Storm in a teacup? The Gard Marine case - subrogated claims and co-insurance

Although the underlying facts of this case concern a marine claim, the principles addressed in this decision are of general importance to the insurance and construction markets.

It has always been understood that parties to a joint insurance scheme (eg used in construction projects) cannot sue each other for insured losses. The majority of the judges who heard the Gard Marine shipping case have applied that rule to prevent claims between the ship owner and the demise charterer, arising from the insured loss of a vessel (which grounded during a storm in the port of Kashima in Japan).

The demise charterer had arranged (and paid for) insurance of the ship in the owner’s and charterer’s joint names. The owner had approved the insurance cover. By a majority, the Supreme Court upheld the above rule, and refused (obiter) to allow the claims between these co insureds (brought by Gard, as an assigned/subrogated claim). However, a minority in the Supreme Court (including Lord Sumption), and the judge at first instance, would have allowed claims between co-insureds. In light of the well-established rule described above, that may raise eyebrows. However, the minority view may be limited in effect (or a "storm in a teacup"). This is because it (i) depended on the particular contract being considered (Barecon 89), (ii) it was a minority view, and (iii) it was obiter anyway.

Read more about this case here

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