Marine insurer refuses to pay yacht repair bill – and it turns out to be costly

Repairing any major damage to a ship or yacht will usually involve the involvement of the ship’s insurer. When making a request for redress, honesty is of paramount importance. We have previously explored the idea that even the suggestion of fraud on the part of the person seeking to make a claim under a marine insurance policy can result in the entire claim being rejected.

But what happens when an insurer refuses to pay a seemingly fair and reasonable repair bill? This is what happened in the High Court of England case ABS Company Ltd. vs. Pantaenius UK Ltd. and others (2020) where a £ 250,000 repair bill for a high-end yacht was disputed. We take a look at the case below and, as we will see, the yacht owner ultimately managed to charge for the repairs. The case is an edifying tale for any marine insurer when it disputes a repair bill. ParrisWhittaker is one of the leading maritime and maritime law firms based in the Bahamas. Our team of specialists regularly advises shipowners and insurers on their rights and obligations under specialized marine insurance contracts.

ABS Company Ltd. vs. Pantaenius (2020): What was the dispute about?

The case arose after a luxury yacht designed to navigate at high speed ran aground in Turkey’s Bosphorus Strait as it returned to its home port after a day trip. The owners spent £ 250,000 to repair the damage caused by the collision.

The yacht was built to a very specific design and a significant portion of the repair bill reflected the cost of shipping damaged parts to specialist technicians in Italy for repair. Insurers argued this was unreasonable – they believed parts could have been inspected and repaired much cheaper locally in Turkey.

The High Court judge (whose ruling will have convincing authority here in the Bahamas), however, agreed with the yacht owner. In his view, the damaged parts (highly specialized computer-controlled training systems) were integral to the proper functioning and performance of the vessel. It was “obvious” that they needed to be removed and inspected by the manufacturer in Italy. The judge included the provision that if the work could have been done locally, it should have been. But he had found no evidence from a repairman in Turkey that he was able to repair units to the standards required by policy.

The specific terms of the policy were as follows:

complaints for.. damage to the yacht shall be settled on the basis of the reasonable repair and / or replacement costs necessary to restore the yacht to as close as possible to its pre-accident condition. Where a claim is recoverable under this insurance, such necessary costs will include the cost of transporting the yacht to the nearest appropriate repair center.. ‘

Referring to an earlier English case, the judge confirmed that whether the cost of repairs is reasonable or not is an objective consideration, and whether the cost is

objectively reasonable, then this cost is recoverable by an insured – regardless of the insured’s motives.

Comment

The success of the yacht owner in ABS Company Ltd. the fact that his repair bill was paid more or less in full (some deductions were made for anti-fouling and tent measures which the judge considered excessive) is a stern warning to insurers. They will, in reasonable cases, be bound by their obligations under a marine insurance contract.

The case also gained attention for another reason: the legal costs involved. Almost a quarter of the 80-paragraph judgment deals with objections raised by insurers to the plaintiff’s legal costs. The costs claimed were £ 213,000 – a significant total given that the repair bill which was the subject of the case itself was £ 250,000.

Although the costs claimed were not paid in full, the yacht owner overcame many of the insurer’s objections. The level of legal fees is a clear demonstration – if needed – of the importance of trying to come to an agreement before court in cases like this, and of considering arbitration and other forms of ADR. In Each Case Although mediation was attempted in this case, it failed.


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