No recovery under liability policy where named co-assured had no contractual liability

Policy

In a recent dispute in the English Commercial Court it was found that a named co-assured on the head charterers’ liability policy was not covered as it was not a sub-charterer. The dispute came out of an outbreak of norovirus on a cruise ship on a voyage from Tilbury. The voyage was aborted due to the outbreak and the passengers sought substantial sums in compensation for personal injury and ruined holidays.

The head charterers had time chartered the ship and time charterers had, in turn, sub-chartered to a tour operating company that had become insolvent. The sub-charterers had a contract (a General Sales Agency Agreement) with a company called CMS. The passengers sued CMS under the Athens Convention, and CMS sought indemnity against those liabilities under the head charterers insurance policy. The Court found that CMS was not a contracting carrier within the meaning of the Athens Convention and were not liable to the passengers. At the time of the outbreak, the passengers were in a contract with the sub-charterer not CMS and their claims should therefore have been against the sub-charterers. CMS did not have any relationship with the passengers as its contract with the sub-charterer did not include any provisions to this effect.

The head charterers were insured under a liability policy, and even though CMS was named as co-assured, the Court held it was not entitled to an indemnity. The policy was for charterers’ liability, “losses, costs and expenses incurred as Charterers”. The Court found that the contract between the sub-charterers and CMS was not the same as a charterparty nor were CMS slot charterers, space charterers or time charterers. The fact that CMS’s name had been added to the policy without any real thought did not mean that the claims against it fell within the policy. The Court commented that the discounts to passengers on future cruises, were not made by CMS to the passengers but to the sub-charterers who would pass the discount on to the passengers. This was to preserve CMS’s commercial relationship with the tour operators rather than for reasons of liability to the passengers. The absence of CMS’s liability to the passengers was an absolute bar to its recovery of losses under the head charterers’ liability policy.

Cruise and Maritime Services v. Navigators Underwriting Agency (Marco Polo) [2017] EWHC 843 (Comm)

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