Jacobs J has handed down judgment dismissing a US$31m claim under a policy of offshore construction all risks insurance on the WELCAR form.
The insured, Technip, was the principal contractor for works in an oil and gas field offshore Saudia Arabia. In 2015, a vessel chartered by Technip allided with and caused damage to a platform in the field. Technip reached a settlement with the owner of the platform in the sum of US$25m and claimed that sum, and various other alleged losses, under its insurance.
The insurer, Medgulf, declined cover on the primary basis that Technip’s liability in respect of the platform was excluded by two provisions (Limb 1 and Limb 3) of an Existing Property Endorsement (an endorsement which is commonly incorporated into the Section II liability cover in WELCAR policies) and by the Watercraft Exclusion in the WELCAR form. Medgulf also argued that Technip bore no liability for the damage to the platform but, if it did, Technip’s liability for the damage was significantly lower than US$25m and that it could only recover (if at all) for that lesser amount.
Jacobs J held that Technip was liable for the damage to the platform but that there was no cover for Technip’s liability in respect of the platform by reason of Limb 1 of the Existing Property Endorsement. The Judge however held that the exclusion in Limb 3 and the Watercraft Exclusion did not apply.
The Judge also found that if the exclusion in Limb 1 had not applied, then Technip’s claim would have succeeded in the sum of US$10,377,059. He found that the reasonable cost of repairs was less than US$7m and that, had there been cover under the policy, Technip would only have been able to recover that amount in respect of the settlement reached with the owner of the platform.
The Judge has granted Technip permission to appeal in relation to the proper construction of Limb 1 of the Existing Property Endorsement.
James Brocklebank KC and Douglas Grant acted for the insurer, Medgulf, instructed by Angela Flaherty and Abigail Li of Clyde & Co.
Technip was represented by Peter MacDonald Eggers KC, leading David Walsh of Essex Court Chambers, instructed by Jonathan Bruce and Angela Bilardi of HFW LLP.
Please click here for the judgment.