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Court of Appeal construes important Typhoon Warranty in marine reinsurance contract

Judgment was handed down today in the case of Amlin Corporate Member Ltd & Ors v Oriental Assurance Company [2014] EWCA Civ 1135 in which the Court of Appeal gave consideration to the proper construction of a highly important “Typhoon Warranty” clause. Such clauses are in widespread use in marine insurance and reinsurance contracts throughout the Far East and the case has far reaching implications for shipping in those areas.

The Defendant was a Philippines’ insurance company that insured a vessel, the MV Princess of the Stars. The Claimants were members of a London syndicate with which the Defendant had reinsured the risk. On 21 June 2008, the vessel was travelling from Manila to Cebu when she became caught in the eye of Typhoon Frank and was lost.

At the same time that the Defendant was facing multiple cargo claims brought in the Philippines by those who had lost goods onboard the vessel, the Claimant Reinsurers brought proceedings in the English Court for a declaration that the policy had been avoided for failure to comply with the Typhoon Warranty. The Court of Appeal upheld the decision of Field J that the warranty had been breached and that the Reinsurers were entitled to the declaration sought.

The case causes concern not only because of the strict interpretation given to the Typhoon Warranty, which may not reflect how it would be understood by mariners in the Philippines, but also because of the fact that in an earlier decision, the Court of Appeal permitted Reinsurers to continue with proceedings in this jurisdiction when proceedings in the Philippines are ongoing. While this decision may have a bearing on the approach taken in the Philippines hereafter, the possibility of inconsistent verdicts remains very real.

Roger ter Haar KC and Caroline McColgan represented the Defendant at first instance and in the Court of Appeal.

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