Reinsurers of cargo aboard the tragic Philippine ferry Princess of the Stars have won a London appeal court ruling that there was no cover as a key warranty was ignored.
Six Lloyd’s syndicates have successfully repudiated cover provided to Manila based Oriental Assurance in respect of the Sulpicio Lines fleet.
Oriental reinsured its Sulpicio Lines exposure for an annual aggregate limit of PHP 450m ($10.24m) in 2008, the year the 23,800-gt ro-ro ferry Princess of the Stars (built 1984) capsized and sank during Typhoon Frank.
More than 800 passengers and crew died in the tragedy but the insurance dispute is not about loss of life or the hull cover but instead relates to nearly 3,000 tons of cargo including containers, trucks and cars that were lost.
Oriental reinsured its exposure to Sulpicio Lines with Amlin’s Syndicate 2001, Talbot’s Syndicate 1183, Limit’s Syndicate 1036, Aegis’s Syndicate 1225, Novae’s Syndicate 2007 and Brit’s Syndicate 2987 with the contract containing a provision that cover would follow the original policy wording.
The Oriental policy contained a typhoon warranty clause voiding cover if vessels sailed from sheltered ports when a typhoon or storm warning was in force or when the destination or intended route would take the vessel into the path of a typhoon.
The reinsurers won a London High Court ruling in their favour in July 2013 but Oriental Assurance challenged this outcome in the appeal court arguing that insufficient weight had been given to the way typhoon warnings were understood and acted upon by the maritime community in the Philippines.
But appeal court judge Lady Justice Gloster rejected this contention saying “what is absolutely clear is that, on the plain reading of the words used by the parties, there is no ambiguity as to the requirement of the existence of a typhoon or storm warning….. the warranty simply and unambiguously refers to a “typhoon or storm warning”, without limitation.”
Lord Justice David and master of the rolls, Lord Dyson agreed making the ruling unanimous.
A large number of cargo claims arising from the Princess of the Stars loss are currently being pursued against Sulpicio Lines and Oriental Assurance in the Philippines.
Oriental was already arguing that breach of the typhoon warranty voided cover even though it was taking the opposite tack in its dispute with the London reinsurance market.
If Oriental is found liable it appears it will be facing the loss without reinsurance.
Sulpicio Lines involved in a whole series of ferry tragedies that have cost many thousands of lives changed its name to Philippine Span Asia Carrier Corp after the Princess of the Stars disaster.
The appeal court ruled on Oriental Assurance’s appeal in March but the judgment was only published last week.
Click on the document in the related media column to the right to read both the appeal and high court judgments in full.
