The First Hall Civil Court presided over by Mr Justice Joseph Azzopardi in the case ‘AJD Tuna Ltd v Citadel Insurance plc’ held, among other things, that the insurance company was not bound to reimburse the damages once the assured had taken unnecessary risks.

The company AJD Tuna Ltd was the owner of a boat, Pippo II, which was insured by Citadel Insurance plc. On December 9, 2001, the boat was berthed at Xemxija Bay. Its ropes broke in bad weather and it was grounded on the rocks.

The boat started to sink. There was also a risk of pollution if the fuel from its tanks contaminated the sea, which would have caused damage to the fish farms in the vicinity.

The director of the company notified the insurance company.

Company director Anthony Azzopardi tried to save the boat from sinking. Temporary repairs were made to the underwater cracks and seawater was pumped out of the boat. The company also tried to take the boat to the closest viable port, but in spite its best efforts, the boat still sank in rough weather.

The company subsequently requested the insurance company to reimburse it all damages suffered.

Citadel Insurance, on the other hand, refused, stating that the company had acted negligently.

Faced with this situation, the company proceeded to file legal proceedings against the insurance company.

It asked the court to declare that the sinking of the boat as well as the damages were covered under the policy of insurance; to liquidate the damages, if need be by appointing an expert; and to condemn the insurance company to pay the damages which it liquidated.

Citadel Insurance was not obliged to pay for the damages because the company had failed to carry out its obligations under the policy

In reply, Citadel Insurance contested the legal proceedings. It said that it was not obliged to pay for the damages because the company had failed to carry out its obligations under the policy. It alleged that the company had acted negligently in moving the boat from Xemxija to Mġarr, in such weather conditions.

The court considered that this legal action was based on a contract of insurance between the parties.

The insurance policy stated:

“The underwriters agree to indemnify the assured for any sum or sums which the assured shall become legally liable to pay and shall pay by reason of interest in the insured vessel and arising out of accidents occurring during the currency of this insurance in respect of

• Loss of or damage to any other vessel or property whatsoever;

• Loss or personal injury or illness including payments made for salvage caused on or near the vessel or any other vessel;

• Any attempt or actual raising, removal or destruction of the wreck of the insured vessel or the cargo thereof or any neglect or failure to raise, remove or destroy the same.”

At issue was whether the company was directly responsible for the damages as a result of its own negligence.

The court noted that the company had made temporary repairs and while it had tried to take the boat to Gozo, it had started to take in a lot of water and sunk.

Citadel Insurance maintained that the company had taken unnecessary and unreasonable risks by deciding to take the boat to Gozo. The fact that the boat had sunk in deep water prevented any investigation, to its prejudice. If the boat had sunk in shallow waters the loss would have been much less, it said. Citadel Insurance explained that it had not been safe to move the boat to Gozo, and in this respect it was not obliged to pay anything.

The court reproduced the conclusions of the technical expert.

“The referee reported that the boat suffered cracks under its waterline. It hit the rocks and damaged its keel. A part of its keel was missing. The keel of the vessel was its backbone, and constituted an important element in making the boat safe and staunch. The cracks were not properly repaired and it was well possible that they would reopen by structural movements of the boat.

“The water seeping into the boat could slosh about, losing the stability of the boat and risking it to capsize.

“A part of the keel was missing. There was also the risk of the boat splitting in half in rough weather. To reduce stress on the structure, its load had to be substantially reduced.

“The trip to Gozo should have been attempted in calm weather under tow. It was not clear whether the Civil Protection Department had been notified.

“The referee did not consider that the trip to Gozo was a correct decision.

“The insurance company should have advised what steps should have been taken in this case. The owners were aware of the risk that the boat could sink, and should have followed the advice of the insurance company. It would have been preferable if Civil Protection had been contacted. They would have covered the boat with protective booms in order to avoid the spread of diesel fuel in case the vessel sank.

“The court expert concluded that the company had been negligent by choosing to take the vessel to Gozo in such adverse weather conditions and in its present condition.”

The insurance company had failed to provide expert opinion at the time of the incident, and this lapse would be reflected in its decision on the costs, pointed out the court.

The court adopted the technical expert’s conclusions as its own.

In Giswarda Bugeja v Emanuele Muscat et, decided on June 23, 1967, it was held that although the court was not bound to follow the referee’s report, this report should not be set aside without reason, especially if the other party did not request an additional referee: re Josephine Micallef v Louis Zammit dated October 11, 2010, which was confirmed by the Court of Appeal on October 31, 2014.

For these reasons, on October 7, 2015, the First Hall Civil Court gave judgment by accepting the pleas of Citadel Insurance that it was not liable to pay for the damages, dismissing AJD Tuna Ltd’s claims.

Karl Grech Orr is a partner at Ganado Advocates.