On 14 December 2017, in the case Buttigieg v. Argus Insurance Agencies Limited, acting in their capacity as agents for Argus Insurance Company (Europe) Limited, the First Hall Civil Hall, presided over by Mr Justice Joseph Zammit McKeon, discussed the key principle of proximate cause in insurance law and whether the damage which actually occurred was a result of the insured peril.

Mr Buttigieg (plaintiff) owned a boat which was protected by a Marine Hull policy which the plaintiff entered into with Argus Insurance Agencies Limited (defendant company). Prior to issuing the insurance policy, the defendant company requested that a survey be undertaken on the boat in question and indicated their preferred surveyor to carry out the survey from which it resulted that the boat was strong in structure and in a seaworthy condition.

Shortly after the certification on the condition of the boat was issued, the boat collided with an object which was submerged directly below the surface of the water whilst crossing over from Malta to Gozo. Upon impact, there was a substantial ingress of water which eventually caused the boat to sink, notwithstanding the plaintiff’s efforts to save it.

The plaintiff proceeded to inform the defendant company immediately after the accident took place and engaged divers to lift the boat up from the seabed and transported it back to Malta by trailer.

According to the plaintiff, the defendant company had initially assured him that since the boat had been subjected to a survey the previous summer, it would provide him with a sum equivalent to the cost of repair of the boat or negotiate an amount in the event that the boat would be declared a total loss, whilst retaining the wreck. However, the defendant company subsequently agreed to limit its refund to the damage which the boat suffered directly as a result of the impact with the submerged object rather than the damage which ensued following the collision. The defendant company strongly believed that the damage which caused the boat to sink was due to the corrosion of a number of bolts on which substantial body parts of the boat were attached, thus falling outside insured events protected in the policy in question.

The plaintiff instituted proceedings in which they asked the courts to declare that the incident in which the boat hit a submerged object and consequently sank was covered by the insurance policy which was issued by the defendant company in favour of the plaintiff, to liquidate, in accordance with the terms and conditions of the insurance policy, not only the damages suffered by the plaintiff when the boat hit the submerged object but also the damages suffered by him as a result of the ingress of water which caused the boat to sink and to order the defendant company to settle the liquidated damages.

The defendant company denied having ever assured the plaintiff that it would cover all the damages and explained that following the claim which was filed by the plaintiff it engaged the same marine surveyor who had carried out the initial inspection on the boat to examine the damage suffered by the boat. The report compiled by the surveyor resulted that the damages alone would have never led to the ingress of water which caused the boat to sink. The defendant company argued that the plaintiff’s request should be dismissed on the basis that the defendant company should not be held responsible for damages which fell outside the insurance policy.

The Court primarily examined the principles on which the insurance policy is established. An insurance policy creates a bilateral relationship between two parties whereby the insured pays a premium to the insurance company which then binds itself to indemnify the insured should he suffer any loss as a result of a risk covered by the insurance policy. The Court held that the principle element in this contract is the element of risk which is assumed by the insurance company.

On the cover provided by the insurance policy, the Court made reference to the publications of experts in insurance law. In ‘Modern Insurance Law’, John Birds held that “[i]t is not sufficient in order that an insured should recover for a loss that the loss falls within the cover provided as a matter of construction or definition. He must also show that the loss was proximately caused by an insured peril.” According to E.R. Hardy Ivamy in ‘General Principles of Insurance’, “[i]t is not necessary for the excepted cause to remain in operation down to the loss; it is sufficient that it has started the chain of circumstances leading to the loss. The whole circumstances beginning from the excepted clause constitute one accident, the intervention of the peril insured against is merely the natural and probable consequence of the expected cause.”

The Court noted that although the incident was caused when the submerged object collided with the drive which was attached to bolts beneath the boat, the defendant company argued that the drastic and grave consequences following the collision would not have taken place had the bolts been properly maintained. The Court reasoned that the condition of the bolts was to be considered as an immediate cause which could have given rise to the damage, in accordance with the principle ‘causa proxima non remota spectator’, which means that the immediate cause and not the remote cause is to be considered.

In this respect, the Court observed that the report compiled by the surveyor after the accident does not amount to conclusive proof that the bolts beneath the boat broke on impact because they were in rusty and corroded condition. The Court held that the burden to prove that an exclusion exists to preclude coverage falls on the defendant company. In light of this, he Court made reference to “Claims and the question of onus” by Frank Liebenberg and Ana Mullins wherein it was said that “often an insurer may repudiate a claim because of an exception in the policy. Almost always it will be the insurer asserting that it is not liable because of exception. The application of the fundamental principle of onus means that the burden to prove that the facts fall within the exception rests on the insurer.” In this respect, the Court confirmed that no satisfactory evidence was submitted by the defendant company to support its argument that it was not liable to indemnify the plaintiff.

In light of the above considerations, the First Hall Civil Code upheld the plaintiff’s request for compensation by the defendant company, calculated that the liquidation of damages suffered by the plaintiff amounted to €31, 880.67, and ordered the defendant company to settle the liquidated amount along with the expenses relative to the proceedings.

Dr Maria Grima is an advocate at Ganado Advocates