MT ZOUZOU: Court of Appeal declines to hear mortgagee bank’s appeal of Commercial Court decision clarifying the scope of MII policy cover in MII underwriters’ favour
Piraeus Bank A.E. v Antares Underwriting Limited and others [17.05.2022]
By an Order dated 15 August 2022, the Court of Appeal has refused Piraeus Bank’s application for permission to appeal the decision of the Commercial Court in Piraeus Bank v Antares Underwriting Limited and others (‘The ZOUZOU').
This means that the Bank will not have an opportunity to re-argue its case on policy construction, and the Commercial Court’s decision that where there has been no damage to the Bank’s insured interest as assignee and/or loss payee under the Owners’ insurance, there is no insured loss under the mortgagee's interest insurance (MII) Policy, stands. Our summary of the Commercial Court decision can be found here.
Permission to appeal application
Piraeus Bank had initially sought leave to appeal from the trial judge, Mr Justice Calver, but that was promptly refused. The Bank subsequently sought permission to appeal from the Court of Appeal on the following grounds:
- That the Judge erred in law in misconstruing the Detainment Clause in the Vessel’s Owner’s War Risk policy as applying only in circumstances where the Vessel’s Owners could establish that they had been deprived of possession of the Vessel due to an insured, and non-excluded, peril for a continuous period of 12 months.
- The Judge erred in law in misconstruing Clause 1(ii) of the MII Wording for a number of reasons, including that the Judge should not have accepted MII Underwriters’ argument that the scope of cover under Clause 1(ii) is limited to the terms of Clause (1)(a).
- The Judge erred in law misconstruing Clause 4 of the MII Wording by holding that it is implicit that if non-payment under the Owners’ Policies is not made by reason of any the circumstances specified in Clause 1, then there will not be any claim for an indemnity and there will be no need to calculate the measure of indemnity via Clause (i) i.e., that cover under the MII policy is fully contingent on non-payment under Owners’ Policies.
- The Judge erred in law in concluding that the measure of indemnity was ‘nil’.
- The Judge failed to make findings on matters that will arise contingently if the above grounds prove successful: (a) The cause of the Vessel’s loss under Clause 1(ii) of the MII Wording; and (b) The level of the Total Indebtedness recoverable by way of an indemnity.
Mr Lord Justice Males refused the Bank’s application for permission to appeal on the basis that there was no real prospect of successfully arguing that Clause 4(i)(a) of the MII policy must be ignored in circumstances where there is cover under Clause 1(ii). This was the only way in which the Bank’s appeal could succeed.
Mr Lord Justice Males considered that the Bank’s MII policy construction argument would produce a highly implausible result in that the Bank could recover its Total Indebtedness (circa. US$71m) even where this far exceeded the amount insured under the Owners’ Policies (US$55m). The Court of Appeal reiterated that Clause 4(i)(a), which limits the indemnity payable in all cases to the amount not paid under the Owners’ Policies, is fundamental to the operation of the MII policy, and there was no sound basis for ignoring it.
By rejecting the Bank’s application for permission to appeal, the Court of Appeal affirmed Mr Justice Calver’s approach to construing the MII policy as a whole, despite the ingenuity of the Bank’s arguments.
This is not a surprising decision by the Court of Appeal. The Court of Appeal has refused to hear the Bank’s application which would have sought to re-write the terms of the MII policy to fill the perceived gaps in cover in circumstances where the Commercial Court had already found that the MII policy wording did not contain difference in conditions insurance for the Bank in the event of a CTL not being covered under Owners’ Policies due to a policy exclusion.
MII underwriters will be delighted that the Court of Appeal has shared their views on policy construction, and in particular, clarified how the covered perils operate in conjunction with the measure of indemnity under the MII policy wording
Jonathan Evans, Partner
MT ZOUZOU: Commercial Court clarifies scope of indemnity
On 17 May 2022, the Commercial Court handed down judgment in Piraeus Bank v Antares Underwriting Limited and others.Read more