We are grateful to Waltons & Morse for their recent briefing in respect of a claim made by an Assured for the total loss of a superyacht that was over-valued in a hull policy.

The facts are as detailed in the briefing, but we are concentrating on two main aspects: the Assured over-valued the yacht in question; and did not disclose that they were aware the market value was substantially lower than the insured value.

There are two aspects that should be drawn to the attention of Assureds:

1.  Ensuring the sum insured is as accurate as possible and, in the event there is a difference between the sum insured and market value, disclosing this to underwriters prior to commencement of the policy; and

2.  The benefits of having the new Insurance Act incorporated in to your policy, particularly in relation to the ‘fair presentation’ of the risk and shifting some of the burden to underwriters to utilize their own knowledge of the risk at the time of writing it.

Putting aside the claim was in respect of a superyacht, valuations can be difficult to accurately determine without actually putting a vessel on the market.  However, under existing English law, the Assured must determine the commercial value and insure accordingly, or advise their insurer where there is a difference between the market and insured values.

The further complication is that values are only looked at, generally, at the time of a claim (a salvage, GA or CTL will always give rise to a market valuation being taken, and that might be at the end of a policy year, almost 12 months after the Assured last assessed the value for insurance) or at renewal.

As has always been the case, disclosure is key (and was so in this case) – underwriters can and will insure vessels for values in excess of their sound commercial value where there is a good reason to do so, but they must be made aware of that difference at the outset.  Furthermore, where an Assured becomes aware of a substantial change in the value (either up or down) during the policy year, Assureds should advise their underwriters and note it on the Policy.

Ultimately, where an inadvertent over-valuation occurs, the existing Act is out-dated in our view as it allows underwriters to avoid the policy totally, not apply the more proportional remedy the new Act offers (although, it should be noted that this only protects an Assured who has mistakenly over or under-insured, not an Assured seeking to defraud insurers).

The new Insurance Act provides protection to Assureds who have incorrectly valued their assets as Waltons & Morse have advised.  As our previous blog on the Insurance Act advised, we are already incorporating the new Act in to policies for the benefit of our clients.

Please contact us to discuss how we can assist with your insurances.