The Supreme Court has unanimously rejected a ship owner’s attempt to recover insurance after the vessel was seized by the Venezuelan authorities in a cocaine smuggling sting.
Packages of the drug had been strapped to the ship’s hull underwater. The smugglers were third parties, unconnected with the ship’s owner.
The owners treated the ship as a constructive total loss as it was confiscated for more than six months. A dispute arose, however, over whether the seizing of the ship was an insured peril, entitling the owners to recover her value from her war risks insurers.
The cover afforded was on the terms of the Institute War Strikes Clauses Hulls-Time. The ‘perils’ included loss or damage caused by ‘any person acting maliciously’ and also ‘capture seizure arrest restraint or detainment’. However, the policy’s exclusions included ‘arrest restraint detainment confiscation or expropriation…by reason of infringement of any customs or trading regulations’.
The Court of Appeal held that the claim was excluded. The ship’s owners appealed to the Supreme Court on the basis of common ground that the smugglers had been ‘acting maliciously’.
Giving the lead judgment in Navigators Insurance Company v Atlasnavios-Navegacao [2018] UKSC 26, Lord Mance said the smugglers were not ‘acting maliciously’ and that, even if they had been, the exclusion clause would have applied.
‘Under Venezuelan law, the smuggling was no doubt itself a wrongful act done intentionally without just cause or excuse,’ he said.
‘But the smugglers were not intending that any act of theirs should cause the vessel’s detention or cause it any loss or damage at all. In my opinion, they were not acting maliciously within the meaning of [the relevant clause].’
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