Malice in Marine Insurance Law

Author:M. Bob Kao
Position:PhD Candidate, Centre for Commercial Law Studies, Queen Mary University of London
Pages:23-25
(2019) 33 A&NZ Mar LJ 23
MALICE IN MARINE INSURANCE LAW: NAVIGATORS INSURANCE CO LTD V
ATLASNAVIOS-NAVEGACAO LDA [2018] UKSC 26
M Bob Kao*
Introduction
What is malice? This was not the question the United Kingdom Supreme Court was originally asked to determine.
Yet, the answer ultimately decided the case. Lord Mance’s opinion in Navigators Insura nce Co Ltd v Atlasnavios-
Navegacao LDA1 may have been a surprise to many given that it was based on an issue that was not in dispute. It
was common ground that the drug smugglers involved in the case were acting maliciously, but Lord Mance found
that their covertly strapping cocaine to the hull of the vessel was done without malice, and consequently the ship
was not co vered by the marine insurance policy. Lord Mance clarified he was not making new law but merely
reverting it back to what it should have been had subsequent decisions not been erroneously thought to have
broadened its scope. Though the case may be correctly decided, this case serves as a cautionary tale that the courts
can raise iss ues not in dispute and even base their decisions on what was originally common ground. Such sua
sponte or pr oprio motu action occurs from time to ti me and should be a consideration for parties when deciding
whether to appeal.
Facts and Procedural History
Shipowner Atlasnavios-Navegacao LDA, the Appellant, and the insurers, the Respondents, entered into a marine
insurance contract for a period of one year for the vessel B Atlantic from July 2007 to June 2008.2 This was a war
risks insurance policy under the terms of the Institute War and Strikes Clauses Hulls-Time (1/10/83), which
provides cover for loss or damage to the vessel caused by, inter alia, ‘any terrorist or any person acting maliciously
or from a political motive’.3 Clause 3 of the policy governs constructive total loss:
In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or
expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period
of 12 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.
The 12-month period was later reduced to six months by agreement.4 The policy is subject to exclusions in Clause
4 of the policy, which excludes, a mong others, ‘loss damage liab ility or expenses arising from arrest restraint
detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs
or trading regulations’.5
In August 2007, the B Atlantic was required to undergo underwater inspection by authorities in Lake Maracaibo,
Venezuela after loading of co al bound for Italy was completed. 6 The divers noticed bags o f cocaine weighing
132kg hidden ten meters below the waterline strapped to the hull of the ship.7 For the purposes of the insurance
claim, neither the shipowner nor crew were deemed responsible for the smuggling, but the ship was detained and
the cre w was arrested per Anti-Drug Law 2005 (Venezuela).8 After long exceeding a detention period of six
months, in June 2008, the shipowner served a notice of abandonment to the insurers and treated the vessel as a
constructive total loss.9 The insurers found no defect with the notice and only disputed that the peril was covered
by the insurance policy.10
At issue in the case is ‘whether the vessel sustained a loss by an insured peril, entitling the owners to recover the
vessel’s insured value from the respondents, her war risks insurer’.11 This case began in the Commercial Court in
* PhD Candidate, Centre for Commercial Law Studies, Queen Mary University of London.
1 [2018] UKSC 26 (‘Navigators Insurance’).
2 Ibid [2].
3 Ibid.
4 Ibid.
5 Ibid.
6 Ibid [7].
7 Ibid.
8 Ibid [8]–[9].
9 Ibid [10]. See Marine Insurance Act 1906, 6 Edw 7, c 41, ss 603.
10 Ibid.
11 Ibid [1].

To continue reading

Request your trial