Insolvency at Sea (again)—Court of Appeal upholds ‘pay first’ clauses in marine insurance policy (MS Amlin v King Trader)
Commercial analysis: In MS Amlin Marine NV (on behalf of MS Amlin Syndicate AML/2001) v King Trader Ltd & others, the Court of Appeal dismissed the owner’s and P&I club’s appeal and upheld the Commercial Court’s declarations that a ‘pay first’ clause in a charterers’ liability policy defeated a direct claim under the Third Parties (Rights against Insurers) Act 2010 TP(RAI)A 2010. The court (Vos MR, Lord Justice Singh and Lord Justice Males) rejected arguments that the clause conflicted with the insuring clause, that it was ‘onerous’ and insufficiently signposted under the so‑called ‘red hand’ rule, and that it was not incorporated. It reframed the red hand rule as the ‘onerous clause doctrine’, emphasising a high threshold before commercial standard‑form terms will require special notification—particularly where the insured has specialist brokers. For practitioners, the case gives clear guidance on: (i) reconciling alleged inconsistencies, (ii) when hierarchy clauses bite, and (iii) how and when the onerous clause doctrine applies in negotiated commercial insurance. Written by Tom Bell, barrister at Gatehouse Chambers.