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Friday, 23 September 16
"COLLATERAL LIES" DO NOT NECESSARILY UNDERMINE AN INSURANCE CLAIM
 KNOWLEDGE TO ELEVATE
An insured was not precluded from recovering under an insurance policy even though it had made a false statement during the claims process with a view to strengthening its claim. The Supreme Court in Versloot Dredging BV & anr v HDI Gerling Industrie Versicherung AG [2016] UKSC 45 considered the extent of the fraudulent claims rule which applies to insurance contracts and prevents an insured recovering under an insurance policy where the claim is fabricated or exaggerated. The Supreme Court held (Lord Mance dissenting) that this rule does not apply to false statements that are immaterial to an insured’s right to recovery under the policy. Insurers have expressed their concern at the decision.
The claimant ship owners suffered irreparable damage of a vessel’s engine after the engine room was flooded, causing a loss of EUR 3,241 million, which they sought to recover from the defendant insurers. The ship owners had falsely stated, in response to inquiries made by the insurers, that an alarm had sounded but that no action had been taken by the crew as the alarm was attributed to the ship rolling in heavy seas. In actual fact no alarm had sounded. The ship owners had been frustrated by the insurers’ delay in recognising the claim and this statement was intended to reassure the insurers that the ship was seaworthy with fully operational alarm systems. They believed that this statement would fortify the claim and accelerate payment.
The alarm statement was later discovered to be false, but was irrelevant to the validity of the claim. Although the alarm had not sounded, it was tested shortly after the incident and found to be working. Even if it had not been working, Popplewell J at first instance held that this would not assist the insurers as the alarm’s failure to sound would not have been the proximate cause of the loss. Popplewell J concluded that the loss was caused by a peril of the seas covered by the insurance policy. Nevertheless, Popplewell J held that the insurers were entitled to repudiate the entire claim under the ship owners’ insurance policy as a result of this false statement. The ship owners appealed, with the Court of Appeal upholding the decision.
Fraudulent and exaggerated claims
At common law it is well established that if an insured makes a fraudulent or exaggerated claim on its insurer, the insured loses the right to recover the entirety of that claim, including any genuine losses it would have obtained. The law refuses to sever the honest part of the claim from the invented part.1 This is commonly referred to as the “fraudulent claims rule”.
Section 12 of the Insurance Act 2015 (which came into force on 12 August 2016) has preserved this rule. It does not, however, define what constitutes a fraudulent claim and does not refer to a situation where a valid claim is supported by a false statement.
Collateral lies and fraudulent devices
The extension of the common law rule to justified claims supported by false statements is more recent and controversial. Lord Sumption referred to Agapitos v Agnew (The Aegeon) [2003] QB 556, where Lord Mance had considered, obiter, whether the fraudulent claims rule could apply to a lie made in the presentation of a claim which does not affect the merits of, or the amount of, the claim. This has been generally termed a “fraudulent device” (or, adopting Lord Sumption’s expression, a “collateral lie”). Lord Mance considered that such collateral lies were also subject to the fraudulent claims rule.
The majority of the Supreme Court, with Lord Sumption giving the lead judgment, disagreed with this approach. Lord Sumption distinguished between a fraudulent exaggerated claim, which is designed to enable the insured to gain something which it is not entitled to, and a justified claim supported by a collateral lie. Where the lie is irrelevant to the existence or the amount the insured is entitled to, the insured gains nothing from the lie which he was not already entitled to by law and the insurer loses nothing from meeting a liability it already had (having crystallised at the moment of loss). The lie is therefore dishonest but the claim is not.
Lord Sumption concluded that it was disproportionately harsh to the insured and would go further than any legitimate commercial interest for the fraudulent claim rule to extend to collateral lies. The policy of deterrence did not justify such an extension of the rule.
COMMENT
The historic justification for the fraudulent claim rule was as a clear deterrent to fraudulent claims, recognising that insurers can be dependant on the insured for information, both at the formation of the contract and in the processing of claims. Honest policyholders would otherwise bear the financial burden of costs incurred by the insurers due to fraudulent or exaggerated claims, through increased premiums. As the judges recognised, fraudulent insurance claims are a serious issue, with insurance fraud widely perceived as victimless (a perception the judges emphasised was quite false).
However, this judgment prevents any extension of this rule and limits an insurer’s right to reject a claim. Although the decision has raised concerns within the insurance industry, it is far from being an invitation for an insured to embellish an insurance claim without fear of any consequences. Any attempt to enhance a claim which would result in increasing the amount recoverable will lead to forfeiture of the entirety of the claim if discovered. Even where a false statement is wholly collateral to a justified claim, an insured may be penalised for that statement if exposed. In the context of a contested claim, any settlement agreement induced by the false statement could be set aside. Moreover, there could be cost orders in any proceedings, increased premiums and difficulty in obtaining future insurance policies after the requirement to disclose the insured’s claims history in any insurance proposal is met. Insureds will also want to avoid litigation concerning whether a false statement is collateral or not to a justified claim.
Finally, insurers can consider including clauses in insurance contracts precluding the recovery of any claims supported by collateral lies. It is likely that going forward insurers will seek legal advice as to the merits of doing so.
Source: Allen & Overy
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Tuesday, 06 September 16
CAPESIZE: THE PACIFIC BASIN WAS THE MAIN REGION KEEPING UP WITH THE POSITIVE SUPPORT - ALLIED
Capesize
Despite some mixed feelings being seen early on in the week, we managed to see a positive week-on-week close on Friday with some positiv ...
Monday, 05 September 16
INDIA BECAME ADARO'S SECOND LARGEST MARKET IN 1H' 16
COALspot.com: The Wara Balangan blend product has been well received by customers in China and India - AI
In the second quarter of 2 ...
Monday, 05 September 16
POOR FREIGHT RATES DESPITE STRONG DEMAND GROWTH FROM CHINA - BIMCO
Demand
The dry bulk commodity imports into and exports out of China we have seen in the first half of 2016 are very positive – and nothing ...
Monday, 05 September 16
FREIGHT RATE FROM INDONESIA TO INDIA IS EXPECTED TO BE FLAT TO SOFT THIS WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
Friday, 02 September 16
EIA FORECASTS U.S. COAL EXPORTS TO DECLINE BY 19 MMST IN 2016 TO 55 MMST
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16.3 million sho ...
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- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Renaissance Capital - South Africa
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- The Treasury - Australian Government
- Kideco Jaya Agung - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Marubeni Corporation - India
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Latin American Coal - Colombia
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The University of Queensland
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Indika Energy - Indonesia
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Standard Chartered Bank - UAE
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Vedanta Resources Plc - India
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- London Commodity Brokers - England
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Kumho Petrochemical, South Korea
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- ASAPP Information Group - India
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Eastern Coal Council - USA
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Binh Thuan Hamico - Vietnam
- Sakthi Sugars Limited - India
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Metalloyd Limited - United Kingdom
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Semirara Mining and Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
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