The Singapore Court of Appeal’s decision in Argoglobal Underwriting v OCBC [2026] SGCA 14 provides critical guidance on the limits of marine insurance claims, specifically addressing the interaction between the burden of proof, the definition of “perils of the seas,” and the strict evidentiary requirements needed to sustain a claim for a Constructive Total Loss (CTL). 

The case arose from the capsize of the jackup rig “TERAS LYZA” (the “Vessel“) during its maiden tow voyage from Vietnam to Taiwan. Oversea-Chinese Banking Corporation (“OCBC“), as the mortgagee and sole loss payee under a hull and machinery marine insurance policy, brought a claim against five appellant insurance companies (the “Insurers“). Although the High Court originally found in favour of OCBC, the Court of Appeal reversed the decision, delivering a judgement that strictly reinforces fundamental tenets of marine insurance law. 

 

Proving that the loss of the Vessel was caused by a peril of the seas

The Court of Appeal disagreed with the High Court’s finding that OCBC had discharged its burden to prove that the loss of the Vessel was caused by a peril of the seas, as defined under standard Institute Time Clauses (Hulls). The Court of Appeal highlighted that the High Court judge had conflated the rejection of the Insurers’ alternative defence theories (e.g., that the vessel was inherently unstable or a “decreptitude”) with a positive affirmation of OCBC’s primary case. 

 

The Dual Element Definition

The Court reaffirmed that under standard English marine insurance law and practice (applicable via the policy), “peril of the seas” comprises two distinct elements: 

The first element is the maritime element – the loss or damage must be “of the seas” (Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2013] 2 All ER (Comm) 465 (“The DC Merwestone“) at [31] and [34]). This element is most commonly satisfied by proving seawater ingress (Howard Bennet, Law of Marine Insurance (Oxford University Press, 2nd Ed, 2006) (“Bennett“) at para 10.26) 

The second element is the fortuity element – the loss must be an accident. The loss cannout encompass the ordinary action of winds and waves, nor can it be an inevitable consequence of the vessel’s inherent condition (Arnould: Law of Marine Insurance and Average (Sweet & Maxwell, 21st Ed 2024) (“Arnould“) at para 23-11). 

 

Direct Proof vs. Circumstantial Proof

The Court articulated two convential methods by which an insured can establish a claim on a balance of probabilities: 

The insurer can so establish a claim with direct proof. The insured can establish the precise, physical cause of the seawater ingress and demonstrate its fortuitous nature. If the exact cause cannot be pinpointed, the insurance may alternatively prove that the ingress resulted from one of several identified possibilities, provided all such possibilities are fortuitous and maritime in nature.

Alternatively, the insurer can rely on circumstantial proof. Historically designed to aid shipowners when a vessel vanishes without a trace, the law allows for a rebuttable presumption of loss by perils of the seas. However, the Court of Appeal explicitly restricted the boundaries of this presumption, ruling that it can only be invoked if two cumulative conditions are met: 

1. The vessel must be proven to be seaworthy upon sailing.
2. The vessel must have been lost in wholly unexplained circumstances. 

 

Where there is evidence of an incursion of seawater in a particular part of the vessel, the cause of which is uncertain, this presumption is not applicable (Arnould at para 20-35). 

 

OCBC’s direct proof did not address the fortuity element

OCBC had pleased that the capsize of the Vessel was caused by a combination (i) the flooding of the Vessel’s port aft thruster room and adjacent machinery space, and (ii) the effect of wind and waves. OCBC’s own expert witness had testified that prevailing wind and waves did not cause the capsize, and OCBC did not plead any cause of the flooding. The Court of Appeal Noted that the OCBC had made out only the maritime element, but not the fortuity element. Because OCBC’s expert could only theorise potential routes of water ingress but could not propound a specific, fortuitous cause, direct proof failed. 

 

OCBC’s circumstantial proof did not show loss in “wholly unexplained” circumstances

OCBC had framed the rebuttable presumption of loss by perils of the seas as: 

Where the insured vessel is seaworthy and has been lost by the entry of seawater in circumstances where seawater is not expected to enter in the ordinary course of things, there is a presumption of fact that the vessel has been fortuitiously lost by perils of the seas. 

This formulation ostensibly fuses circumstantial proof with the maritime element of direct proof. 

Where OCBC appeared to accept the rebuttable presumption as requiring an “unexplained loss” of a seaworthy vessel, OCBC scoped “unexplained loss” as including circumstances where the insured simply did not proffer a plausible explanation. This goes beyond the convential understanding that “unexplained loss” is where the insured is realistically incapable of providing an explanation.

Tracing the lineage of the term, the Court of Appeal reaffirmed the convential understanding of “unexplained loss”, such that a claimant can only rely on the rebuttable presumption where it could not determine the cause of the loss. Because the Vessel did not sink immediately but remained afloat for several weeks, the Owners had ample opportunity to conduct detailed inspections to discover the cause of the ingress but failed to do so – the circumstances were not “wholly unexplained.” The Court ruled that the presumption cannot be used as an “evidential tool of convenience” to rescue an insured from shortcomings in its own evidentiary collection. 

 

A crucial guide for claiming constructive total loss

The judgement also serves as an essential manual for both insurers and insureds regarding the rigorous thresholds required to successfully establish a Constructive Total Loss (“CTL“).

Under marine insurance law, a vessel is a CTL if it is reasonably abandoned because its actual total loss appears unavoidable, or because the costof recovering and repairing the vessel would exceed its insured value. In this case, the rig’s insured value was US$56 million. 

 

The Hearsay Obstacle and Business Records Exception

To prove that the costs of recovery and repair exceeded US$56 million, OCBC relied on a suite of “CTL Documents,” including initial cost estimates and correspondence from third-party shipyards (Triyards, Offshore Heavy Transport, and Marco Polo). However, OCBC did not call on any representatives from these third-party shipyards – the makers of these quotations – to testify at trial. 

 

The insurers objected to these documents as inadmissible hearsay. While the High Court had admitted them under the “business records exception” of the Evidence Act, the Court of Appeal forcefully disagreed. The Court clarified that third-party quotations compiled retrospectively for the purpose of assessing an insurance claim are not made in the ordinary course of routine daily business trade. Consequently, they remained inadmissible hearsay and carried no weight in proving the actual figures of estimated repair costs. 

 

Total Loss of Evidentiary Value via Scuttling

The case delivers a stark warning to insured parties against the premature destruction of evidence. After serving a Notice of Abandonment, which the Insurers rejected, the Owners scuttled the rig in deep waters off the Philippines after no scrap buyers emerged. By scuttling the vessel before a consensus was reached or a definitive, independent joint survey could confirm that repair costs exceeded the insured value, the insured effectively destroyed the primary subject matter of the dispute. Without live witness testimonies from the shipyards or a verifiable physical wreck to assess, the Court held that OCBC failed to make out even a prima facie case that the rig was a CTL. 

 

Key Takeaways for Insureds and Insurers 

The Court of Appeal’s ruling establishes clear behavioural and legal benchmarks for parties navigating maritime casualties: 

For the Insured

• Investigate Dynamically: If a vessel experiences a casualty but remains accessible (e.g., capsized but afloat), the insured cannot simply declare the cause “unknown” and rely on legal presumptions. A rigorous, proactive investigation into the exact mechanism of water ingress is required. 
• Secure Substantive Evidence for CTL: To prove a CTL based on commercial unfeasibility, an insured must present legally bulletproof evidence of repair costs. Relying on written yard quotations without securing the live or deposition testimony of the entities responsible for the estimates risks having the entire financial framework of the claim thrown out as inadmissible hearsay. 
• Preserve the Subject Matter: Scuttling or disposing of a vessel before a claim is legally settled or before an exhaustive, undisputed condition report is completed severely impairs the insured’s ability to discharge its burden of proof. 

 

For the Insurer

• The Power of Inaction on Alternative Theories: The judgement reaffirms that insurers do not bear the burden of proving an alternative theory of loss (such as wear and tear or unseaworthiness). An insurer can succeed simply by showing that the insured’s evidence is insufficient to prove a fortuitous peril on a balance of probabilities. 
• Strict Adherence to Policy Conditions: Insurers are fully entitled to hold insured parties to strict compliance regarding the presentation of original, non-hearsay evidence when validating multi-million-dollar cost estimates. 

 

Conclusion 

Argoglobal v OCBC reinforces the conservative, predictable nature of marine insurance law in Singapore. It strictly confines the legal presumption of “perils of the seas” to true maritime mysteries where a vessel is lost without a trace. Where a casualty leaves behind physidcal evidence and surviving data, the burden remains squarely on the insured to systemactially investigate and prove fortuity, while ensuring that any subsequent claim for a Constructive Total Loss is anchored in rigorous, legally admissible financial evidence. 

 

Prepared by: