What Is Your Ship Worth? - 'Agreed Value' Policies In Marine Insurance

Marine insurance policies can either specify an agreed value or

specify that a value be determined when a claim is made. A recent

New Zealand case serves as a reminder of the importance of using

correct terminology in an insurance policy, and of the need to

check and understand the wording when the risk is placed.

Background

In Vero Insurance NZ Limited v Posa (Unreported, High

Court, Hamilton, Asher J, 6 August 2008) the question of whether a

policy was for an agreed value arose in relation to a wider issue

of material non-disclosure. In 2005 Mr Posa was storing a

pleasurecraft at his home when it was destroyed by a fire. The

origin of the fire was identified as a battery that was attached to

the vessel's motor. The insurer investigated the incident and

in doing so uncovered what it perceived as a degree of irregularity

on the part of the assured. It declined the claim on a number of

grounds. One of the grounds was for a failure to disclose material

information at previous renewals of the policy; in particular,

failing to tell the insurer about unsuccessful attempts to sell the

vessel for less than the going market rate. Whether the disclosure

was material in part turned on whether the policy was an agreed

value policy.

Marine Insurance Act 1908

The case relied on the interpretation of the New Zealand Marine

Insurance Act 1908 (MI Act). The New Zealand MI Act is in all

material respects identical to the Australian and English Acts.

A marine policy may be valued or unvalued (in New Zealand see

section 28(1) of the MI Act). A valued policy is one that sets out

the agreed amount in advance, whereas an unvalued policy does not

specify the value of the subject matter and leaves the insurable

value to be subsequently ascertained (see section 29).

Section 28 of the New Zealand MI Act provides:

(2) A valued policy is a policy which specifies the agreed

value of the subject-matter insured.

(3) Subject to the provisions of this Act, and in the

absence of fraud, the value fixed by the policy is, as between the

insurer and assured, conclusive of the insurable value of the

subject intended to be insured, whether the loss is total or

partial.

The Court's findings

In Posa, the insurer relied on the policy Schedule

stating that the 'sum insured' was $105,000 and reference

to an 'agreed value' in the policy definitions, as grounds

for the policy being for an agreed amount. The following featured

in the policy and supporting documents:

The policy Schedule...