Cruise cancelled following fire damage

An Assured operated cruise vessels in the Mediterranean and was insured with Transmarine for net loss of earnings.

The Assured had acquired a second-hand vessel, which had been extensively modified and refitted and was due to enter service. Immediately prior to commencing her first cruise for the Assured, a major fire occurred affecting the vessel’s main power generation plant. This resulted in the cancellation of two 10-day cruises and a re-scheduling of one further cruise.

Being a vessel new to the Assured, a financial exercise had to be undertaken to determine the Assured’s claim for loss of earnings. Whilst the actual ticket sales, upon which the charter income was based, were known, the additional loss of revenue from onboard sales needed to be determined. This was based upon historical data provided in respect of similar cruises together with details of income achieved during the first few cruises following completion of the repairs.

In addition to the ticket/charter income and other revenue lost as a result of this casualty, the shipowner was also liable, under the terms of his contract with the tour operator, for compensation payments made to passengers for alterations to or cancellation of their holidays. The holiday cruise/tour operator had, within their terms and conditions, a fixed tariff of compensation such that payments were made to clients in respect of delays, cancellation or alteration to their holidays. This was on a sliding scale, within the range of £10 to £100 per person, depending on the number of days notice given to the client regarding the changes to their holiday.

Transmarine had agreed to cover the shipowner’s liability for these compensation payments when the policy had been taken out and accordingly indemnified the Assured for these plus his own net loss of earnings.