A EUR 13m agreed value on a EUR 8m yacht voided the whole policy

What she was insured for, and what she was worth

The Riva 115 Galatea caught fire at her mooring in Athens Marina in the early hours of 3 December 2011 and was damaged beyond economic repair. She was covered on an agreed value of EUR 13m. Before the policy went on risk, her owner's managers were holding a market valuation of roughly EUR 7m to EUR 8m and had already put her up for sale asking EUR 8m.

Neither the valuation nor the asking price reached the underwriter. In Involnert Management v Aprilgrange, Mr Justice Leggatt held that this was a material non-disclosure which induced the policy, and that the insurers were entitled to avoid it. The total loss claim failed outright.

An agreed value is a statement, not a preference

Owners tend to treat the agreed value as a dial. Round it up, pay a little more premium, sleep better. The judgment treats it as something the underwriter relies on, which means a valuation sitting in a manager's file at half the insured figure is a fact the insurer had a right to see before writing the risk.

The court accepted the over-valuation had happened through oversight rather than design. It made no difference to the outcome. The defence was complete and the claim was worth nothing.

Valuation is looser than owners assume

The same judgment refused to accept that yachts depreciate at any typical rate, and rejected the percentage-of-purchase-price reasoning one expert had leaned on. Comparable sales survived as a method, but only with the sample left intact, adjusted for builder and condition, and with the discount from asking price explained rather than assumed.

That cuts both ways for an owner. The figure in the insurance file and the figure a broker quotes are both estimates in an illiquid market. The moment they disagree by a wide margin, the gap stops being a technicality and becomes the insurer's argument.