Direct Action against the Insurer and its Limited Effect

Part of the Hamburg Studies on Maritime Affairs book series (HAMBURG, volume 5)


Insurance Policy Insurance Contract Liability Insurance Fund Convention Environmental Liability 
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  1. 1.
    Arnould, Joseph/ Mustill, Michael J., Law of Marine Insurance and Average (1981), 16th ed., Volume 1, p. 155–156: “Questions have been raised as to the parties who may avail themselves of these very broad and comprehensive terms. In the first place it is clear they must be persons who may lawfully be insured. In the next place they must be persons who, at some time during the risk, have an insurable interest in the property, either as the persons originally insured or as their assignee. Beyond this, it must be shown that the person affecting the insurance either intended it for their benefit, or at all events did not intend it exclusively for the benefit of others having a conflicting or inconsistent interest, but mean it to apply generally, so as to cover the interests of those who should ultimately appear concerned...”Google Scholar
  2. 5.
    Clarke, Malcolm A., The Law of Insurance Contract (2002), p. 225. For instance, in England, the assignment of marine policies is now governed by the Marine Insurance Act 1906, sections 50 and 51: “50. (1) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss. (2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected. (3) A marine policy may be assigned by indorsement thereon or in other customary manner.” “51.Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative: provided that nothing in this section affects the assignment of a policy after loss.”Google Scholar
  3. 6.
    Clarke, Malcolm A., ibid., p. 226: “A distinction is made between (a) assignment of the (entire) contract of insurance, and (b) assignment of the right to recover insurance money under the contract. (a) must also be distinguished from (c), the conclusion of a new contract between insurer and “assignee”. It may be difficult to distinguish (a) from (c), but it can be said that the consent of the insurer to the assignment is not of itself enough to indicate a new contract. In (a) and (c) the assignee becomes the insured under the contract, whether it be the old contract or a new contract, and the assignor drops out, a change described as a innovation, while in (b) the assignor remains the insured. This difference produces differences in the consequences of assignment. In any case, any contract which is normally assignable may be made expressly non-assignable.”Google Scholar
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  5. 10.
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  6. 11.
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  8. 13.
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  9. 14.
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  10. 15.
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  15. 24.
    In Re Allobrogia Steamship Corporation (The “Allobrogia”) [1979] 1 Lloyd’s Rep. 190, at 194, it was held by Mr. Justice Slade: “...He referred me to footnote 14 at p. 935 of MacGillivray’s and Parkington’s Insurance Law (6th ed.) which reads: Difficulty sometimes arises in deciding whether a particular agreement is a contract of insurance. A mutual indemnity society which derived its funds from the contributions of its members was held to be an insurer in Wooding v. Monmouthshire and South Wales Mutual Indemnity Society Ltd., [1939]4 All E.R.570, so that an agreement to indemnify one of its members could be held to be a contract of insurance. But a person may belong to a society (such as a P. & I. Club) whose rules do not entitle him to an indemnity but only to contributions from other members towards his loss. Since the essence of a contract of insurance is that the insured should be entitled to an indemnity; it seems that in such a case there cannot be a contract of insurance. The 1930 Act contains no definition of a ‘contract of insurance’ but, without purporting finally to decide the point for the purpose of any subsequent proceedings, because I regard this as unnecessary for my present decision, I feel little doubt that, whatever may be the general position of Protecting and Indemnity Clubs, the relevant contracts between this particular association and its members are ‘contracts of insurance’ within ordinary legal terminology and within the meaning of the 1930 Act.” So the judgment in this case made it clear, at least in one aspect, that the 1930 Act applies to P&I insurance. See also Chapter 2, Section C.I.4.c).Google Scholar
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  17. 27.
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  18. 28.
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  19. 29.
    Johnson, H. Alston, ‘The Louisiana Direct Action Statute’, 43 La.L.Rev. 1455, at 1478.Google Scholar
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    Holmes, Eric M. (general ed.), supra, note 28, pp. 55, 56.Google Scholar
  21. 31.
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  22. 32.
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    Holmes, Eric M. (general ed.), supra, note 28, p. 35.Google Scholar
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    More details read Holmes, Eric M. (general ed.), supra, note 28, pp. 29–44.Google Scholar
  27. 37.
    Ibid., p. 49.Google Scholar
  28. 39.
    It has been suggested that: “although the direct action has been granted based on the general policy of protection of the weaker (third) party and the legal rules confirm this right explicitly, there seems to e a more important legal principle to protect the economic interest of the P&I Clubs.” See Fossion, Gregory, ‘An Eternal Triangle at Sea: Loss of Insurance Cover under a Direct Action in Marine Liability Insurance’, at <> (visited 10 October 2005).Google Scholar
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    Hazelwood, Steven J., supra, note 13, p. 113, the coverage takes great account of the individual characteristics and requirements of a member.Google Scholar
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  32. 44.
    The general reference is from ibid., Chapter 9: “Exceptions and Limitation to Club Cover”.Google Scholar
  33. 45.
    The indemnity principle may not be so absolute to all types of insurance. As observed in Holmes, Eric M. (general ed.), supra, note 28, p. 4: “The most accurate conceptualization of insurance arrangements is to observe, first, that neither life insurance nor any other form of insurance is invariably a pure indemnity contract; second, that all forms of insurance are subject to the influence of the principle of indemnity; and third, that the influence of the indemnity principle is less pervasive in some forms of insurance, such as life insurance, than in other forms of insurance, such as property insurance. In other words, although the characterization of insurance as an indemnity contract is useful as a statement of a tendency or as a generalization, it is not always a reliable guide when answers are sought to specific problems of insurance law.”Google Scholar
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    Holmes, Eric M. (general ed.), ibid., p. 3.Google Scholar
  35. 47.
  36. 48.
    A.M.C 1969 III, p. 2334–2336.Google Scholar
  37. 49.
    A.M.C 1969 III, p. 2335. There are also cases in American: Ali Galeb Ahmed, et al. v American Steamship Owners Mutual Protection and Indemnity Association al. [1978] A.M.C.586; Robert Allen Willer v. Twin City Barge & Towing Company [1978] A.M.C. 2008.Google Scholar
  38. 50.
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  39. 51.
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  44. 72.
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  51. 83.
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    Hazelwood, Steven J., supra, note 13, p. 246. As to a company’s alter ego, see H.L. Bolton Engineering Co.Ltd v. T.J.Graham&Sons Ltd. [1957] 1 Q.B. 159, pp. 172 and 173, per Denning L.J.; see also Lennard’s Carrying Co.Ltd. v. Asiatic Petroleum Co. Ltd [1915] A.C. 705.Google Scholar
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  71. 112.
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    Brodecki, Z., ‘New Definition of Pollution Damage’, Lloyd’s Mar. & Com. L. Q. (1985), pp. 382–391, at 386. These three elements are largely reflected in the CLCs.Google Scholar
  73. 115.
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    Except some claims which are covered by the IOPC Fund but not covered by the liability conventions; meanwhile, as observed by Özçayir, Z. Oya, supra, note 126, p. 248, “The P&I clubs support the view of the IOPC Fund that a uniform interpretation of the definition of ‘pollution damage’ is essential for the proper functioning of the regime of compensation established under the CLC and FC. The clubs agree...But they urge a cautious and restrictive approach to the criteria for ‘preventive measures’ when considering economic loss. The clubs support the decisions of the Executive Committee in relation to environmental damage but emphasize that an environmental damage claim is not payable when the claim is not quantifiable by reference to an actual economic loss.”Google Scholar
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