Securely moored to the quay, or cast adrift?

by John Curnow on 15 Mar 2017 With boating, you have to cast the lines off in order to go and get into it. However, when it comes to your insurer, you kind of expect that they’re going to be as bound to you as the standing rigging is to the mast, the ring frames to the hull, or the engine mounts to the runners, and the propellers to the shafts, skegs and cutlass bearings. In a marine pleasure craft scenario, whom would you rather be insured with?

Pantaenius has always said that you need to be able to easily read and understand your policy. In the material below, there is real and direct evidence that the true, marine originated Pantaenius policy stands as strongly under scrutiny, as the crew does next to their clients. In this way, they have not only educated the market about what an agreed value really is, but also that no deductions actually means you get the number on the policy document paid out to you, amongst many other things.

No doubt, this very notion was the essence of a recent court directive, and the subsequent appeal. Yet before we delve into that, we need to appreciate the circumstances of the grounding of Froia II, and how Pantaenius Sail and Motor Yacht Insurance was very securely fastened to her owner, Arthur Phillips, whereas Nautilus Marine Insurance denied his claim.

When speaking with Phillips it is very easy to totally comprehend and empathise with his loss, for that is exactly what it was. “She was a one in a million yacht, and I will never be able to replace her. I am glad to put the sad event to rest. In short I am very thankful for the assistance and personalised service, which Pantaenius provided.”

Boats can be complicated things. Marine Law certainly is. Insurance Law has its moments too, but boat ownership should be a joyous thing. The law is never easy, but the problem can be clear. Understanding your insurance you can be in charge of. Knowing the law you will have to leave up to the experts, but you do need to know that there are clauses in policies that may not stand up under Australian consumer or other laws.

Be clear. This is about a genuine marine precedence, and also goes to ask the question, how many cases out there that could be in play as result of this decision and subsequent upholding under appeal? So without repeating it too much, know your wording, and know your insurance crew even better, so that they not only stand up for you, the retain the motivation to pursue it all the way to the end, just like you.

You’re about to see that one paid up and solved the problem. The other triggered a three-year long legal matter with all the associated costs and stresses! You may also understand a little more now, or very soon, about how these sorts of things directly raise the cost of premiums…

Phillips intended to partake in the Fremantle to Bali yacht race and rally of 2013. He notified his insurer and they alerted him to the fact that they could not cover him outside of Australian waters. This led him to seek additional cover with Pantaenius, who are the experts in the field, and were able to provide him with the cover that he needed.

On June 22, 2013, at Cape Talbot in Western Australia, whilst on her return voyage home, Froia II, a 2006 Dufour 455 ran aground and was wrecked. She was bound for Darwin, so as to clear Customs, remembering that there is not much in the way of services up in the top end. Now in the insurance business, where there are multiple policies in place, which respond to the claim, the costs are split between the insurers. On 26 June 2013, Nautilus confirmed to Pantaenius, without admission of liability, that it was happy to negotiate costs in relation to salvaging the Vessel up to 50% and subject to reserving underwriter's rights in relation to indemnity under and in connection with the Nautilus policy.

On 28 June 2013 a Marine Surveyor reported to Pantaenius that the Vessel was no longer salvageable and that the operation had become a Wreck Removal in accordance with the WA Department of Transport direction. Pantaenius promptly conclude that the policy responded to the claim, paid all the salvage costs, and Mr Phillips in full, inside four months of the event.

However, obtaining Nautilus' contribution through the courts took a great deal longer. Now what is quite alarming is that the initial judgment by Foster J, was handed down on January 5, 2016, and the final judgment on appeal was delivered by Allsop CJ, Rares and Besanko JJ on November 8, 2016. A long time in anyone’s estimation! Also note that Pantaenius only sought 48% of the final bill, to account for the slight variance in the value both companies had applied to the craft.

This following sentence is pretty plain and about as easy as the legalese in the findings gets. Both initial matter and appeal had strong directives from their Honours, and by way of example, “THE COURT: DECLARES that, in the events which have happened, the respondent was not justified in refusing to pay the claim for indemnity made by Arthur Phillips upon it on 27 June 2013 under Policy of Insurance No PR1-213636 in respect of the loss of the yacht, Froia II (the vessel),…”

Now both Courts reviewed the material and most specifically, the policies in great detail. Despite the fact that the yacht was within the geographical policy limits, Nautilus sought to deny liability based on its geographical exclusion and in particular the reference to the yacht having cleared Australian Customs. However, Section 54 of the Insurance Act protects the consumer from such a denial of cover based solely on an unconnected act of the insured. As such the exclusion was wrongly maintained.

In reviewing the material, effectively twice, the Courts also found that ‘Geographic limits’ applied by Nautilus was proven to be very much a qualified statement, and effectively an exclusion, and therefore meant that no suspension of the policy was in place at the time of the incident. Equally, they found that “The expression 'Australian waters' is not defined in the Nautilus policy.”

The reason all of this is important is that it was found that “…it was not reasonably possible for the Vessel to have cleared Australian Customs at any time prior to arriving at Darwin.” The simple act of not clearing Customs was not shown to have caused the grounding or have any influence on the matter, nor was the course to get to Darwin to clear Customs. In short, the vessel was in Australian waters, attempting to clear, and was therefore, back inside the jurisdiction of the Nautilus policy, and that the act of clearance or non-clearance of customs was not material to the loss.

This was totally clarified in the court documents, which state, “Had the vessel left Fremantle in early May 2013, not for the purpose of competing in the Fremantle to Bali sailboat race but only for the purpose of sailing to Darwin and not cleared Australian Customs because it was not obliged to do so, but nevertheless ran aground off Cape Talbot, as it did, the loss thereby suffered would clearly have been covered under the Nautilus policy.”

In the end, Foster, J. was clear, strong and decisive, stating, “For the above reasons, I consider that the respondent (Nautilus) has failed to make out any entitlement to refuse to pay the claim under s 54(2) of the Act and has also failed to demonstrate the requisite prejudice contemplated by s 54(1) of the Act.” He then added, “I do not find these (Nautilus) submissions persuasive”.

So the harrowing tale had a shining light, in the end. Quote to this effect from Phillips, “We had a great time in the rally and also in Indonesia. Yes it was all brought undone in the end, but we came away with our lives, and had the terrific assistance of many, especially Pantaenius.”

So it has always been prudent to have the crew that really know boats as your insurer. Now it has also been proven in a court of law and comes with that one extra, and utterly priceless commodity as well, peace of mind. Contact Pantaenius Sail and Motor Yacht Insurance on +61 2 9936 1670, or see www.pantaenius.com.au for all the right information.