The insured sought loss of hire coverage from various US and London insurers claiming in part that its factory processing vessel was unable to process fish in Alaska because of engine damage. The court held that the insured had breached an express duty to cooperate by withholding from the adjuster’s historical financial information, thus discharging insurers of their coverage obligations under the loss of hire policy. Because the insured breached an implied duty to cooperate, the insurers were prejudiced as a result and the court denied coverage. Whilst withholding information, the insured had threatened a bad faith claim and the insured only provided the information 15 months late after the threat had been made.

The financial information was material because it was “relevant and germane” to insurers’ investigation into the actual loss arising from the claim. Due consideration had to be given to the experience of the business before the loss and the probable experience thereafter. Secondly, the insured expressly and unequivocally refused to supply material financial records for at least 15 months. Thirdly, the insured threatened administrative action and a bad faith claim if the demand was not paid in full without the Insured seeing the documents which were later produced in the ensuing lawsuit. The insured’s persistent refusal to cooperate by withholding relevant documents precluded insurers from performing their duties under the contract.

The case took place in Washington State where there is a rule that every contract contains an implied duty of good faith and fair dealing and obligates the parties to cooperate with each other so that each may obtain the full benefit of performance. This is not exactly South African law but there is a duty of good faith in relation to all insurance contracts that does not only apply to the insurer. The better way of dealing with it is to ensure that there is a clear claims cooperation clause according to which relevant information has to be provided by the insured.

United States Fire Insurance Co and Others v Icicle Seafoods Inc, case no. 22-35024 in the US Court of Appeals for the Ninth Circuit (