Court of Appeal agrees that there had been a breach of warranty in a reinsurance contract

The first instance decision in this case was reported in Weekly Update 29/13. The claimant  reinsurer alleged   that there had been a breach of a Typhoon Warranty contained in both the  reinsurance and insurance policies. The warranty read as follows: “Notwithstanding anything  contained in this policy or clauses attached hereto, it is expressly warranted that the carrying  vessel shall not  sail or put out of Sheltered Port when there is a typhoon or storm warning at  that port nor when her destination or intended route may be within the possible path of the typhoon  or storm announced at the port of sailing, port  of destination or any intervening point. Violation  of this warranty shall render this policy void”.

Field J held that there had been a breach of warranty because a storm warning had been given before  the vessel had sailed from port. The reinsured appealed and that appeal has now been dismissed. The  Court of Appeal held as follows:

  1. Although the warranty should be construed in accordance with Philippine law (given the presence  of a follow the settlements clause and the almost identical wording for the warranty in both the  insurance policy and the reinsurance contact), no evidence had been adduced as to the  interpretation of the warranty in that jurisdiction and hence the clause in the reinsurance policy  had to be construed in accordance with English law. It was common ground that there was no  difference in any event between Philippine and English law with respect to policy interpretation.
  2. In accordance with well-established principles of construction, the court should look at the  language actually chosen by the parties and give those words their ordinary natural meaning. The  words used here were not commercially nonsensical, and hence there was no need to add in any  wording. The warranty was clear and unambiguous and there was therefore no need to consider how  typhoon warnings were generally understood and acted upon by the maritime community in the Philippines.
  3. It was also clear that the underlying policy of the warranty was “safety first” and it therefore made no difference that the reinsurers’ interpretation might  possibly lead, in some cases, to uncommercial results (eg the warranty would be breached even if a  vessel was trying to sail away from an area covered by a warning): “I agree with the judge that the  typhoon warranty has to be construed in such a way so as to prevent the vessel from sailing when there was any possibility of an encounter by the  scheduled vessel with a typhoon or storm”.
  4. The Court of Appeal also upheld the first instance decision that the “intended” route of the  vessel had been its usual route (even if the captain intended to depart from that route if the  weather becomes “really, really bad”).
  5. The Court of Appeal also concluded that the judge was not bound to accept as evidence the  differing conclusions of the various Philippine tribunals in relation to any issue in this case: “In the circumstances, he was clearly entitled to look at the  underlying evidence himself”. In reaching that conclusion, reliance was placed on the recent Court  of Appeal decision in Rogers v Hoyle (see Weekly Update 11/14) which, it was said, demonstrated  that the findings of tribunals may be admissible in evidence (insofar as they reflect expert  opinion) but those opinions can be excluded or held to be irrelevant. Here, the tribunals’ findings (dealing with what the insured would have  understood at the relevant time) were irrelevant to the factual issue of whether the vessel had set sail during a storm warning.