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Re-Insurers Avoid Liability for Typhoon Ferry Disaster

FerryIn a ruling which underlines that insurance policy exclusion clauses are not just small print and must be taken seriously, reinsurers have successfully avoided liability for the loss of a cargo and passenger ferry that sailed into the eye of a typhoon off the Philippines and foundered with the loss of more than 800 lives.

When The ‘Princess of the Stars’ sank in June 2008 after being struck by ‘Typhoon Frank’ all but 32 of the 851 passengers and crew on board, including the ship’s master, lost their lives. Almost 300 tonnes of cargo, including lorries, containers and passengers’ vehicles, were also lost.

The insurance company that provided primary cover to the ship’s owners in respect of cargo claimed an indemnity from Lloyds of London-based re-insurers who sought to avoid the relevant policy – which was governed by English law and contained an exclusive English jurisdiction clause – on the basis that the ship had sailed in breach of an express typhoon warranty.

Upholding the re-insurers’ arguments, the court noted that a severe weather bulletin had been in the hands of the ship’s master just under an hour before the ship set sail. The vessel’s departure from Manila had breached the requirements of the warranty that it should not leave port if there was an extant storm warning or where the vessel’s intended route might take it into the possible path of a typhoon.

The ruling that the reinsurance policy was avoided on a correct interpretation of the warranty made it unnecessary for the Court to consider whether the ship’s master had been imprudent in setting sail having regard to the safety of the lives on board and the property at risk. The Court noted, however, that the policy that lay behind the warranty was one of ‘safety first’.