Supreme Court finds drug smugglers were not acting maliciously

Where a vessel was detained after being used by smugglers in an attempt to export drugs, the shipowner could not claim in respect of the constructive…

Navigators Insurance Company Limited and others (Respondents) v Atlasnavios-Navegacao LDA (formerly Bnavios-Navegacao LDA) (Appellant) [2018] UKSC 26

Executive summary

Where a vessel was detained after being used, without the knowledge of her crew and owner, by smugglers in an attempt to export drugs, the shipowner could not claim in respect of the constructive total loss of the vessel under the Institute War and Strikes Clauses, because:

  • The vessel's loss was not caused by “any person acting maliciously” so it was not covered by cl. 1.5; and
  • Although the loss was caused by detainment, allowing the owner to invoke cl.1.2 and cl.3, the detainment had arisen by reason of infringement of customs regulations, so the claim was excluded under the policy by cl.4.1.5.

Facts

The vessel had been detained by the Venezuelan authorities after the discovery of drugs strapped to the hull below the waterline, and after a period of more than six months, the owner treated the vessel as a constructive total loss, and claimed under its war risks insurance policy. The issue was whether the vessel had sustained a loss by an insured peril, entitling the owners to recover the vessel's insured value from her war risks insurers.

The policy was on the terms of the Institute War and Strikes Clauses Hulls-Time (1/10/83), which covered loss of or damage to the vessel caused by:

  • Detainment (cl.1.2); or
  • “…any person acting maliciously…” (cl.1.5)
    • But excluded loss or damage arising from detainment by reason of infringement of customs regulations (cl.4.1.5).
  • Cl. 3 determined whether, in the case of detainment, the vessel was a constructive total loss.

The court’s decision

The court decided that:

  • The concept of “any person acting maliciously” in cl.1.5 required an element of spite or ill-will vis-a-vis the property insured, or to other property or person leading to consequential loss of/damage to the property insured. But the smugglers were not intending to cause the vessel's detention or cause it any loss or damage at all. On the contrary, they were intent on avoiding detection. As such, they were not acting maliciously within the meaning of clause 1.5.
  • The vessel’s loss was caused simply by detainment, which entitled the owners to invoke clauses 1.2 as well as clause 3.
  • However, the detainment itself arose by reason of infringement of customs regulations, so the exception in clause 4.1.5 applied.
  • Even if it were possible (which it was not) to view the loss as caused by a person acting maliciously within cl.1.5, the loss would still have been excluded by cl.4.1.5 as arising, at least concurrently, from detainment by reason of infringement of customs regulations.

As such, the owner could not recover under the policy in respect of the constructive total loss.

Comment

The court’s interpretation of the standard war-risk clauses in cases of detention of the vessel caught drug smuggling will be of particular interest to those insureds whose vessels sail in high-risk jurisdictions, and their insurers. Insureds may wish to review their cover with their broker.

If you have any questions or would like to know more about our legal update, please get in touch with your usual Weightmans contact or the author of this update, Richard Hawkins (Consultant) on 0151 242 6967 (richard.hawkins@weightmans.com).

Share on Twitter