Navigators v. Atlasnavios-Navegacao – Supreme Court provides final twist in the tale - DAC Beachcroft

Navigators v. Atlasnavios-Navegacao – Supreme Court provides final twist in the tale's Tags

Tags related to this article

Navigators v. Atlasnavios-Navegacao – Supreme Court provides final twist in the tale

Published 23 May 2018

The Supreme Court has held that, contrary to the common ground between the parties, the vessel's loss was not caused by "any person acting" maliciously. As such, the Supreme Court has reached the same result as the Court of Appeal: that the relevant exclusion applies, albeit for different reasons.

A vessel was detained in a Venezuelan port when 132kg of cocaine was found strapped to its hull. There is no suggestion that either the owners or their crew were in any way implicated. In accordance with clause 3 (Detainment), after 6-month's detainment, the owner served a notice of abandonment, declaring that the vessel was a constructive total loss.

The vessel was insured under the Institute War and Strike Clauses 1/10/83. These clauses provide that loss caused by "any person acting maliciously" is an insured peril (under 1.5). The clauses also exclude cover for “arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations” (under 4.1.5). It was common ground between the parties that drug smuggling constituted "any person acting maliciously".

The judge at first instance held that the concealment of cocaine had been a malicious act for the purposes of 1.5 and implied a limitation on the scope of exclusion 4.1.5 where the customs infringement only came about due to the malicious act.

The Court of Appeal deemed that the clauses had to be considered together to determine the ambit of the policy; neither had primacy over the other. It held that if the malicious act was concealing drugs on the vessel, and concealing drugs was an infringement of customs regulations, then the detention was for a breach of customs regulations. There was no justification to exclude an infringement of customs regulations consisting of a malicious act from 4.1.5; this was not supported by the case law.

The owners having appealed that decision, the Supreme Court has taken an entirely different approach. They say that, despite the common ground between the parties, the necessary starting point is to examine the scope of the concept of "any person acting maliciously" in clause 1.5.

On their analysis, the Supreme Court has held that the smugglers were not "any person acting maliciously" within the meaning of clause 1.5. Relevant marine insurance authorities (The Mandarin Star and The Salem) indicate that in that context an element of spite or ill-will is required. Lord Mance considered that while it may have been foreseeable that the smuggled drugs may be detected, "their detection and any consequent loss or damage to the vessel were the exact opposite of the unknown smugglers' aim or, presumably, expectation".

Having found that cover under clause 1.5 did not apply, Lord Mance concluded this was sufficient in itself to dismiss the appeal. However, he went on to consider the position if clause 1.5 was applicable and agreed with the Court of Appeal that if there are two concurrent causes, one insured and the other excluded, the exclusion will prevail (P Samuel & Co Ltd v. Dumas [1924] AC 431; Wayne Tank & Pump Co Ltd v. Employers’ Liability Assurance Corpn Ltd [1974] QB 57). There was nothing to suggest that insurers were willing to accept the risk of smuggling by third parties. In addition, the owners' reliance on clause 3 (loss of use due to detainment) meant there was no distinction between the malicious act of drug smuggling and the infringement of customs regulations; they are one and the same for the purpose of the owners' claim.

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

Authors

Anthony Menzies

Anthony Menzies

London - Minster Court

+44 (0)20 7894 6948

Toby Vallance

Toby Vallance

London - Minster Court

+44 (0)20 7894 6257

Angela Bilardi

Angela Bilardi

London - Minster Court

+44 (0)20 7894 6177

< Back to articles