Lloyd's Maritime and Commercial Law Quarterly

English Marine Insurance And General Average Law

Howard Bennett *


108. Allianz Insurance Co Egypt v. Aigaion Insurance Co SA1

Premium warranty—Marine Insurance Act 1906, s 53(1)
Having honoured a constructive total loss claim, the claimant insurer sought to recover on a reinsurance policy. At first instance, the reinsurer denied liability on the basis that there had never been a concluded contract of reinsurance; alternatively, any such contract was subject to a premium warranty that had been broken, triggering an automatic termination of cover before the casualty. HHJ Chambers held in favour of the insurer. A contract of reinsurance had been concluded, and on terms such that non-payment of premium merely gave rise to a right to serve a notice of cancellation, which had never been done. The reinsurer appealed solely on the ground that no contract had been concluded. It argued that the insurer’s slip, containing the offer of cover, erroneously omitted an IACS classification warranty and the warranty could not be read into it. However, its response should be construed as referring back to a previous communication containing a quotation on the basis of terms expressly including the warranty. There was therefore no agreement on a fundamental clause.
Decision: There was a binding contract and the reinsurer was therefore liable.
Held: (1) The slip was the definitive statement of the offer and the warranty could not be read into it. (2) The reinsurer’s response contained sufficient indicia of finality that it had to be read as an acceptance and not a counter-offer.
Comment: In terms of legal principle, the main interest in the case lies in an alternative argument advanced on behalf of the insurers at first instance. Assuming the reinsurance was subject to a premium payment warranty, the insurers contended that marine insurance law precluded any argument that the warranty had been broken: the statutory liability of brokers for premiums under Marine Insurance Act 1906, s 53(1) is said to be based on a fiction that the broker has paid the premium and received a loan of an equivalent sum which it remains liable to repay. If taken seriously, premium warranties are ineffective in marine insurance since the premium is deemed paid. Obiter, however, HHJ Chambers QC rejected this argument, noting that the subsection itself makes no reference to the fiction and stating that the fiction should not be read into it.



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