MS Amlin Marine NV v King Trader Ltd: Policy interpretation guide

The Court of Appeal handed down judgment on 5 November 2025 in MS Amlin Marine NV v King Trader Limited [2025] EWCA Civ 1387, upholding declarations that a "pay first" clause in a marine liability insurance policy remained enforceable despite the charterer's insolvency and statutory transfer of rights under the Third Parties (Rights against Insurers) Act 2010.

While the decision addresses marine-specific issues, the judgment provides useful guidance applicable beyond marine policies, including dicta on reconciling apparently conflicting policy terms and the enforceability of standard market clauses in commercial insurance.

Factual background

MS Amlin Marine NV issued a marine liability policy to Bintan Mining Corporation (the Charterer) on 28 March 2018. King Trader Ltd time-chartered the vessel Solomon Trader to the Charterer, and in February 2019 the vessel grounded in the Solomon Islands. The Owner and Korea Shipowners' Mutual Protection & Indemnity Association obtained an LMAA arbitration award in Hong Kong on 14 March 2023 against the Charterer exceeding US$47 million, but the Charterer was wound up in the BVI on 25 March 2021 and in London on 24 April 2024.

The policy contained a pay-first clause at clause 30.13 providing:

"It is a condition precedent to the Assured's right of recovery under this policy with regard to any claim by the Assured in respect of any loss, expense or liability, that the Assured shall first have discharged any loss, expense or liability."

The Insurer sought declarations that this clause was enforceable and survived the transfer of rights under the 2010 Act.

The Marine Insurance context

Section 9(5) of the 2010 Act renders pay-first clauses unenforceable by providing that transferred rights "are not subject to a condition requiring the prior discharge by the insured of the insured's liability".

However, section 9(6) provided that in contracts of marine insurance, section 9(5) "applies only to the extent that the liability of the insured is a liability in respect of death or personal injury" , thereby excluding non-personal injury marine insurance policies from the statutory override. 

Claims handlers in other insurance classes should note that section 9(5) applies without exception to non-marine policies, rendering pay-first clauses unenforceable following insolvency and statutory transfer.

Broader guidance: Reconciling apparently conflicting policy terms

The Court's analysis of whether the pay-first clause contradicted the insuring clause provides guidance for coverage assessment across insurance classes. The insuring clause provided that the Insurer "shall indemnify the Assured against the Legal Liabilities ... arising from Events occurring during the Period of Insurance", while hierarchy clause 25 provided that terms in each Class of Insurance "shall prevail over the general terms and conditions in the event of a conflict between them".

The Court adopted Males LJ's summary from The Nounou that there is a distinction between a printed term which qualifies or supplements a specially agreed term and one which transforms or negates it, with the question being whether the two clauses can be read together fairly and sensibly so as to give effect to both. The Court held that the pay-first clause does not negate the insuring clause but qualifies and supplements it in a significant way; the indemnity fell due when the award was made but could not be enforced until the insured had paid the claim.

This reasoning applies directly to property damage and liability insurance. Claims handlers should distinguish between clauses that merely qualify coverage (such as excess provisions, notification requirements, or claims cooperation clauses) and those that fundamentally negate the insuring promise. The Court concluded that pay-first clauses do not emasculate the insuring clause or deprive it of all practical effect, because the insuring clause has full effect whenever the insured discharges a judgment or award. The same analysis applies when assessing whether conditions precedent, claims control provisions or subrogation clauses conflict with the primary insuring obligation in property damage or liability policies.

The onerous clause doctrine: Commercial context

The onerous clause doctrine provides that where a particularly onerous or unusual term is contained in one party's standard terms and the other contracting party does not actually know of that term, it will not bind the other party unless the party relying upon it shows the clause was fairly and reasonably brought to the other party's attention.

The Court noted at paragraphs 87–88 and 91 that the questions of “how onerous” the clause needs to be and “what amounts to fair and reasonable notice” are “questions of fact and degree”, emphasising the “high threshold” needed to engage the onerous clause doctrine. Males LJ noted that:

"it is difficult to see how this doctrine could ever apply to a contract of marine insurance in which the insured was represented, as will usually be the case, by specialist brokers who can be expected to familiarise themselves with the terms available in the market"

and ventured the doctrine “could never be applicable in any normal case where a party has its own professional broker or adviser acting for it in the transaction”, restating the principle that contracting parties are deemed to have read and understood the policy terms.

This holding has significant implications for commercial property damage and liability claims. Claims handlers can rely on standard market terms (including excess provisions, claims notification deadlines, subrogation cooperation requirements, and claims control clauses) without special highlighting, provided the insured is commercially sophisticated or broker-represented.

The doctrine applies to contracts which a reasonable party would not be expected to read carefully from beginning to end, making it difficult to apply to marine insurance, where insureds are typically represented by specialist brokers. The same logic applies to commercial property and liability placements.

Practical takeaways for indemnity assessment

First, when assessing whether policy terms conflict, hierarchy clauses do not automatically invalidate provisions in general terms and conditions. The Court confirmed that clauses can be fairly and sensibly read together, because they qualify rather than negate the primary obligation to indemnify. In property damage policies, this means excess clauses, betterment provisions and depreciation adjustments typically qualify rather than contradict the insuring clause.

Second, market prevalence matters when determining whether a clause is onerous. Claims handlers defending coverage positions should document that challenged terms reflect standard market practice in the relevant insurance class, particularly for commercial risks placed through brokers. If you would like to discuss the topics above in detail, contact our insurance coverage disputes and policy interpretation team to learn more.