Lloyd's Law Reporter


[2010] EWHC 280 (Comm), Queen's Bench Division, Commercial Court, Mr Justice David Steel, 18 February 2010

Insurance (marine) - Piracy - Vessel seized by pirates - Ransom paid and vessel and cargo released - Whether became an actual total loss on seizure - Whether cargo became a constructive total loss on seizure - Legality of payment of ransom - Marine Insurance Act 1906, sections 57 and 60

A cargo consisting of two parcels of biodiesel, shipped on board the oil tanker Bunga Melati Dua, was insured by the defendant insurers under an open cover. The policy covered piracy, and excluded constructive total loss "unless the subject matter insured is reasonably abandoned either on account of its actual loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject matter to the destination to which it is insured would exceed its value on arrival". The vessel, while en route from Malaysia to Rotterdam, was seized by Somali pirates on 19 August 2008. A notice of abandonment in respect of the cargo was served, but rejected on 18 September 2008. A ransom was paid and the vessel was released about 11 days after the service of the notice of abandonment. The cargo was taken to Rotterdam and for about half of its insured value. The insurers denied liability for the difference. David Steel J held that they were not liable. (1) There was no actual total loss under section 57 of the 1906 Act because the claimants had not been irretrievably deprived of the cargo. It was possible to recover the cargo, and the cost and effort of doing so was to be disregarded. Piracy did not of itself amount to an actual total loss without more. (2) There was no constructive total loss under section 60 of the 1906 Act. It could not be said that the subject matter had been reasonably abandoned because an actual total loss appeared unavoidable: the assured had not at any point given up hope of recovery (which was what "abandonment" meant in section 60) nor could it be said that an actual total loss appeared unavoidable. (3) The ransom was not to be disregarded in determining whether there was an actual or constructive total loss. Payment of a ransom was not illegal or contrary to public policy.

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