Elafonissos Fishing & Shipping v Aigaion Insurance Co SA (the "AGIOS SPYRIDON") [2012]
Commercial Court, 4 April 2012

Societe Generale v Wurttembergische Versicherung AG & Ors [2012]1

Commercial Court, 5 April 2012

The English Commercial Court has recently had to consider two cases in which insurers sought to introduce new defences to the claim very late in the day. The Agios Spyridon involved a hull and machinery policy claim arising from storm damage to a fishing vessel while at anchor in Madagascar. The policy contained a warranty to the effect that the vessel was "laid up in port of Mahanjanga", and insurers contended that the vessel was in fact not laid up in port at the time of the loss. They also alleged material non-disclosure.

The matter was due to proceed to trial on 14 May 2012, but on 7 March 2012 insurers sought to add a new defence, that compliance with the lay-up warranty required the vessel to be maintained in "hot lay-up", meaning that she was still manned, and with at least her main engine operable. This, they alleged, was the customary meaning of the lay-up warranty, and they sought to adduce expert witness evidence to that effect. They also alleged that the lay-up warranty meant that the vessel would be laid up in a seaworthy condition and in accordance with the port regulations.

The court permitted the last of these amendments, but refused permission in respect of the balance. Although the assured would have suffered no prejudice by the late amendments (that is to say, no prejudice that could not be compensated in costs), the court still had to be satisfied in considering such a late application whether the proposed amendments had any real prospect of success. This question should be scrutinised all the more where, as here, a relatively small sum was in issue. In this case, it was held that the insurers had no prospect of showing that the lay-up warranty specifically meant "hot" lay-up as distinct from "cold", or that a vessel not laid up in a seaworthy condition was thereby in breach of any alleged implied warranty. Consequently, the amendments were rejected.

The Societe Generale case arose under a policy insuring both precious and non-precious metals, and concerned a US$500m claim for loss of gold in store at the assured's site in Turkey. The insurer's defence had been based upon breach of warranty and the date when title to the gold had passed to the insured under Turkish law. However, the insurer latterly sought to amend its defence to include an allegation of misrepresentation or non-disclosure. Specifically, it was said that the insured had failed to disclose that no shipments of non-precious metals were ever intended, and that the premium had been mis-priced accordingly.

The court noted that the amendments, if granted, would "make a mockery" of the existing timetable, and said the onus was clearly on the insurer to show that they were just and necessary. However, in this case the amendments were pleaded with particularity, and had a prospect of success, which left the court to consider the reasons for lateness, and in particular whether the insurers should have considered the point earlier. Again, prejudice to the insured was also a factor. On balance, the court said it was just to allow the insurers to amend their defence, although considerable leeway would be given to the insureds in responding to the amendments.

The court in the Societe Generale case noted that there was less readiness nowadays to accept late amendments than was the case in the past. Although the balance was held to be in favour of allowing the amendments in that case, insurers should be careful not to delay in bringing forward all defences available to them. A defence asserted late in the day that could and should be considered much earlier will receive little sympathy.

Footnotes

1. [2012] EWHC 892 (Comm)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.