NAVIGATORS INSURANCE CO LTD AND OTHERS V ATLASNAVIOS-NAVEGAÇÃO LDA (THE "B ATLANTIC")

[2018] UKSC 26, Supreme Court, Lord Mance, Lord Sumption, Lord Hughes, Lord Hodge and Lord Briggs, 22 May 2018

Insurance (marine) - War risks clauses - Smuggling by crew members - Causation - Coverage for acts by persons acting maliciously - Exclusion for detainment for infringement of customs regulations

B Atlantic was insured under a war risks policy commencing 1 July 2007. Insured perils included: "capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat" (clause 1.2); "any terrorist or any person acting maliciously or from a political motive" (clause 1.5); and "confiscation or expropriation" (clause 1.6). Excluded from cover was "arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations" (clause 4.1.5). In August 2007 the vessel took on a cargo of coal in Venezuela for discharge in Italy. During an underwater inspection on 13 August 2007, divers discovered three bags of cocaine weighing 132 kg strapped to the vessel's hull. It was assumed that this was the work of a drug cartel intending to smuggle drugs from South America to Europe. Under Venezuelan law the concealment of drugs constituted a criminal offence and any vessel involved could be seized as a precautionary measure. If there was a definitive judgment finding the owner of the vessel culpable, then any seized vessel would be confiscated. The vessel was detained and the crew were arrested. Notice of abandonment was served on 18 June 2008. The master and second officer were in August 2010 convicted and sentenced to nine years' imprisonment. The vessel itself was confiscated. The Court of Appeal held that the smuggling constituted the act of a person acting maliciously and thus was insured, but that there was also infringement of customs regulations and that the two causes operated concurrently. On that basis the exclusion prevailed and there was no recovery.