Classification societies provide a system of assurance for the insurers. Hull policies are often subject to the vessels maintaining Class, and any change, suspension, or withdrawal of Class could lead to a loss of insurance. In The Sea Panther [2023] insurers were refusing to pay out for the total loss alleging that the vessel’s Class had automatically suspended or withdrawn as the owners had concealed vital information from the classification society about a major damage to the engines.
The Vessel suffered major damage to the crankshaft and connecting rods of the main engine, and given the commercial commitments, temporary repairs were carried out instead of permanent repairs. Permanent repairs were never carried out and the vessel continued trading. The vessel’s classification society, ABS, was also not informed which the owners were obliged to do under the Class rules, even when it was left unrepaired. It wasn’t also picked up by the Class ABS during the annual surveys. The insurance policy was renewed for another year and subsequent to that the vessel collided with another ship and sank. The insurer refused to pay out for the total loss saying the vessel was not in Class since any violation of the Class rules leads to automatic withdrawal / suspension of the class, which in turn meant that there was a breach of warranty in the insurance policy, or there had been a material non-disclosure during renewal of the policy.
As per the Supreme Court of India the H&M insurer was discharged from liability as the warranty in the insurance policy had been breached when the vessel’s Classification Certificate had automatically become invalid as a result of the owner not intimating Class about the main engine damage, even after the damages had been left unrepaired.
Link to judgment: https://indiankanoon.org/doc/78043762/
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