A ruling by the UK’s Supreme Court against Atlasnavios Navegacao over a $20m war risk claim for a lengthy detention in Venezuela does not mean such losses are not covered, according to the lawyer representing insurers.
The Italian owner's 38,000-dwt bulk carrier B Atlantic (built 1983) was detained after falling victim to smugglers who used the vessel to carry drugs by strapping them to the hull. The ship was declared a constructive total loss after being detained for six months. Atlasnavios is the successor of Enrico Bogazzi-linked company Bnavios Navegacao.
The Supreme Court backed an appeal ruling that the loss was not covered by war risk as it was not the result of a malicious act, as claimed by the owner. The judges said a malicious act requires the smugglers to act out of “spite or ill will” to the vessel.
Even if the court had recognised the owner’s “malicious act” claim, there is a custom’s violation exclusion under war risk insurance.
Stephenson Harwood partner Simon Moore, who successfully defended insurers Navigators, Travelers and Aegis, said that although the Supreme Court had ruled war risk cover did not apply in this case, such circumstances are a coverable risk.
“Alternative insurance is available in the market for detentions due to third parties planting contraband on vessels,” he said. “This extra cover has been available before our case and the number of insurers has grown.”
There is potential in such cases to also claim under protection and indemnity for detention due to drugs but that is awarded on a discretionary basis.
He said that there is now clarity in the insurance market following the Supreme Court ruling. Although the owner appears unlucky not to be able to recover losses when it was the victim of smugglers, Moore said the ruling showed that the courts would stick strictly to the wording of insurance policies rather than seek ways to rule in favour of one party.
“There have been a couple of cases where the courts have given the impression they are willing to qualify exclusions or apply language to exclusions but there are very strict rules on interpretation,” he said.
Stephenson Harwood senior associate Paul Hofmeyer said: “This has firmly set in stone that this [claim] is not a war risk issue.”
