Every practitioner of English marine insurance law knows that the measure of indemnity for damage to a vessel is the reasonable cost of repairs (Marine Insurance Act 1906 section 69(1)) i.e. “what would have to be expended to put the ship right?” (The Medina Princess [1965] 1 Lloyd’s Rep 361). Behind that disarmingly simple phrase are over 100 years of debate about what ‘reasonable’ means, often reflecting a tension between what a shipowner or underwriter might see as reasonable from their own perspective.  This is an issue that is not unique to English law and also arises under other legal systems.

In a time of rising repair costs there is now focus on whether repairs should be effected by an Original Equipment Manufacturer (OEM) or a third-party.  Third party repairers trade on offering quicker and cheaper repairs and offer their own warranties.  Against that is the comfort of dealing with an OEM, and the warnings given about invalidating warranties if third parties are used.  But if an OEM solution is a significantly more expensive option, does there come a point where the reasonable cost of repairs would not extend beyond a third-party solution?

In the DC Merwestone [2013] 1 Lloyd’s Rep 131 the court held that a new (rather than reconditioned) engine was reasonable given the evidence that the latter would incur greater installation and operational difficulties.  The court appeared to support the view that a shipowner’s commercial interests may have some part to play. But there must be a limit where a third party solution is equally effective such that the OEM option should be viewed as no more than a preference. As ever, the answer will be a question of degree and an objective assessment of the perceived advantages of an OEM repair.