Is a P & I Association able to change its mind over what is covered by a policy?
Posted: Tuesday 28 February 2012
The recent case of Micoperi SRL v. Shipowners’ Mutual Protection & Indemnity Association (Luxembourg) addressed a situation where a P & I Association first accepted that a claimant was covered but consequently tried to claim otherwise.
In October 2005, the vessel Microperi 30, belonging to Microperi SRL (“Microperi”), was involved in an accident in the Black Sea, resulting in a claim by Toreador against Microperi of up to €11.6m. In July 2006, Toreador arrested the vessel. Later that month, Microperi’s P & I Association unequivocally accepted that Microperi was covered and security for the release of the vessel was provided. Toreador then raised proceedings against Microperi, at which point the P & I Association informed Microperi that its claim was excluded from its P & I cover, however the P & I Association agreed to fund the defence on a without prejudice basis.
Following agreement of a settlement, Microperi commenced arbitration against the P & I Association, seeking to recover the amount of its liability under the settlement and its costs for defending the claim. The preliminary issue at arbitration was whether the P & I Association was prevented from denying cover to Microperi following its earlier confirmation that Microperi was covered. The arbitrators held that the P & I Association had made an unequivocal statement, however there had been no reliance on that statement leading to Microperi prejudicing its position. Microperi appealed this decision, claiming the arbitrators had erred in law by insisting on proof of detriment to Microperi and further that they had incorrectly considered the reasonableness of the settlement achieved.
Burton J dismissed both of these arguments, finding that: (1) there had been no error of law by the arbitrators, nor any serious irregularity leading to substantial injustice; and (2) the arbitrators were entitled to find that although there had been an unequivocal representation of cover, there had been no reliance on it by Microperi.
If you'd like to discuss this case or its potential implications, please contact our shipping expert, Beverley Wood.
