Court of Appeal decision on insured perils and excepted perils under the Institute War Clauses.

Colin Edelman QC acted for the underwriters in Atlasnavios v. Navigators Insurance (the “B Atlantic”) [2016] EWCA Civ 808, Court of Appeal.                                              

On 13 August 2007 the vessel “B Atlantic” was detained in Lake Maracaibo, Venezuela. The ship contained a cargo of coal, destined for shipment to Italy, when during a second divers’ inspection some 132kg of cocaine was discovered attached to the vessel’s hull. The vessel was detained and thereafter abandoned by her Owners, who claimed for a constructive total loss and for sue & labour expenses under war risks cover.

At first instance, the court held that the detention of the vessel was caused by an insured peril, malicious acts of the drugs smugglers, and held that the standard war risk exclusion for detainment by reason of infringement of any customs regulation, clause 4.1.5, did not apply when the infringement was no more than the “mere manifestation” of third parties’ malicious acts.

1 August 2016, the Court of Appeal unanimously overturned the decision and held that the loss was caused by both the concealment of the drugs and the detention.  The Court also held that clause 4.1.5 should not be read as being subject to the “mere manifestation” limitation for 7 main reasons.  The Owners’ claim therefore failed.

For the full judgment click here 

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