception therefore affected the operation of the mortgagees’ policy and defeated the consent element of privity (paras 62–63, 75–83).
5. The court left undecided whether privity required subjective appreciation that the particular owners’ policy was potentially relevant to a mortgagees’ claim, and the associated burden of proof. It also left the separate conditional-consent argument unresolved (paras 69–75, 84).
6. The mine strike was fortuitous and caused the insured loss. Where insured perils had to combine to produce that loss, a fortuitous essential component rendered their combination fortuitous. Independently, the insurers could not treat Oceanus’ fraud-induced consent as an untainted voluntary choice. The breadth of any general restriction on insuring known certainties remained open. The judgment awarding US$3.6 million plus interest stood (paras 89–95).

• Court of Appeal (Civil Division): [2026] EWCA Civ 863 . Unanimously dismissed the insurers’ appeal and upheld the judgment for Oceanus.
• High Court, Commercial Court: [2025] EWHC 3293 (Comm) . Sue Prevezer KC, sitting as a Deputy High Court Judge, rejected the insurers’ three defences and awarded Oceanus US$3.6 million plus interest. She granted permission to appeal.