Mortgagee Bank Scuttled

It is rare for insurers to succeed in refusing to pay out because the insured ship was scuttled. The burden of proof on the insurers is high and the evidence may be at the bottom of the sea. The "BRILLANTE VIRTUOSO" ((1) Suez Fortune Investments Ltd (2) Piraeus Bank AE v Talbot Underwriting Ltd & 9 Ors [2019] EWHC 2599 (Comm)) is one of those rare cases, and is particularly striking because the scuttling involved a conspiracy between a large number of individuals, including the owner.

Following the constructive total loss of the "BRILLANTE VIRTUOSO" by fire, the owner and the mortgagee bank brought proceedings against the war risk insurers to recover the insured value of the vessel. The owner's claim was dismissed when it failed to comply with disclosure orders, leaving the mortgagee bank as sole claimant.

After a lengthy trial, Mr Justice Teare found that the insurers had established that the vessel had been scuttled with the connivance of the owner, and that accordingly the mortgagee bank had no right to recover under the war risks insurance. His key findings were:

In determining whether a ship had been scuttled by its owner, it is important to look at all the evidence in the round, including witness evidence, whether the owner had a financial incentive, and whether there was a plausible innocent explanation of what had happened. In this case, having reviewed all the evidence, the constructive total loss of...