Insurance Law Monthly

In ENE Kos 1 Ltd v Petroleo Brasileiro SA (The Kos) [2012] UKSC 17 the Supreme Court considered the rights available to an owner of a time-chartered ship following lawful withdrawal of the vessel for non-payment of hire. The Supreme Court addressed several potential bases on which the owners could recover from the charterers. The analysis of causation in the context of an indemnity clause (contained in the speeches of Lord Sumption and Lord Clarke for the majority and Lord Mance dissenting on the indemnity clause) will be of particular interest to all involved in coverage litigation. The decision is discussed by George Spalton of 4 New Square.

There is little English authority on the content and operation of cover notes. This type of document, traditionally used in the motor insurance market, grants the assured temporary cover pending a final decision by the insurers on the assured’s application. In China Ping An Insurance (Hong Kong) Co Ltd v Tsang Fung Yin, 19 March 2012, Hong Kong Court of First Instance, To J has confirmed that a cover note is a contract distinct from the subsequent policy but that it is unlikely that the parties intended the obligations of the assured under the two contracts to be at variance.

Professional liability policies are limited in coverage by reference to the professional activities carried on by the assured. In Sutherland Professional Funding Ltd v Bakewells [2011] EWHC 2658 (QB) HHJ Hegarty QC was required to determine whether interim funding arrangements for the benefit of clients entered into by a firm of solicitors specialising in personal injury claims, under which the firm undertook personal liability in the event of client default in repayment, constituted a professional activity within the scope of a liability policy or whether the debt incurred by them was in the form of a business debt. A number of separate points of construction arose, but the court’s ultimate conclusion was that a guarantee of client debts, which was primarily for the benefit of the business rather than out of any duty to clients, was not insured.

Cheung Kwan Wah v China Ping An Insurance (Hong Kong) Co Ltd [2012] HKDC 802, 26 June 2012, a decision of Deputy District Judge Grace Chan in the Hong Kong District Court, is an illustration of the operation of the waiver principle applicable to non-disclosure in the context of express limited questions asked by the insurers. The case was argued on the basis of both materiality and waiver, and they lead to the same conclusion. Of interest is the suggestion that an insurer who does not provide any space on the proposal form for the disclosure of additional evidence cannot complain if nothing is actually disclosed.