Refusal by hull underwriters to pay claim


  • Date: 01/01/1997

A cruise ship suffered a breakdown of both main engines due to contaminated lube oil and the owners submitted their claim for US$ 3million to their hull underwriters, who rejected it on the grounds that the engine breakdown was due to poor maintenance.  The hull underwriters alleged that there had been problems with the lube oil filters for two years. The shipowners then sued the hull underwriters and the ship's technical managers, even though the engine breakdown occurred six months after the management agreement had been terminated. One of the claims against the ship managers was that, as they had fixed the hull insurance, and had presented the claim which had been rejected, they had breached their fiduciary duty to the owners.  The hull underwriters filed a cross claim against the ship managers for indemnity and contribution for failing to notify them that they were no longer managers of the cruise ship.  The claim was finally settled out of court for US$ 975,000, which sum was shared equally between both parties.

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