Category: Insurance case law · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed June 2026
Supreme Court ruling on safe-port warranties and co-insurance: a split-decision majority held that no breach of the safe-port warranty arose where the danger combined two abnormal occurrences, and (separately) that a co-insured owner could not be sued in subrogation by hull underwriters.
The Ocean Victory was a Capesize bulk carrier owned by Ocean Victory Maritime Inc and demise-chartered to Ocean Line Holdings Ltd. The vessel was time-chartered down the chain to China National Chartering Co Ltd (Sinochart) and sub-time-chartered to Daiichi Chuo Kisen Kaisha. In October 2006 the vessel was directed under the sub-charter to load iron ore at the port of Kashima, Japan.
While the vessel was berthed at Kashima, a severe storm developed. The Kashima fairway — the narrow channel by which vessels enter and leave the port — became dangerous because of long waves caused by swell from the open sea, while at the same time a powerful northerly gale made it impossible to remain safely at the berth. The master, attempting to leave the port under instructions from the local pilots and port authorities, was unable to navigate the fairway safely. The vessel broke her back and became a total loss. The wreck was eventually removed at substantial cost.
The hull-and-machinery underwriters (led by Gard Marine and Energy Ltd) paid the demise charterers/owners for the loss under the hull policy and took an assignment of rights, asserting subrogation against the time charterers (Sinochart) and sub-charterers (Daiichi) for breach of the safe-port warranty. The proceedings traversed the entire charter chain.
A central feature of the case was the hull policy, which was effected jointly for the benefit of the registered owners, the demise charterers and (subject to argument) the time charterers — raising questions about whether underwriters could pursue subrogated claims against co-assured parties.
At first instance, Teare J found that there had been a breach of the safe-port warranty. The Court of Appeal reversed, holding there was no breach because the combination of the long-wave swell and the storm was an abnormal occurrence. The Supreme Court heard the further appeal.
The Supreme Court considered three principal issues:
(1) Whether Kashima was an unsafe port for the purposes of the safe-port warranty, having regard to the proper test in The Eastern City [1958] 2 Lloyd’s Rep 127: was the danger an “abnormal occurrence” or a characteristic of the port?
(2) Whether the existence of joint insurance arranged for the benefit of owners and demise charterers precluded the demise charterers (and through them their subrogated hull underwriters) from claiming against the time charterers for breach of the safe-port warranty — the “co-insurance” question.
(3) The proper limit of liability under the Convention on Limitation of Liability for Maritime Claims 1976.
The Supreme Court allowed the appeal by a 3:2 majority on the safe-port issue and held that there had been no breach of the safe-port warranty. Lord Clarke gave the leading judgment, with which Lord Sumption and Lord Hodge agreed. Lord Mance and Lord Toulson dissented.
The majority held that the combination of long-wave swell entering the Kashima fairway and the simultaneous gale at the berth was an “abnormal occurrence” within the test in The Eastern City. The port did not have a permanent or characteristic feature that rendered it unsafe; rather, two unusual weather events had combined in an exceptional way. The safe-port warranty was therefore not breached.
On the second (and equally important) issue, the Supreme Court held — Lord Toulson and Lord Mance dissenting on this point as well — that the joint insurance arrangement precluded the demise charterer from recovering against the time charterer. The Court reasoned that where parties have agreed that an insurance policy will be the exclusive means of compensation for a particular loss, the insurer who pays cannot sue a co-assured by subrogation, and the relevant assured cannot sue another co-assured for the same loss. The terms of the demise charter and the structure of the joint policy indicated such an agreement here.
On limitation, the Court considered the application of the 1976 Convention but the outcome was not determinative given the safe-port finding.
There are two distinct ratios. First, the safe-port warranty is breached only where the danger is one to which the port is exposed in the ordinary course; if the danger arises from an abnormal combination of events that are themselves unusual, the warranty is not breached. The test in The Eastern City remains authoritative.
Second, where owners and demise charterers (and any other relevant parties) have arranged joint or composite insurance and the structure of their contract indicates that the insurance is to be the exclusive fund for losses of the type insured, an underwriter who has paid cannot pursue a subrogated recovery against a co-assured. Equally, the assured itself cannot sue the co-assured. This is a matter of construction of the underlying contract (here, the demise charter) and the policy together.
The Ocean Victory is one of the most important Supreme Court decisions on marine insurance and charter-party law in recent decades and is unavoidable in any discussion of safe-port warranties, hull subrogation and co-insurance structures.
On co-insurance and subrogation, the case clarifies that the existence of joint or composite insurance is not in itself sufficient to bar subrogation: there must be a contractual arrangement, properly construed, by which the parties agreed the insurance would be their exclusive remedy. This has significant implications for the drafting of demise charters, bareboat charters, construction-all-risks (CAR) policies, energy package policies and any other arrangement involving multiple insured interests. The decision is now routinely cited in non-marine co-insurance disputes including in construction, offshore energy and property cases.
On safe-port law, the case is the leading modern authority and is essential reading for any dispute arising out of vessel casualties at port. It tightens the definition of “unsafe port” and provides comfort to charterers facing claims following abnormal weather or other extraordinary events.
For marine hull underwriters and P&I clubs, the decision sharply limits the scope for subrogated recoveries up the charter chain where co-insurance has been arranged, which has knock-on effects on hull premium rating, recovery prospects and the design of bareboat-charter insurance covenants. The case is also frequently raised in argument about the interaction between contractual exclusive-remedy regimes and tort-based or contribution claims.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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