Perils of the Seas and Constructive Total Loss: Lessons from Agroglobal v OCBC [2026] SGCA 14

Vessels are from time to time lost or damaged at sea during the course of their voyages, often giving rise to claims under marine insurance policies. Following a five‑year litigation journey, the insurers of a capsized vessel successfully resisted a substantial claim brought by the mortgagee bank as co-assured under a Hull & Machinery (“H&M”) insurance policy. In this update, we examine the Court of Appeal’s decision in Agroglobal Underwriting Asia Pte Ltd and other v Oversea-Chinese Banking Corp Ltd [2026] SGCA 14 – a decision of note to insureds and insurers dealing with claims for loss caused by perils of the seas and constructive total loss. 

Background

A jack‑up rig, TERAS LYZA, (the “Vessel”) capsized during a wet tow voyage from Vietnam to Taiwan. It was common ground that the Vessel capsized due to seawater ingress. The Vessel did not sink and remained afloat for a number of weeks. During that period, the vessel was inspected but no steps were taken to investigate the cause of the seawater ingress. The Vessel was eventually scuttled by the shipowner and no offer for its scrap value was reportedly forthcoming.¹ 

OCBC (the “Bank”), the mortgagee and co-assured, claimed under the H&M policy. In the High Court, the Bank prevailed. The Court of Appeal, however allowed the insurers’ appeal and reversed the High Court’s decision. We focus on two particular issues addressed by the Court of Appeal:

1. Whether the Bank had discharged its burden in proving that the loss was caused by perils of the seas.
2. Whether the Bank had established that the Vessel was constructive total loss (“CTL”).

Establishing that the loss was caused by perils of the seas

In establishing a claim under an insurance policy, the insured bears the burden of proof to establish loss by an insured peril. Where the insured claims that the loss was occasioned by perils of the seas, the insured must prove so on a balance of probabilities. 

The Court of Appeal set out the two conventional ways in which an insured may discharge its burden of proof:

1. Direct proof: An insured may directly prove that the loss of the vessel was caused by a peril of the seas by putting forward a cause for the loss of the vessel which is attributable to perils of the seas.² This would include where the insured relies on inferential reasoning and elimination of possibilities to bolster its case.³
2. Circumstantial proof: An insured may resort to circumstantial proof and rely on a rebuttable presumption that the vessel was lost by perils of the seas, if it can prove that the vessel was seaworthy and that it was lost in wholly unexplained circumstances. In doing so, an insured need not propound a cause for the loss of the vessel.⁴

While it was common ground that the Vessel capsized due to seawater ingress, the Bank did not advance any explanation for the cause of the seawater ingress. Although an underwater inspection of the Vessel was conducted, the resulting reports were confined to recording the extent of the physical damage observed. Crucially, no steps were taken to investigate or ascertain the cause of the seawater ingress. No evidence was adduced at trial suggesting that the cause of the seawater ingress could not be ascertained.

On the first method of direct proof, the Bank first argued that where a vessel has been lost by the ingress of seawater, there is no requirement on the insured to prove what occasioned the ingress as long as fortuity can be demonstrated. 

The Court of Appeal disagreed. As a matter of direct proof of loss, an insured is required to propound a cause (or causes) of seawater ingress to prove the fortuity. It must put forward an explanation for the seawater entry which was intrinsically sufficiently probable and not attributable to the general debility of the vessel.⁵ The Bank, however, did not propound a cause of the seawater ingress. While the Bank’s expert testified that there was unexpected flooding in the hull compartments, she did not offer an opinion on the likely causes of seawater ingress.⁶

In the alternative, on the second method of circumstantial proof, the Bank sought to rely on the rebuttable presumption that the loss was caused by a peril of the seas. According to the Bank, where the vessel is seaworthy and has been lost by 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 fortuitously lost by perils of the seas. 

The Court of Appeal rejected the Bank’s position. The Court of Appeal distinguished between a situation where the insured is realistically incapable of providing an explanation for the loss (i.e., an “unexplained loss”) and where the insured simply fails to put forward a plausible explanation – with the rebuttable presumption applying only in the former situation. This is because the presumption is intended to assist an insured shipowner who is unable to identify the actual cause of the loss to discharge its burden of proof. Where a vessel is a lost at sea without a trace, the shipowner would not have the means to prove the cause of the loss. In such a situation, the law allows the shipowner to rely on the presumption that the loss was due to “perils of the seas” provided that the vessel is otherwise seaworthy, thus dispensing with any need to advance a cause as to the seawater ingress.⁷ Where the loss is capable of being explained, the presumption cannot be invoked, and it is insufficient for the shipowner to claim that the cause of the seawater ingress is unknown. In other words, the insured must not be in a position to investigate or determine the cause of the loss (due to a deficit of direct evidence) before the presumption may be invoked. The presumption should not be used to overcome evidential shortcomings arising from the manner in which the insured has chosen to prove its case. 

While the Vessel was, on balance, seaworthy at the commencement of the voyage, the Bank failed to show that the Vessel was lost in wholly unexplained circumstances. The Vessel had only capsized and did not sink until sometime later when it was scuttled. Given the apparent availability of the Vessel for inspection, the Court of Appeal was not satisfied that the cause of seawater ingress was not capable of being explained. It did not appear that any effort was made to determine the cause of the seawater ingress. The dive inspection report, for example, appeared to be an inspection to merely record the Vessel’s condition as opposed to an investigation of the cause of seawater ingress. Accordingly, the presumption could not apply.

It was suggested in the course of argument that the Bank was merely the mortgagee as opposed to the Vessel owner and was therefore not in a position to undertake the investigation. The Court of Appeal, however, pointed out that the mortgagee stands in the shoes of the shipowner in its claim under the marine insurance policy and there was simply no basis to apply a different standard. 

Establishing that the Vessel was a constructive total loss

It was common ground that the Vessel would only constitute a CTL if the cost of recovery and/or repair exceeds the Vessel’s insured value. In this regard, it was the Bank’s burden to prove that the Vessel was a CTL. The Bank, however, failed to discharge its burden. 

The Bank rested its case on a set of documents (referred to as “CTL Documents” in the judgment), which included:⁸(a) correspondence between owners and insurers, which included cost estimates and quotations; (b) the salvors and dive inspection reports; and (c) a letter from the owners to the insurers on the lack of interest in purchasing the Vessel as scrap. 

While these were largely hearsay documents, the Bank had not called the makers of the documents to testify and instead sought to admit the documents on the basis of the business records exception under s 32(1)(b) of the Evidence Act. Apart from the reports, the Court of Appeal was not persuaded the documents were business records as they were largely made for the purposes of establishing an insurance claim. Even if the CTL Documents were admitted wholesale and taken at face value, they did not prove that the cost of repair and/or recovery exceeded the insured value of the Vessel.⁹ Taking the cost estimates for example, one quote was for the design, building and delivery of a new jack-up rig. There was, however, no explanation as to why a wholesale replacement, as opposed to a repair, was necessary.¹⁰ Overall, the Court of Appeal took the view that the Bank had failed to establish a CTL. 

Whether the Bank had breached the warranties or its duty of fair presentation

For completeness, the High Court had at first instance also considered the insurers’ allegations of breach of the duty of fair presentation under the UK Insurance Act 2015 and alleged breaches of warranties in the policy. The High Court found that the Bank had not breached either its duty of fair presentation or the relevant warranties. The Court of Appeal saw no reason to disturb the High Court’s decision.

Closing remarks

The Court of Appeal’s decision underscores the strict evidential burden on insureds seeking recovery under marine insurance policies. It highlights the importance of taking investigative steps to ascertain the cause of loss as far as possible, potentially even before any dispute under the policy has arisen. In particular, an insured cannot simply assert that a vessel was lost to perils of the seas where investigative steps were available but not taken. This rule applies equally to all insureds who may seek recovery under the policy, even if they are not the shipowner of the insured vessel. For mortgagees, this may mean getting involved at an earlier stage to ensure future claims are not prejudiced. 

The decision also illustrates the extent to which the Court may scrutinize the evidence put forward by an insured in support of a claim. Parties should also be mindful of their reliance on hearsay documents and to take steps to procure the appropriate witnesses to adduce the evidence. 

¹ Judgment at [4].

² Judgment at [36]. 

³ Judgment at [37].

⁴ Judgment at [36]. 

⁵ Judgment at [44]–[46].

⁶ Judgment at [95] and [98].

⁷ Judgment at [86]. 

⁸ Judgment at [127]. 

⁹ Judgment at [139].

¹⁰ Judgment at [140].