Might you need a specialised drug-smuggling insurance clause?

Another worry for hard-pressed shipowners operating in the Caribbean and bits of South America. If someone tries to use your ship as a mechanical “mule” for drug-smuggling and the vessel gets seized, you can lose insurance cover. In Atlasnavios Navegação Lda v Navigators Insurance Company Ltd [2016] EWCA Civ 808 this happened to an elderly  bulker, the B Atlantic. While she was loading a cargo of coal in Venezuela, enterprising drug smugglers strapped nearly 300 lb of cocaine to her hull for later retrieval. The drugs were found, and the vessel seized and condemned.

The loss was prima facie covered under the Institute War & Strikes Clause, which gave cover for capture, seizure and arrest; against persons acting maliciously; and against confiscation and expropriation. But specifically excluded under Clause 4.1.5 was detainment, confiscation or expropriation by reason of infringement of customs or trading regulations, which led the insurers to decline to pay. Flaux J decided for the owners, essentially on the basis that the substantial cause of their loss was the malicious acts of the smugglers and not the resulting infringement of the Venezuelan customs code. The Court of Appeal disagreed: the exclusion of infringement of customs or trading regulations should be given its ordinary meaning, and in the circumstances excluded liability.

As we said at the beginning, a big headache for owners (and in future a matter for consideration by their insurance brokers).

 

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