Cocaine planted on ship by smugglers not an insured ‘malicious act’ (UK)

Patrick Bracher from Norton Rose Fulbright.

Unknown third parties strapped bags of cocaine to the hull of a vessel leaving Venezuela resulting in the detention of the ship for more than six months and therefore a constructive total loss. The UK Supreme Court ruled that the loss did not result from ‘any person acting maliciously’.

In the context of a clause which covered loss caused by ‘any terrorist or any person acting maliciously or from a political motive’ it covered actions aimed at causing loss of or damage to the vessel or to other property or persons as a by-product. Foreseeable though the risk of confiscation may have been to the drug smugglers, the would-be smugglers could not have had such a state of mind. They were, on the contrary, intent on avoiding detection.

The motive or aim of the persons said to be acting maliciously is relevant. The element of spite, ill-will or the like is required. These motives do not have to be directed towards the insured interest as long as there is intent to clause loss or damage or injury to some property or person.

The attempted smuggling cannot be regarded as having been deliberately aimed at the detention or constructive total loss of or any loss or damage to the vessel or any property or person. The smugglers were therefore not ‘acting maliciously’ within the meaning of the covering clause and the claim failed.

The case is Navigators Insurance Co Ltd v Atlasnavios-Navegacao LDA.

First published by Financial Institutions Legal Snapshot.