Insurance Law

• Author: LEE KIAT SENG LLB (NUS), LLM (Lond), Advocate & Solicitor (Singapore)
• Citation: (2000) 1 SAL Ann Rev 224
• Date: 01 December 2000
• Published date: 01 December 2000

Introduction

The Singapore Law Reports for 2000 contain two cases on insurance law which are of general interest. By the nature of marine insurance, the cases revolved around the construction of clauses in standard term contracts.

Scope of cover - “As Owner of the Vessel”

The assured, Pan United Shipyard Pte Ltd, are in the business of ship building and repairs. The assured entered into a contract to convert a vessel, the “Ikopa”, from a bulk carrier to a clean-product tanker. The contract provided that the title and risk in the vessel vested in the assured until delivery of the vessel took place. The assured took out a Collective Policy of Insurance, which included, inter alia, the incorporation of the Institute Time Clauses for Builders” Risks. The policy covered “hull and machinery, equipment, outfits and everything connected therewith in respect of a bulk carrier IKOPA to be converted to a clean product tanker.”

While conversion works were carried out from early 1992 to early 1993, a yacht was undergoing works in a shipyard next to the assured”s yard. In June 1995, the owners of the yacht made a claim against the assured for negligence, in the course of the work carried out on the “Ikopa”, which caused damage to their yacht.

The claim under the policy was rejected on two grounds: firstly, that the claim did not fall within the scope of the policy; and secondly, the claim was excluded by the exclusion clause in the policy. The assured then conducted their own defence with the suit being settled and the claim dismissed but with no order as to costs. The assured subsequently brought a suit against the insurers for a declaration that they were entitled, under the policy, to an indemnity for their legal costs.

The relevant section in the policy, cl 19.1 provides:

“The Underwriters agree to indemnify the Assured for any sum or sums paid by the Assured to any other person or persons by reason of the Assured being legally liable, as Owner of the Vessel, for any claim, demand, damages and/or expenses, where such liability is in consequence of any of the following matters or things and arises from an accident or occurrence during the period of this insurance.”

Clause 10.1 provides:

“No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence (including claims under clauses… 19 …) exceeds - … in which case this sum shall be deducted.”

(The exclusion sum is stipulated by the schedule as being $50,000.)

In the trial court, the judge held that cl 19.1 limited indemnity in relation to any liability qua owner of the vessel. Since the negligence suit in question was brought in relation to the assured”s negligence as ship repairers and had nothing to do with them being owners of the vessel, the claim would fall outside the scope of the insurance cover offered by the policy. In any event, the trial judge held that even if the insurers were liable to indemnify the assured, the deduction of cl 10.1 would apply.

The assured then appealed to the Court of Appeal where the main point of contention was the scope of cl 19.1. The decision is reported as Pan-United Shipyard Pte Ltd v India International Insurance Pte Ltd[2000] 4 SLR 303.

On appeal, the insurers adopted the same arguments as they took in the lower court - the character of the assured was central in establishing if the liability incurred was within the scope of the cover. In order to be within the cover, it had to be shown that the assured had incurred such liability in relation to his role as “owner” of the vessel. This was “an essential...