The Time Within Which To Commence A Marine Insurance Claim

The Time Within Which To Commence A Marine Insurance Claim.

OLA ALOKOLARO, JACOB FAMODIMU & LAZARUS KALU

BACKGROUND

A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.[1]Marine insurance refers to that branch of insurance concerned with the insurance of ships as well as their freight and cargo against maritime risks or perils of the sea. Marine insurance therefore enables shipowners and the owners and buyers of goods to operate their respective businesses while relieving themselves of the burdensome financial consequences of their properties being lost or damaged as a result of perils of the sea.

Where a dispute arises between an insurance company and a shipowner or cargo owner in respect of a marine insurance policy, the aggrieved party needs to commence an action in court within the time prescribed by law, otherwise the aggrieved party may lose the right to sue. The case under review examines the dispute as to the time within which to institute a marine insurance claim in Nigeria. It also highlights the implication of the decision for the maritime industry.

BRIEF FACTS OF THE CASE

In Liverpool and London Steamship Protection and Indemnity Association Limited V. M/T. Tuma & Ors,[1]the Appellant instituted an action against the Respondents at the Federal High Court, Lagos in 2006 claiming the sum of US$517,808.56 as the total outstanding amount and interest owed by the Respondents to the Appellant as insurance premium under various marine insurance policies in respect of the 1^stRespondent’s vessel, MT Tuma. The Appellant alleged that the amount represented the total outstanding amount and interest due from the Respondents as a result of unpaid premium calls on the various insurance covers provided for the vessel. The insurance covers were terminated in October 2001.

The Respondents filed Notice of Preliminary Objection seeking to dismiss the Appellant’s suit on the ground that the action was statute-barred as the action was not brought within three (3) years as required by section 18 of the Admiralty Jurisdiction Act, 1991. The Federal High Court in its ruling upheld the preliminary objection and dismissed the Appellant’s action. The Appellant, being dissatisfied with the ruling of the trial court, appealed to the Court of Appeal. The Court of Appeal dismissed the appeal and affirmed the decision of the Federal High Court. The Appellant further appealed to the Supreme Court and the issue presented for determination of the Supreme Court was whether, having regard to the provisions of section 18 of the Admiralty Jurisdiction Act, 1991, the Appellant’s action was incompetent having been filed after the three (3) years period prescribed by law. The marine insurance was terminated in 2001, whilst the action was brought in 2006.

The Appellant argued that the nature of the claim presented before the trial court was a simple contract of insurance. Even though the subject matter of the insurance was a vessel, both the State High Court and the Federal High Court have jurisdiction to determine the suit and the Appellant contended that the Appellant’s claim could have been initiated at the State High Court where the Limitation Laws of Lagos State would have governed the time within which the claim is to be brought. Under the Limitation Laws of Lagos State, a claim for breach of a simple contract must be instituted within a period of six

(6) years from the accrual of the cause of action. The Appellant urged the Court to apply the six (6) years period provided by the Limitation Laws of Lagos State instead of the three (3) years period prescribed by the Admiralty Jurisdiction Act. On their part, the Respondents argued that the Appellant’s claim at the trial court clearly shows that the action is for an insurance premium arising from an insurance cover made in respect of the 1^stRespondents’ vessel, MT Tuma and as such, the action pertains to a breach of a marine insurance which falls within the exclusive jurisdiction of the Federal High Court. The Respondents further argued that the insurance contract between the parties is not just a simple insurance contract but a marine insurance contract being that the subject matter in the claim is what differentiates it from other insurance claims, making the claim subject to the provisions of the Admiralty Jurisdiction Act.

The Supreme Court held that the claim was not a simple insurance contract but a marine insurance contract and that the action filed by the Appellant was incompetent as same was filed after the expiration of the limitation period of three (3) years prescribed by section 18 of the Admiralty Jurisdiction Act, 1991.

 BASIS OF THE COURT’S DECISION

In arriving at its decision, the Supreme Court referred to sections 2(3)(q) and 18 of the Admiralty Jurisdiction Actwhich provide as follows:

2(3)(q)              “A reference in this Act to a general maritime claim is a reference to a claim for an insurance premium, or for a mutual insurance call, in relation to a ship or goods or cargoes carried by a ship.”

“18(1)               “A proceeding may be brought under this Act on a maritime claim or on a claim on a maritime lien or other charge, at any time before the end of … a period of 3 years after the cause of action arose.”

The Supreme Court also referred to section 251(1)(g) of the Constitutionwhich confers on the Federal High Court the competence to entertain any admiralty matters in Nigeria to the exclusion of all other courts in the country.

The Supreme Court held that by virtue of section 2(3)(q) of the Admiralty Jurisdiction Act 1991, the Appellant’s claim which was for payment of insurance premium fell within the ambit of a general maritime claim for which jurisdiction is conferred only on the Federal High Court. It did not fall within the scope of simple insurance contract as contended by the Appellant. The claim was for an insurance premium arising from an insurance cover made in respect of the 1^stRespondent’s vessel. Having found that the Appellant’s claim fell within the exclusive jurisdiction of the Federal High Court, Oseji, J.S.C. held that

“Now having found that the time limit for the commencement of the action at the trial court under section 18(1) of the Admiralty Jurisdiction Act 1991 is 3 years from the date the cause of action arose, a perusal of the record of appeal with particular reference to the writ of summons and statement of claim show that the cause of action arose on the 19^thOctober, 2001 when the insurance cover was terminated. However, the suit at the trial court was not commenced until the 5^thof December 2006. That is about 5 years and two months, a period clearly outside the 3 years limitation period prescribed by Section 18(1) of the Admiralty Jurisdiction Act 1991. I therefore hold that the appellant’s suit filed in the lower court on the 5^thDay of December 2006 is statute barred.”

The Court further held that if the Appellant’s claim had fallen under a simple insurance contract, and not marine insurance, then the six (6) years limitation period prescribed by the Limitation Law of Lagos State would have applied.

COMMENTARY

The decision under review clarifies the position that marine insurance contracts do not fall within the category of simple insurance contracts. A claim in respect of a marine insurance falls within the exclusive jurisdiction of the Federal High Court and is subject to the three (3) years period of limitation within which to commence an action. On the other hand, an insurance contract, not being a marine insurance contract, is regarded as a simple contract in respect of which the Federal High Court has no jurisdiction. A claim for breach of a simple insurance contract is subject to the six (6) years limitation period prescribed by the Limitation Law.

This position differs from other common law jurisdictions. For instance, the English Court regards a claim for breach of marine insurance as a claim on simple contract.[2]Section 5 of the Limitation Law of England provides that an action founded on simple contract shall not be brought after the expiration of six (6) years from the date the cause of action arose. Accordingly, claims for breach of marine insurance in England is subject to six (6) years limitation period.

Insurance companies, shipowners, cargo owners, charterers and other maritime industry stakeholders are to note that marine insurance claims in Nigeria must be commenced at the Federal High Court within three (3) years from the date the cause of action arose.

For further enquiries, please contact:

OLA ALOKOLARO
ola.alokolaro@advocaat-law.com

JACOB FAMODIMU

jacob.famodimu@advocaat-law.com

LAZARUS KALU

Lazarus.Kalu@advocaat-law.com

[1][2021] 10 NWLR (Pt. 1784) 347

[2]Chrandris v. Argo Insurance Co. Ltd. (1963) 2 Lloyd’s Report 65. See also“Limitation periods for making an insurance/reinsurance claim” available at https://uk.practicallaw.thomsonreuters.com/8-518-2251?transitionType=Default&contextData=(sc.Default)&firstPage=true

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