K/S Merc-Scandia XXXXII v Lloyd’s Underwriters (The "Mercandian Continent") - Court of Appeal (Robert Walker and Longmore LJJ and Carnwath J) - 31 July 2001

Marine insurance - Section 17 Marine Insurance Act 1906 - Whether duty of utmost good faith continues post contract - Whether insured’s dishonesty entitled underwriters to avoid contract

The claimant shipowners brought proceedings against shiprepairers arising out of damage to the claimants’ engine. The shiprepairers were insured by the defendant underwriters under a liability policy. The shiprepairers’ defence to the owners’ claim was that the damage to the engine had been caused by a failure to tighten the bolts to the required tension. The shiprepairers said that that was not a failure by their employees but a failure on the part of the employees of the shipowners. The trial took place in the absence of the shiprepairers, and Colman J gave judgment in favour of the shipowners. The shiprepairers were wound up, and the shipowners then launched the present action against the underwriters under the Third Parties (Rights against Insurers) Act 1930.