Supreme Court
Action No. 200 of 1994
7th April, 2000.
Shanks, J.

Mr. Dean Barrow, S.C. for the Plaintiff
Mr. Denys Barrow, S.C. for the Defendant

J U D G M E N T

Insurance - Claim against insurers of boat - Material non-disclosure when making application for insurance - Avoidance of insurance contract - Proof required to show loss of boat through "the perils of the sea".

1. This is an insurance claim arising from the capsizing of a fishing vessel, the "Sharkey Maru", on 14 November 1992 about two miles from Mauger Caye. The vessel was owned by the Plaintiff and David Mortensen. They acquired the finished 33 foot hull for about $17,000 in Chetumal in early September 1992 and transported it to Corozal where they fitted it out as a fishing vessel, in particular by constructing a wheel-house on it which stood about six feet above the gunwhale and was eight feet long. They proposed to use it for commercial shark fishing off the coast of Belize. There is no dispute about the above facts or that the vessel was insured by the Defendant insurers. Almost everything else in the case, which has been argued and presented with characteristic skill and tenacity on both sides, is disputed.

2. The insurance application was made on 16 September, 1992 and I have seen the form signed by the Plaintiff. According to him and Mr. Mortensen, when they went to Atlantic's offices in Belize City to obtain insurance, the fitting out work had not begun. However, they told me that they explained to the General Manager, Yolanda Crombie, exactly what they were going to do with the vessel including the intention to put on a wheel-house. They told me they showed her receipts for the items they had already acquired (I was shown one for the hull for about $17,000 and one for a 225 horse power engine for $10,000) and discussed with her in detail the cost of the remainder of the items needed for the fit-out, reaching a value of $60,000. They accepted that Mr. Barton had filled in the application form in the absence of Mrs. Crombie but said that they specifically raised with her whether they should circle "open cockpit" which it was agreed they should as it reflected the then existing position and, although only one engine is mentioned on the application form (mention of another is crossed out) they would be getting another smaller motor too. They were told by Mrs. Crombie that the premium would be $2,237 (which is recorded as such in Mrs. Crombie's writing on the form) and that it could be paid in three installments. She also told them that when they had completed the fit-out they should contact the Manager of Atlantic Bank in Corozal, Celso Ramirez (who, it emerged later in the trial, had originally referred them to the Defendant), and he would inspect the boat and take the first installment of the premium. The cover would then commence.

3. Mrs. Crombie's account of the interview was quite different. She denied that she had been told about the wheel-house or that she had played any part in arriving at the $60,000 valuation or that she had in any way approved the circling of "open cockpit". As far as she was concerned, cover was to take effect immediately but she nevertheless agreed that the first of three installments could be paid at a later date. The Plaintiff was reminded that he should make payment a number of times and he later asked whether he could make payment of the first installment to Mr. Ramirez. Mr. Ramirez was instructed simply to collect the money and issue a receipt on behalf of the Defendant and to take a photo of the vessel solely for identification purposes for the company's file. There was nothing said at the interview with the Plaintiff about Mr. Ramirez carrying out an inspection or cover becoming effective when the inspection had been made.

4. Mrs. Crombie also told me that shortly after 16 September, 1992 she received through her secretary a breakdown of the $60,000 valuation in the application form, in the form of a small piece of paper, which unfortunately was no longer on the file. She told me that the breakdown on the piece of paper was repeated in a fax report she undoubtedly sent to a director of the Defendant on 18 September, 1992 as follows:

This breakdown does not reflect the figures which the Plaintiff claims to have discussed with Mrs. Crombie, and in cross examination he denied ever having given a value for a boat trailer, and said he did not remember giving these figures for the motor or import duty, though he might have.

5. The insurance documents were then prepared and apparently signed by Mrs. Crombie on 30 September, 1992. The "Schedule" shows the breakdown I mentioned above. It also shows a premium of $2,550 though Mrs. Crombie was unable to explain the difference between this figure and the $2,237 shown on the application form. I also note it states that the vessel is a "PRIVATE PLEASURE VESSEL", which was clearly wrong and inconsistent with the application form. It states that the period of coverage begins on 16 September, 1992. To the Schedule is attached a document headed "PLEASURE, PASSENGER & FISHING VESSEL POLICY" which contains detailed terms and conditions but no operative insuring clause as one would expect in the main policy document, which would normally refer to the Schedule and incorporate detailed terms and conditions. It was accepted on all sides that something appeared to have gone wrong with the Defendant's documents but I was assured by Mrs. Crombie that the two documents I have described were the only documents produced by the Defendant at the time (I hope the position has now been reviewed). In any event, there is no dispute that the documents were not provided to the Plaintiff.

6. For whatever reason Mr. Ramirez came to visit the finished vessel on 26 October, 1992 at about 6:00 p.m. It is common ground that the Plaintiff gave him a cheque for $873 and he issued a receipt for this amount and that he took some polaroid photos of the vessel. As I have said Mrs. Crombie told me that Mr. Ramirez was instructed by her solely to take pictures for identification purposes and to collect the money and issue a receipt on behalf of the Defendant and she told me she had provided this receipt to him in blank a day of two before. The Plaintiff and Mr. Mortensen told me that Mr. Ramirez inspected the vessel and told them not to launch it until he had actually issued the receipt which he in fact did the following morning. Mr. Ramirez, who was called by the Defendant insurers, told me he was not instructed to inspect or report on the vessel and that he took the pictures and sent them to the Defendant purely on his initiative to be helpful. If he looked closely at the vessel this was purely out of personal interest. He had no knowledge of the insurance application.

7. He also told me that he received a call from a Ms. Palmer at the Defendant a day or two later who asked why he had sent the photos since they had not asked for any, and reluctantly she said they would be put on the file (they appear not to have remained there since the Defendant could not produce them at trial). Mrs. Crombie told me by contrast that she saw the photos (which she had requested) as soon as they were sent in and immediately realized that they showed a wheel-house which was inconsistent with the application form which talks of an "open cockpit". She decided there and then that the insurers were entitled to avoid the policy on these grounds and that she would do so. She tried to contact the Plaintiff by telephone to let him know of her intention without success.

8. The vessel was launched, according to the Plaintiff's evidence, on 27 October, 1992 and underwent rigorous sea trials, survived a storm and had been on about six fishing trips, when it capsized on 14 November, 1992. Neither the Plaintiff nor Mr. Mortensen were on board at the time and no admissible evidence at all was presented as to how this occurred, though there was some hearsay evidence that the seas were "moderately choppy". Mr. Mortensen told me he went directly to the Defendant's office to report the loss. He told me he was handed the policy documents by a secretary as he walked through the door. He looked at them and they were all in order. The Mrs. Crombie came out. He told her of the loss and she immediately snatched the policy from him. She suggested they get in touch with Mr. Niven (a marine surveyor) and take an aeroplane to have a look for the vessel. This they did at Mr. Mortensen's expense. The vessel was discovered at Mauger Caye. Mrs. Crombie strenuously denied the allegation that she had snatched back any policy and told me that when Mr. Mortensen came into the office she immediately told him that liability would be denied on the basis of material misdescription of the vessel in the application form. She denied she had suggested that he charter an aeroplane but accepted that she continued to discuss the claim thereafter.

9. There is no dispute that Mrs. Crombie later arranged for Paul Duke to recover the vessel and return it to Belize City and that it was inspected by Mr. Niven (whose report was put before the Court without objection) on behalf of the insurers on 21 November, 1992. On 20 November Mrs. Crombie had faxed the Plaintiff advising him to meet Mr. Niven as soon as possible so he could compile a report and stating: "I remind you that we are not able to consider any settlement . . . unless we have a report from Mr. Niven". She also wrote on 23 November stating among other things: "I will appreciate if you will send me a list of the various features and equipments that were added to the value of the boat. This does not mean that the amounts will be included in settlement. It will only help to assess an accurate value of the loss". Mr. Mortensen also told me that shortly after the loss he reported to Mrs. Crombie that they had heard rumours that the motors had been stolen and turned up in Belize City and asked whether they should seek to recover them and that she responded that they should not worry because it was all covered by the policy. This was denied by Mrs. Crombie.

10. In due course the claim was certainly denied and these proceedings were begun. The Plaintiff obtained something, but could not say how much, for the hull. The claim has never been itemized (it has simply been put as a total loss at $60,000) but Mr. Mortensen gave a breakdown of the amounts spent on fitting out the vessel in cross-examination which, as revised somewhat by the Plaintiff, gave a total of only $53,440. The Plaintiff never paid the balance of the premium.

11. The following issues arise:

    (1) Was there a material non-disclosure or misrepresentation in relation to the addition of the wheel-house?

    (2) Did Mrs. Crombie avoid the contract of insurance at the time Mr. Mortensen first reported the loss?

    (3) If not, did insurers lose the right to avoid by their subsequent actions?

    (4) Was the loss covered by the insurance policy?

    (5) Were the insurers entitled to rely on s. 39(5) of the Marine Insurance Act 1906 (or the common law which it codified) to avoid liability on the grounds that the loss was attributable to unseaworthiness arising from the added superstructure?

    (6) What can the Plaintiff recover if the loss was indeed covered?

12. Issue (1) It cannot be disputed that the intention of the Plaintiff to add a superstructure to the hull was a material matter which ought to have been disclosed. Unfortunately, I am faced with a direct conflict of testimony as to whether it was disclosed to Mrs. Crombie and the surrounding circumstances point in both directions. On the one hand, the application form was clearly misleading but was signed by the Plaintiff and the figures which Mrs. Crombie somehow came to report to her directors were not consistent with his having told her of the proposed superstructure. On the other hand, Mr. Dean Barrow drew attention to a number of weaknesses in her evidence which undermined her credibility and were inconsistent with her evidence on this point, notably that she made no written record of her intention to avoid the policy at the time, that she agreed an extension of time for payment of the premium for no apparent reason and that her evidence that she avoided the policy verbally when Mr. Mortensen reported the claim was totally incredible given her subsequent actions. On balance, but only just, I find that the Plaintiff has failed to satisfy the onus which lies on him to prove that he made the necessary disclosure to Mrs. Crombie at the initial meeting. I am aware that this finding leaves various factual questions which arose unanswered, but a finding the other way would equally do so. I should also say in this context that I am satisfied that Mr. Ramirez was not acting as an agent for insurers with authority to inspect and approve the vessel and agree that the insurance should be binding in respect of the vessel as adapted.

13. Issue (2) I am afraid I cannot accept Mrs. Crombie's evidence that she told Mr. Mortensen that she was avoiding the policy and that liability was denied when he came to report the loss. It is inconsistent with her actions and letters thereafter and I cannot believe that a responsible insurer would not record its position in writing. (On the other hand, I cannot accept that a responsible insurer would seek to snatch back a policy document in the way Mr. Mortensen described either, though nothing turns on this issue).

14. Issue (3) Since the Defendant insurers undoubtedly had Mr. Ramirez's photos which showed the wheel-house but did not avoid the policy and instead took all the steps I have described, it seems to me they must be taken to have affirmed the insurance contract or to be estopped from relying on the point. It would have been open to them to reserve their rights while arranging to retrieve the vessel and have it inspected but it is clear from the two faxes of 20 November and 23 November, 1992 that they did not do so. I should say in this context that I accept Mr. Mortensen's evidence that Mrs. Crombie suggested that he get hold of a plane and take Mr. Niven out to look for the vessel. They cannot therefore rely on the material non-disclosure or misdescription relating to the wheel-house.

15. Issue (4) Since the Defendant insurers' policy documents did not apparently include an insuring clause, it was impossible to know what risks were meant to be covered by this insurance. There can be no doubt that "perils of sea" must have been covered and there was a clause in the term and conditions produced which expressly extended cover inter alia to theft of the vessel or outboard motors and to loss or damage "caused by the negligence of any person whatsoever …" It is also possible (though perhaps unusual) for a marine insurance policy to cover "loss by incursion of sea-water, or by foundering at sea" (see e.g. Arnould 16th Ed. Vol. III p. 398) and, given that they were the ones who caused the difficulty, I would certainly not have made any assumption in the insurers' favour limiting the scope of the cover. However, as I have already said, the Plaintiff led no evidence at all as to the cause of the loss and it is quite clear that the policy was not intended to be an "all risks" policy (if such a thing ever exists in a marine insurance context). The statement of claim pleaded that the loss was caused by "perils of the sea". Mr. Denys Barrow drew my attention to the authority of "The Marel" [1994] 1 Lloyd's Rep. 624 which makes it quite clear that a Plaintiff alleging loss by perils of the sea must prove that such perils caused the loss. This the Plaintiff has signally failed to do (indeed from what is known-by hearsay-of the weather it seems unlikely that he could have) and he cannot therefore succeed on his pleaded claim. Mr. Dean Barrow applied to amend the statement of claim so that it would simply allege that the loss was caused "… by perils insured against". Mr. Denys Barrow opposed any such amendment on the grounds that he had conducted his case after the close of the Plaintiff's case in the knowledge that they had not presented evidence to prove the pleaded case of loss by perils of the sea and, in particular, that he had not therefore gone to the lengths he might have to seek to prove that the vessel was unseaworthy. Mr. Dean Barrow said that the whole problem had been caused by the Defendant insurers and that pleader had been put in an impossible position by the state of their policy documentation. However, the fact was that the Plaintiff had a copy of the policy documents the Defendant was relying on long ago and could have tailored his pleading accordingly (inviting the court to infer what risks were covered) and there was no doubt that Mr. Denys Barrow conducted his own case on the basis that the Plaintiff would be tied to his pleaded case. Although I am not in favour of cases being won and lost on pleading points, I do not think it would be right to allow an amendment in these circumstances and I decline leave to amend. I should say that even if I had allowed the amendment, there was still an evidential gap in that I was presented with no evidence at all as to how the vessel capsized: in those circumstances I would have been no more able to say that it was caused by perils of the sea or negligence than that it occurred deliberately or through unseaworthiness, so that the proposed amendment would not, in my view, have solved the Plaintiff's problem in any event.

16. Issue (5) As I have indicated, Mr. Denys Barrow did not attempt to muster the full case he might have on unseaworthiness and he has not proved this as the cause of the loss.

17. Issue (6) It follows from my conclusion on issue (4) that the Plaintiff's claim must fail. In case I am wrong on this, I must find what he might have recovered if he had succeeded on liability. It follows from my conclusion on issue (1) that I do not accept that the Plaintiff provided the Defendant with all the details to make up the $60,000 valuation put on the vessel. In my judgment, in the light of the application form and the breakdown in the Policy, he would be limited to recovering for the hull, the 225 horse power motor, the depth sounder and the radio. Mr. Niven's report says the hull could have been repaired for $1,700; the Plaintiff told me the motor was worth $10,000, the radio was worth $1,200 and the depth sounder was worth $2,400. I would therefore have awarded the Plaintiff $14,300 less the unpaid premiums ($1,707) and very little by way of interest given the lack of any detailed claim listing the various items of loss.

18. I am sorry the Plaintiff and Mr. Mortensen lost their vessel so early in the venture and that the case has taken so long to come to trial, but the claim must be dismissed for the reasons I have given.