The Court of Appeal in Valiant Insurance Co v (1) Sealion Shipping Ltd (2) Toisa Horizon Inc [2012] EWCA Civ 1625 has affirmed the High Court’s first instance decision that the insureds (the Respondents) were entitled to an indemnity under a loss of hire marine insurance policy issued by Valiant, the Appellant. The policy entitled the insureds to $70,000 per day, plus interest, for a maximum of thirty days in excess of twenty-one days.

Following a breakdown of its port motor during a long-term charterparty (the first occurrence), the insured vessel commenced a period of off-hire lasting eighty-two days. While the two motors on the port and starboard sides of the vessel were removed for repairs, the Respondents undertook maintenance work on an unused cooler which could not be easily accessed with the motors in place. During this maintenance work, a hydraulics failure occurred (the Second Occurrence), requiring the dry-docking of the vessel and further repairs. The Respondents used the occasion of the vessel’s dry-docking to undertake various works already scheduled for later that year. The starboard motor broke down, requiring further repairs (the third occurrence) before the vessel could be restored to the charterers.

Valiant argued that the Second Occurrence had broken the chain of causation and the indemnity payable should therefore be reduced accordingly. Lord Justice Gross in the Court of Appeal said the question was fact-sensitive, and that the reasonableness of undertaking the work which led to the Second Occurrence and the works’ close relationship to the Respondents’ efforts to mitigate, told strongly against any suggestion that the Second Occurrence broke the chain of causation.

He rejected Valiant’s submission that separate excess periods of twenty-one days should be applied to each occurrence, noting that the policy wording did not permit or oblige him to do so.

Valiant submitted that no loss of hire had been suffered by the Respondents in respect of the Second Occurrence as they had undertaken their own work (thus saving time and earning capacity later), and that any decision in favour of the Respondents conferred a windfall. Gross LJ disagreed and said for this point to succeed, he would have to read into the policy a requirement for the Respondents to give credit for time saved later. He said there was no warrant for reading any such term into the policy.

To view the judgment in full, click here.