Navigators Insurance Company Limited v Atlasnavios-Navegacao LDA [2018] UKSC 26

In a decision handed down yesterday (22 May) the Supreme Court held that where a vessel was used by unknown third parties in an unsuccessful attempt to export cocaine from Venezuela (by strapping a parcel of drugs to the vessel underwater), leading to a detention of the vessel by Venezuelan authorities for more than 6 months, the Owners were not entitled to recover the vessel’s insured value from the vessel’s war risk insurers.

The case turns on the wording of the Institute War Strikes Clauses Holds – Time, which provided, insofar as relevant:

Clause 1: Perils

Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the vessel caused by …

1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat.

1.5: any terrorist or any person acting maliciously or from a political motive…

Clause 3: Detainment

In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or appropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of [6] months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.

Clause 4: Exclusions

This insurance excludes

4.1 loss damage liability or expense arising from…

4.1.5 arrest restraint detainment confiscation or appropriation… by reason of infringement of any customs or trading regulations.

The Supreme Court took upon itself to consider whether the loss was caused by “any person acting maliciously” within the meaning of clause 1.5 and determined that it was not. Whilst this was subject to much debate, and consideration of the previous wording of the clauses and the relevant authorities, ultimately it came down to the context in which the words appear and the fact that the phrase is aimed at persons intent on “causing loss of or damage to the vessel”, or to other property “as a by-product of which the vessel is lost or damaged.” That was the precise opposite of the drug smugglers’ intent: they had no wish to have the vessel detained. In any event, it was held that even if it were loss falling within clause 1.5, such loss was excluded by clause 4.1.5, which was not limited to capture seizure arrest restraint or detainment under clause 1.2 (or 1.6) but to the wider reliance on “detainment” under clause 3.