The case was brought by a BVI-based company and owner of 36m Riva-built Galatea, declared a Constructive Total Loss of Yacht, following a fire at her Athens marina homeport in December 2011. A 12-month policy to insure the yacht had been agreed between the claimant and the underwriter in May 2011 to the value of €13 million (€9.75 million hull & machinery and €3.25 million increased value).
In O’Keeffe’s report it is stated that, during the course of litigation, it emerged the claimant had received a formal valuation in 2009, placing the yacht at €7 million, net VAT, and had been marketing the yacht at €8 million when the policy was concluded.
O’Keeffe’s article states, ‘the Judge (Mr Justice Leggatt) held that the 2009 valuation, the March 2011 email and the fact that the Yacht was being marketed for sale with an asking price of €8m were all material facts, in the sense of being facts or circumstances which a prudent yacht underwriter would wish to take into account when deciding whether to offer cover for a yacht on the basis of an agreed value of €13m, and should have been disclosed to Underwriters.
What is perhaps most interesting about O’Keeffe’s analysis of the judgment, is its outcome, had it taken place under the auspices of the Insurance Act 2015 (which will come into effect in August 2016).
In this instance the failure of the claimant to disclose this information would have resulted in the awarding of proportionate remedies based on the legal revision of the contract using the hypothetical terms. As O’Keeffe explains, ‘Under the new system, given that the non-disclosures in this case were neither fraudulent nor reckless, the court would be required to consider what the actual underwriter would have done if a fair presentation had been given.’