ATLASNAVIOS-NAVEGAÇÃO, LDA v NAVIGATORS INSURANCE COMPANY LIMITED & OTHERS

Exclusion clauses in standard marine war-risk insurance policies must be construed by reference to their general wording and commercial context. A customs-regulations exclusion is not implicitly limited to infringements involving the assured, its servants or agents. Nor is it legally confined to claims otherwise falling under particular insured perils, where its wording applies generally to loss arising from detention or related measures. The exclusion remains subject to ordinary causation requirements: it is unlikely to apply where the alleged infringement could not reasonably arguably justify the detention under the relevant local law.

The claimant sought indemnity under a war-risks policy for the constructive total loss of its vessel, which had been detained in Venezuela after cocaine was found attached to its hull. The underwriters relied principally on clause 4.1.5 of the Institute War Clauses, excluding loss arising from arrest, restraint, detention, confiscation or expropriation by reason of infringement of customs or trading regulations.

Four preliminary questions concerned privity or complicity, the scope of the exclusion across the insured perils, and whether the exclusion could apply where the infringement did not arguably justify detention under local law. The court determined the first three questions and left the fourth formally unanswered following agreement between the parties.

1. Privity or complicity. The exclusion in clause 4.1.5 is expressed in general and unqualified terms. It contains no requirement that the infringement be committed by, or with the knowledge or participation of, the assured, its servants or its agents. Reading such a limitation into the clause would add words which the draughtsmen had not used and would create practical difficulties concerning proof and the identity of relevant agents. Issues 1 and 2 were therefore answered no.

2. Construction and scope. The Institute War Clauses must be given a businesslike interpretation in their commercial and worldwide context. They cannot be construed by reference to technical differences in local law. The burden remains on underwriters to bring the loss within the exclusion. Clause 4.1.5 applies, on its wording, to any loss, damage, liability or expense arising from the stated detention-related cause, regardless of how the assured frames its claim. It is therefore capable of applying to loss claimed under insured perils other than clauses 1.2 and 1.6, although it will most naturally arise in cases involving detention. Issue 3 was answered no.

3. Causation and local law. The parties effectively agreed that the exclusion would not apply where the infringement was not reasonably arguable as a ground for the arrest, restraint, detention, confiscation or expropriation under the relevant local law. The judge agreed that the exclusion was unlikely to apply in such circumstances, but did not formally determine issue 4 because it was fact-sensitive and had been withdrawn by agreement.

4. The unresolved question whether an infringement caused by a terrorist or malicious actor falls within clause 4.1.5 was left for trial, together with the construction of clause 1.5 and the proximate-cause issue.