In the case of Viking Inshore Fishing (Pty) Ltd v Mutual and Federal Insurance Co. Ltd, the Supreme Court of Appeal (“SCA”) upheld an appeal by the owners of the fishing vessel Lindsay against Mutual and Federal Insurance Ltd ("M&F") for payment of R3.99 million under a marine insurance hull policy.
The claim arose from the sinking of the Lindsay at approximately 12.45am on 8 May 2005 after a collision with the Ouro de Brasil, a carrier sailing from Singapore to Santos in Brazil. M&F repudiated liability for the claim on the grounds that the owners of the Lindsay breached a warranty that they would at all times comply with the provisions of the Merchant Shipping Act, 1951 and regulations under that Act relating to the safety and seaworthiness of the vessel.
The warranty that M&F sought to rely on states:
"...provisions of the South African Merchant Shipping Act and the Regulations thereto shall be complied with at all times during the currency of this policy, provides that this warranty shall be effective only to the extent of those Regulations which are promulgated for the safety and or seaworthiness of the vessel(s).
It is understood and agreed that this warranty shall in no way be construed to nullify the “Inchmaree” clause, or any part of the institute clauses attached to this policy."
Summary of the Court’s decision:
The Court held that the operation of the warranty would have had the effect of nullifying the insurer’s liability in terms of two clauses in the policy, known as Inchmaree clauses, that provided cover against loss of theLindsay due to negligence on the part of any person, including the master and crew of the Lindsay. The SCA further held that M&F's reliance on strict compliance at every moment with the provisions of the Merchant Shipping Act was unduly extreme and that a practical construction should be given in light of the purpose of the clause and the insurance policy. The warranty expressly stated that it would not be construed in a way that nullified the insurer’s liability under these two clauses. Accordingly the High Court’s rejection of the claim on the grounds of the warranty was incorrect.
As to an alternative defence by the insurer that the loss of the Lindsay was due to a want of due diligence on the part of the vessel’s owners, the Court held that there was no evidence that such lack of due diligence was the cause of her sinking.