Claim No: CL-2022-000527 - [2025] EWCA Civ 1387

Fecha: 05-Nov-2025

The critical terms of the Policy

11.

The essential argument advanced in support of the appeal, across the three grounds, is that the pay first clause (section 30.13 in part 5) is inconsistent with the certificate of insurance (the Certificate) and the insuring clause (section 1 in part 1), that the pay first clause is buried in the claims section of the General Terms and Conditions in part 5 and should not be given effect, and that the Certificate and the insuring clause take precedence over the pay first clause under the hierarchy clause (section 25 in part 5).

12.

With these arguments in mind, I will outline the critical terms of the Policy in this section, with the other relevant terms left to the next section.

13.

Part 1 of the Policy booklet (which is incorporated by the Certificate) (the Booklet) provided that:

The Company [the Insurer] shall indemnify the Assured [the Charterer] against the Legal Liabilities [defined in part 7 of the Booklet as “Liability arising out of a final unappealable judgment or award from a competent Court, arbitral tribunal or other judicial body”], costs and expenses under this Class of Insurance which are incurred in respect of the operation of the Vessel, arising from Events occurring during the Period of Insurance as set out in sections 1 to 17 below.

14.

The pay first clause in section 30.13 of part 5 provided as follows:

It is a condition precedent to the Assured’s right of recovery under this policy with regard to any claim by the Assured in respect of any loss, expense or liability, that the Assured shall first have discharged any loss, expense or liability.

15.

The hierarchy clause 25 (under the heading “Application of Terms”) in part 5 of the Booklet provided as follows:

Any contract of insurance effected pursuant to the Marine Liability Policy for Charterers shall incorporate the general terms and conditions and the terms and conditions of Class of Insurance 1, Class of Insurance 2 or Class of Insurance 3 as the case may be. The terms and conditions set out in each Class of Insurance in this policy shall prevail over the general terms and conditions in the event of a conflict between them, but any terms appearing in the Certificate of Insurance shall prevail above all others.

16.

The relevant insurance for our purposes is in section 1 (i.e. Class of Insurance 1). The hierarchy clause is saying that the terms of the specific Charterers’ Liability clauses in section 1 of the Booklet should prevail over the General Terms and Conditions (in part 5, which includes the pay first clause) “in the event of a conflict between them”. The Certificate did not actually contain any relevant terms beyond its reference to the class of insurance in part 1, so its overall hierarchy is not critical for these purposes.

17.

It can be seen immediately that the central question is likely to be whether there is or is not, as a matter of proper interpretation, a conflict between the pay first clause and the insuring clause. That question is, as I shall explain, not free from authority.