Background
Cometsambre SA held charterers’ liability and freight, demurrage and defence insurance underwritten by Lloyd’s Insurance Company SA for vessels chartered to transport scrap metal from Ghent. After the cover was renewed for 2022, fires occurred on 22 and 23 June aboard the LOWLANDS MIMOSA while scrap was being loaded. The second fire allegedly caused substantial vessel damage and led the disponent owner, Lalemant NV, to commence charterparty arbitration against Cometsambre.
Cometsambre sought declarations that Lloyd’s must indemnify it against the charterparty claim and associated legal costs. Lloyd’s avoided the policy and denied liability, alleging that Cometsambre had breached its duty of fair presentation under the Insurance Act 2015 by failing to disclose several earlier fires involving its scrap, including fires aboard chartered vessels and in quayside stockpiles during 2020 and 2021. Lloyd’s did not allege that the breach was deliberate or reckless.
The Court’s Holding
Mr Justice Butcher held that the earlier fires were material circumstances that Cometsambre was required to disclose when renewing the policy. A prudent charterers’ liability underwriter would have wanted to consider the pattern of fires because it bore directly on the danger posed by the scrap cargoes and the risk of damage to chartered vessels. Cometsambre knew, or ought to have known through a reasonable search of information within its organisation, of the relevant incidents.
The court also accepted that the non-disclosure induced the insurer to renew on the existing terms and that, had a fair presentation been made, the insurer would not have entered into the insurance contract. The breach was therefore a qualifying breach under the Insurance Act 2015, entitling Lloyd’s to avoid the 2022 policy, refuse the claims, and return the premium. Cometsambre was consequently not entitled to the declarations or indemnities it sought.
Key Takeaways
- Repeated earlier incidents may be material even when individual fires were extinguished quickly or produced no insurance claim.
- An insured company’s disclosure obligation extends to information that a reasonable search of its internal records and personnel would reveal.
- For a non-deliberate breach, avoidance requires proof that the insurer would not have written the policy on any terms if the risk had been fairly presented.
Why It Matters
The decision illustrates the practical reach of the Insurance Act 2015’s duty of fair presentation in marine insurance renewals. A quiet claims history does not necessarily discharge that duty where the insured knows of operational incidents that bear directly on the insured peril.
Insureds transporting potentially hazardous cargo should maintain systems that bring incident reports from operational personnel into the renewal process. Insurers seeking avoidance must still establish actual inducement and the relevant counterfactual underwriting decision, not merely show that omitted information was material to a prudent insurer.