The owner of the 38,000-dwt B Atlantic(built 1983) has succeeded in a claim against 14 Lloyd’s syndicates and insurance companies led by Navigators and its syndicate 1221.
The vessel was detained in 2007 after the Venezuelan authorities discovered three packages containing 132 kilos of cocaine strapped to the hull, ten metres below the waterline.
There was no suggestion that the Enrico Bogazzi linked owner, Bnavios Navegacao, or successor company, Atlasnavios Navegacao, were implicated or had any knowledge of the cocaine, but there was nevertheless an offence committed under Venezuela’s anti-drug laws.
The vessel, which had just completed loading a cargo of coal bound for Europe, was detained and three years later confiscated by court order. The master and second officer were convicted in 2010.
Atlasnavios claimed for the constructive total loss (CTL) of the B Atlantic as it had been detained for longer than six months, potentially triggering a payout under the war risks policy, the Institute War and Strikes Clauses.
The underwriters admitted the vessel was a CTL but denied cover as the vessel had been detained for infringement of customs regulations and for failure to provide security.
Justice Flaux has however ruled that the owner’s CTL claim succeeds on the basis that there was cover for the malicious acts of third parties such as a drug cartel and the exclusion for infringement of customs regulations did not apply in this case.
The judge ruled that there was no break in the chain of causation between the infringement and the detainment of the vessel that allowed the customs argument to apply.
The owner’s lawyer, Aurelio Fernandez-Concheso, of Clyde & Co’s Caracas office considered the detention of the B Atlantic to be part of a part of a Venezuelan conspiracy to steal the vessel and cargo but in the end this issue came to nothing.
Justic Flaux ruled that “the decisions of the Venezuelan courts ordering such detainment were not perverse or wrong and were not procured by unwarranted political interference.”
The hull of the B Atlantic was insured for $14.135m, with the owner claiming a further $5.87m for sue and labour.
The judge said the owners were entitled to recover sue and labour expenses after a writ agreement in June 2008.
They were also entitled to recompense for legal expenses incurred in seeking the release of the vessel and defence of the crew as well as most of the running costs of the vessel until it was abandoned.
The B Atlantic had protection and indemnity cover from Gard and a side issue was the Norwegian mutual’s refusal to provide a club guarantee or other security to get the ship released from detention.
Gard refused arguing that it should not give an undertaking as club cover did not include the risk of confiscation but funded about $1.2m of legal costs on an ex gratia basis.
The war risks market won a preliminary victor in the London courts in 2012.
Read Justice Flaux’s 60,000 word judgement and earlier coverage of the B Atlantic issue by clicking on items in the related media column to the right.
