GREEN ISLAND ORGANICS LTD V QBE INSURANCE (EUROPE) LTD

[2011] ScotsCS CSOH_15, Court Session, Outer House, Lord Menzies, 27 January 2011

Insurance (aquacultural) - Exclusion from predation for physical damage caused by sea lice - Coverage for disease - Whether disease caused by sea lice was an insured peril

The assured carried on a fish farming business in Shetland, and was insured against the mortality and physical loss of farmed Atlantic salmon. Insured Peril 3 was "Predation or physical damage by predators or other aquatic organisms (but not sea lice or other ectoparasites)". Insured Peril 8 was "Disease", defined as "the presence of a pathogen or group of pathogens shown to have a primary causative relationship to the mortality of the insured fish". The assured claimed that in November 2008 Atlantic salmon owned by them at one of their sites suffered an infestation of sea lice, and they argued that an infestation of sea lice leading to mortality of fish stock was a disease within the meaning of Peril 8. The insurers' case was that sea lice were aquatic organisms that caused physical damage and that such damage was excluded by Peril 3. The issue before the court was, therefore, whether the losses were the result of disease (insured) or damage (uninsured). The Court of Session, applying the now accepted principles of construction that a policy is to be construed as a whole and words should be construed in accordance with commercial sense, held that the reference to sea lice in Peril 3 did not exclude loss caused by them from the policy, but only from that part of the policy dealing with predators. Sea lice were not predators but parasites and pathogens, and were capable of causing disease. The loss thus fell within the definition of disease for the purposes of Peril 8.